On July 31, 2024, Archrock Inc (AROC, Financial) released its 8-K filing for the second quarter of 2024, showcasing a robust financial performance that surpassed analyst expectations. Archrock Inc, an energy infrastructure company specializing in midstream natural gas compression, reported significant growth in its Contract Operations segment, contributing to a notable increase in overall revenue.
Company Overview
Archrock Inc (AROC, Financial) is a leading provider of natural gas compression services, focusing on midstream operations. The company operates through two main segments: Contract Operations and Aftermarket Services. The Contract Operations segment, which generates the majority of the company's revenue, involves designing, owning, installing, operating, and maintaining compression equipment for customers. The Aftermarket Services segment offers a comprehensive range of services, including maintenance, overhaul, reconfiguration, and parts sales for customer-owned compression equipment.
Second Quarter 2024 Financial Highlights
Archrock Inc (AROC, Financial) reported a net income of $34.4 million for the second quarter of 2024, compared to $24.7 million in the same period last year. The company's revenue for the quarter reached $270.5 million, slightly below the analyst estimate of $270.60 million. The earnings per share (EPS) stood at $0.22, slightly below the analyst estimate of $0.25.
Segment Performance
In the Contract Operations segment, Archrock Inc (AROC, Financial) achieved a revenue of $225.5 million, marking a 12% increase from $201.1 million in the second quarter of 2023. The adjusted gross margin for this segment was $146.2 million, up 17% from $125.1 million in the previous year. The adjusted gross margin percentage improved to 65% from 62%.
However, the Aftermarket Services segment saw a slight decline in revenue, totaling $45.1 million compared to $46.4 million in the second quarter of 2023. The adjusted gross margin for this segment was $9.9 million, down from $11.1 million, with the adjusted gross margin percentage decreasing to 22% from 24%.
Balance Sheet and Cash Flow
Archrock Inc (AROC, Financial) reported long-term debt of $1.6 billion as of June 30, 2024, with available liquidity totaling $435 million. The company's leverage ratio improved to 3.2x from 4.2x in the previous year. Net cash provided by operating activities was $70.7 million, a significant increase from $30.5 million in the second quarter of 2023.
Shareholder Returns and Guidance
The Board of Directors declared a quarterly dividend of $0.165 per share, or $0.66 on an annualized basis, with a dividend coverage ratio of 2.6x. Additionally, the Board approved an extension of the share repurchase program, replenishing the available capacity to $50 million.
Archrock Inc (AROC, Financial) updated its standalone 2024 net income guidance to a range of $139 million to $167 million, excluding the impact of the pending TOPS acquisition. The company expects standalone 2024 Adjusted EBITDA between $510 million and $540 million and total capital expenditures between $290 million and $300 million.
Management Commentary
“Archrock’s second quarter performance reflects the earnings power from our investment in high-quality assets, exceptional customer service, efficient execution and implementation of enabling technology,” said Brad Childers, Archrock’s President and Chief Executive Officer. “We grew our operating horsepower and our fleet remained fully utilized, with utilization exiting the quarter at a rate of 95 percent. In addition, we again achieved record-setting average revenue per horsepower and both of our segments delivered outstanding margin performance.”
Summary Metrics
| Three Months Ended | June 30, 2024 | March 31, 2024 | June 30, 2023 |
|---|---|---|---|
| Net income | $34,425 | $40,532 | $24,653 |
| Adjusted EBITDA | $129,712 | $131,024 | $112,775 |
| Contract operations revenue | $225,468 | $223,051 | $201,120 |
| Aftermarket services revenue | $45,058 | $45,437 | $46,423 |
| Net cash provided by operating activities | $70,651 | $137,702 | $30,542 |
Analysis
Archrock Inc (AROC, Financial) demonstrated a strong performance in the second quarter of 2024, driven by the growth in its Contract Operations segment. The company's ability to maintain high utilization rates and achieve record-setting average revenue per horsepower highlights its operational efficiency and market demand. However, the slight decline in the Aftermarket Services segment indicates potential challenges in maintaining revenue growth across all segments.
The improvement in the leverage ratio and the significant increase in net cash provided by operating activities reflect Archrock Inc (AROC, Financial)'s strong financial position. The company's commitment to shareholder returns through dividends and share repurchase programs further underscores its focus on delivering value to investors.
Overall, Archrock Inc (AROC, Financial)'s second quarter results indicate a positive outlook for the remainder of 2024, supported by strong market conditions and strategic investments in high-quality assets.
Explore the complete 8-K earnings release (here) from Archrock Inc for further details.
