Kodiak Gas Services Q1 Earnings Call Highlights

Key Points

• Kodiak Gas Services posted record Q1 2026 Adjusted EBITDA of $190 million and raised full-year guidance, with stronger contract compression results driving higher revenue, margins, and cash flow. The company also increased its dividend, which was covered 2.9 times by first-quarter discretionary cash flow.
• The company’s compression business remains very tight, with 98% fleet utilization and lead times for large-horsepower equipment stretching beyond 180 weeks. Management said it has already secured new units for 2027 and 2028 and is targeting annual horsepower growth of about 150,000.
• Kodiak is aggressively expanding into distributed power for data centers and microgrids after acquiring DPS, placing orders for more than 260 megawatts and pursuing an additional 1.3 gigawatts. Management expects power growth of 300-500 megawatts per year through decade-end, alongside 2026 EBITDA guidance of $820 million to $860 million.

Kodiak Gas Services NYSE: KGS reported record first-quarter 2026 Adjusted EBITDA and raised its full-year outlook as the company highlighted continued strength in contract compression and outlined an aggressive growth plan for its newly acquired distributed power business.

President and Chief Executive Officer Mickey McKee said the company is benefiting from rising natural gas demand tied to LNG exports, power generation and data centers, while equipment supply remains tight across the industry. He said lead times for new large-horsepower compression equipment have stretched to more than 180 weeks for 3,600-horsepower inline gas compression engines.

“Natural gas Compression market is in uncharted territory,” McKee said, adding that Kodiak has secured new large-horsepower compression packages for 2027 and 2028 and is working to secure additional units for 2029 delivery.

The company ended the quarter with 4.4 million revenue-generating horsepower and fleet utilization of 98%. McKee said Kodiak remains confident it can achieve annual horsepower growth of 150,000 horsepower, reaching a compression fleet of at least 5.2 million horsepower by the end of the decade.

Compression Business Sets Revenue and Margin Records

Executive Vice President and Chief Financial Officer John Griggs said total revenue for the quarter was $346 million, up 5% from the prior year. Contract Services revenue increased 6% year over year and 2% sequentially, driven by new horsepower, price increases and operational execution.

Revenue-generating horsepower rose by about 35,000 sequentially, while pricing increased 3.7% year over year to $23.31 per ending revenue-generating horsepower. Griggs noted that roughly 20,000 horsepower added during the quarter came late in the period through a purchase-leaseback transaction and did not materially affect revenue.

Kodiak reported Contract Services adjusted gross margin of 70.6%, up 138 basis points sequentially and 286 basis points year over year. Griggs said the margin expansion reflected investments in training, operational technology, telemetry and data analysis, which have helped reduce equipment failures and parts expense.

McKee said real-time equipment monitoring is helping Kodiak catch issues earlier, reduce failures, increase efficiency and lower parts spending. He also pointed to fleet high-grading, noting that average horsepower per unit increased to 977 from 943 at the end of the first quarter of 2025.

Adjusted EBITDA reached $190 million, up 7% year over year and a company record. Adjusted net income was $52 million, or $0.59 per diluted share. Discretionary cash flow rose 9% year over year to $126.5 million.

Power Strategy Expands Following DPS Acquisition

Kodiak closed its acquisition of Distributed Power Solutions, or DPS, on April 1 and is now marketing the business as Kodiak Power Solutions. McKee said integration is moving quickly, with the acquired business already operating on Kodiak’s ERP platform and commercial and operations teams realigned.

The company is creating a new Power Infrastructure segment, which will include most of the acquired power business. Some historical and future DPS revenue, such as fleet mobilization and logistics, will be included in Other Services.

McKee said DPS brought a commercial team with experience in distributed power, including an islanded primary power data center contract that is in its third year of operation and has delivered on a 99.9% reliability guarantee.

Kodiak said it has placed orders for more than 260 megawatts of additional power generation capacity, with about 61 megawatts expected to be received in 2026 and the balance between 2027 and 2029. The company is also in advanced discussions with multiple counterparties for an additional 1.3 gigawatts to be delivered on a relatively ratable schedule through the end of the decade.

McKee said the equipment mix includes reciprocating engines and industrial gas turbines designed for data center and microgrid applications. In the Q&A session, he said the 260 megawatts already procured is roughly split between reciprocating engines and turbines, while future deliveries may be weighted about 25% toward reciprocating engines and 75% toward turbines.

Data Center Demand Drives Long-Term Power Outlook

McKee said Texas is leading the nation in data centers under development, citing more than 150 projects currently in development and an estimate of more than 30 gigawatts of planned data centers in Texas over the next two years. He said Kodiak is in discussions with multiple data center customers for long-term primary power contracts.

The company is targeting power growth of 300 to 500 megawatts per year through the end of the decade, which would bring the Distributed Power fleet to about 2 gigawatts by year-end 2030. McKee said Kodiak expects power equipment investments to generate unlevered returns greater than 15% and EBITDA build multiples around 5 times.

In response to analyst questions, McKee said many data center customers are discussing 10- or 15-year contracts, often with extension options. He said the market has shifted from viewing behind-the-meter power as a bridge to grid interconnection toward seeing it as a potentially permanent power supply.

“Increasingly, more and more what we’re hearing is that it’s gonna be probably a permanent power supply for them,” McKee said.

Kodiak Raises 2026 Guidance

Kodiak raised its 2026 Adjusted EBITDA guidance to a range of $820 million to $860 million and its discretionary cash flow guidance to $520 million to $570 million. The guidance includes three quarters of contribution from the DPS acquisition.

For Power Infrastructure, Kodiak guided to full-year revenue of $95 million to $125 million and adjusted gross margin of 60% to 70%. Griggs said the ranges are wide because the acquisition is new and because the company wants commercial flexibility around timing for longer-term strategic deployments. He said Kodiak does not expect material revenue from the 61 megawatts of additional 2026 power equipment until early 2027.

Compression Infrastructure revenue guidance was raised at the low end, reflecting progress in recontracting units and greater visibility on new unit growth. Kodiak now expects Compression Infrastructure adjusted gross margin of 68.5% to 70%.

Growth capital spending for Compression is expected to be $245 million to $275 million, consistent with a March announcement tied to the purchase-leaseback transaction. Kodiak said it remains on pace to add about 170,000 horsepower during 2026.

Power growth capital spending is expected to range from $400 million to $500 million in 2026. Griggs said approximately $90 million relates to generators and balance-of-plant equipment to be delivered in 2026, with the remainder tied to equipment scheduled for 2027 and later.

Balance Sheet and Contracting Focus

Kodiak ended the quarter with net debt of $2.7 billion. In February, the company issued $1 billion of senior notes due 2031 at 5.875%, using proceeds to redeem its 2029 senior notes and pay down its asset-based lending facility. Its credit agreement leverage ratio was 3.6 times as of March 31.

Griggs said Kodiak is focused on protecting its balance sheet as it enters an investment cycle in power. He said investors should expect leverage to drift above the company’s long-term 4 times target periodically as investments are made, but said the combination of compression and power contracts should help the company delever over time.

The board declared a dividend of $0.49 per share, payable later in May. Griggs said the dividend was covered 2.9 times by first-quarter discretionary cash flow.

During the call, management also emphasized customer interest in longer-term compression contracts. McKee said Kodiak entered into a 10-year compression services contract extension with one of its top customers during the quarter and is finalizing another 10-year extension with another top customer. He also said the company completed a purchase-leaseback of large-horsepower compression units from a Permian producer and signed a seven-year services contract.

McKee concluded by saying the first quarter exceeded company expectations and that Kodiak sees “continued strong momentum” in compression and significant opportunity in distributed power.

About Kodiak Gas Services NYSE: KGS

Kodiak Gas Services, Inc operates contract compression infrastructure for customers in the oil and gas industry in the United States. It operates in two segments, Compression Operations and Other Services. The Compression Operations segment operates company-owned and customer-owned compression infrastructure to enable the production, gathering, and transportation of natural gas and oil. The Other Services segment provides a range of contract services, including station construction, maintenance and overhaul, and other ancillary time and material-based offerings.

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