USA Compression Partners Q3 Earnings Call Highlights

Key Points

• USA Compression reported record third-quarter metrics, with revenue up 43% year over year to $357.2 million and new highs in adjusted EBITDA, distributable cash flow and average revenue-generating horsepower.
• The company narrowed full-year adjusted EBITDA guidance to $770 million–$780 million, citing higher operating costs and softer parts and service revenue; distributable cash flow guidance is $495 million–$505 million.
• Demand for compression capacity remains strong amid long equipment lead times: more than 60% of 2027 new horsepower deliveries are contracted, and the company has about $500 million in new-unit orders through 2029.

USA Compression Partners NYSE: USAC reported record operating metrics in the third quarter of 2026, with revenue, adjusted EBITDA, distributable cash flow and average revenue-generating horsepower reaching new highs, as the company cited steady contract compression demand and continued integration progress following the J-W acquisition.

President and Chief Executive Officer Clint Green said the company delivered sequential growth in revenue, adjusted EBITDA and distributable cash flow during the quarter. He said its core contract operations business remained strong, even as the company adjusted its full-year outlook to account for higher commodity-linked operating expenses and lower-than-expected retail parts and service activity.

Third-Quarter Financial Results

Total third-quarter revenue was $357.2 million, up approximately 43% from $250.3 million in the prior-year period, according to Senior Vice President and Chief Financial Officer Chris Paulsen. Contract operations revenue totaled about $308 million, supported by acquired horsepower and higher average revenue per revenue-generating horsepower.

Retail parts and service revenue was approximately $30 million, including sales to affiliate parties. Paulsen said that result benefited from the timing of certain manufacturing unit sales that occurred in September rather than in the fourth quarter.

• Net income was $47.3 million.
• Operating income was $102.2 million.
• Net cash provided by operating activities was $117.7 million.
• Cash interest expense, net, was $47.3 million.
• Adjusted gross margin was 62.2%, modestly below the second quarter.

Paulsen attributed the lower adjusted gross margin percentage primarily to commodity-linked cost pressures and a higher mix of parts and service revenue. The company’s total fleet horsepower stood at approximately 5 million horsepower at the end of the quarter.

Average revenue per revenue-generating horsepower per month was $23.14, increasing about 1% sequentially and 8% year over year. Average revenue-generating horsepower was approximately 4.48 million, while average utilization increased slightly from the prior quarter to 92.1%.

Guidance Updated as Costs Rise

The company tightened its full-year distributable cash flow guidance to a range of $495 million to $505 million. Green said the range reflects cash flows that remain consistent with the company’s expectations entering 2026.

USA Compression narrowed its full-year adjusted EBITDA outlook to $770 million to $780 million, from its prior range of $770 million to $800 million. Paulsen said the revision reflects higher operating costs and softer retail parts and service revenue than previously expected.

The company continues to expect maintenance capital expenditures of $60 million to $70 million and expansion capital expenditures of $230 million to $250 million. The expansion spending outlook includes modest deposits related to limited 2027 new-unit orders from third parties.

Commodity costs remained a significant near-term issue. Senior Vice President and Chief Operating Officer Chris Wauson said monthly lube oil costs exited the quarter about 25% above first-half levels, while diesel prices reached an all-time high in September. He added that higher labor costs across the industry had been incorporated into third-quarter results.

Wauson said the cost increases were largely offset by strong synergy capture, but they have not yet been fully reflected in customer pricing. Green said the company expects to push some higher costs through contract escalators over time, while Wauson noted there can be a two- to three-month delay as contracts are renewed or new agreements begin.

Contracting Activity and New-Unit Demand

Management said customers are increasingly securing compression capacity further in advance as supply remains tight and equipment lead times lengthen. Green said compressor lead times can extend to roughly four years, while engine deliveries can take 185 to 200 weeks.

“There is definitely an urgency to make sure they have equipment for what is coming down the pipe,” Green said, referring to anticipated demand growth through 2029 and 2030.

Wauson said customers are often contracting for horsepower based on forecasted growth curves rather than specific project locations. More than 60% of the company’s new horsepower scheduled for delivery in 2027 is contracted, including about 90% of first-half deliveries.

The company reported 30 basis points of utilization improvement from the end of the second quarter, as unit stops moderated. It also achieved 1% sequential rate growth during the third quarter despite increased competition from smaller operators in certain markets, Wauson said.

Contract terms generally range from two years to six or seven years, according to Wauson. While some agreements are for two or three years, he said the company continues to secure favorable contract durations.

Integration, Capital Position and Outlook

USA Compression completed the integration of legacy J-W compression units into its SAP platform on Oct. 1. Wauson said the move brings operations onto a more consistent system for maintenance, inventory management and performance reporting, while providing more visibility across the fleet.

Management said most core integration work is now complete. The company plans to expand its use of analytics and intelligence tools and invest in a larger, more standardized training facility in the Dallas-Fort Worth area, replacing its facility in San Angelo.

Paulsen said third-quarter leverage was 3.78 times, near the company’s 3.75 times target. In September, the company issued $600 million of 6.750% senior notes due 2035 and used the proceeds to reduce borrowings under its asset-based lending facility. Available capacity under that facility was approximately $1.06 billion at quarter-end.

Looking ahead, Green said near-term growth is expected to be “consistent but measured.” He said higher oil prices have supported customer balance sheets but have not produced a broad increase in oil-directed drilling activity. Management expects incremental natural gas demand to have a greater impact beginning in late 2027, with more meaningful acceleration anticipated in 2028.

The company has approximately $500 million in aggregate new-unit orders through 2029. Green said the combined platform provides a broader customer base and greater flexibility to deploy equipment between cash sales and the contract compression fleet as market opportunities evolve.

About USA Compression Partners (NYSE:USAC)

USA Compression Partners LP NYSE: USAC is a master limited partnership that provides natural gas compression services in the United States. The company owns and operates a fleet of natural gas compression equipment and supplies compression to producers, processors, gatherers and pipeline operators under primarily fee-based contracts.

Its services support several stages of the natural gas value chain, including the gathering and processing of natural gas, transportation through interstate and intrastate pipelines, and natural gas storage.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.