Strong Adjusted Earnings and EBITDA Growth
Adjusted EPS of $0.42 and adjusted EBITDA of $221 million for Q1 2026, representing a 12% increase in adjusted EBITDA versus Q1 2025.
Archrock
· AROC
May 5th, 2026
Summary
- Earnings Call Date:
- 2026-05-05
- Change Since:
- -2.02%
- Next Earnings Date:
- 2026-08-04
Earnings Call Sentiment
PositiveThe call emphasized multiple strong operational and financial metrics — double-digit EBITDA growth year-over-year, robust free cash flow, high fleet utilization (~95%), disciplined capital allocation, a strong balance sheet with leverage below target, and reaffirmed full-year guidance — while acknowledging manageable near-term challenges including higher SG&A (largely non-recurring), seasonal aftermarket softness, higher maintenance capex timing, supply-chain lead times (~160 weeks), and potential lube oil cost pressure. Overall, positives (profitability, cash generation, utilization, balance sheet flexibility, and confirmed guidance) substantially outweigh the headwinds, which management characterizes as manageable and addressed through disciplined execution and capital allocation.
Company Guidance
Archrock reaffirmed full‑year 2026 adjusted EBITDA guidance of $865–$915 million and reiterated total 2026 capex of $400–$445 million (growth CapEx $250–$275M, maintenance $125–$135M, other $25–$35M). The company declared a quarterly dividend of $0.22 per share ($0.88 annualized) with Q1 cash available for dividend of $134M and dividend coverage of 3.5x, reported Q1 adjusted EBITDA of $221M and adjusted free cash flow of $92M (after‑dividend $52M), and said it expects substantial free cash flow supported by higher monthly revenue per horsepower and back‑half‑weighted newbuild deliveries. Archrock ended the quarter with ~4.5 million operating horsepower at 95% utilization, total debt of $2.4B (leverage 2.6x), pro‑forma liquidity of ~ $600M, $21M of year‑to‑date asset sale proceeds, $113M remaining on its share repurchase authorization, and does not expect the $3.7M LTIP expense acceleration to recur.
Robust Free Cash Flow and Shareholder Returns
Adjusted free cash flow of $92 million in the quarter; returned $44 million to shareholders via dividends and share repurchases (up 29% year-over-year). Declared quarterly dividend of $0.22 per share (up ~16% YoY) with cash available for dividend of $134 million and dividend coverage of 3.5x.
High Fleet Utilization and Operating Footprint
Fleet remained highly utilized, exiting the quarter at ~95% utilization with approximately 4.5 million operating horsepower (4.53 million reported end of quarter), supporting durable revenue generation.
Revenue Momentum in Contract Operations
Contract operations revenue of $331 million in Q1 2026, up 10% year-over-year, driven by growth in horsepower and higher pricing; monthly revenue per horsepower increased sequentially and year-over-year.
Strong Profitability and Margins
Adjusted gross margin percentage of 72% in Q1 2026 (contract operations) and aftermarket services adjusted gross margin of 23%, reflecting sustained profitability above targets and disciplined cost management.
Balance Sheet Strength and Liquidity
Total debt of $2.4 billion at quarter-end with leverage ratio of 2.6x (below the company's long-term target of 3.0–3.5x and management expects to operate below 3x in the near term); pro forma available liquidity approximately $600 million after refinancing activity.
Disciplined Capital Allocation and Reaffirmed Guidance
Reaffirmed full-year 2026 adjusted EBITDA guidance of $865 million to $915 million; reiterated growth CapEx of $250–275 million and total CapEx guidance of $400–445 million; year-to-date nonstrategic asset sale proceeds of ~$21 million to help fund newbuild program.
Asset Sales and Portfolio High-Grading
Sale of nonstrategic compression units totaling ~40,000 horsepower in Q1 (21,000 active) and prior sales of ~123,000 horsepower at end of 2025; Q1 included a ~$10 million net gain from asset sales, supporting fleet high-grading and funding newbuilds.
Order Book and Market Demand Visibility
Management reports strong customer demand, growing order book and bookings that were more geographically diverse in Q1 (only ~35% in Permian), supporting optimism for multi-year growth driven by LNG exports, rising gas-to-oil ratios, and data center power demand.
Share Repurchase Capacity
Repurchased ~171,000 shares for ~$4.4 million in Q1 at an average price of $25.87, leaving ~$113 million of remaining authorization under the repurchase program.
Operator
Good morning, and welcome to the Archrock First Quarter 2026 Conference Call. Your host for today's call is Megan Repine, Vice President of Investor Relations at Archrock. I would now like to turn the call over to Ms. Repine. You may begin.
Megan Repine
Thank you, Carrie. Hello, everyone, and thanks for joining us on today's call. With me today are Brad Childers, President and Chief Executive Officer of Archrock; and Doug Aron, Chief Financial Officer of Archrock. Yesterday, Archrock released its financial and operating results for the first quarter of 2026. If you have not received a copy, you can find the information on the company's website at www.archrock.com. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on current beliefs and expectations as well as assumptions made by and information currently available to Archrock's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that expectations will prove to be correct. Please refer to our latest SEC filings with the securities -- with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call.
In addition, our discussion today will reference certain non-GAAP financial measures, including adjusted EBITDA, adjusted EPS, adjusted net income, cash available for dividend, adjusted free cash flow and adjusted free cash flow after dividend. For reconciliations of ...
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