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    USAC
    Earnings call· Jun 2026(Q2 FY26)

    USA Compression Partners Q2 FY26 earnings call USAC

    Aug 4, 2026 Source

    Executive summary

    USA Compression Partners Q2 FY26 — Strong Horsepower Growth and Integration Progress

    USA Compression Partners reported strong Q2 FY26 results, driven by the J-W acquisition and robust demand for natural gas compression. The company is making deliberate investments in fleet expansion, integration of J-W, and advanced telemetry, positioning itself for sustained growth. Management highlighted unprecedented long-term customer commitments, reflecting confidence in future natural gas demand and the company's ability to deliver.

    Highlights

    5

    • Total revenues increased 37% year-over-year to $342.1 million.

    • Contract operations revenue grew 34% year-over-year to $304.9 million.

    • Average revenue per revenue-generating horsepower per month increased 7% year-over-year to $22.84.

    • Expected average annual new horsepower growth of approximately 2.5% through 2029, adding over 500,000 horsepower by 2030.

    • Contracted approximately 50% of new units scheduled for delivery in 2027 and mid-teens percentage for 2028.

    Concerns

    3

    • Adjusted gross margin percentage decreased to 63.5% in Q2, reflecting the blended impact of the J-W acquisition.

    • Expected incremental lube oil costs of approximately $1 million per month in the second half of the year.

    • New large horsepower lead times remain extended, as high as 200 weeks or nearly 4 years.

    Guidance & targets

    5
    CategoryTargetConfidence
    Average annual new horsepower growth
    approximately 2.5%
    high materiality
    High
    Full-year Adjusted EBITDA
    $770 million to $800 million
    high materiality
    High
    Full-year Distributable Cash Flow
    $480 million to $510 million
    high materiality
    High
    Full-year Maintenance Capital
    $60 million to $70 million
    medium materiality
    High
    Full-year Expansion Capital
    $230 million to $250 million
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Contract Operations
    Revenue growth driven primarily by the addition of J-W's horsepower and average revenue per revenue-generating horsepower.
    		$304.9 million34%——
    Parts and Service
    Reflects manufacturing and aftermarket services activity brought by J-W.
    		$22.1 million———

    Operational metrics

    24
    Total revenues
    $342.1 millionup 37% YoY
    Q2 FY26

    Compared to $250.1 million in the prior year period.

    Net income
    $45.7 million
    Q2 FY26
    Operating income
    $100.4 million
    Q2 FY26
    Net cash provided by operating activities
    $145.7 million
    Q2 FY26
    Cash interest expense net
    $47.4 million
    Q2 FY26
    Adjusted gross margin percentage
    63.5%
    Q2 FY26

    Reflects the blended impact of incorporating J-W's fleet.

    Leverage ratio
    3.72x
    Q2 FY26

    Remained just below the near-term target of 3.75x debt to EBITDA.

    Total fleet horsepower
    4.95 million
    Q2 FY26 end
    Average revenue per revenue-generating horsepower per month
    $22.840.5% sequential increase, 7% YoY increase
    Q2 FY26
    Average active horsepower
    4.45 million
    Q2 FY26
    Average utilization
    92%
    Q2 FY26

    Continues to reflect the blended impact of incorporating J-W's fleet.

    Expansion capital expenditures
    $46.8 million
    Q2 FY26

    Primarily consisted of new units.

    Maintenance capital expenditures
    $16.9 millionaccelerated vs Q1
    Q2 FY26
    Incremental lube oil cost
    $1 million
    H2 FY26

    Expected in the second half of the year as contracts are updated to reflect higher oil prices.

    Distribution yield
    approaching 8%
    Current

    Part of the compelling and differentiated value proposition.

    Leverage ratio target
    3.75x
    Near-term

    The company's leverage ratio is currently just below this target.

    ABL interest rate
    sub-6%
    Current

    The SOFR rate has remained relatively unchanged over the past 6 months at around 3.65%.

    SOFR rate
    3.65%relatively unchanged
    Past 6 months
    Longer term debt rate differential
    50 bps
    Current

    For 8-year to 8.5-year tenor, compared to current ABL rate.

    Natural gas demand growth
    140 Bcf/dayup over 30 Bcf from 2025 averages
    by end of 2031

    Expected to serve LNG demand and burgeoning data center growth.

    LNG demand growth
    18 Bcf to 20 Bcf/day
    by end of 2031

    Majority of the total natural gas demand growth.

    Data center demand growth
    4 Bcf to 6 Bcf/day
    next several years

    Associated with data centers coming online.

    Associated gas basins growth
    11 Bcf/day
    through 2031

    Permian leads growth in associated gas basins.

    Drier gas basins growth
    12 Bcf/day
    through 2031

    Composed of Northeast and Haynesville basins.

    Industry KPIs

    4
    MetricValueDetails
    FCF CAPEX leverage3.72xx
    M a integration progress—
    Orders bookings by segmentapproximately 50%%
    Data center new energy revenue capacity4 Bcf to 6 Bcf/dayBcf/day

    Orderbook & backlog

    2
    New units contracted for 2027 deliveryapproximately 50%Q2 FY26

    Percentage of total new units scheduled for delivery in 2027.

    New units contracted for 2028 deliverymid-teens percentageQ2 FY26

    Percentage of total new units planned for 2028.

    Deals & partnerships

    1
    J-W Power CompanyAcquisition of approximately 850,000 active horsepower and manufacturing business.

    The acquisition included approximately 850,000 active horsepower and specialized manufacturing facilities. Integration is underway, capturing labor and cost synergies, and integrating best practices.

    Capital programs

    2
    New Horsepower Growth Planunderwayover 500,000 horsepower

    Benefit: over 500,000 horsepower added

    This plan highlights internal confidence in natural gas demand growth and is a key pillar of the capital allocation framework.

    J-W Manufacturing Facility Capacityoperational

    Benefit: 100,000 to 125,000 horsepower

    The facility provides flexibility to build compression in-house, ordering engines early and components later, reducing full package cost commitment.

    Risks & headwinds

    4
    Elevated stopsQ2 FY26

    Elevated stops in Q2

    Mitigation: RFP activity remains healthy and pipeline of customer contracts gives confidence in continued forward progress.

    Increased lube oil costsH2 FY26

    Approximately $1 million per month incremental cost

    Mitigation: Renegotiating contracts upon renewal to cover increased cost inputs; CPIU escalators also help offset inflation.

    Extended new large horsepower lead timesCurrent and future

    As high as 200 weeks (nearly 4 years)

    Mitigation: Company has committed to multi-year horsepower additions, utilizing J-W's manufacturing facility for flexibility, and customers are planning further out.

    Debt markets pulling backRecently

    Yields have moved away, 10-year around 4.7%

    Mitigation: Company has ample liquidity under ABL at a low interest rate and remains patient, opportunistically exploring accessing public markets later this year.

    What to watch in Q3 FY26

    5

    J-W contract migration progress

    Next quarter
    CurrentUnderway
    TargetContinued progress on standardized terms, tenure, pricing, and unit optimization

    Why it matters

    Successful migration of J-W contracts is key to realizing full integration benefits and optimizing fleet profitability.

    Additionally, J-W contract migration is underway and progressing with a focus on standardized terms, tenure and pricing, all while assessing unit optimization.

    Q&A highlights

    7

    Given the improved balance sheet and growth visibility, what are the company's thoughts on distribution growth, target yields, and timing for a decision?

    Management stated that any distribution policy change would be board-approved. The current priority for excess cash flow is to fund the 2.5% annual new horsepower growth. They aim to maintain a prudent leverage profile and believe the current yield is attractive, positioning them competitively. They will continue to evaluate distribution in the future.

    “The current priority for excess cash flow is to prioritize that 2.5% of growth per annum in new horsepower. Balanced long-term growth should continue to elevate underlying value of the units and positions the company to have more flexibility as it relates to distribution discussions in the future.”

    asked by Douglas Irwin · answered by Christopher Paulsen

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Horsepower Investments and Growth Outlook

    USA Compression is committed to an average annual new horsepower growth of approximately 2.5% through 2029, aiming to add over 500,000 horsepower by 2030. This aggressive investment plan is driven by internal confidence in natural gas demand growth and the ability to maintain market share. It also serves as a key pillar of the company's capital allocation framework and long-term DCF growth formula, enabling multi-year customer deployment plans.

    02

    J-W Integration and Manufacturing Capabilities

    The integration of J-W is progressing well, with the company going live with SAP in February. Operationally, labor and cost synergies are being captured through fleet standardization. Commercially, best practices are being integrated across pricing, contracting, and customer service. J-W's specialized manufacturing facilities provide the ability to package compression in-house, offering optionality and differentiation, especially given extended lead times for new engines.

    03

    Technology Investments in Telemetry and AI

    USA Compression is investing in enhanced telemetry and real-time data capabilities across its fleet, including AI. The goal is to improve decision-making for maintenance, deployment, and efficiency. The company expects to reach a critical mass of connected assets with telemetry in 2027, which will enable predictive maintenance, more efficient field service routing, and fewer unplanned downtime events.

    04

    Customer Engagement and Long Lead Times

    The company's long-term growth plans have enabled different customer conversations, focusing on future support. USA Compression has already contracted approximately 50% of new units for 2027 and a mid-teens percentage for 2028, which is atypical for the industry. This reflects strong customer conviction in long-term production growth, driven by new large horsepower lead times extending up to 200 weeks.

    05

    Capital Allocation Priorities and Leverage

    USA Compression has deliberately positioned its business to simultaneously deliver on three core capital allocation priorities: growing the fleet, sustaining and ultimately growing the distribution, and maintaining a prudent leverage profile. The company aims for 2% to 3% annual new horsepower growth, a distribution yield approaching 8%, and an improving sub-4x leverage ratio, which it believes offers a compelling value proposition.

    06

    M&A Strategy and Geographic Focus

    The company is actively looking at M&A opportunities, maintaining a disciplined approach to ensure accretive deals. Geographic preference for M&A focuses on high-growth basins like the Permian and drier gas basins such as the Northeast and Haynesville, which are expected to drive significant natural gas demand growth. Underserved basins like the Rockies are also considered for their long-term gas growth potential.

    AI-generated summary of the company’s earnings call. Not investment advice.