Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2026
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-33666
Archrock, Inc.
(Exact name of registrant as specified in its charter)
Delaware
74-3204509
(State or other jurisdiction of incorporation or organization)
or organization)
(I.R.S. Employer Identification No.)
9807 Katy Freeway, Suite 100, Houston, Texas 77024
(Address of principal executive offices, zip code)
(281) 836-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common stock, $0.01 par value per share
AROC
New York Stock Exchange
NYSE Texas
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of the common stock of the registrant outstanding as of October 27, 2026: 175,354,040 shares.
TABLE OF CONTENTS
Page
Glossary
3
Forward-Looking Statements
5
Part I. Financial Information
Item 1. Financial Statements (unaudited)
6
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
7
Condensed Consolidated Statements of Equity
8
Condensed Consolidated Statements of Cash Flows
10
Notes to Unaudited Condensed Consolidated Financial Statements
11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
35
Item 3. Quantitative and Qualitative Disclosures About Market Risk
46
Item 4. Controls and Procedures
47
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
48
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
49
Signatures
50
2
GLOSSARY
The following terms and abbreviations appearing in the text of this report, including the Financial Statements, have the meanings indicated below.
2020 Plan
2020 Stock Incentive Plan
2025 Form 10-K
Annual Report on Form 10-K for the year ended December 31, 2025
2027 Notes
$500.0 million of 6.875% senior notes due April 2027
2027 Notes Redemption
$300.0 million redemption of the 2027 Notes, completed in November 2025
2027 Notes Tender Offer
$200.0 million partial redemption of the 2027 Notes, completed in August 2024
2028 Notes
$800.0 million of 6.250% senior notes due April 2028
2028 Notes Redemption
$800.0 million redemption of the 2028 Notes, completed in April 2026
2032 Notes
$700.0 million of 6.625% senior notes due September 2032
2034 Notes
$800.0 million of 6.000% senior notes due February 2034
Amended and Restated Credit Agreement
Amended and Restated Credit Agreement, dated May 16, 2023, which amended and restated that Credit Agreement, dated as of March 30, 2017, and which governs the Credit Facility
Archrock, our, we, us
Archrock, Inc., individually and together with its wholly owned subsidiaries
ASU
Accounting Standards Update
CODM
Chief operating decision maker
ColdStream
ColdStream Energy Holdings, LLC
Credit Facility
$1.5 billion asset-based revolving credit facility due May 2028, as governed by the Amended and Restated Credit Agreement, as amended
ECOTEC
Ecotec International Holdings, LLC
ESPP
Employee Stock Purchase Plan
Exchange Act
Securities Exchange Act of 1934, as amended
FASB
Financial Accounting Standards Board
FGC Holdco
FGC Holdco LLC, a subsidiary of ColdStream
Financial Statements
Condensed consolidated financial statements included in Part I Item 1 of this Quarterly Report on Form 10-Q
First Amendment to the Amended and Restated Credit Agreement
First Amendment to the Amended and Restated Credit Agreement, dated August 28, 2024, which amended the Amended and Restated Credit Agreement
Flowco
Flowco Holdings Inc.
Flowco Disposition
Transaction completed on August 1, 2025 pursuant to the asset purchase agreement, dated as of July 1, 2025, whereby Archrock sold certain contract operations customer service agreements, compressors, and other assets to Flowco
Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2026
GAAP
Accounting principles generally accepted in the U.S.
GHG
Greenhouse gases (carbon dioxide, methane and water vapor for example)
Hilcorp
Hilcorp Energy Company
Ionada
Ionada PLC
LIBOR
London Interbank Offered Rate
MaCH4 NRS
Natural gas liquid recovery patented technology solution developed by ColdStream, capable of capturing natural gas liquids instead of burning them and simultaneously delivering lean, dry fuel gas to natural gas fired engines and equipment at compressor stations
NGCS
Natural Gas Compression System, Inc. (“NGCSI”), and NGCSE, Inc. (“NGCSE”)
NGCS Acquisition
Transaction completed on May 1, 2025 (“NGCS acquisition date”) pursuant to certain definitive agreements dated as of March 10, 2025, whereby Archrock acquired all of the issued and outstanding equity interests in NGCS, referred to as “NGCSI Merger Agreement” and “NGCSE Merger Agreement” (together, “Merger Agreements”)
OB3 Tax Law
Public Law No. 119-21, a comprehensive tax and spending reform bill signed into law on July 4, 2025 also known as the “One Big Beautiful Bill Act” or “OBBBA”
OTC
Over-the-counter, as related to aftermarket services parts and components
Pillar 2
A framework proposed by the Organization for Economic Co-operation and Development to implement a minimum global tax of 15% for companies with global revenues and profits above certain thresholds
SAFE
Simple agreement for future equity
SEC
U.S. Securities and Exchange Commission
Second Amendment to the Amended and Restated Credit Agreement
Second Amendment to the Amended and Restated Credit Agreement, dated May 16, 2025, which amended the Amended and Restated Credit Agreement
Securities Act
Securities Act of 1933, as amended
SG&A
Selling, general and administrative
Share Repurchase Program
Share repurchase program approved by our Board of Directors that allows us to repurchase outstanding common stock and retire shares repurchased for a designated amount and period of time
SOFR
Secured Overnight Financing Rate
Spin-off
Spin-off of our international contract operations, international aftermarket services and global fabrication businesses into a standalone public company operating as Exterran Corporation in November 2015. Exterran Corporation was subsequently acquired by Enerflex Ltd. (“Enerflex”) in October 2022. The separation and distribution agreement specifies our right to receive payments from Enerflex and our obligation to satisfy capital calls from Enerflex
Tax Cuts and Jobs Act
Public Law No. 115-97, a comprehensive tax reform bill signed into law on December 22, 2017
Third Amendment to the Amended and Restated Credit Agreement
Third Amendment to the Amended and Restated Credit Agreement, dated December 12, 2025, which amended the Amended and Restated Credit Agreement
TOPS
Total Operations and Production Services, LLC
TOPS Acquisition
Transaction completed on August 30, 2024 pursuant to that certain purchase and sale agreement, dated as of July 22, 2024, whereby Archrock acquired all of the issued and outstanding equity interests in TOPS
U.S.
United States of America
VIE
Variable interest entity
WACC
Weighted-average cost of capital
4
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this Form 10-Q are forward-looking statements within the meaning of the Exchange Act, including, without limitation, statements regarding our business growth strategy and projected costs; future financial position; the sufficiency of available cash flows to fund continuing operations and pay dividends; the expected amount of our capital expenditures; anticipated cost savings; future revenue, adjusted gross margin and other financial or operational measures related to our business; the future value of our equipment; and plans and objectives of our management for our future operations. You can identify many of these statements by words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “will continue,” or similar words or the negative thereof.
Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this Form 10-Q. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations will prove to be correct. Known material factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include the risk factors described in our 2025 Form 10-K and those set forth from time to time in our filings with the SEC, which are available through our website at www.archrock.com and through the SEC’s website at www.sec.gov. These risk factors include, but are not limited to, risks related to macroeconomic conditions, including an increase in inflation and trade tensions; pandemics and other public health crises; ongoing international conflicts and tensions; risks related to our operations; competitive pressures; risks of acquisitions or mergers to reduce our ability to make distributions to our common stockholders; inability to make acquisitions on economically acceptable terms; inability to achieve the expected benefits of the NGCS Acquisition and difficulties integrating NGCS; risks related to our sustainability initiatives; uncertainty to pay dividends in the future; risks related to a substantial amount of debt and our debt agreements; inability to access the capital and credit markets or borrow on affordable terms to obtain additional capital; inability to fund purchases of additional compression equipment; vulnerability to interest rate increases and fluctuations; erosion of the financial condition of our customers; risks related to the loss of our most significant customers; uncertainty of the renewals for our contract operations service agreements; risks related to losing management or operational personnel; dependence on particular suppliers and vulnerability to product shortages and price increases; information technology and cybersecurity risks; tax-related risks; legal and regulatory risks, including climate-related and environmental, social and governance risks.
All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Form 10-Q. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained throughout this Form 10-Q.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(in thousands, except par value and share amounts)
(unaudited)
September 30, 2026
December 31, 2025
Assets
Current assets:
Cash and cash equivalents
$
4,147
1,553
Accounts receivable, net of allowance of $777 and $1,205, respectively
178,154
142,327
Inventory
116,664
109,747
Tax refund receivable
—
41,479
Other current assets
9,653
9,057
Total current assets
308,618
304,163
Property, plant and equipment, net
3,764,906
3,658,089
Operating lease right-of-use assets
12,442
13,581
Goodwill
124,178
125,189
Intangible assets, net
132,063
143,947
Contract costs, net
40,555
38,959
Deferred tax assets
858
2,059
Other assets
84,204
55,449
Non-current assets of discontinued operations
7,868
Total assets
4,475,692
4,349,304
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade
63,687
43,731
Accrued liabilities
139,384
145,024
Deferred revenue
8,522
8,391
Total current liabilities
211,593
197,146
Long-term debt
2,343,100
2,410,893
Operating lease liabilities
9,046
10,220
Deferred tax liabilities
269,355
198,309
Other liabilities
36,863
33,389
Non-current liabilities of discontinued operations
Total liabilities
2,877,825
2,857,825
Commitments and contingencies (Note 11)
Equity:
Preferred stock: $0.01 par value per share, 50,000,000 shares authorized, zero issued
Common stock: $0.01 par value per share, 250,000,000 shares authorized, 185,182,119 and 184,746,759 shares issued, respectively
1,851
1,847
Additional paid-in capital
3,876,627
3,876,834
Accumulated deficit
(2,151,500)
(2,257,386)
Treasury stock: 9,831,608 and 9,877,754 common shares, at cost, respectively
(129,111)
(129,816)
Total equity
1,597,867
1,491,479
Total liabilities and equity
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
(in thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
2026
2025
Revenue:
Contract operations
331,155
326,269
991,295
944,993
Aftermarket services
39,656
56,161
124,521
167,752
Total revenue
370,811
382,430
1,115,816
1,112,745
Cost of sales, exclusive of depreciation and amortization
92,433
86,710
280,376
272,661
30,580
43,115
95,707
128,258
Total cost of sales, exclusive of depreciation and amortization
123,013
129,825
376,083
400,919
26,049
37,676
110,921
111,127
Depreciation and amortization
71,948
67,130
213,160
187,889
Long-lived and other asset impairment
3,217
4,676
13,357
16,495
Restructuring charges
688
261
1,497
Debt extinguishment gain
(687)
Interest expense
37,017
43,661
113,543
123,113
Transaction-related costs
270
1,767
1,194
11,829
Gain on sale of assets, net
(2,146)
(3,835)
(12,559)
(15,467)
Other (income) expense, net
(103)
3,984
(1,675)
459
Income before income taxes
111,546
96,858
302,218
274,884
Provision for income taxes
26,660
25,425
75,885
68,994
Income before equity in net loss of unconsolidated affiliate
84,886
71,433
226,333
205,890
Equity in net loss of unconsolidated affiliate
420
185
1,353
372
Net income
84,466
71,248
224,980
205,518
Basic and diluted earnings per common share
0.48
0.40
1.27
1.16
Weighted-average common shares outstanding:
Basic
174,526
174,619
174,341
174,549
Diluted
174,774
174,913
174,700
174,855
(in thousands, except shares and per share amounts)
Additional
Common Stock
Paid-in
Accumulated
Treasury Stock
Amount
Shares
Capital
Deficit
Total
Balance at June 30, 2025
1,858
185,783,778
3,892,168
(2,371,609)
(113,977)
(9,216,485)
1,408,440
Shares repurchased
(25,371)
(1,094,516)
Shares retired
(11)
(25,360)
25,371
1,094,516
Shares withheld related to net settlement of equity awards
(8)
(301)
Cash dividends ($0.210 per common share)
(36,921)
Shares issued under ESPP
18,247
403
Stock-based compensation, net of forfeitures
4,488
(8,395)
Balance at September 30, 2025
184,707,509
3,871,699
(2,337,282)
(113,985)
(9,225,181)
1,422,279
Balance at June 30, 2026
1,849
184,982,818
3,872,653
(2,195,403)
(126,994)
(9,765,857)
1,552,105
(2,117)
(55,955)
Cash dividends ($0.230 per common share)
(40,563)
20,405
555
178,896
3,419
(9,796)
3,421
Balance at September 30, 2026
185,182,119
(9,831,608)
Balance at December 31, 2024
1,854
185,350,510
3,880,936
(2,438,074)
(121,185)
(10,182,985)
1,323,531
(54,416)
(2,330,631)
(38)
(3,813,831)
(76,574)
76,612
3,813,831
(14,996)
(505,269)
Cash dividends ($0.590 per common share)
(104,726)
52,266
1,169
805,050
12,592
(20,127)
12,600
Time-based cash or equity settled units settled as equity
1
62,500
1,755
1,756
Contribution to Enerflex
(1,123)
Shares issued for NGCS Acquisition
22
2,251,014
52,944
52,966
Balance at December 31, 2025
184,746,759
(9,877,754)
(4,422)
(170,952)
(818,432)
(20,233)
20,241
818,432
(15,114)
(522,065)
Cash dividends ($0.670 per common share)
(119,094)
58,128
1,586
1,103,987
15,728
(79,269)
15,739
91,677
2,712
2,713
9
(in thousands)
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash restructuring charges
251
483
Inventory write-downs
229
792
Amortization of operating lease right-of-use assets
3,551
3,469
Amortization of deferred financing costs
4,578
4,772
Amortization of debt premium
(501)
(1,504)
Amortization of capitalized implementation costs
3,076
2,431
Stock-based compensation expense
18,452
14,356
(Benefit from) provision for credit losses
(195)
524
Deferred income tax provision
73,164
67,350
Amortization of contract costs
14,593
17,053
Deferred revenue recognized in earnings
(17,815)
(14,596)
Changes in operating assets and liabilities:
Accounts receivable, net
(35,521)
(46,064)
(10,096)
(11,823)
10,209
(18,391)
Contract costs
(16,189)
(19,046)
Accounts payable and other liabilities
(367)
(4,600)
18,581
17,700
Other
106
37
Net cash provided by operating activities
505,459
407,629
Cash flows from investing activities:
Capital expenditures
(329,355)
(414,667)
Proceeds from sale of business
71,000
Proceeds from sale of property, equipment and other assets
36,517
42,556
Proceeds from insurance and other settlements
155
3,811
Cash paid in NGCS Acquisition, net of cash acquired
(294,613)
Investments in unconsolidated affiliates and other strategic investments
(4,277)
(471)
Net cash used in investing activities
(296,960)
(592,384)
Cash flows from financing activities:
Borrowings of long-term debt
1,874,025
1,495,701
Repayments of long-term debt
(1,932,200)
(1,135,301)
Redemption of 2028 Notes
(800,000)
Proceeds from 2034 Notes offering
800,000
Payments of debt issuance costs
(10,686)
(1,890)
Dividends paid to stockholders
Repurchases of common stock
Taxes paid related to net share settlement of equity awards
Proceeds from stock issued under ESPP
Net cash (used in) provided by financing activities
(205,905)
184,418
Net increase (decrease) in cash and cash equivalents
2,594
(337)
Cash and cash equivalents, beginning of period
4,420
Cash and cash equivalents, end of period
4,083
Supplemental disclosure of non-cash investing transactions:
Issuance of Archrock common stock pursuant to NGCS Acquisition
Notes to Condensed Consolidated Financial Statements
1. Description of Business and Basis of Presentation
We are an energy infrastructure company with a primary focus on midstream natural gas compression. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Our business supports a must–run service that is essential to the production, processing, transportation and storage of natural gas.
We operate in two business segments: contract operations and aftermarket services. Our contract operations business primarily includes designing, sourcing, owning, installing, operating, servicing, repairing and maintaining our owned fleet of natural gas compression equipment to provide natural gas compression services to our customers. Our aftermarket services business provides a full range of services to support the compression needs of our customers that own compression equipment, including operations, maintenance, overhaul and reconfiguration services and sales of parts and components.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to this Form 10-Q and do not include all information and disclosures required by GAAP. Therefore, this information should be read in conjunction with our consolidated financial statements and notes contained in our 2025 Form 10-K. The information furnished herein reflects all adjustments that are, in the opinion of management, of a normal recurring nature and considered necessary for a fair statement of the results of the interim periods reported. All intercompany balances and transactions have been eliminated in consolidation. Operating results for the nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.
2. Recent Accounting Developments
Accounting Standards Updates Implemented
Measurement of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU 2025-05, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends Topic 326 to provide for a practical expedient for all entities and an accounting policy election for entities other than public business entities related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under FASB ASU 2016-10, Revenue from Contracts with Customers (Topic 606). All entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. We adopted ASU 2025-05 on January 1, 2026 and elected the practical expedient. The adoption did not have a material impact on our condensed consolidated financial statements.
Income Tax Disclosures
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires additional disclosures, primarily focused on the disclosure of income taxes paid and the rate reconciliation table. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. We adopted ASU 2023-09 retrospectively during the year ended December 31, 2025.
Notes to Condensed Consolidated Financial Statements (continued)
Business Combinations – Joint Venture Formations
In August 2023, the FASB issued ASU 2023-05, to reduce diversity in practice and provide decision-useful information to a joint venture’s investors by requiring that a joint venture apply a new basis of accounting upon formation. By applying a new basis of accounting, a joint venture will recognize and initially measure its assets and liabilities at fair value, with exceptions to fair value measurement that are consistent with the business combinations guidance, on the date of formation. ASU 2023-05 is effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. Additionally, a joint venture that was formed before January 1, 2025, may elect to apply the amendments retrospectively if it has sufficient information to do so. We adopted ASU 2023-05 during the three months ended March 31, 2025 and its adoption had no impact on our condensed consolidated financial statements.
Accounting Standards Updates Not Yet Implemented
Accounting for Internal-Use Software Costs
In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, to clarify and modernize the accounting for costs related to internal-use software. ASU 2025-06 removes all references to software project development stages in Subtopic 350-40 and clarifies cost capitalization may begin when (1) management has authorized and committed to funding the project and (2) it is probable the project will be completed, and the software will be used to perform its intended function and provides new examples to illustrate its application. ASU 2025-06 specifies that the property, plant and equipment disclosure requirements apply to capitalized software costs accounted for under Subtopic 350-40, regardless of how those costs are presented in the financial statements. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years. Entities may apply the guidance using a prospective, retrospective or modified transition approach. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40), which will require tabular disclosures in the notes to the consolidated financial statements that disaggregate certain relevant expense captions presented on the face of the income statement into specified natural expense categories, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization. ASU 2024-03 also requires disclosure of the total amount of selling expenses for each reporting period and, in annual periods, a description of the entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. Entities are required to adopt ASU 2024-03 prospectively with the option for retrospective application. We continue to advance our implementation efforts to adopt ASU 2024-03, including developing disclosure methodologies, identifying data sources, and designing related processes and controls. While we do not expect the adoption to impact our condensed consolidated financial statements, we do expect the adoption to impact presentation of expense information within related disclosures.
3. Business Transactions
On August 1, 2025, we completed the sale of certain contract operations customer agreements and approximately 155 compressors, comprising approximately 47,000 horsepower, used to provide compression services under those agreements along with other supporting assets, for aggregate total consideration of $71.0 million. Goodwill, customer-related intangible assets and deferred revenue were allocated based on a ratio of the horsepower sold relative to the total horsepower of the asset group. The disposal group was classified as held for sale as of June 30, 2025, and its carrying value was adjusted to estimated fair value less costs to sell. We recorded a write-down of $0.9 million and $9.6 million during the three and nine months ended September 30, 2025, which is included in long-lived and other asset impairment in our condensed consolidated statements of operations.
12
On May 1, 2025, we completed the NGCS Acquisition, whereby we acquired all of the issued and outstanding equity interests in NGCS, including a fleet of approximately 326,000 operating horsepower and an 18,000 horsepower backlog of contracted new equipment, for aggregate total consideration of $349.4 million. Total consideration consisted of $296.5 million in cash, of which we paid $265.1 million to NGCSI sellers and $31.4 million to NGCSE sellers, and approximately 2.3 million shares of common stock issued to NGCSE sellers with an NGCS acquisition date fair value of $53.0 million. The cash portion of the purchase price was funded with borrowings under the Credit Facility. In accordance with the terms of the Merger Agreements, customary post-closing adjustments were made during the third quarter of 2025, resulting in a reduction to the purchase price of approximately $2.0 million.
The NGCS Acquisition was accounted for using the acquisition method of accounting, which requires, among other things, assets acquired and liabilities assumed to be recorded at their fair value on the NGCS acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill.
The following table summarizes the purchase price allocation based on the fair values of the assets acquired and liabilities assumed as of the NGCS acquisition date:
NGCSI
NGCSE
Cash
1,671
188
1,859
Accounts receivable
4,960
5,007
11,385
143
Property, plant and equipment
200,637
40,460
241,097
Operating lease right of use asset
138
50,955
21,616
72,571
Intangible assets
33,320
31,210
64,530
385
(2,700)
(49)
(2,749)
(1,833)
(171)
(2,004)
(138)
(32,258)
(8,953)
(41,211)
(1,575)
Purchase price
265,090
84,348
349,438
The amount of goodwill resulting from the NGCS Acquisition is attributable to the expansion of our services in the Permian Basin where we currently operate and was allocated to our contract operations segment. The goodwill recorded is considered to have an indefinite life and will be reviewed annually for impairment or more frequently if indicators of potential impairment exist. None of the goodwill recorded for the NGCS Acquisition is expected to be deductible for U.S. federal income tax purposes.
Tax Contingency and Indemnification
We recorded a non-income tax-based contingency of $0.5 million and a corresponding indemnification asset of $0.5 million based on facts existing on the NGCS acquisition date. The non-income tax-based contingency arose from pre-acquisition activity at NGCS. As part of the NGCS Acquisition, the sellers agreed to indemnify us for certain non-income tax and environmental contingencies up to $11.4 million as of the NGCS acquisition date. Dependent upon facts and circumstances, the sellers’ indemnification obligation may be reduced over a period of four years from the NGCS acquisition date but may also be extended until the resolution of claims timely submitted to the sellers.
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Results of Operations
The results of operations attributable to the NGCS Acquisition have been included in our condensed consolidated financial statements as part of our contract operations segment since the NGCS acquisition date. We are unable to provide earnings attributable to the assets acquired and liabilities assumed since the NGCS acquisition date, as we do not prepare full stand-alone earnings reports for those assets and liabilities.
Transaction-Related Costs
The following table presents transaction-related costs incurred in connection with the NGCS Acquisition by cost type:
Professional fees (1)
131
144
540
6,646
Compensation-related costs (2)
867
64
1,579
Other costs
92
455
Total transaction-related costs
1,103
604
8,680
Unaudited Pro Forma Financial Information
The unaudited pro forma financial information for the three and nine months ended September 30, 2025 was derived by adjusting our historical financial statements in order to give effect to the assets acquired and liabilities assumed in the NGCS Acquisition. The NGCS Acquisition is presented in this unaudited pro forma financial information as though the acquisition occurred as of January 1, 2024, and reflects the following:
The unaudited pro forma financial information below combines the effects of the NGCSI Merger Agreement and the NGCSE Merger Agreement, as the Merger Agreements were negotiated as a single transaction and mutually dependent to close. The unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of our results of operations that would have occurred had the NGCS Acquisition been consummated at the beginning of the period presented, nor is it necessarily indicative of future results.
September 30, 2025
Revenue
1,139,021
Net income attributable to Archrock stockholders
72,096
212,960
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Valuation Methodologies
The valuation methodologies and significant inputs for fair value measurements associated with the NGCS Acquisition are detailed by significant asset class below. The fair value measurements for property, plant and equipment and intangible assets are based on significant inputs that are not observable in the market and therefore represent Level 3 measurements.
Property, Plant and Equipment
Property, plant and equipment is primarily comprised of natural gas and electric motor drive compression equipment that will depreciate on a straight-line basis over an estimated average remaining useful life of 15 years. The fair value of the property, plant and equipment was determined using both the cost and market approach. For most of the compression equipment, we estimated the replacement cost using the direct cost method by evaluating recent purchases of similar assets or published data, then adjusting the replacement cost for physical deterioration and functional and economic obsolescence, as applicable. For certain compression equipment, we then considered the market approach by comparing our estimated dollar per horsepower to market comparables and market participant assumptions and adjusted as necessary.
Other fixed assets were valued using the indirect cost method, whereby we applied asset-specific trend information using published indexes to calculate the estimated replacement cost of assets that were identified to be reflected at historical cost. Other assets were depreciated based on published normal useful life estimates and prior experience with similar assets.
Intangible Assets
The intangible assets consist of customer relationships and trade names that have estimated useful lives of 12 years and five years, respectively. The amount of intangible assets and their associated useful lives were determined based on the period over which the assets are expected to contribute directly or indirectly to our future cash flows.
The fair value of the identifiable intangible assets related to customer relationships was determined using the multi-period excess earnings method, which is a specific application of the discounted cash flow method, an income approach, whereby we estimated and then discounted the future cash flows of the intangible asset by adjusting overall business revenue for attrition, obsolescence, cost of sales, operating expenses, taxes and the required returns attributable to other contributory assets acquired. Significant estimates made in arriving at expected future cash flows included our expected customer attrition rate and the amount of earnings attributable to the assets. To discount the estimated future cash flows, we utilized a discount rate that was at a premium to our WACC to reflect the less liquid nature of the customer relationships relative to the tangible assets acquired.
The trade name fair market value was measured using the relief-from-royalty method under the income approach, whereby we calculated the royalty savings by estimating a reasonable royalty rate that a third party would negotiate in a licensing agreement expressed as a percentage of total revenue involving a trade name. The revenue related to the trade name was multiplied by the selected royalty rate over the estimated expected useful life of the trade name to arrive at the royalty savings. The royalty savings were tax effected and discounted to present value using a discount rate commensurate with the risk profile of the trade name relative to our WACC and the return on the other acquired assets.
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4. Accounts Receivable
Accounts receivable, net is comprised of the following:
Customer related:
Third party
152,919
128,318
Related parties (1)
358
1,739
25,654
13,475
178,931
143,532
Allowance for credit losses
(777)
(1,205)
As of September 30, 2026, we continued to recognize a gross insurance recovery receivable within accounts receivable, net and other assets in our condensed consolidated balance sheets as recovery under the applicable insurance policy remained probable and reasonably estimable. We continue to recognize a gross litigation settlement liability within accrued liabilities related to a settlement agreement.
5. Inventory
Inventory is comprised of the following:
Parts and supplies
102,077
96,943
Work in progress
14,587
12,804
6. Property, Plant and Equipment, Net
Property, plant and equipment, net is comprised of the following:
Compression equipment, facilities and other fleet assets
5,023,115
4,791,318
Land and buildings
37,302
36,058
Transportation and shop equipment
149,641
147,160
Computer hardware and software
81,197
79,367
9,549
11,997
5,300,804
5,065,900
Accumulated depreciation
(1,535,898)
(1,407,811)
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7. Other Assets
Other assets are comprised of the following:
28,840
25,440
Insurance recovery receivable
29,566
Other long-term assets
25,798
30,009
8. Investments in Unconsolidated Affiliates and Other Strategic Investments
Investment in FGC Holdco
In October 2024, we, together with ColdStream, entered into a limited liability agreement with FGC Holdco, a company that designs, manufactures and sells MaCH4 NRS equipment through distributors. As of the effective date of the agreement, FGC Holdco had initial authorized capital of 1.0 million units, with 68% of its units issued to ColdStream and 32% of its units issued to us at a cost of $0.001 per unit. Subject to certain contractual provisions, we are obligated to fund, as capital contributions, our proportionate share of FGC Holdco’s general, administrative and operational costs and expenses.
On July 1, 2026, the limited liability agreement was amended to include, among other provisions, authorization of additional capital of 80 thousand units issued to us at a purchase price of $25 per unit. In connection with the amendment, we invested $2.0 million in FGC Holdco, which resulted in a 37% equity interest in FGC Holdco at that time.
During the three months ended September 30, 2026 and 2025, we invested $2.5 million and $0.1 million, respectively, in FGC Holdco and during the nine months ended September 30, 2026 and 2025, we invested $2.9 million and $0.5 million, respectively, in FGC Holdco. As of September 30, 2026 and December 31, 2025, the carrying value of our investment in FGC Holdco was $2.2 million and $0.2 million, respectively, which is included in other assets in our condensed consolidated balance sheets. Cash contributions are included in the investing activities section of our condensed consolidated statements of cash flows.
We determined FGC Holdco is a VIE over which we do not have the power to direct the activities that most significantly impact economic performance and therefore are not the primary beneficiary. The board of directors of FGC Holdco has control over the activities that most significantly impact the economic performance, and although we participate in board governance, we do not have the unilateral ability to control board decisions. We apply the equity method of accounting to account for our investment. The carrying value of our equity investment is impacted by our share of investee income or loss, distributions, amortization or accretion of basis differences and other-than-temporary impairments.
As of September 30, 2026, we had a $2.8 million basis difference between the cost of our investment and our proportionate share of the carrying value of FGC Holdco’s underlying net assets. The basis difference is primarily attributed to intangible assets and is being amortized over the estimated 20-year useful life.
We recognized equity method losses of $0.5 million and $0.3 million during the three months ended September 30, 2026 and 2025, respectively, and $1.4 million and $0.5 million during the nine months ended September 30, 2026 and 2025, respectively, which is included in equity in net loss of unconsolidated affiliate in our condensed consolidated statements of operations. We eliminate intra-entity profits and losses on transactions with FGC Holdco to the extent such profits or losses are not realized through transactions with third parties. See Note 19 (“Related Party Transactions”) for further details.
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Investment in Ionada
We are the lead investor in a series A preferred financing round for Ionada, a global carbon capture technology company committed to reducing GHG emissions and creating a sustainable future. We have elected the fair value measurement alternative to account for this investment. See Note 18 (“Fair Value Measurements”) for further details.
On March 13, 2026, we invested $1.3 million in Ionada and as a result, the carrying value of our investment in Ionada at September 30, 2026 was $6.8 million, including transaction costs of $0.5 million, and is included in other assets in our condensed consolidated balance sheets. As of September 30, 2026 and December 31, 2025, we had a fully diluted ownership equity interest in Ionada of 16% and 12%, respectively.
On October 21, 2026, we invested an additional $0.9 million in Ionada, and as a result, the carrying value of our investment was $7.7 million and resulted in a fully diluted ownership equity interest in Ionada of 18% at that time. Subject to certain contractual conditions, we may invest on the same terms and conditions as the initial and secondary investments, up to $3.8 million prior to April 3, 2027, for a fully diluted ownership interest up to 25%.
Investment in ECOTEC
We hold a 25% equity interest in ECOTEC, a company specializing in methane emissions detection, monitoring and management. We have elected the fair value option to account for this investment, and during the three and nine months ended September 30, 2026 and 2025, we did not recognize unrealized gains or losses related to the change in fair value of our investment. Changes in the fair value of this investment are recognized in other (income) expense, net in our condensed consolidated statements of operations. See Note 18 (“Fair Value Measurements”) for further details.
Other Strategic Investments
In December 2025, we entered into a SAFE with Shoreline AI, a software-as-a-service company, focused on predictive maintenance for energy infrastructure assets. We have elected the fair value measurement alternative to account for this investment and as of both September 30, 2026 and December 31, 2025, the carrying value of our investment was equal to its $5.2 million cost, including transaction costs of $0.2 million, and is included in other assets in our condensed consolidated balance sheets. See Note 18 (“Fair Value Measurements”) for further details.
f
9. Accrued Liabilities
Accrued liabilities are comprised of the following:
Accrued salaries and other benefits
40,160
61,017
Accrued income and other taxes
14,969
17,192
Accrued interest
15,908
31,037
Accrued sales and use tax audit settlement liabilities
9,867
Other accrued liabilities
68,347
25,911
As of September 30, 2026, we continue to recognize a gross litigation settlement liability within accrued liabilities related to a settlement agreement finalized during the third quarter of 2026, prior to the issuance of the condensed consolidated financial statements for the quarterly period ended June 30, 2026. We also continue to recognize a gross insurance recovery receivable within accounts receivable, net and other assets in our condensed consolidated balance sheets as of September 30, 2026, as recovery under the applicable insurance policy remained probable and reasonably estimable.
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10. Long-Term Debt
Long-term debt is comprised of the following:
860,300
918,475
6.000% senior notes due February 2034:
Principal outstanding
Unamortized debt issuance costs
(9,784)
790,216
6.625% senior notes due September 2032:
700,000
(7,416)
(8,356)
692,584
691,644
6.250% senior notes due April 2028:
Unamortized debt premium
4,513
(3,739)
800,774
In December 2025, we amended our Amended and Restated Credit Agreement to, among other things, remove the 0.10% per annum credit spread adjustment that was previously included in the calculation of the interest rate applicable to the loans made under the Credit Facility, decrease the applicable margin for all borrowings by 0.25% per annum such that the applicable margin for borrowings varies and decrease the commitment fee payable on the daily unused amount of the Credit Facility from 0.375% per annum to 0.25% per annum when less than 50% of the Credit Facility is utilized. We did not incur any transaction costs related to the Third Amendment to the Amended and Restated Credit Agreement.
As of September 30, 2026, there were $3.2 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 1.7%. The weighted-average annual interest rate on the outstanding balance under the Credit Facility was 5.5% and 5.8% at September 30, 2026 and December 31, 2025, respectively. We incurred $0.4 million and $0.5 million of commitment fees on the daily unused amount of the Credit Facility during the three months ended September 30, 2026 and 2025, respectively, and $1.5 million during both the nine months ended September 30, 2026 and 2025.
As of September 30, 2026, we were in compliance with all covenants under our Amended and Restated Credit Agreement. Additionally, all undrawn capacity on our Credit Facility was available for borrowings as of September 30, 2026.
In May 2025, we amended our Amended and Restated Credit Agreement to, among other things, increase the borrowing capacity of the Credit Facility from $1.1 billion to $1.5 billion and to provide for the ability for the borrowers to request additional increases in the aggregate commitments under the Credit Facility to a total amount not to exceed $2.3 billion (with any increase being at the discretion of the lenders and subject to the satisfaction of certain conditions set forth in the Amended and Restated Credit Agreement).
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During the year ended December 31, 2025, we incurred $1.9 million in transaction costs related to the Second Amendment to the Amended and Restated Credit Agreement, which were included in other assets in our condensed consolidated balance sheets and are being amortized over the remaining term of the Credit Facility.
In August 2024, we amended our Amended and Restated Credit Agreement to, among other things:
We incurred $2.6 million in transaction costs related to the First Amendment to the Amended and Restated Credit Agreement, which were included in other assets in our condensed consolidated balance sheets and are being amortized over the remaining term of the Credit Facility.
On January 21, 2026, we completed a private offering of $800.0 million aggregate principal amount of 6.0% senior notes due 2034 and received net proceeds of $789.4 million after deducting issuance costs. In January 2026, the approximately $10.6 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statements of operations over the term of the notes. The net proceeds were used to repay borrowings outstanding under our Credit Facility.
The 2034 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2034 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act. The 2034 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us, and by all of our existing subsidiaries, other than Archrock Services, L.P. and Archrock Partners Finance Corp., which are the issuers of the 2034 Notes. The 2034 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior unsecured indebtedness.
We may, at our option, redeem all or part of the 2034 Notes at any time on or after February 1, 2029, at specified redemption prices, plus any accrued and unpaid interest. In addition, prior to February 1, 2029, we may redeem up to 40% of the 2034 Notes, in an amount equal to the net cash proceeds of one or more equity offerings, at a specified redemption price, plus any accrued and unpaid interest. We may also redeem all or part of the 2034 Notes at any time prior to February 1, 2029 at a redemption price equal to the principal amount and a make whole premium, plus any accrued and unpaid interest.
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The indenture governing the 2034 Notes contains covenants that, among other things, limit our ability to pay dividends on, repurchase or redeem our common stock or repurchase or redeem subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred securities; create or incur certain liens; sell assets; consolidate, merge or transfer all or substantially all of our assets; enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; engage in transactions with affiliates; and create unrestricted subsidiaries. If the 2034 Notes achieve an investment grade rating from any two out of three of Moody’s Investors Service, Inc., Fitch Ratings, Inc. and S&P Global Ratings and no default has occurred and is continuing, many of these covenants will terminate. The indenture governing the 2034 Notes also contains customary events of default.
In August 2024, we completed a private offering of $700.0 million aggregate principal amount of 6.625% senior notes due September 2032 and received net proceeds of $690.0 million after deducting issuance costs. The $10.0 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statements of operations over the term of the notes. A portion of the net proceeds were used to fund a portion of the cash consideration for the TOPS Acquisition, the 2027 Notes Tender Offer and to repay borrowings outstanding under our Credit Facility.
The 2032 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. We offered and issued the 2032 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act.
The 2032 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us, and by all of our existing subsidiaries, other than Archrock Partners, L.P. and Archrock Partners Finance Corp., which are the issuers of the 2032 Notes. The 2032 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior unsecured indebtedness.
We may, at our option, redeem all or part of the 2032 Notes at any time on or after September 1, 2027, at specified redemption prices, plus any accrued and unpaid interest. In addition, prior to September 1, 2027, we may redeem up to 40% of the 2032 Notes, in an amount equal to the net cash proceeds of one or more equity offerings, at a specified redemption price, plus any accrued and unpaid interest. We may also redeem all or part of the 2032 Notes at any time prior to September 1, 2027 at a redemption price equal to the principal amount and a make whole premium, plus any accrued and unpaid interest.
The indenture governing the 2032 Notes contains covenants that, among other things, limit our ability to pay dividends on, repurchase or redeem our common stock or repurchase or redeem subordinated debt; make investments; incur or guarantee additional indebtedness or issue preferred securities; create or incur certain liens; sell assets; consolidate, merge or transfer all or substantially all of our assets; enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; engage in transactions with affiliates; and create unrestricted subsidiaries. If the 2032 Notes achieve an investment grade rating from each of Moody’s Investors Service, Inc. and S&P Global Ratings and no default has occurred and is continuing, many of these covenants will terminate. The indenture governing the 2032 Notes also contains customary events of default.
In December 2020, we completed a private offering of $300.0 million aggregate principal amount of 6.25% senior notes due April 2028, which were issued pursuant to the indenture under which we completed a private offering of $500.0 million aggregate principal amount of 6.25% senior notes in December 2019. The notes of the two offerings have identical terms and are treated as a single class of securities. The $300.0 million of notes were issued at 104.875% of their face value and have an effective interest rate of 5.6%. The $500.0 million of notes were issued at 100% of their face value and have an effective interest rate of 6.8%.
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The net proceeds from the 2028 Notes were used to repay borrowings outstanding under our Credit Facility. Issuance costs related to the 2028 Notes were considered deferred financing costs, and together with the issue premium of the December 2020 offering of 2028 Notes, were recorded within long-term debt in our condensed consolidated balance sheets and were being amortized to interest expense in our condensed consolidated statements of operations over the terms of the notes.
On April 1, 2026, we repurchased our 2028 Notes. The 2028 Notes were redeemed at 100% of their $800.0 million aggregate principal amount plus accrued and unpaid interest of approximately $25.0 million with borrowings under the Credit Facility. We recorded a debt extinguishment gain of $0.7 million in our condensed consolidated statements of operations during the second quarter of 2026 due to the write-off of unamortized debt premium of $4.0 million, which was partially offset by the write-off of unamortized debt issuance costs of $3.3 million.
In March 2019, we completed a private offering of $500.0 million aggregate principal amount of 6.875% senior notes due April 2027 and received net proceeds of $491.2 million after deducting issuance costs of $8.8 million. The $500.0 million of notes were issued at 100% of their face value and have an effective interest rate of 7.9%.
The net proceeds from the 2027 Notes were used to repay borrowings outstanding under our Credit Facility. Issuance costs related to the 2027 Notes were considered deferred financing costs and were recorded within long-term debt in our condensed consolidated balance sheets and were being amortized to interest expense in our condensed consolidated statements of operations over the terms of the notes.
In connection with the offering of the 2032 Notes, we completed a concurrent cash tender offer of $202.0 million, which reflects approximately 101% of the $200.0 million aggregate principal amount of the tendered 2027 Notes and $0.2 million of agent and legal fees. On the date of tender, the net carrying value of the tendered 2027 Notes was $198.8 million and during the third quarter of 2024, we recorded a debt extinguishment loss of $3.2 million in our condensed consolidated statements of operations.
In November 2025, we repurchased our 2027 Notes. The 2027 Notes were redeemed at 100% of their $300.0 million aggregate principal amount plus accrued and unpaid interest of approximately $2.6 million with borrowings under the Credit Facility. We recorded a debt extinguishment loss of $0.9 million related to unamortized debt issuance costs during the fourth quarter of 2025.
11. Commitments and Contingencies
Purchase Commitments
As of September 30, 2026, we had purchase commitments for new fleet assets with anticipated deliveries through 2030 in the amount of $958.1 million, of which $278.1 million is due within the next 12 months.
Insurance Matters
Our business can be hazardous, involving unforeseen circumstances such as uncontrollable flows of natural gas or well fluids and fires or explosions. As is customary in our industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Our insurance coverage includes property damage, general liability and commercial automobile liability and other coverage we believe is appropriate. We believe that our insurance coverage is customary for the industry and adequate for our business; however, losses and liabilities not covered by insurance would increase our costs.
Additionally, we are substantially self-insured for workers’ compensation and employee group health claims in view of the relatively high per-incident deductibles we absorb under our insurance arrangements for these risks. Losses up to the deductible amounts are estimated and accrued based upon known facts, historical trends and industry averages. We are also self-insured for property damage to our offshore assets.
Tax Matters
We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to audit by the taxing authorities, it is reasonably possible that an audit could result in additional taxes due. We accrue for such additional taxes when we determine that it is probable that we have incurred a liability and we can reasonably estimate the amount of the liability. As of September 30, 2026 and December 31, 2025, we accrued $7.7 million and $7.9 million, respectively, for the outcomes of non-income-based tax audits. We do not expect that the ultimate resolutions of these audits will result in a material variance from the amounts accrued. We do not accrue for unasserted claims for tax audits unless we believe the assertion of a claim is probable, it is probable that it will be determined that the claim is owed and we can reasonably estimate the claim or range of the claim. We believe the likelihood is remote that the impact of potential unasserted claims from non-income-based tax audits could be material to our condensed consolidated financial position, but it is reasonably possible that the resolution of future audits could be material to our condensed consolidated results of operations or cash flows.
As of September 30, 2026 and December 31, 2025, $2.9 million and $3.1 million, respectively, of the tax contingencies mentioned above had an offsetting indemnification asset.
We settled certain sales and use tax audits for which we recorded net benefits of $9.9 million and $10.8 million during the three and nine months ended September 30, 2025, respectively. Additional settlement activity during the fourth quarter of 2025 increased the cumulative net settlement benefit recorded for the year ended December 31, 2025 to $27.8 million. For certain subsequent open sales and use tax periods, we recorded tax credits resulting in a net benefit of $8.0 million during the year ended December 31, 2025. The net benefits from these settlements and credits were primarily reflected as a decrease to cost of sales, exclusive of depreciation and amortization in our condensed consolidated statements of operations. As of December 31, 2025, these settlements and credits were reflected in our condensed consolidated balance sheet as a $41.5 million tax refund receivable, partially offset by $9.9 million in accrued liabilities and $1.0 million in other liabilities.
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Litigation and Claims
In the ordinary course of business, we are involved in various pending or threatened legal actions. While we are unable to predict the ultimate outcome of these actions, we believe that any ultimate liability arising from any of these actions will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows, including our ability to pay dividends. However, because of the inherent uncertainty of litigation and arbitration proceedings, we cannot provide assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows, including our ability to pay dividends.
12. Stockholders’ Equity
In May 2025, we completed the NGCS Acquisition and issued approximately 2.3 million shares of common stock to NGCSE sellers as part of the acquisition purchase price. The NGCS acquisition date fair value was $53.0 million and is reflected in common stock and additional paid-in capital in our condensed consolidated statements of equity. See Note 3 (“Business Transactions”) for further details.
Share Repurchases
Our Board of Directors authorized the Share Repurchase Program in April 2023 that allowed us to repurchase and retire up to $50.0 million of outstanding common stock. Between April 2024 and October 2025, extensions of the Share Repurchase Program were approved by our Board of Directors to repurchase and retire outstanding common stock through December 31, 2026. As of September 30, 2026, available capacity under the Share Repurchase Program was $113.2 million.
Under the Share Repurchase Program, shares of our common stock may be repurchased periodically, including in the open market, privately negotiated transactions, or otherwise in accordance with applicable federal securities laws, at any time.
Since the inception of the Share Repurchase Program in April 2023 and through September 30, 2026, we have repurchased 4,632,263 shares of common stock at an average price of $20.91 per share, for an aggregate of $96.9 million. As of September 30, 2026, we have retired all of the shares of common stock that had been previously repurchased under the Share Repurchase Program.
Shares Withheld Related to Net Settlement of Equity Awards
The 2020 Plan allows us to withhold shares upon vesting of restricted stock at the then-current market price to cover taxes required to be withheld on the vesting date.
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The following table summarizes shares repurchased and shares withheld:
Three Months Ended September 30, 2026
Nine Months Ended September 30, 2026
(dollars in thousands, except per share amounts)
Total Number of Shares
Average Price per Share
Total Cost of Shares
Shares repurchased under the Share Repurchase Program
170,952
25.87
4,422
55,955
37.85
2,117
522,065
28.95
15,114
693,017
28.19
19,536
Three Months Ended September 30, 2025
Nine Months Ended September 30, 2025
23.18
2,330,631
23.35
54,416
301
25.00
505,269
29.68
14,996
1,094,817
25,379
2,835,900
24.48
69,412
Cash Dividends
The following table summarizes our dividends declared and paid in each of the quarterly periods of 2026 and 2025:
Dividends per
Common Share
Dividends Paid
Q3
0.230
40,563
Q2
0.220
38,624
Q1
39,907
Q4
0.210
36,876
36,921
0.190
33,620
34,185
On October 22, 2026, our Board of Directors declared a quarterly dividend of $0.23 per share of common stock, or approximately $40.5 million, to be paid on November 10, 2026 to stockholders of record at the close of business on November 3, 2026.
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13. Revenue from Contracts with Customers
The following table presents our revenue from contracts with customers by segment and disaggregated by revenue source:
Contract operations:
0 ― 1,000 horsepower per unit
103,753
107,606
316,337
318,508
1,001 ― 1,500 horsepower per unit
106,913
109,494
322,613
317,450
Over 1,500 horsepower per unit
120,325
109,020
351,912
308,591
Other (1)
164
149
433
444
Total contract operations revenue (2)
Aftermarket services:
Services
21,986
35,039
66,373
94,201
OTC parts and components sales
17,670
21,122
58,148
71,679
1,872
Total aftermarket services revenue (3)
See Note 20 (“Segments”) for further details.
Performance Obligations
As of September 30, 2026, we had $1.5 billion of remaining performance obligations related to our contract operations segment, which will be recognized through 2034 as follows:
2027
2028
2029
2030
Thereafter (1)
Remaining performance obligations
210,408
451,036
241,629
155,855
117,970
292,293
1,469,191
We do not disclose the aggregate transaction price for the remaining performance obligations for aftermarket services as there are no contracts with customers with an original contract term that is greater than one year.
Receivables from Contracts with Customers
As of September 30, 2026 and December 31, 2025, our receivables from contracts with customers, net of allowance for credit losses, were $152.5 million and $128.9 million, respectively.
26
Allowance for Credit Losses
The changes in our allowance for credit losses during the nine months ended September 30, 2026 are as follows:
Balance at beginning of period
1,205
Benefit from credit losses
Write-offs charged against allowance
(233)
Balance at end of period
777
Contract Liabilities
Freight billings to customers for the transport of compression assets, customer-specified modifications of compression assets and milestone billings on aftermarket services often result in a contract liability. As of September 30, 2026 and December 31, 2025, our contract liabilities were $12.8 million and $12.0 million, respectively, which are included in other liabilities in our condensed consolidated balance sheets.
During the nine months ended September 30, 2026 and 2025, we deferred revenue of $18.6 million and $17.7 million, respectively, and recognized revenue of $17.8 million and $14.6 million, respectively. The revenue recognized and deferred during the periods is primarily related to freight billings for contract operations and milestone billings for aftermarket services.
14. Long-Lived and Other Asset Impairment
Compression Fleet
We periodically review the future deployment of our idle compression assets for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. Based on these reviews, we determine that certain idle compressors should be retired from the active fleet. The retirement of these units from the active fleet triggers a review of these assets for impairment, and as a result of our review, we may record an asset impairment to reduce the book value of each unit to its estimated fair value. The fair value of each unit is estimated based on the expected net sale proceeds compared to other fleet units we recently sold, a review of other units recently offered for sale by third parties or the estimated component value of the equipment we plan to use.
In connection with our review of our idle compression assets, we evaluate for impairment idle units that were culled from our fleet in prior years and are available for sale. Based on that review, we may reduce the expected proceeds from disposition and record additional impairment to reduce the book value of each unit to its estimated fair value.
The following table presents the results of our compression fleet impairment review as recorded in our contract operations segment:
(dollars in thousands)
Idle compressors retired from the active fleet
120
70
Horsepower of idle compressors retired from the active fleet
13,000
11,000
54,000
28,000
Impairment recorded on idle compressors retired from the active fleet
3,776
6,859
See Note 18 (“Fair Value Measurements”) for further details.
27
Assets Held For Sale
In connection with the Flowco Disposition, we adjusted the carrying value of the disposal group to its estimated fair value less costs to sell and recorded a write-down of $0.9 million and $9.6 million during the three and nine months ended September 30, 2025, respectively, which is included in long-lived and other asset impairment in our condensed consolidated statements of operations. See Note 3 (“Business Transactions”) for further details.
15. Restructuring Charges
During the second quarter of 2025, management approved and initiated a plan to exit certain facilities that were no longer deemed economical for our business, and during the nine months ended September 30, 2026, we incurred $0.3 million of costs to exit these facilities, whereas during the three months and nine months ended September 30, 2025, we incurred $0.7 million and $0.8 million, respectively of costs to exit these facilities. The facility closure costs incurred under the above restructuring plan were recorded to restructuring charges in our condensed consolidated statements of operations. We do not expect to incur additional restructuring charges related to these restructuring activities.
During the first quarter of 2025, management approved and executed a plan to exit a facility no longer deemed economical for our business, and in the first quarter of 2025, we incurred $0.7 million of costs to exit this facility. The severance and property disposal costs incurred under the above restructuring plan were recorded to restructuring charges in our condensed consolidated statements of operations. We do not expect to incur additional restructuring charges related to these restructuring activities.
The following table presents restructuring charges incurred by segment:
Contract
Aftermarket
Operations
Three months ended September 30, 2025
Facility closure
Total restructuring charges
520
977
The following table presents restructuring charges incurred by cost type:
Severance costs
596
Property disposal and closure costs
901
Total restructuring costs
28
16. Income Taxes
Effective Tax Rate
The year-to-date effective tax rate for the nine months ended September 30, 2026 differed significantly from our statutory rate primarily due to state taxes, unrecognized tax benefits and the limitation on executive compensation, partially offset by the benefit from equity-settled long-term incentive compensation.
17. Earnings Per Common Share
Basic earnings per common share is computed using the two-class method, which is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic earnings per common share is determined by dividing net income, after deducting amounts allocated to participating securities, by the weighted-average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock-settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, only distributed earnings (dividends) are allocated to participating securities, as participating securities do not have a contractual obligation to participate in our undistributed losses.
Diluted earnings per common share is computed using the weighted-average number of common shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding performance-based and time-based restricted stock units and stock to be issued pursuant to our ESPP unless their effect would have been anti-dilutive.
The following table shows the calculation of net income attributable to common stockholders, which is used in the calculation of basic and diluted earnings per common share, potential shares of common stock that were included in computing diluted earnings per common share and the potential shares of common stock issuable that were excluded from computing diluted earnings per common share as their inclusion would have been anti-dilutive:
Less: Allocation of earnings to participating securities
(486)
(544)
(2,696)
(2,434)
Net income attributable to common stockholders
83,980
70,704
222,284
203,084
Allocation of earnings to cash or share settled restricted stock units (1)
Diluted net income attributable to common stockholders
203,085
Weighted-average common shares outstanding used in basic earnings per common share
Effect of dilutive securities:
Performance-based restricted stock units
220
278
277
295
Time-based restricted stock units
ESPP shares
Weighted-average common shares outstanding used in diluted earnings per common share
29
18. Fair Value Measurements
The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value into the following three categories:
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of September 30, 2026, we owned a 25% equity interest in ECOTEC in which we have elected the fair value option to account for this investment. There were no purchases of equity interests or unrealized changes in the fair value of our investment in ECOTEC recognized during the three and nine months ended September 30, 2026 or 2025. The fair value of our investment in ECOTEC as of both September 30, 2026 and December 31, 2025 was $14.6 million and is included in other assets in our condensed consolidated balance sheets.
The fair value determination of this investment primarily consisted of unobservable inputs, which creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement, which was valued through an average of an income approach (discounted cash flow method) and a market approach (guideline public company method), are the WACC and the revenue multiples. Significant increases (decreases) in these inputs in isolation would result in a significantly higher (lower) fair value measurement. This fair value measurement is classified as Level 3. See Note 8 (“Investments in Unconsolidated Affiliates and Other Strategic Investments”) for further details.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Investments in Unconsolidated Affiliates and Other Strategic Investments
As of September 30, 2026 and December 31, 2025, the carrying value of our investments in which we have elected the fair value measurement alternative was $12.0 million and $10.6 million, respectively, and is included in other assets in our condensed consolidated balance sheets. There were no upward adjustments, impairments or downward adjustments to the carrying value of these investments as of both September 30, 2026 and December 31, 2025. See Note 8 (“Investments in Unconsolidated Affiliates and Other Strategic Investments”) for further details.
During the nine months ended September 30, 2026, we recorded nonrecurring fair value measurement adjustments related to our idle compressors. Our estimate of the compression fleet’s fair value was primarily based on the expected net sale proceeds compared with other fleet units we recently sold and/or a review of other units recently offered for sale by third parties, or the estimated component value of the equipment we plan to use. We discounted the expected proceeds, net of selling and other carrying costs, using a weighted-average disposal period of four years. These fair value measurements are classified as Level 3.
30
The fair value of our impaired compression fleet as of September 30, 2026 and December 31, 2025 was as follows:
Impaired compression fleet
1,729
871
The significant unobservable inputs used to develop the above fair value measurements were weighted by the relative fair value of the compression fleet being measured. Additional quantitative information related to our significant unobservable inputs follows:
Range
Weighted Average(1)
Estimated net sale proceeds:
As of September 30, 2026
$0 - $375 per horsepower
$62 per horsepower
As of December 31, 2025
$0 - $241 per horsepower
$54 per horsepower
See Note 14 (“Long-Lived and Other Asset Impairment”) for further details.
Other Financial Instruments
The carrying amounts of our cash, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments.
The carrying amount of borrowings outstanding under our Credit Facility approximates fair value due to its variable interest rate. The fair value of these outstanding borrowings is a Level 3 measurement.
The fair value of our fixed rate debt is estimated using yields observable in active markets, which are Level 2 inputs, and was as follows:
Carrying amount of fixed rate debt (1)
1,500,000
Fair value of fixed rate debt
1,443,000
1,527,000
19. Related Party Transactions
During the nine months ended September 30, 2026, we made purchases of $0.3 million from our unconsolidated affiliate ECOTEC, whereas during the three and nine months ended September 30, 2025, we made purchases of $0.1 million and $0.4 million, respectively.
During the three and nine months ended September 30, 2026, we made no purchases from our unconsolidated affiliate FGC Holdco, whereas during the three and nine months ended September 30, 2025, we made purchases of $0.4 million and $3.5 million, respectively.
31
In August 2025, we amended the limited liability agreement that we, together with ColdStream, entered into with FGC Holdco in October 2024, and agreed to, among other items, cancel our remaining MaCH4 NRS purchase commitments. We incurred and paid an amendment fee of $3.6 million to FGC Holdco, which is included in other (income) expense, net, in our condensed consolidated statements of operations during the three and nine months ended September 30, 2025.
The carrying value of assets and liabilities recognized in our condensed consolidated balance sheets related to our variable interests in FGC Holdco and our maximum exposure to loss related to our involvement with an unconsolidated VIE were as follows:
5,776
7,718
1,934
Investment in unconsolidated affiliate
2,239
159
Total VIE assets
9,949
7,877
Maximum exposure to loss
From August 2019 to present, our Board of Directors has included a member affiliated with our customer Hilcorp or its subsidiaries or affiliates. During the three and nine months ended September 30, 2026, revenue from Hilcorp and affiliates was $9.3 million and $27.8 million, respectively, whereas during the three and nine months ended September 30, 2025, revenue from Hilcorp and affiliates was $9.2 million and $30.9 million, respectively. During the three and nine months ended September 30, 2026, there were no used equipment sales to Hilcorp and affiliates, whereas during the nine months ended September 30, 2025, we recorded a sale of used equipment to Hilcorp and affiliates of $9.9 million.
Accounts receivable, net due from Hilcorp and affiliates was $0.4 million and $1.7 million as of September 30, 2026 and December 31, 2025, respectively.
Shoreline AI
During the nine months ended September 30, 2026, we made purchases of $0.1 million from our unconsolidated affiliate Shoreline AI.
20. Segments
We manage our business segments primarily based on the type of product or service provided. We have two segments that we operate within the U.S.: contract operations and aftermarket services. Our contract operations segment primarily provides natural gas compression services to meet specific customer requirements. Our aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets.
Our CODM is our President & Chief Executive Officer. Our CODM evaluates the performance of our segments and allocates resources primarily based on adjusted gross margin, defined as revenue less cost of sales, exclusive of depreciation and amortization, which are key components of segment operations. Adjusted gross margin is the primary measure used by our CODM to evaluate segment performance because it focuses on the current performance of segment operations and excludes the impact of the prior historical costs of assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. Our CODM considers adjusted gross margin forecast to actual results and period over period financial variances in conjunction with product and customer service metrics and market trends when assessing segment performance and deciding how to allocate resources.
32
Summarized financial information for our reporting segments is shown below:
Three months ended September 30, 2026
Revenue (1)
Adjusted gross margin
238,722
9,076
247,798
239,559
13,046
252,605
710,919
28,814
739,733
672,332
39,494
711,826
The following table reconciles gross margin, the most directly comparable GAAP measure, to adjusted gross margin:
Total revenues
(123,013)
(129,825)
(376,083)
(400,919)
(71,948)
(67,130)
(213,160)
(187,889)
Gross margin
175,850
185,475
526,573
523,937
33
The following table reconciles adjusted gross margin to income before income taxes:
Less:
34
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q and in conjunction with our 2025 Form 10-K.
OVERVIEW
We are an energy infrastructure company with a primary focus on midstream natural gas compression and a commitment to helping our customers produce, compress and transport natural gas in a safe and environmentally responsible way. We are a premier provider of natural gas compression services, in terms of total compression fleet horsepower, to customers in the energy industry throughout the U.S., and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Our business supports a must-run service that is essential to the production, processing, transportation and storage of natural gas.
Significant 2026 Transactions
On April 1, 2026, we repurchased our 2028 Notes. The 2028 Notes were redeemed at 100% of their $800.0 million aggregate principal amount plus accrued and unpaid interest of approximately $25.0 million with borrowings under the Credit Facility. We recorded a debt extinguishment gain of $0.7 million during the second quarter of 2026 due to the write-off of unamortized debt premium of $4.0 million, which was partially offset by the write-off of unamortized debt issuance costs of $3.3 million. See Note 10 (“Long-Term Debt”) for further details.
On January 21, 2026, we completed a private offering of $800.0 million aggregate principal amount of 6.0% senior notes due 2034 and received net proceeds of $789.4 million after deducting issuance costs. In January 2026, the approximately $10.6 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statements of operations over the term of the notes. The net proceeds were used to repay borrowings outstanding under our Credit Facility. See Note 10 (“Long-Term Debt”) for further details.
Operating Highlights
(horsepower in thousands)
Total available horsepower (at period end) (1)
4,811
4,845
Total operating horsepower (at period end) (2)
4,537
4,651
Average operating horsepower (3)
4,528
4,647
4,534
4,454
Horsepower utilization:
Spot (at period end)
94
%
96
Average
95
Non-GAAP Financial Measures
Management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measure of adjusted gross margin.
We define adjusted gross margin as total revenue less cost of sales, exclusive of depreciation and amortization. Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management to evaluate the results of revenue and cost of sales, exclusive of depreciation and amortization, which are key components of our operations. We believe adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. In addition, depreciation and amortization may not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs of current operating activity. As an indicator of our operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin, net income or any other measure presented in accordance with GAAP. Our adjusted gross margin may not be comparable to a similarly titled measure of other entities because other entities may not calculate adjusted gross margin in the same manner.
Adjusted gross margin has certain material limitations associated with its use as compared to net income. These limitations are primarily due to the exclusion of SG&A, depreciation and amortization, long-lived and other asset impairment, restructuring charges, debt extinguishment gain, interest expense, transaction-related costs, gain on sale of assets, net, other (income) expense, net, provision for income taxes and equity in net loss of unconsolidated affiliate. Because we intend to finance a portion of our operations through borrowings, interest expense is a necessary element of our costs and our ability to generate revenue. Additionally, because we use capital assets, depreciation expense is a necessary element of our costs and our ability to generate revenue, and SG&A is necessary to support our operations and required corporate activities. To compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.
36
The following table reconciles net income to adjusted gross margin:
RESULTS OF OPERATIONS
Summary of Results
Revenue was $370.8 million and $382.4 million during the three months ended September 30, 2026 and 2025, respectively. The decrease was primarily driven by decreased revenue from our aftermarket services business, partially offset by increased revenue from our contract operations business. See “Contract Operations” and “Aftermarket Services” below for further details.
Revenue was $1,115.8 million and $1,112.7 million during the nine months ended September 30, 2026 and 2025, respectively. The increase was primarily driven by increased revenue from our contract operations business, partially offset by decreased revenue from our aftermarket services business. See “Contract Operations” and “Aftermarket Services” below for further details.
Net income was $84.5 million and $71.2 million during the three months ended September 30, 2026 and 2025, respectively. The increase was primarily driven by decreases in SG&A and interest expense, as well as a change to other income, net in the three months ended September 30, 2026 from other expense, net in the three months ended September 30, 2025. These decreases were partially offset by an increase in depreciation and amortization, as well as lower adjusted gross margin from our aftermarket services business.
Net income was $225.0 million and $205.5 million during the nine months ended September 30, 2026 and 2025, respectively. The increase was primarily driven by higher adjusted gross margin from our contract operations business and a change to other income, net in the nine months ended September 30, 2026 from other expense, net in the nine months ended September 30, 2025, as well as decreases in transaction-related costs, interest expense and long-lived and other asset impairment. These decreases were partially offset by increases in depreciation and amortization and provision for income taxes, as well as lower adjusted gross margin from our aftermarket services business and a decrease in gain on sale of assts, net.
Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025
Contract Operations
Increase
(Decrease)
(0)
Adjusted gross margin percentage (1)
72
73
(1)
Revenue in our contract operations business increased approximately $4.9 million primarily due to higher rates, partially offset by sales of active horsepower.
The increase in cost of sales, exclusive of depreciation and amortization was primarily due to a net increase of $8.2 million in non-income taxes due to a $9.9 million net benefit recorded during the three months ended September 30, 2025 as a result of certain sales and use tax audit settlements, partially offset by a decrease in non-income tax expense for the three months ended September 30, 2026, as well as an increase of $2.3 million in make-ready costs to put idle compression equipment back to work, and an increase of $0.9 million in lube oil expenses due to higher prices, partially offset by a reduction in volumes purchased. These increases were partially offset by a decrease of $3.7 million in parts expense due to lower service activity levels, and a decrease of $3.0 million in employee compensation and benefits expense. We continue to anticipate lube oil cost pressure in the fourth quarter of 2026.
The decreases in adjusted gross margin and adjusted gross margin percentage were mainly driven by an increase in cost of sales, exclusive of depreciation and amortization that outpaced revenue growth.
Aftermarket Services
(29)
(30)
Revenue in our aftermarket services business decreased primarily due to reduced customer demand for major maintenance service activity, as well as lower parts sales.
The decrease in cost of sales, exclusive of depreciation and amortization, was primarily driven by decreased service activity, including differences in the scope, timing and type of services performed.
38
The decrease in adjusted gross margin was mainly driven by a decrease in revenue that slightly outpaced the decrease in cost of sales, exclusive of depreciation and amortization.
Costs and Expenses
Selling, general and administrative. SG&A decreased for the three months ended September 30, 2026 primarily due to lower long-term incentive compensation expense, including a $7.0 million decrease in cash-settled incentive compensation expense as a result of changes in our stock price and a $3.4 million decrease in cash-settled incentive compensation expense pursuant to executive retention and certain other executive agreements, as well as a $2.9 million decrease in employee compensation and benefits expense. These decreases were partially offset by a $1.1 million increase in professional fees.
Depreciation and amortization. Depreciation and amortization increased primarily due to fixed assets additions, including depreciation associated with capital expenditures for compression units and transportation assets. This increase was partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives as well as compression and other asset sales.
Long-lived and other asset impairment. The decrease in long-lived and other asset impairment was primarily due to the $0.9 million write-down of assets held for sale to estimated fair value less costs to sell recorded during the three months ended September 30, 2025, as well as a decrease of $0.6 million in compression fleet impairment.
We periodically review the future deployment of our idle compressors for units that are not of the type, configuration, condition, make or model that are cost efficient to maintain and operate. We also evaluate for impairment our idle units that have been culled from our compression fleet in prior years and are available for sale. The following table presents the results of our compression fleet impairment review, as recorded in our contract operations segment:
In connection with the classification of the disposal group as assets held for sale as of June 30, 2025, we adjusted the carrying value of the disposal group to its estimated fair value less costs to sell and recorded a write-down of $0.9 million during the three months ended September 30, 2025, which is included in long-lived and other asset impairment in our condensed consolidated statements of operations. See Note 3 (“Business Transactions”) for further details.
Restructuring charges. Restructuring charges of $0.7 million during the three months ended September 30, 2025 consisted of property disposal and closure costs. See Note 15 (“Restructuring Charges”) for further details.
39
Interest expense. Interest expense decreased for the three months ended September 30, 2026, primarily due to a decrease in the average outstanding balance of long-term debt, as well as a decrease in the weighted-average effective interest rate.
Transaction-related costs. We incurred professional fees, compensation and other costs related to the NGCS Acquisition during the three months ended September 30, 2026 and 2025 of $0.1 million and $1.1 million, respectively. We incurred compensation and other costs related to the TOPS Acquisition during the three months ended September 30, 2026 and 2025 of $0.1 million and $0.7 million, respectively. See Note 3 (“Business Transactions”) for further details on the NGCS Acquisition.
Gain on sale of assets, net. Gain on sale of assets, net decreased for the three months ended September 30, 2026, primarily due to gains of $1.2 million and $0.9 million on compression and other asset sales, respectively, compared to gains of $3.1 million and $0.7 million on compression and other asset sales, respectively, during the three months ended September 30, 2025.
Other (income) expense, net. The change to other income during the three months ended September 30, 2026 from other expense during the three months ended September 30, 2025 was primarily due to a limited liability agreement amendment fee of $3.6 million paid to FGC Holdco during the three months ended September 30, 2025 (see Note 19 (“Related Party Transactions”) for further details), as well as indemnification expense of $0.8 million related to a change in a previously recognized indemnification asset recognized during the three months ended September 30, 2025.
Provision for Income Taxes
Provision for income taxes increased during the three months ended September 30, 2026, primarily due to higher income before income taxes.
Effective tax rate
(2)
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025
71
Revenue in our contract operations business increased approximately $46.3 million primarily due to higher rates and an additional four months of revenue from the compression units acquired in the NGCS Acquisition. These increases were partially offset by sales of active horsepower, including the compression units sold in the Flowco Disposition.
40
The increase in cost of sales, exclusive of depreciation and amortization, was primarily due to a net increase of $6.6 million in non-income taxes due to a $10.8 million net benefit recorded during the nine months ended September 30, 2025 as a result of certain sales and use tax audit settlements, partially offset by a decrease in non-income tax expense for the nine months ended September 30, 2026, and a net increase of $3.2 million in costs associated with the timing of the NGCS Acquisition in 2025, partially offset by a reduction in costs associated with asset dispositions in 2025, as well as an increase of $3.0 million in make-ready costs to put idle compression equipment back to work. These increases were partially offset by a decrease of $5.7 million in parts expense due to lower service activity levels, as well as a decrease of $4.5 million in lube oil expenses primarily due to lower prices and a decrease in volumes purchased. We continue to anticipate lube oil cost pressure in the fourth quarter of 2026.
The increases in adjusted gross margin and adjusted gross margin percentage were mainly driven by revenue growth that outpaced the increase in cost of sales, exclusive of depreciation and amortization.
(26)
(25)
(27)
Revenue in our aftermarket services business decreased primarily due to reduced customer demand for major maintenance service activity as well as lower parts sales compared to the nine months ended September 30, 2025, which reflected higher parts sales, including the non-recurring sale of overhauled engines.
The decreases in adjusted gross margin and adjusted gross margin percentage were mainly driven by a decrease in revenue that slightly outpaced the decrease in cost of sales, exclusive of depreciation and amortization.
41
Selling, general and administrative. SG&A decreased for the nine months ended September 30, 2026 primarily due to a $2.3 million decrease in employee compensation and benefits expense and a $1.7 million decrease in professional fees. These decreases were partially offset by a $1.7 million increase in information technology expense, a $1.6 million acceleration of expense recognition for long-term incentive compensation pursuant to an executive retention agreement, partially offset by a $0.9 million decrease in cash-settled incentive compensation expense as a result of changes in our stock price, a benefit of $0.8 million recognized during the nine months ended September 30, 2025 related to a change in previously recognized tax contingencies, as well as a $0.6 million increase in insurance expense.
Depreciation and amortization. Depreciation and amortization increased primarily due to fixed assets additions, including depreciation and amortization associated with the compression units and intangible assets acquired in the NGCS Acquisition, and depreciation associated with capital expenditures for compression units and transportation assets. This increase was partially offset by a decrease in depreciation associated with assets reaching the end of their depreciable lives as well as compression and other asset sales.
Long-lived and other asset impairment. The decrease in long-lived and other asset impairment was primarily due to the $9.6 million write-down of assets held for sale to estimated fair value less costs to sell as of June 30, 2025. The decrease was partially offset by an increase of $6.5 million in compression fleet impairment.
In connection with the classification of the disposal group as assets held for sale as of June 30, 2025, we adjusted the carrying value of the disposal group to its estimated fair value less costs to sell and recorded a write-down of $9.6 million during the nine months ended September 30, 2025, which is included in long-lived and other asset impairment in our condensed consolidated statements of operations. See Note 3 (“Business Transactions”) for further details.
42
Restructuring charges. Restructuring charges of $0.3 million during the nine months ended September 30, 2026 consisted of property disposal and closure costs, whereas restructuring charges of $1.5 million during the nine months ended September 30, 2025 consisted of severance as well as property disposal and closure costs. See Note 15 (“Restructuring Charges”) for further details.
Debt extinguishment gain. We recorded a debt extinguishment gain of $0.7 million during the nine months ended September 30, 2026 as a result of the 2028 Notes Redemption, due to the write-off of unamortized debt premium of $4.0 million, which was partially offset by the write-off of unamortized debt issuance costs of $3.3 million.
Interest expense. Interest expense decreased for the nine months ended September 30, 2026, primarily due to a decrease in the weighted-average effective interest rate, as well as a decrease in the average outstanding balance of long-term debt.
Transaction-related costs. We incurred professional fees, compensation and other costs related to the NGCS Acquisition during the nine months ended September 30, 2026 and 2025 of $0.6 million and $8.7 million, respectively. We incurred compensation and other costs related to the TOPS Acquisition during the nine months ended September 30, 2026 and 2025 of $0.6 million and $3.1 million, respectively. See Note 3 (“Business Transactions”) for further details on the NGCS Acquisition.
Gain on sale of assets, net. Gain on sale of assets, net decreased for the nine months ended September 30, 2026, primarily due to gains of $9.1 million and $3.5 million on compression and other asset sales, respectively, compared to gains of $13.8 million and $1.5 million on compression and other asset sales, respectively, during the nine months ended September 30, 2025.
Other (income) expense, net. The change to other income during the nine months ended September 30, 2026 from other expense during the nine months ended September 30, 2025 was primarily due to a limited liability agreement amendment fee of $3.6 million paid to FGC Holdco during the nine months ended September 30, 2025 (see Note 19 (“Related Party Transactions”) for further details), as well as indemnification expense of $0.8 million related to a change in a previously recognized indemnification asset recognized during the nine months ended September 30, 2025, partially offset by a decrease in proceeds from insurance and other settlements.
Provision for income taxes increased during the nine months ended September 30, 2026, primarily due to higher income before income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our ability to fund operations, finance capital expenditures, pay dividends and fund share repurchases depends on the levels of our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under our Credit Facility. Our cash flow is affected by numerous factors including prices and demand for our services, oil and natural gas exploration and production spending, conditions in the financial markets and other factors. We have no near-term maturities and believe that our operating cash flows and borrowings under the Credit Facility will be sufficient to meet our liquidity needs in the next twelve months and beyond.
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt securities in open market purchases, privately negotiated transactions or otherwise. Such repurchases or
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exchanges, if any, may be material, will be upon terms and prices as we may determine and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Cash Requirements
Our contract operations business is capital intensive, requiring significant investment to maintain and upgrade existing operations. Our capital spending is primarily dependent on the demand for our contract operations services and the availability of the type of compression equipment required for us to provide those contract operations services to our customers. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:
Capital Expenditures
Growth Capital Expenditures. The majority of our growth capital expenditures are related to the acquisition cost of new compressors when our idle equipment cannot be reconfigured to economically fulfill a project’s requirements and the new compressor is expected to generate economic returns that exceed our cost of capital over the compressor’s expected useful life. In addition to newly-acquired compressors, growth capital expenditures include the upgrading of major components on an existing compression package where the current configuration of the compression package is no longer in demand and the compressor is not likely to return to an operating status without the capital expenditures. These expenditures substantially modify the operating parameters of the compression package such that it can be used in applications for which it previously was not suited.
Growth capital expenditures were $194.3 million and $299.0 million for the nine months ended September 30, 2026 and 2025, respectively.
Maintenance Capital Expenditures. Maintenance capital expenditures are related to major overhauls of significant components of a compression package, such as the engine, electric motor, compressor and cooler, which return the components to a like-new condition, but do not modify the application for which the compression package was designed.
Maintenance capital expenditures were $106.7 million and $84.8 million during the nine months ended September 30, 2026 and 2025, respectively. The increase in maintenance capital expenditures was primarily due to an increase in scheduled and unscheduled maintenance activities due to maintenance cycle requirements and the addition of the compression units acquired in the NGCS Acquisition.
Projected Capital Expenditures. We currently plan to spend approximately $400 million to $445 million on capital expenditures during 2026, primarily consisting of approximately $250 million to $275 million for growth capital expenditures and approximately $125 million to $135 million for maintenance capital expenditures.
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Purchase Commitments. As of September 30, 2026, we have purchase commitments for new fleet assets with anticipated deliveries through 2030 in the amount of $958.1 million, of which $278.1 million is due within the next 12 months.
Returning Capital to Stockholders
We continue to return capital to stockholders through quarterly dividends and share repurchases. On October 22, 2026, our Board of Directors declared a quarterly dividend of $0.23 per share of common stock, or approximately $40.5 million, to be paid on November 10, 2026 to stockholders of record at the close of business on November 3, 2026. Any future determinations to pay cash dividends to our stockholders will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations and credit and loan agreements in effect at that time and other factors deemed relevant by our Board of Directors. In October 2025, our Board of Directors approved an additional increase to our Share Repurchase Program of $100.0 million through December 31, 2026, and as of September 30, 2026, available capacity under the Share Repurchase Program was $113.2 million. The actual number of shares repurchased will depend on prevailing market conditions, alternative uses of capital and other factors, and will be determined at management’s discretion.
On April 1, 2026, we repurchased our 2028 Notes. The 2028 Notes were redeemed at 100% of their $800.0 million aggregate principal amount plus accrued and unpaid interest of approximately $25.0 million with borrowings under the Credit Facility. We recorded a debt extinguishment gain of $0.7 million during the second quarter of 2026 due to the write-off of unamortized debt premium of $4.0 million, which was partially offset by the write-off of unamortized debt issuance costs of $3.3 million.
In November 2025, we repurchased our 2027 Notes. The 2027 Notes were redeemed at 100% of their $300.0 million aggregate principal amount plus accrued and unpaid interest of approximately $2.6 million with borrowings under the Credit Facility. We recorded a debt extinguishment loss related to unamortized debt issuance costs of $0.9 million during the fourth quarter of 2025.
Sources of Cash
In December 2025, we amended our Amended and Restated Credit Agreement to, among other things, remove the 0.10% per annum credit spread adjustment that was previously included in the calculation of the interest rate applicable to the loans made under the Credit Facility, decrease the applicable margin for all borrowings by 0.25% per annum such that the applicable margin for borrowings varies and decrease the commitment fee payable on the daily unused amount of the Credit Facility from 0.375% per annum to 0.25% per annum when less than 50% of the Credit Facility is utilized.
In May 2025, we amended our Amended and Restated Credit Agreement to, among other things, increase the borrowing capacity of the Credit Facility from $1.1 billion to $1.5 billion and provide for the ability for the borrowers to request additional increases in the aggregate commitments under the Credit Facility to a total amount not to exceed $2.3 billion (with any increase being at the discretion of the lenders and subject to the satisfaction of certain conditions set forth in the Amended and Restated Credit Agreement).
During the nine months ended September 30, 2026 and 2025, our Credit Facility had an average daily balance of $682.8 million and $653.6 million, respectively. The weighted-average annual interest rate on the outstanding balance under the Credit Facility was 5.5% and 5.8% at September 30, 2026 and December 31, 2025, respectively. As of September 30, 2026, there were $3.2 million letters of credit outstanding under the Credit Facility and the applicable margin on borrowings outstanding was 1.7%.
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Cash Flows
Our cash flows, as reflected in our condensed consolidated statements of cash flows, are summarized below:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Operating Activities
The increase in net cash provided by operating activities was primarily due to tax refund receipts of $41.5 million and higher adjusted gross margin from our contract operations business.
Investing Activities
The decrease in net cash used in investing activities was primarily due to $294.6 million of cash consideration paid, net of cash acquired, in the NGCS Acquisition during the nine months ended September 30, 2025, as well as an $85.3 million decrease in capital expenditures. These decreases were partially offset by a $71.0 million reduction in proceeds from the sale of a business and a $6.0 million reduction in proceeds from the sale of property, equipment and other assets.
Financing Activities
The change to net cash used in financing activities from net cash provided by financing activities was primarily due to net repayments on our Credit Facility of $58.2 million compared to net borrowings on our Credit Facility of $360.4 million in the prior year, a $14.4 million increase in dividends paid to stockholders and an $8.8 million increase in payments for debt issuance costs. These increases were partially offset by a $50.0 million decrease in shares repurchased under the Share Repurchase Program. Additionally, proceeds from the issuance of the 2034 Notes in January 2026 were offset by the 2028 Notes Redemption in April 2026.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks associated with changes in the variable interest rate of our Credit Facility.
As of September 30, 2026, we had $860.3 million of variable interest rate indebtedness outstanding at a weighted-average annual interest rate of 5.5%.
A 1% increase or decrease in the effective interest rate on our Credit Facility’s outstanding balance at September 30, 2026 would have resulted in an annual increase or decrease in our interest expense of $8.6 million.
ITEM 4. CONTROLS AND PROCEDURES
This Item 4 includes information concerning the controls and controls evaluation referred to in the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Exchange Act included in this Form 10-Q as Exhibits 31.1 and 31.2.
Management’s Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.
As of the end of the period covered by this Form 10-Q, our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act), which are designed to provide reasonable assurance that we are able to record, process, summarize and report the information required to be disclosed in our reports under the Exchange Act within the time periods specified in the rules and forms of the SEC. Based on the evaluation, as of September 30, 2026, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to management, and made known to our principal executive officer and principal financial officer, on a timely basis to ensure that it is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
There have been no material changes or updates to the risk factors previously disclosed in our 2025 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Sales of Unregistered Securities
None.
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
The following table summarizes shares repurchased and shares withheld during the three months ended September 30, 2026:
Total number of
Approximate dollar
shares repurchased
value of shares
price
as part of publicly
that may yet be
Total number
paid per
announced plans
purchased under the
of shares purchased (1)
share (2)
or programs (3)
plans or programs (3)
July 1, 2026 — July 31, 2026
113,233
August 1, 2026 — August 31, 2026
September 1, 2026 — September 30, 2026
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2026, none of our directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
ITEM 6. EXHIBITS
The exhibits listed below are filed or furnished as part of this report:
3.1
Composite Certificate of Incorporation of Archrock, Inc., as amended as of November 3, 2015 (incorporated by reference to Exhibit 3.3 to Archrock Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015)
3.2
Fourth Amended and Restated Bylaws of Exterran Holdings, Inc., now Archrock, Inc. (incorporated by reference to Exhibit 3.1 of Archrock Inc.’s Current Report on Form 8-K filed on July 27, 2023)
10.1†
Severance Benefit Agreement, effective July 6, 2026, between Mohit Singh and Archrock, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 25, 2026)
10.2†
Change of Control Agreement, effective July 6, 2026, between Mohit Singh and Archrock, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on June 25, 2026)
31.1*
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1*
Interactive data files (formatted in Inline XBRL) pursuant to Rule 405 of Regulation S-T
104.1*
Cover page interactive data file (formatted in Inline XBRL) pursuant to Rule 406 of Regulation S-T
† Management contract or compensatory plan or arrangement.
* Filed herewith.
** Furnished, not filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
By:
/s/ Mohit Singh
Mohit Singh
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Donna A. Henderson
Donna A. Henderson
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
November 3, 2026