CSI Compressco (CCLP) 9 Aug 222022 Q2 Earnings call transcript

Good day, and welcome to the CSI Compressco Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Jon Byers, Chief Financial Officer. sir. ahead, go Please

that morning, XXXX you like Results this statements contain you Good to be Compressco's forward-looking. be to joining Second that These statements may call Quarter Conference conference or and you. may for deemed thank CSI remind are are Thank Call. are many number of the CSI statements factors. beyond and based are and of of based partnership. are subject by certain made assumptions a risks These uncertainties, and on which on to the of analysis Compressco a control I'd number

that You're the future differ forward-looking actual statements materially cautioned and may such of are not results in statements. performance, guarantees from projected those that

the website These ratio, context with refer to addition, period. the non-GAAP should non-GAAP cash flow, complete for to in accordance refer we considered financial GAAP, our not Please distributable may gross of results for utilization financial financial distribution financial measures. prepared press our free morning's In to for the within are substitute of to ratio, reconciliations be coverage or cash measures the flow, reconciliations in other leverage information public measures. of call, and or release margins, course this GAAP the nearest EBITDA, adjusted a EBITDA,

that to is announcement addition website. In our this press went morning earlier out release posted on our

to today, views accurate replay. of turn note provided be over John on information time as of today. X, this no that Our only I'll XX-Q With Please filed speaks to be Jackson. now the Form management's later will and it at call that, longer August may

appreciate everyone morning. good the joining and I call John today. Thanks,

want for that results of quarter second are year, talk beginning. at remainder the the the I about two the overarching discuss and the there we outlook themes to As

currently The and of the ultimately demand maintain in units. demand. our units, horsepower, pick with year demand to electric large first has margins. strength, is for to new high. overall electrics conversions existing continued has led our and equipment pricing to unit medium with The began more and very It drive This horsepower last improve and for attempt build is up continued smaller we both as

make-ready As the our AMS a units. as to full fleet, existing work of result, shops as related well on organization activity are across customer-owned our

the have this We this part level activity and into of see early time year through visibility be the of of to fleet, of deploy sustained we that XXXX, our over the will frame. idle large remaining as portion the a rest

chain The second theme supply impact. is the cost, and the inflation

quarter-over-quarter. quarter, second increases saw the we significant During

with these in As earnings release, fluids, we noted primarily labor. were the associated parts and

The their rest lower are familiar in -- highs, we've in from And since seeing recede as this dramatic seen we noticed. We prices increase the the the quarter. the probably of third our prices with on like gasoline we're second familiar in the costs gasoline second you saw especially immediate impact gasoline prices we cost is of year, in the quarter, the quarter. we're begin financials, gasoline and end all

Lube oil oil. change The other prices lube of fluids slowly. part and more significant is more

occurring from hiring, suppliers, of and from and And so, in We've increases price as gradual we've may the suppliers increased months, the reductions that increases QX while to than QX also, some in from those to effect coming during gasoline. area, had the we significant in related Labor costs, had those result and the expect costs parts QX. the but In early second be of QX here a more overtime. raises on stability increased hope of some see increased more quarter with parts. price increases

increases, rapidly. to deploying as are the and the Overall, rest where of changing working through of but the very we term, that utilized fully diligently cost can, idle remains in expect costs we're effect difficult are to the year. predict the continue fleet people short Our our will it impact mitigate

have As reactivated -- of better we of that early high of idle we over We to still look a contracted be have are 'XX. ahead, degree units, the to and optimism. a be excitement remainder 'XX significant into number and

We of expect makeready to continue improve revenue-generating units assets. to move to utilization year, through see these as rest the this from

the of fleet see seeing continuation horsepower price. give This fleet unit the in new fewer last addition, When notice of we're In higher return to do to what of end instances, that in same the is returns deployed with often began the active begin year before intent our In many re-contracted it higher customers customer few as late is at quarters. unit, is current far unit a tighten. past we is to returned. availability a a the seeing

pricing Our most of at is an current high. for our fleet all-time

are the currently As current in experiencing. fleet, recover across we we're able to contracted to prices to increase the raise market expect we costs prices,

on we be both motor while for XXXX. and completing fleet focused half committed second the will commissioning have units, new deploying XXXX electric final idle converted builds of and The units also drive largely installing

In addition, making we'll the quarter. for lead over next be course of on capital based commitments XXXX demand, time additional the and customer

first on electric fleet our As opportunities including any amine coolers, over we'll capital we being spending the line, about existing for or our existing units. motor the think coming deploy continue allocation conversions money that focus product international compressors quarters, plants drive to to of

capital we As shift towards in near additions. move the full fleet reached, will levels, utilization

electric opportunities compression high-grading. build and new that several currently have and in we're and evaluating gas both We

increased horsepower of of nine One effects the the inflection months. units inflationary new of – six of large the the to the cost last has over significantly is environment

components of come units, we not major new half to times will now addition, of generally In to build commit for until second continue extend. delivery the lead online Any XXXX.

throughout capital well gas we are shareholder drives the – to are All an believe demand areas and continuing watching over need I'll worldwide. into most inflationary the to side our continue to just long-term delivering to look forward but as natural In a cost growth for we surrounding products the turn pricing, The growing return our we ever-increasing capital. geographic summary, this new With and environment conditions and to environment. demand of This for on closely be the strong spending projects. contracts, in service and compression variable product improving company working the pressures. the we year that, in to related see Byers. is terms XXXX. continuing call equation the Jon will this services, We always, our As analysis for return to includes experiencing lines commit new on the This this effective we mitigate, not and look improving exceptional and and returns. and

John. Thanks

For the CSI million prior $XX.X of $XX.X second reported in quarter the XXXX, revenue to million year. compared

$XX $XX.X million $XX.X $XX XXXX, in Our was up the contract X% million quarter XXXX. a services million second Year-on-year, our increase. up of million – second the from quarter from was in of revenue to AMS XX% to from revenue

adjusted compared of Second was quarter to XXXX the flat. million, quarter EBITDA in $XX.X essentially $XX.X million second

a in per XXXX, our discussed, of offset series, X.X main second $XX.X coverage million quarter by Distributable of quarter John revenue $X.XX $XX.X unit labor, was and compared our in fluids cost was cost inflation million, with we'll distribution As second times. to higher parts. pay August of cash XX, the distribution on and flow

Moving on sheet. to the balance

had liquidity capacity customer, quarter. the facility position the collections we at ABL was end In $XX.X total of of million Our from improved substantially. our on cash credit XXXX, an hand July liquidity which plus significant or outstanding international

total As of the end the X, which XXXX. million, $XX.X our August year $XX to compares liquidity of was at million

times quarter in of the from in second net This XXXX ratio of Our QX leverage XXXX. down is X.X of times. peak X.X is our

ratio growth. of we leverage investment to up XXXX, net Our balance from EBITDA slightly and is QX deleveraging, continue drive fleet our in as to

downward of to ratio XXXX. net our through in trend expect rest a leverage continue We the

to credit Finally, we one was quarter this was end capital mature upward of the that of XXXX. spending June year. it revised XXXX, at of second extended of the to in – slightly June our extended guidance our agreements of XXXX We've set XXXX,

$XX is is by of mainly large including well provided to and prior to guidance million projects, up medium driven million the million high-return $XX horsepower older horsepower large $XX quarter. as new demand, customer million, in as This to Our units. meet $XX units from reconfiguring electrification

open we questions. we to to the aim ratio the while and to liquidity is remainder balancing growth overall prior capital to calls, simplify cycle. to thrive reduce the continue our over reduce We'll of opportunities. phases level, said debt position goal all our call our CSI leverage our XXXX, now and on of As energy term Longer structure in

Thank you.

We will Brian DiRubbio from Today's Instructions] Baird. now ahead. [Operator session. first go question the with comes Please question-and-answer begin

Good morning, gentlemen.

Hi, Brian

about the up rates. utilization said comments just Starting you

look utilization under Is I it What CSI? think, XX%? the Is at full you just it XX%. ended like for XX%? quarter is

XXs. low at looking probably we're say, I'd

three three really components have We large our -- of main fleet.

we under our some is up a we fleet. well and [indiscernible] and fleet we're I the end in going which have have fleet, the have We think, compressors mid-XXs. reciprocating the smaller the GasJack the to horsepower screw compression in fleet, And XXX-horsepower

screw going We fleet full in levels utilization is of the mid more smaller up the components. to the to rarely to There's high have in end those but be and XXs, much reach XX% a for kind fleet chance for going upper it's the GasJack XX%, range. to

to So that overall but you XXs. you low that overall blends than a detail blends probably more want,

be is Byers into we sort what of much very No start should helpful. the of then that's the when higher sort fleet fleet that about how And as that up? contracted rates existing in going newer prices? contracts And actually are reset Jon of to we Appreciate could seeing much it. -- think how at rolls

able now But increases at John's those for as of higher rates. have. increases one contracts John, we to the we price do dropping. we some want up term larger have come we do pushing as typically on address you in the back have units those we up then every bit. We're out renewal. come horsepower renewal place opportunity can. to as for typically total back we're of where a Referring units pushing we're So little units returns back year rate And see comments come to are

of contracted longer and at XX% You think or one-time one one term any how than about or about year But of year. -- have XX% our give is fleet take about a fleet that's we our has less. it's

the last would here. what months XX they've prices to capture be a current without most through six and going X months changes lot to up that today we from in to -- to to of months they it's recognizing get So pushed take moved market consider

potentially year. just XX% a started things starting moving to X%, into So were on to year to because back chasing last were the now probably go if X%, you're getting changes. you And increases of price changes. back we Maybe the the ago you digits on XX% were upper fleet Then price to July in we're of tighten. percent X% single moving

so up. see price price And who year, a unit for isn't years change a change at to when XX% X.X someone XX% comes may a their

July is through X, tell off going I would current that price being of because the go almost to the current a to be So increases. these here. you it from price because way what next can't pricing, I I everything the market takes But push XXXX. should that's through of pricing term. time frame would up now, the the current contracts we to generally what the at it still course from But may come flow year say takes months, which over market have XX consider market time

you stay then for of your mentioned a a may one month-to-month? the just to nine with or Do want just well, to -- compression straight to address you're you in year up six And going need be as pricing turned comments over think a so But have And the to or be rate. not you something resize I your window say, dialogue things Is trying come next may may That has this customer. my to of different that you this months? turn some no conditions. we're two rate. I'll it also besides in you

automatic an if but we include in you inflation to may want term, an such index longer that contract it that the adjustment want has inflation. a So

have to the each What don't we standby may rate and go time. So in negotiate be.

that of underpin takes And nine answer, These things months to to the straight standby. whole instead so XX our it across. long-winded XX% floor is we're pricing. question the stand your are but all work of on again, performance push by to reality trying not being But XX% the maybe the to fleet just

there. detail the appreciate Much No.

how are CapEx spending I year. you been is buying is you that we stuff for Just, quotes, number for given more? as CapEx your pressures extended guess, you final buying this But regarding me lead XX% up CapEx And made just cost the or the conceptually of months XXXX so, but thinking stuff that comments and just all seeing about some obviously about equipment? we the new it question the for moved last inflationary considering be and more over earlier XX you or we've should think whatever were times stuff,

of fleet. So by to question, part is -- our your really answer in the increase the first driven of the reconfiguration CapEx we

are we on what On that question? price we broadly provided -- more the So your electrification that used to what not had and reconfiguring answer units seeing had creep we does application. more previously. guidance your -- It's

does, on that it Yeah, yeah. point,

calls We've we're guidance the how any focused then providing part And all Okay. our about for XXXX. capital deleveraging. second in we're on not talked it

on final capital won't point our decision we're but guidance So this opportunities high-grading XXXX a haven't made at or budget. provide now, we

Appreciate Fair Thank it’s enough. early. the you. recognize comments. all I

Thanks Brian.

Selman next Instructions] Please go question [Operator with Today's comes ahead. Akyol Stifel. from

morning. you. Good Thank

Just quick for of couple a me. ones

new You large and quantify for builds you're seeing builds units and horsepower? increasing Can talked horsepower about of out new cost you what acquiring just significantly. there

would today so horsepower the call what units round call I Sure. the are in larger let's it and X,XXX, to horsepower. engine X,XXX XX% to in looking sizes if terms, higher say XX X,XXX to probably Those ,the X,XXX you're more caterpillar which put fleet bill from at December numbers. percentage horsepower is and X,XXX I

increase. that's So a significant

today. got thing So on it let's a set depending up other. nine maybe X,XXX you months how ago, X.XX six million cost Same to $X.X the ago on say costs months

So, you're significantly. up

XX% So, of spend the capital. units, more to same number going to you're build

with other that fleet, be going that comes build existing The pricing new more more to side with of I you is with lot a to think is, your power replace because expensive.

are that the are we a lagging Our think over covering course on costs with we on older our there's rates. of next can op capture We're costs, of our price fleet movement, op up. still lot but year existing

on it. very, can sure, give or I'm is just supporting for then -- Got just That's some you much then, terms how horsepower pricing premium so And are you in helpful. also horsepower are now drives. goals, And you but in do Can you getting electric And see there small, of demand electric? those? much maybe it's very any electric?

electric some didn't we probably into X.X% really fleet larger from moving we the last into medium or year We Yes. and spectrum had our that to of I'd coming higher older have say, that. our probably small had voltage so, emission horsepower, any engines was arena horsepower across the of been converting size. higher electrics. We've to

gas So to horsepower what it's of we're we're to this by converting electric fleet deploying probably go the X% our X.X% to so of year, would based XX,XXX say, on will electric that XX,XXX from to I XXXX. another end

for. the So, that will you're looking to closer if pretty what X% that's range,

then electric And is. That premium a does bring pricing?

it Yes, It bring premium pricing. does a does.

combination. a that there's get you So and

We and get combustible getting have price. you you and at don't you a have engine costs longer term overhaul, point, lower a have we're -- this because You op running. higher gas-fired get minimal least at

and get get reduction, and you rate. So, get you reduction cost you you maintenance get term

So, all pretty that well. works

you Okay. much. Thank very

bet. You

Ladies and over John gentlemen, the for like session. the concludes I'd to conference question-and-answer closing this Jackson back remarks. turn to

talking joining your forward to next Thank today. We quarter. you everyone time. for Appreciate to you look again

thank attending We you presentation. call. conference today's today's concludes this gentlemen, and ladies And all for

a day. may You disconnect your have lines, wonderful now and