USA Compression outlines $620M EBITDA target while expanding horsepower deployment and reducing leverage

Earnings Call Insights: USA Compression Partners (USAC) Q3 2025

MANAGEMENT VIEW

* Micah Green, President & CEO, reported "revenues of over $250 million, adjusted EBITDA over $160 million and DCF approaching $104 million, with strong margins and consistent utilization resulting in improved leverage ratio of 3.9x and DCF coverage ratio of 1.6x." He stated, "Based on year-to-date performance, we have increased our 2025 ranges for EBITDA and DCF guidance."
* Green indicated most of the 2025 new unit horsepower will be deployed in Q4, setting up momentum for 2026, and said, "We expect that new horsepower will exceed 2025 levels given continued natural gas demand and new projects."
* He highlighted an expected "grow by more than 40,000 horsepower before the end of 2025 relative to Q2" in the Northeast and Central regions and projected "year-end active fleet to roughly 3.6 million horsepower."
* Green announced that "we now expect to realize the majority of the $5 million of shared services annualized savings in 2025, ahead of the 2026 time line shared on our last call," and noted refinancing of the ABL and 2027 senior notes, "significantly reducing our weighted average borrowing cost and improved strategic flexibility."
* Chris Paulsen, VP, CFO, shared, "In Q3, our sales team continued to build upon pricing improvements, up to an all-time high, averaging $21.46 per horsepower for the third quarter, a 1% increase in sequential quarters and a 4% increase compared to a year ago."
* Paulsen added, "Our third quarter 2025 net income was $34.5 million. Operating income was $83.9 million. Net cash provided by operating activities was $75.9 million and cash interest expense net was $44.9 million."

OUTLOOK

* Paulsen stated, "We have increased and tightened our adjusted EBITDA range to $610 million to $620 million, increasing the midpoint of the range by approximately $15 million. We have also increased our DCF range to $370 million to $380 million, reduced our expansion capital range to $115 million to $125 million, and maintained our maintenance capital between $38 million and $42 million."
* Management expects "new horsepower will exceed 2025 levels" in 2026 and anticipates releasing the 2026 capital budget in February.
* Paulsen explained that about "$11 million of expansion capital tied to late December deliveries is now expected to be realized in 2025 instead of January 2026, as stated in our Q2 call and therefore, is factored into our 2025 capital range."

FINANCIAL RESULTS

* Sales team achieved "an all-time high, averaging $21.46 per horsepower for the third quarter."
* Adjusted gross margins were "higher at 69.3%, in large part due to the realization of both onetime and ongoing cost savings tied to our centralized procurement processes, employee health care savings and onetime sales tax refund."
* Average active horsepower was "flattish compared to Q2 at $3.55 million."
* Total fleet horsepower at the end of the quarter was "approximately 3.9 million horsepower, essentially flat versus the prior quarter."
* Average utilization for the third quarter was "94%, consistent with the prior quarter."
* Expansion capital expenditures were "$37.3 million, and our maintenance capital expenditures were $9 million."
* Leverage ratio at the end of the third quarter was "3.9x."
* Paulsen noted, "we are on track to realize over $10 million annualized interest savings given these efforts and based on forecasted rate cuts, all while increasing overall liquidity and extending tenor."

Q&A

* Nate Pendleton, Texas Capital: "In a sustained slowdown in oil-directed activity, can you speak to your willingness to lean further into compression and dry gas plays... would there be any investment in in-basin facilities required to support any significant increase in gas-directed compression?" Green responded, "We're already established in the dry gas markets... we can move equipment from anywhere that may slow down to those basins or we can buy new equipment and install there for operating."
* Pendleton: "With the strong pricing trends that you guys noted during the quarter, can you speak to recent pricing dynamics and how spot prices are comparing to your fleet average here?" Chris Wauson answered, "Our market has definitely picked up since Q2. So our pricing trends from a dollar per horsepower basis is going to be consistent into the back half of 2025 into 2026."

SENTIMENT ANALYSIS

* Analyst tone was positive, focusing on growth opportunities and pricing trends, with Pendleton describing the company's geographic diversification as "definitely positive."
* Management demonstrated confidence, as Green remarked, "we continue to see growth opportunities in the markets we operate" and Paulsen highlighted, "we are on track to realize over $10 million annualized interest savings."
* Compared to the previous quarter, analysts were less focused on macro risks and more on operational execution and strategic positioning, while management appeared more assertive in guidance and cost management language.
* Management’s tone in prepared remarks was confident, and remained consistent during the Q&A.

QUARTER-OVER-QUARTER COMPARISON

* The EBITDA guidance was raised and the range tightened from $590 million-$610 million in Q2 to $610 million-$620 million in Q3, with the midpoint up by $15 million.
* Distributable cash flow guidance increased from $350 million-$370 million to $370 million-$380 million.
* Expansion capital guidance was reduced, and more capital is now expected to be realized in 2025 rather than deferred to 2026.
* Leverage ratio improved from 4.08x to 3.9x.
* Management’s language around cost savings and refinancing efforts became more specific and proactive compared to the previous quarter.
* Analysts in Q2 raised concerns about gross margin pressures and G&A costs, while Q3 focused on growth, pricing power, and geographic flexibility.

RISKS AND CONCERNS

* Management noted rising lead times for large equipment orders, now "more than 60 weeks for larger orders."
* U.S. producers are "still evaluating macro market conditions to arrive at their appropriate capital budgets for 2026," indicating potential uncertainty in customer spending.
* Green mentioned that 2026 G&A is expected to "grow modestly off of our new baseline, reflecting typical wage inflation and modest investments in new commercial and financial capabilities."
* No new material operational or financial risks were highlighted as acute, and management emphasized mitigation through flexible equipment deployment and continued cost discipline.

FINAL TAKEAWAY

USA Compression Partners raised its 2025 EBITDA and DCF guidance, driven by strong pricing, high utilization, and continued cost savings, while achieving improved leverage and refinancing milestones. Management expects to deploy most of its new horsepower in Q4 and projects further fleet growth in 2026, supported by customer demand in both the Permian and Northeast regions. The company signaled confidence in maintaining margins and advancing operational efficiency, while remaining attentive to evolving market conditions and capital expenditure timing.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/usac/earnings/transcripts]

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