Greetings, and welcome to the Kodiak Gas Services Third Quarter 2025 Earnings Conference Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Graham Sones. Please go ahead.

Good morning, and thank you for joining us for the Kodiak Gas Services conference call and webcast to review third quarter 2025 results. Participating from the company today are Mickey McKee, President and Chief Executive Officer; and John Griggs, Executive Vice President and Chief Financial Officer. Following my remarks, Mickey and John will discuss our financial and operating results and 2025 guidance, then we'll open the call for Q&A. There will be a replay of today's call available via webcast and also by phone until November 19, 2025. Information on how to access the replay can be found on the Investors tab of our website at kodiakgas.com. Please note that information reported on this call speaks only as of today, November 5, 2025, and therefore, you are advised that such information may no longer be accurate as of the time of any replay listening or transcript reading. The comments made by management during this call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views, beliefs and assumptions of Kodiak's management based on information currently available. Although we believe the expectations referenced in these forward-looking statements are reasonable, various risks, uncertainties and contingencies could cause the company's actual results, performance or achievements to differ materially from those expressed in the statements made by management, and management can give no assurance that such statements or expectations will prove to be correct. The comments today will also include certain non-GAAP financial measures. Details and reconciliations to the most comparable GAAP measures are included in yesterday's earnings release, which can be found on our website. And now I'd like to turn the call over to Kodiak's President and CEO, Mr. Mickey McKee. Mickey?

Thanks, Graham, and thank you all for joining us today. I'd like to begin today's call, as we do with all meetings at Kodiak with a safety topic. As we head into the holiday season and prepare to travel and spend time with friends and family, I want to remind everybody that safety doesn't stop at the workplace. Whether you're commuting, visiting family or running errands, please avoid distractions while driving. No text or call is worth risking your safety. Please join me in committing to staying focused behind the wheel so we can enjoy the holidays with those who matter most. We had a busy third quarter, delivering solid financial results and executing on several strategic actions to improve the operational and financial outlook of the company while remaining focused on returning capital to shareholders. Let me begin by discussing some of the strategic actions we have taken over the past few months. First, we went live with our new ERP system in August that was delivered on time and under budget. We consolidated several legacy systems into an integrated platform that will increase our visibility with real-time financial and operational information and enable us to deploy multiple facets of AI technology into our everyday business. The implementation of the new ERP system involved a lot of hard work by the team, and I want to thank everyone involved for their dedication to getting this important project over the line. The new ERP system is a foundational step in our agentic AI initiatives. The team is currently working on multiple AI agents across a broad range of processes, including parts sales, customer order handling and supplier and inventory management. We're specifically excited about our tech parts agent, which will assist our field service technicians in locating the right parts for the job in an expedited manner. These agentic AI initiatives complement our operational AI initiatives, which include condition-based preventative maintenance scheduling and predictive failure detection, just to name a few. The next, as a result of the CSI acquisition 18 months ago, we inherited operations in five foreign countries. As part of our strategic goal to high-grade our fleet and concentrate capital and efforts on markets with the best combination of growth and returns, we made a decision to exit all of our international operations. I'm pleased to report that during the third quarter, we successfully exited the last of our international operations by divesting our operations and assets in Mexico, which included the sale of approximately 19,000 operating horsepower. We had great people in those countries, and I wish the buyers well, but we firmly believe that the U.S. is the right place to be for Kodiak in the contract compression business. Relative to the international markets where we previously operated, including Argentina, Canada, Chile, Romania and Mexico, we believe the U.S. offers higher returns, lower operating risk and a superior growth outlook for many years to come. And we successfully divested all of these operating areas in under 18 months from the close of the highly successful acquisition of CSI. The next major initiative in Q3 that I'd like to highlight is the strategic moves we made with our balance sheet. During the quarter, we termed out $1.4 billion of debt through two bond offerings at a weighted average cost of debt of 6.6%, including the first-ever 10-year term bond issuance in the compression sector. These offerings were another strategic step in derisking our business and setting us up for continued growth and success by allowing us to stagger and extend our debt maturities and significantly increase our liquidity. We ended the quarter with $1.5 billion of availability in our ABL Facility, giving us ample flexibility to pursue exciting future growth opportunities. Finally, we returned an industry-leading amount of over $90 million to our shareholders in the quarter through a $50 million share repurchase and our dividend. Furthermore, as a result of the underlying strength of our business fundamentals, our strong financial results and our outlook for future discretionary cash flow, we increased our quarterly dividend by another 9% to $0.49 per share, equal to approximately 35% of our discretionary cash flow, our stated goal for return of capital to our shareholders. Since September 2024, the $110 million in share repurchases we've completed have allowed us to reduce our share count by nearly 3.5 million shares. We have approximately $65 million available under this program, and we expect to use it. Share repurchases are a fundamental and exciting part of our overall shareholder return strategy. We ended the quarter with $4.35 million in revenue-generating horsepower. Average horsepower per revenue-generating unit was $965, a figure that continues to lead the industry and that has increased each quarter since we closed the CSI acquisition. In the third quarter, we deployed approximately 60,000 new horsepower that averaged more than 1,900 horsepower per unit, and roughly 40% of those new units were electric motor driven. We also added about 30,000 operating horsepower through a small purchase leaseback with an existing customer and through the exercise of an early buyout option on some previously leased units. Including the exit from Mexico, we divested approximately 26,000 operating horsepower of nonstrategic units during the quarter. Our investments to grow the fleet, along with strategic divestitures of noncore units drove our fleet utilization to roughly 98%, another industry-leading metric. Our large horsepower units remain fully utilized at over 99%, reflecting the continuing strong demand for large horsepower compression, and we expect that to continue. With new or expanded pipelines representing over 4.5 Bcf a day of incremental Permian gas takeaway capacity coming online by the end of 2026, our Permian customers have been very active this fall in ordering new compression to be delivered next year. In addition to the new pipelines, there's another 4 Bcf a day of sanctioned pipeline projects that are expected to be online by the end of the decade with numerous other Permian egress projects in the works. Given the recent surge in new compression orders, new pipeline takeaway capacity and forecasted natural gas volume growth, lead times for new compression equipment have significantly stretched out to upwards of 60 weeks. We'll give you more details on our 2026 capital spending plans next quarter, but as a result of the high level of demand across the industry and our customers' needs, our capital plan for 2026 is effectively fully under contract. Before we discuss our third quarter financial results, a few thoughts about the macro environment. Since oil broke below $70 in the first quarter, we have seen the U.S. E&P industry adjust to the lower pricing environment in different ways. Permian operators have high-graded their drilling locations and realized increases in drilling and completion efficiencies, such as reducing days to drill to help offset the decline in oil prices and rig count. The result is that we continue to see oil production growth from the Permian Basin and the U.S., and our customers continue to see accelerating growth in natural gas. So we expect 2026 to be a big year in gas growth from the Permian Basin. Given this backdrop, combined with the strength of our business model, the demand outlook for large horsepower compression remains very strong. Kodiak has continued to deliver top-line revenue growth, margin increases and Contract Services segment growth throughout the year. Also, as I'll discuss shortly, we have taken several steps to reduce costs and boost our operating efficiencies. We see no reason why this dynamic won't continue into 2026, driving further revenue growth and margin improvement. Now turning to third quarter 2025 results. We once again delivered sequential growth in contract services adjusted gross margin and set another record in quarterly discretionary cash flow. As John will discuss in more detail, adjusted EBITDA for the quarter of $175 million was negatively impacted by over $5 million of nonrecurring SG&A expenses associated with the divested Mexico business. Given strong customer demand, historically high industry-wide utilization and disciplined decision-making by the contract compression industry, pricing conversations with customers continue to be constructive. We completed the majority of our planned 2025 contract renewals in the first half. But in Q3, we recontracted just over 200,000 horsepower at above our current fleet average. Contract Services adjusted gross margin percentage matched the high watermark we set last quarter at 68.3%, a 230 basis point increase compared to the third quarter of 2024. In addition to fleet growth, optimization efforts and pricing, we're seeing margin improvements from setting new large horsepower units and our investments in technology to drive fleet uptime and reliability. Specifically, we've reduced lube oil consumption on a per horsepower basis through our AI and machine learning deployment. And our fleet reliability center that monitors our fleet remotely 24 hours a day is helping us identify problems before they become more expensive repairs with longer downtime. This drives lower engine and compressor repair costs and leads to better uptime for our customers. In our Other Services segment, third quarter results were consistent with our expectations. We're seeing positive momentum in our station construction business as evidenced by the recent award of a 30,000 horsepower compressor station that will feed supply fuel gas to a power plant located in Texas. This project is expected to kick off soon and will take roughly a year to complete. As Texas and other areas in the country look for additional natural gas-fired power plants to satisfy surging electricity demand, we're optimistic that more opportunities like this will arise. I'd now like to pivot to a few things that I believe are an underappreciated part of Kodiak's investment case, our short cash conversion cycle and our industry-leading discretionary cash flow yield. Unlike other midstream and infrastructure companies with lengthy construction projects that require substantial percentages of total capital expenditures long before revenues are generated, Kodiak has a short time frame between capital outlay and first revenue. The ability to quickly generate cash plus the strong returns on our growth investments allows Kodiak to generate a discretionary cash flow yield that we believe to be among the best in the midstream investment universe. We generated nearly $117 million in discretionary cash flow in the third quarter and over $450 million over the last four quarters. That equates to approximately 15% discretionary cash flow yield at our current stock price. We define discretionary cash flow as adjusted EBITDA less cash taxes, cash interest and maintenance CapEx. This represents a starting point for our capital allocation framework. We continue to use this cash flow to return capital to shareholders, buying back approximately $50 million in stock in Q3 2025 and paying out a well-covered quarterly dividend. Now I'd like to turn to the outlook for the remainder of 2025. Even following the sale of Mexico and the incurrence of extraordinary and nonrecurring SG&A expenses during Q3, we remain on track to hit our annual revenue, margin and adjusted EBITDA guidance, and we're right where we expected to be with capital spending. At the end of the quarter, we have deployed about 90% of the new units for the year with the remainder expected to be installed in the fourth quarter. Given our reduced outlook for cash taxes, we're on pace to exceed our discretionary cash flow guidance. Therefore, we increased our outlook on this metric for the year. In summary, we're very pleased with our third quarter results. We're on track to achieve our full-year guidance and the steps we've taken this year position us for continued margin growth in the future. Our focused large horsepower business model is helping us generate industry-leading discretionary cash flow yields, position us to further strengthen our balance sheet and return cash to shareholders. And now I'll pass the call to John Griggs to further discuss our financial results and our updated guidance for the year. John?

Thank you. As Mickey made clear, we accomplished some really important strategic objectives during the quarter, actions that serve to set us up well for the next leg of returns-oriented growth in the years to come. Let's turn to the quarter's highlights, and I'll start with our Contract Services segment. We generated solid revenue growth in this segment in Q3 as evidenced by a year-over-year increase of 4.5% and quarter-over-quarter increase of 1.2%. Revenue per ending horsepower was $22.75 this quarter, a nice uplift versus the same quarter last year and effectively flat sequentially. We anticipated this outcome, and we called it out on our last quarterly call because we knew we were adding a lot of revenue-generating horsepower during this quarter, but only a portion of that horsepower's revenues. With less new horsepower being set in Q4 and in conjunction with the recontracting rate increases and solid pricing for new units, Mickey already spoke to, we expect to see a nice uptick in the revenue per horsepower metric for Q4. Relative to Q3 of '24, Contract Services adjusted gross margin percentage increased by 230 basis points to 68.3%. The margin improvement is a reflection of the success we've realized in achieving higher pricing per horsepower alongside lower operating expenses per horsepower. We've driven these results through a relentless focus on high-grading the fleet through large horsepower, gas and electric additions, combined with the sale of noncore, low-margin units. And we're habitually rolling out new technology and process initiatives that either reduce costs, defer spending or improve labor productivity or some combination of the three. In our Other Services segment, we generated revenues and adjusted gross margin in line with our expectations. We've seen a resurgence of contract activity and that, plus our backlog gives us confidence that we remain on track to achieve our annual revenue and margin guidance. Reported SG&A for the quarter was $37.8 million. And after adjusting for nonrecurring or noncash items, it was $31.5 million. As Mickey mentioned, the $31.5 million still includes approximately $5 million in professional expenses associated with the cleanup and sale of our former Mexico operations. With our Mexico operations and assets now sold, we expect SG&A to revert back to a more normalized level during Q4. During the quarter, we booked a noncash charge of $28 million in other expenses that was related to our multiyear negotiation with the state of Texas over the taxability of our compression assets. We've recently made significant progress in gaining clarity on the issue and ultimate potential settlement. The charge takes our reserve to an amount we believe will satisfy this obligation in full. Based on our current discussions, we'd expect to pay the state and close out this accrual in early '26. By doing so, we'll eliminate a significant contingent liability that has been with us for many years. And importantly, we believe that our view and the state's view on taxability of these assets is relatively aligned, and we don't foresee any changes to our future margins or return on investment associated with the tax structure going forward. Net loss attributable to common shareholders for the third quarter was $14 million or $0.17 per diluted share. Excluding the loss on the sale of our Mexico business, the Texas sales and use tax charge and other one-time items, adjusted net income was $31.5 million or $0.36 per diluted share. Maintenance CapEx for the quarter was approximately $20 million and trending toward the low end of our guidance range for the full year. Our investments in technology and the insights we're gaining from that are allowing us to extend preventative maintenance intervals and commensurately associated spending on a major portion of the fleet. We're increasingly seeing the benefit in our maintenance CapEx and believe we'll see more of that going forward as well. As expected, growth CapEx more than doubled quarter-over-quarter to approximately $80 million based on the addition of the roughly 60,000 in new horsepower. Year-to-date, we've added roughly 140,000 horsepower, and we're on pace to slightly exceed our forecast of 150,000 for the year. Other CapEx was $12 million for the quarter. As we previously highlighted, other CapEx was front-half weighted in 2025 due to capitalized spend on our new ERP system as well as some residual spend on our CSI-related fleet upgrades, which are now complete. The discretionary cash flow came in at $117 million, an increase of approximately $14 million versus the comparable quarter from last year. Free cash flow for the quarter was $33 million. With regard to the balance sheet, we made great strides in the execution of our finance strategy. We achieved our goal of terming out the majority of our ABL into bonds with staggered maturities, including the first 10-year bond in the compression space. These actions derisk our balance sheet and add a further element of cash flow stability to our business, which in turn helps us execute on our capital allocation and shareholder return strategies with enhanced confidence. During Q3, we issued $1.4 billion of bonds, exiting the quarter with $521 million drawn on the ABL and leaving us with approximately $1.5 billion in availability. Total debt at quarter end was approximately $2.7 billion. We exited the quarter with a credit agreement leverage ratio of around 3.8x, up from the prior quarter, mainly as a result of debt financing fees as well as our $50 million share repurchase from EQT. We expect to exit the year at about 3.6x. Last, our Board recently declared an increased dividend of $0.49 per share. Even with two increases totaling nearly 20% this year, our dividend is well covered at 2.9x. Briefly on guidance. As we close out the year, we remain on track to hit our segment-level guidance for revenues and margins as well as adjusted EBITDA, even after all the extra spend on Mexico during Q3. On CapEx, our prior guidance remains unchanged as the vast majority of 2025's capital spending is now behind us. We expect the fourth quarter CapEx and new unit growth to decline from Q3 levels. Thanks to our reduced outlook on cash taxes and reduced spending we're seeing in maintenance CapEx, we're on pace to exceed our prior guidance for discretionary cash flow. We now expect to generate between $450 million and $470 million in discretionary cash flow for the year. And with that, I'll hand it back to Mickey.

Thanks, John. Our business model, which generates stable and recurring cash flows is performing well in the current market. The demand outlook for contract compression remains robust, demonstrated by our ability to maintain strong pricing and continued growth in our industry-leading horsepower utilization. Additionally, our new unit horsepower order book is essentially fully contracted for 2026 as we capitalize on the robust outlook for growth in natural gas. Besides the top-line growth, we are successfully making steps to increase margins by divesting noncore units and investing in technology to reduce costs and increase uptime. These targeted actions have enabled us to reach new financial milestones across several important metrics. As a result, we delivered year-over-year increases in Contract Services revenue, adjusted gross margin and set a new quarterly record in discretionary cash flow, strengthening our ability to return capital and drive ongoing value for Kodiak shareholders. Thank you for your participation today. And now we're happy to open up the line for questions. Operator?

Our first question comes from Doug Irwin with Citi.

I just wanted to start with '26 here. And I realize you haven't given any explicit guidance, but it sounds like you have a pretty good idea of what bookings are looking like into next year at this point. So just wondering if you could maybe provide a bit more detail about how the backlog is shaping up and maybe just high level, how you're thinking about fleet additions and pricing power relative to the last few years.

Doug, this is Mickey. Thanks for being with us today. Yes, we're not quite ready to give guidance into '26 quite yet. But like we said in our prepared remarks, we're effectively fully contracted out for what we plan on spending for next year. We've been pretty clear about the fact that our plan is to spend kind of roughly 60% of our discretionary cash flow on our growth capital for any given year. And we think that next year ought to be pretty comparable to that. And we have contracts out into the latter parts of next year that ought to be somewhere in that ballpark. So next quarter, when we give official guidance for '26, we'll give that more detail, but we feel pretty good about where we're at right now and set to have continued growth into next year.

Understood. And then my second question, just around M&A. I think so far this year, you've been focused on more kind of smaller acquisitions and divestitures, but it sounds like a lot of the obvious high-grading is maybe concluded at this point. So just curious if larger scale M&A is something that's on your radar? And if so, what kind of deals might make sense? And would you maybe even consider stepping outside of traditional compression if the right opportunity presents itself?

Yes, Doug, I mean, we definitely would consider that. We don't comment too much on potential M&A deals. But I will tell you that the strategic actions that we took this year set us up to be in a position to consider some of that stuff for next year. So we went live with our ERP system, which was a huge step for us to dial in technology and utilize AI going forward as well as the bond issuance that we did that's freed up $1.5 billion worth of availability on our ABL. So as of this quarter, we have a balance sheet that's in a position to pursue some M&A activity if the right opportunity presents itself.

And our next question comes from John Mackay with Goldman Sachs.

Last quarter, we spent a fair amount of time on some of the initiatives you were working on with your customers, kind of sale leasebacks or other kind of similar types of deals. Can you maybe just catch us up on where those sit and how conversations gone so far?

It's great to connect with you this morning, John. In the third quarter, we completed a small purchase leaseback transaction that proved beneficial for us, allowing us to increase our revenue-generating capacity above the 30,000 horsepower threshold. We are having productive discussions around similar opportunities, although nothing major is imminent at this moment. Regarding Doug's earlier question, the strategic initiatives we implemented this quarter, including the ERP system that provides us real-time financial and operational data, along with the bond issuance that has increased our liquidity, are crucial steps towards pursuing larger M&A and strategic transactions with our customers. We needed to address these foundational steps before moving forward. Overall, we are pleased with the progress made in the third quarter.

Understood. And then going back to your comment earlier around, I guess, you're doing some station construction for some power out in the basin. Can you talk a little bit more about what the opportunity set looks like there for you guys and whether Kodiak could get more kind of directly into the power gen side?

Yes, absolutely. I mean that specific opportunity is one of our station construction deals. We've got a ton of backlog that it looks like for opportunities in our pipeline for that station construction business, a lot of interest in the power sector. And so we are doing a lot of work there. We're gaining a lot of valuable expertise and industry insight there. And if the right entry point presents itself, then we will probably take advantage of it. But nothing to report just yet, but we're doing a lot of work, and we're very interested in the segment.

And we'll go next to Connor Jensen with Raymond James.

I noticed that lead times are back above 60 weeks for equipment, which lines up with what we've heard from others. Wondering if this will potentially lead to higher prices down the road on incremental orders that you could maybe capture through higher prices and just kind of how you're thinking about that dynamic?

Yes, I believe lead times are influenced by the industry's demand. Currently, the industry is experiencing remarkable demand due to both capacity increases in the Permian Basin and significant volume projections for natural gas across various basins. We are seeing LNG capacity come online, and there are considerable volume increase projections from our customers, indicating a strong need for more compression. This trend is likely to be favorable for pricing, and we anticipate ongoing positive pricing discussions with our customers.

Got it. That makes sense. And then a nice job exiting all the international operations focus on the core U.S. market. Is there any cost savings to be had being an entirely domestic business? And how should we think about divestments following this presumably at a lower pace now that you have all the international businesses sold?

Yes. I believe that moving forward, the divestitures will occur at a slower rate, as we have successfully exited our operations in Mexico and Argentina. Those businesses contributed lower margins compared to our primary large horsepower compression operations, which are heavily focused in the U.S., particularly in the Permian Basin. We are indeed divesting from lower-margin operations, which should be beneficial for our overall margin. However, the contribution from this is relatively small, so it won’t have a significant impact.

And I will add to that, this is John. We mentioned it in the prepared remarks and included it in our press release. We spent about $5 million on professional expenses in the third quarter in SG&A for a business that has now been sold. This is all coming to a close. As a result, there will be genuine savings that you won't see repeated in the fourth quarter and beyond.

Moving next to John Annis with Texas Capital.

For my first one, with the new horsepower added this quarter, can you talk about how much of that is electric? I think you may have mentioned around 40% in your prepared remarks, if I heard you correctly. And then just more broadly, has there been any recent changes in your customers' desire to add electric motor drive compression?

Yes. Thanks. This is John. I'll tackle the first piece and then hand it back to Mickey for the customer kind of feedback. So in the third quarter, we added around 60,000 new horsepower, and about 40% of it happened to be electric. We also, over the course of the year, have kind of told everybody that about 40% of the total order book for '25 was electric. So that was just a coincidence in terms of the third quarter versus the year. In terms of what Mickey is saying in the future, I'll turn it back to you.

Yes. I mean I think that you're definitely seeing a little bit of a pullback away from electric-driven compression orders and inquiries coming in. It's just a power problem, especially in the Permian Basin. They're just the lead times for getting power and connecting the grid access is just a problem for people that have aspirations to go to electric. I think those aspirations are still there. They just are looking at shorter-term solutions and that kind of thing that are kind of then the longer-term electric desires that they have. So the power problem is real, and it's kind of shifting some of those customers' desire to go electric.

Terrific. For my follow-up, you highlighted robust natural gas demand drivers, including power for data centers and LNG. Can you quantify what portion of your new unit deployments or backlog are directly tied to serving these emerging areas versus traditional wellhead production? And then are there any differences in contract terms, duration or equipment requirements for these applications?

It's difficult for us to quantify how much of our compression is dedicated to LNG versus data center demand. Once gas enters a pipeline, we can't determine whether a specific molecule will be used for data center power or sent to the Gulf Coast for liquefaction and export to Europe. From our perspective, we can't differentiate between them. However, we know there's significant demand for natural gas, which involves multiple stages of compression, ultimately benefiting our business. We see this demand emerging, and there don't appear to be any significant differences in contract terms or duration. Therefore, from our position in the value chain, it's too soon to make a determination.

Moving next to Zack Van Everen with TPH & Company.

Maybe just going back to the 60 weeks on new equipment. Does that kind of indicate you're already starting conversations with customers for 2027? And would you guys be willing to order some on spec just to make sure you have the equipment when it's needed?

I believe discussions for 2027 will begin soon. We've been quite busy lately, so I haven't heard of many discussions regarding 2027, but I know they are starting. We usually don’t order equipment on speculation, and we will continue to avoid doing so for compression if possible. However, we can collaborate with packagers and Cat dealers to ensure engines are available in the pipeline for our access. There are ways we can manage our supply chain without needing to order complete equipment packages based on speculation, especially given the longer lead times.

Got you. That makes sense. And maybe related to the same question, have you seen contract duration get extended as we see continued rates increasing for customers is when they renegotiate? Has that gone out from the typical 3 to 5 years? Or are you still within that range for most new contracts?

Most new contracts are still within that 3- to 5-year range. So we are starting to see some interest from some customers that want to term equipment out for longer than that, but haven't gotten too much traction there as we're really more prone to key in on price rather than term for those contracts.

And we'll go next to Selman Akyol with Stifel.

I just want to go back to the station construction opportunity that you're seeing. And you talked about backlog, and I just want to make sure I understand that. Is backlog opportunities that you've identified? Or is that stuff you've identified and you actually expect to become order and we should expect to see it at some point flow through?

A little bit of both, Selman. I think that we probably have more opportunities in our pipeline today than we've probably had in the last couple of years. Now conversion rate on those, I think we expect to be pretty high, but haven't signed, sealed the deal on all of those yet, but we feel pretty good about that business model going forward and the contribution that it's going to have in 2026.

And then as we think about margins, you've talked about divesting lower contributions. You've got your ERP system. You've talked about AI. What should we be expecting margins as we kind of go through '26? Is there still upward pressure to those numbers that you're putting up?

I think so. I mean we're not quite ready to guide on '26 what margins are going to look like yet, but we would expect those to be higher than they are today.

Got it. And one last question, if I could squeeze it in. Can you just talk about what the outlook is for other basins besides the Permian? I know the Permian gets all the attention, but seeing any uplift in any others?

Yes. Selman, good question. And quite frankly, the bulk of the capital spend by our customers has gone to the Permian Basin, like you said. So we key on the Permian probably more than most people. But I will tell you, there is some uplift in opportunities that we're seeing in some other basins. We've got some really interesting opportunities that we're taking advantage of up in the Northeast as well as in the Eagle Ford and Rocky Mountains. So we're seeing some of those other basins start to have a lot more interest and activity. So it's a good thing. And we think that certainly from a natural gas standpoint of supporting LNG build-out and data center build-out and that kind of thing, some interest from these other basins is a quality thing for us.

And we'll hear next from Eli Jossen with JPMorgan.

Maybe just on some of the strong liquidity you guys have and the optionality it creates. I recognize that '26 is pretty filled out, but can you just talk about what makes the most sense to do with that dry powder? I mean, could we think about something bigger in the Power Solutions realm? I know you guys talked about you're looking at those, but maybe just stacking that kind of opportunity set versus some of the M&A that's out there.

Yes, this is John. I'll address that, and I expect Mickey will add his thoughts as well. You posed a general question, and I want to emphasize that our capital allocation strategy, which we have consistently followed since going public, remains in place. This strategy involves aiming for a 3% to 4% year-over-year growth in horsepower over several years, which leads to upper single-digit EBITDA growth for multiple years. We anticipate that this will result in a similar or slightly higher growth rate in discretionary cash flow going forward. We aim to maintain our long-term leverage target of 3.5x and will always prioritize protection of our balance sheet. We have a strong amount of discretionary cash flow and the flexibility regarding how we utilize it. We continue to see excellent returns, especially with new sets of horsepower that yield high-quality returns significantly above our hurdle rates. We will carry on with that approach. Regarding M&A, Mickey has addressed many aspects at the outset. Our history since going public includes key focuses like the integration of CSI, exiting international operations, moving away from the small horsepower sector, and implementing a new ERP system designed to enhance our management capabilities for the next phase of Kodiak’s growth. We will explore all opportunities in the compression sector that align with our focus on large horsepower, high-quality assets in advantageous basins. Power is an essential consideration in today’s landscape, and our customers are involved in discussions about their own distributed power solutions due to concerns surrounding grid stability. These discussions will continue. Lastly, we have the chance to engage creatively with our customers through potential purchase leaseback transactions, which could be excellent opportunities for growth without significantly increasing industry capacity and would be financially beneficial for investors. We are well-positioned for 2026 as we consider the next phase of Kodiak’s growth, building upon our strong long-term business model in large horsepower U.S. compression.

Yes. Awesome. Really appreciate the color there. And then maybe just kind of back to some of the 60-week lead times and the contracting that you're seeing. Can you just talk a little bit about pricing trends, particularly in the Permian? I know those continue to move up and to the right, but just what you guys are seeing on the pricing front and how you expect that to evolve in the future?

Yes, we don't expect much change. We believe we still have the ability to maintain leading-edge pricing that we've held for the past few years. We have adjusted prices for a significant portion of our fleet, but there is still a large part that remains unchanged. We anticipate that the current pricing structure for our existing fleet will continue to increase over time as we update some of the older contracts that are 3 to 4 years old. We also expect to continue achieving leading-edge pricing for new unit deployments because, given inflation and rising operational costs, we need to set higher prices to maintain our current margins. We will remain focused on this area, and we believe the pricing situation will remain stable, allowing us to drive prices for both new units and the existing fleet.

Anything further, Mr. Jossen?

I leave it there.

This now concludes our question-and-answer session. I would like to turn the floor back over to Mickey McKee for closing comments.

All right. Thank you, operator, and thank you to everyone participating in today's call. We look forward to speaking with you again after we report our results for the fourth quarter.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.