USA Compression Partners, LP

Previous wording

Known material factors that could cause our actual results to differ from those represented within these forward-looking statements are described in Part I, Item 1A “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2024, filed on February 11, 2025 (our “2024 Annual Report”), as well as our subsequent filings with the SEC, and those described in Part II, Item 1A “Risk Factors” and elsewhere in this report. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among other things:

Current wording

Known material factors that could cause our actual results to differ from those represented within these forward-looking statements are described in Part I, Item 1A “Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2024, filed on February 11, 2025 (our “2024 Annual Report”), Part II, Item 1A. “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, as well as our subsequent filings with the SEC. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among other things:

Previous wording

(1)Fleet horsepower is horsepower for compression units that have been delivered to us and excludes 13,210 and 21,690 of non-marketable horsepower as of March 31, 2025 and 2024, respectively. As of March 31, 2025, we had 39,800 large horsepower on order for delivery, all of which is expected to be delivered within the next 12 months.

Current wording

(1)Fleet horsepower is horsepower for compression units that have been delivered to us and excludes 14,985 and 19,915 of non-marketable horsepower as of June 30, 2025 and 2024, respectively. As of June 30, 2025, we had 39,800 large horsepower on order for delivery, all of which is expected to be delivered within the next 12 months.

Previous wording

(7)Horsepower utilization is calculated as (i) the sum of (a) revenue-generating horsepower, (b) horsepower in our fleet that is under contract but is not yet generating revenue, and (c) horsepower not yet in our fleet that is under contract but not yet generating revenue and that is expected to be delivered, divided by (ii) total available horsepower less idle horsepower that is under repair. Horsepower utilization based on revenue-generating horsepower and fleet horsepower as of March 31, 2025 and 2024, was 92.2% and 91.2%, respectively.

Current wording

(7)Horsepower utilization is calculated as (i) the sum of (a) revenue-generating horsepower, (b) horsepower in our fleet that is under contract but is not yet generating revenue, and (c) horsepower not yet in our fleet that is under contract but not yet generating revenue and that is expected to be delivered, divided by (ii) total available horsepower less idle horsepower that is under repair. Horsepower utilization based on revenue-generating horsepower and fleet horsepower as of June 30, 2025 and 2024, was 91.7% and 91.9%, respectively.

Previous wording

(8)Calculated as the average utilization for the months in the period based on utilization at the end of each month in the period. Average horsepower utilization based on revenue-generating horsepower and fleet horsepower for the three months ended March 31, 2025 and 2024, was 91.9% and 91.0%, respectively.

Current wording

(8)Calculated as the average utilization for the months in the period based on utilization at the end of each month in the period. Average horsepower utilization based on revenue-generating horsepower and fleet horsepower for the three months ended June 30, 2025 and 2024, was 91.9% and 91.2%, respectively. Average horsepower utilization based on revenue-generating horsepower and fleet horsepower for the six months ended June 30, 2025 and 2024, was 91.9% and 91.1%, respectively.

Previous wording

The 5.5% increase in average revenue per revenue-generating horsepower per month for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit.

Current wording

The 5.0% and 5.3% increases in average revenue per revenue-generating horsepower per month for the three and six months ended June 30, 2025, respectively, compared to the three and six months ended June 30, 2024, primarily was due to higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit.

Previous wording

The 2.7% increase in average horsepower per revenue-generating compression unit for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to an increase in large-horsepower compression units deployed.

Current wording

The 2.1% and 2.4% increases in average horsepower per revenue-generating compression unit for the three and six months ended June 30, 2025, respectively, compared to the three and six months ended June 30, 2024, primarily was due to an increase in large-horsepower compression units deployed.

Previous wording

Contract operations revenue. The $6.9 million increase in contract operations revenue for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to (i) a 5.5% increase in average revenue per revenue-generating horsepower per month, as a result of higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit and (ii) a 2.4% increase in average revenue-generating horsepower as a result of increased demand for our services, commensurate with an overall increase in crude oil and natural gas production in the onshore U.S., partially offset by (iii) an $8.0 million decrease in contract operations revenue from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period and (iv) a $2.7 million decrease in revenue attributable to natural gas treating services.

Current wording

Contract operations revenue. The $3.6 million increase in contract operations revenue for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a 5.0% increase in average revenue per revenue-generating horsepower per month as a result of higher market-based rates on newly deployed and redeployed compression units, and CPI-based and other market-based price increases on existing customer contracts that occur as market conditions permit and (ii) a 1.0% increase in average revenue-generating horsepower as a result of increased demand for our services, commensurate with an overall increase in crude oil and natural gas production in the onshore U.S., partially offset by (iii) a $9.1 million decrease in contract operations revenue from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period and (iv) a $2.5 million decrease in revenue attributable to natural gas treating services.

Previous wording

Parts and service revenue. The $0.4 million decrease in parts and service revenue for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to a decrease in maintenance work performed on units at customer locations that are outside the scope of our core maintenance activities and that are offered as a convenience, and in directly reimbursable freight and crane charges that are the financial responsibility of the customers. Demand for retail parts and services fluctuates from period to period based on varying customer needs.

Current wording

Parts and service revenue. The $0.7 million increase in parts and service revenue for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to an increase in maintenance work performed on units outside the scope of our core maintenance activities and in directly reimbursable freight and crane charges that are the financial responsibility of the customers. Demand for retail parts and services fluctuates from period to period based on varying customer needs.

Previous wording

Related-party revenue. Related-party revenue was earned through related-party transactions that occur in the ordinary course of business with various affiliated entities of Energy Transfer. The $9.5 million increase in related-party revenue for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to revenue recognized from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period.

Current wording

Related-party revenue. Related-party revenue was earned through related-party transactions that occur in the ordinary course of business with various affiliated entities of Energy Transfer. The $10.5 million increase in related-party revenue for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to revenue recognized from existing customers acquired by Energy Transfer since the previous period that are now classified as related-party revenue in the current period.

Previous wording

Cost of operations, exclusive of depreciation and amortization. The $6.5 million increase in cost of operations, exclusive of depreciation and amortization, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to (i) a $3.2 million increase in direct labor costs due to increased headcount associated with increased revenue-generating horsepower and higher employee costs, (ii) a $2.5 million increase in direct expenses, primarily driven by increased spending on parts resulting from higher costs and increased usage associated with increased revenue-generating horsepower, and (iii) a $0.6 million increase in retail parts and service expenses.

Current wording

Cost of operations, exclusive of depreciation and amortization. The $8.3 million increase in cost of operations, exclusive of depreciation and amortization, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a $3.5 million increase in direct expenses, primarily driven by increased spending on parts resulting from higher costs and increased usage associated with increased average revenue-generating horsepower, (ii) a $3.2 million increase in direct labor costs due to increased operating headcount associated with increased average revenue-generating horsepower and higher employee costs, and (iii) a $0.9 million increase in retail parts and service expenses.

Previous wording

Depreciation and amortization expense. The $7.1 million increase in depreciation and amortization expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to overhauls and major improvements to compression units.

Current wording

Depreciation and amortization expense. The $5.5 million increase in depreciation and amortization expense for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to overhauls and major improvements to compression units.

Previous wording

Impairment of assets. The $3.6 million impairment of assets for the three months ended March 31, 2025 primarily resulted from our evaluation of the future deployment of our idle fleet under current market conditions. The primary circumstances supporting this impairment were: (i) unmarketability of certain compression units into the foreseeable future, (ii) excessive maintenance costs associated with certain fleet assets, and (iii) prohibitive retrofitting costs that likely would prevent certain compression units from securing customer acceptance. These compression units were written down to their estimated salvage values, if any.

Current wording

Impairment of assets. The $3.2 million and $0.3 million impairments of assets for the three months ended June 30, 2025 and 2024, respectively, primarily resulted from our evaluation of the future deployment of our idle fleet under current market conditions. The primary circumstances supporting this impairment were: (i) unmarketability of certain compression units into the foreseeable future, (ii) excessive maintenance costs associated with certain fleet assets, and (iii) prohibitive retrofitting costs that likely would prevent certain compression units from securing customer acceptance. These compression units were written down to their estimated salvage values, if any.

Previous wording

As a result of our evaluation during the three months ended March 31, 2025, we retired 17 compression units representing approximately 10,200 of aggregate horsepower that previously were used to provide compression services in our business.

Current wording

As a result of our evaluation during the three months ended June 30, 2025 and 2024, we retired four and two compression units, respectively, with approximately 5,900 and 1,300 of aggregate horsepower, respectively, that previously were used to provide compression services in our business.

Previous wording

Interest expense, net. The $0.7 million increase in interest expense, net for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to increased aggregate borrowings, partially offset by lower weighted-average interest rates under the Credit Agreement.

Current wording

Interest expense, net. The $1.2 million decrease in interest expense, net for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to lower weighted-average interest rates under the Credit Agreement, partially offset by increased aggregate borrowings.

Previous wording

Gain on derivative instrument. The $8.8 million gain on derivative instrument for the three months ended March 31, 2024, resulted from the change in fair value of the interest-rate swap due to changes in the interest-rate forward curve and cash received during the period. This interest-rate swap was terminated in August 2024; see Note 7 to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this report for additional information on this interest-rate swap and termination.

Current wording

Gain on derivative instrument. The $3.1 million gain on derivative instrument for the three months ended June 30, 2024, resulted from the change in fair value of the interest-rate swap due to changes in the interest-rate forward curve and cash received during the period. This interest-rate swap was terminated in August 2024; see Note 7 to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this report for additional information on this interest-rate swap and termination.

Previous wording

Selling, general, and administrative expense. The $4.0 million decrease in selling, general, and administrative expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to (i) a $4.2 million decrease in unit-based compensation expense, primarily attributable to mark-to-market changes to our unit-based compensation liability that occurred as a result of changes to our per-unit trading price as of March 31, 2025 and (ii) a $1.2 million decrease in professional fees primarily driven by a decrease in expenses related to our initiative to improve business performance, partially offset by (iii) a $1.4 million increase in severance charges and other employee costs primarily related to the departure of certain executives as well as retention and relocation payments related to the shared services integration during the current period and (iv) a $0.7 million increase in insurance and other administrative expenses.

Current wording

Selling, general, and administrative expense. The $5.2 million decrease in selling, general, and administrative expense for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $6.3 million decrease in unit-based compensation expense attributable to a reversal of unit-based compensation expense resulting from the forfeiture of certain awards by certain former senior management and to mark-to-market changes to our unit-based compensation liability that occurred as a result of changes to our per-unit trading price as of June 30, 2025, (ii) a $1.4 million decrease in employee related expenses due to decreased administrative headcount and lower employee costs, and (iii) a $0.9 million decrease in professional fees primarily related to an initiative to improve business performance, partially offset by (iv) a $1.8 million increase in severance charges and other employee costs primarily related to the departure of certain senior management as well as retention and relocation payments related to the shared services integration during the current period and (v) a $1.7 million increase in insurance and other administrative expenses.

Previous wording

Loss on extinguishment of debt. The$5.0 million loss on extinguishment of debtfor the three months ended March 31, 2024 resulted from the satisfaction and discharge of the Senior Notes 2026, which constituted a legal defeasance under GAAP (the “Defeasance”). This loss consists of the write-off of deferred financing costs of $4.3 million and the difference between (i) the purchase price of U.S. government securities of $748.8 million, which were used for the Defeasance, and (ii) the aggregate outstanding principal balance and accrued interest of the Senior Notes 2026 of $748.1 million at the time of Defeasance.

Current wording

Loss on extinguishment of debt. The $5.0 million loss on extinguishment of debt for the six months ended June 30, 2024 resulted from the satisfaction and discharge of the Senior Notes 2026, which constituted a legal defeasance under GAAP (the “Defeasance”). This loss consists of the write-off of deferred financing costs of $4.3 million and the difference between (i) the purchase price of U.S. government securities of $748.8 million, which were used for the Defeasance, and (ii) the aggregate outstanding principal balance and accrued interest of the Senior Notes 2026 of $748.1 million at the time of Defeasance.

Previous wording

Income tax expense. The $1.1 million increase in income tax expense for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was related to a charge of $1.0 million which we believe is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the years 2019 and 2020 with the

Current wording

Income tax expense. The $1.0 million increase in income tax expense for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was related to a charge of $1.0 million which we believe is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the years 2019 and 2020 with the IRS, see Note 13 to our unaudited condensed consolidated financial statements under Part I, Item 1 “Financial Statements” of this report.

Previous wording

Gross margin. The $2.3 million increase in gross margin for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was due to (i) a $16.0 million increase in revenues, offset by (ii) a $6.5 million increase in cost of operations, exclusive of depreciation and amortization, and (iii) a $7.1 million increase in depreciation and amortization.

Current wording

Gross margin. The $0.9 million increase in gross margin for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, was due to (i) a $14.8 million increase in revenues, offset by (ii) an $8.3 million increase in cost of operations, exclusive of depreciation and amortization, and (iii) a $5.5 million increase in depreciation and amortization.

Previous wording

Adjusted EBITDA. The $10.1 million increase in Adjusted EBITDA for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to (i) a $9.4 million increase in Adjusted gross margin and a $0.8 million decrease in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges and other employee costs.

Current wording

Adjusted EBITDA. The $5.8 million increase in Adjusted EBITDA for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to a $6.5 million increase in Adjusted gross margin, offset by a $0.7 million increase in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges and other employee costs.

Previous wording

DCF. The $2.1 million increase in DCF for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to (i) a $9.4 million increase in Adjusted gross margin and (ii) a $0.8 million decrease in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges and other employee costs, partially offset by (iii) a $5.1 million increase in maintenance capital expenditures, (iv) a $2.4 million decrease in cash received on derivative instrument, and (v) a $0.5 million increase in cash interest expense, net.

Current wording

DCF. The $4.1 million increase in DCF for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, primarily was due to (i) a $6.5 million increase in Adjusted gross margin, (ii) a $2.4 million decrease in distributions on Preferred Units due to the conversion of 100,000 Preferred Units to 4,997,126 common units, and (iii) a $1.1 million decrease in cash interest expense, net, offset by (iv) a $2.8 million increase in maintenance capital expenditures, (v) a $2.5 million decrease in cash received on derivative instrument, and (vi) a $0.7 million increase in selling, general, and administrative expenses, excluding unit-based compensation expense, transaction expenses, and severance charges and other employee costs.

Previous wording

DCF Coverage Ratio. The increase in DCF Coverage Ratio for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was due to the increase in DCF for the period, partially offset by increased distributions due to an increase in the number of common units.

Current wording

DCF Coverage Ratio. The DCF Coverage Ratio for the three months ended June 30, 2025 equaled the DCF Coverage Ratio for the three months ended June 30, 2024, as the increase in DCF for the period was offset by increased distributions due to an increase in the number of common units. The increase in DCF Coverage Ratio for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was due to the increase in DCF for the period, partially offset by increased distributions due to an increase in the number of common units.

Previous wording

We classify capital expenditures as maintenance or expansion on an individual-asset basis. Over the long term, we expect that our maintenance capital expenditure requirements will continue to increase as the overall size and age of our fleet increases. Our aggregate maintenance capital expenditures for the three months ended March 31, 2025 and 2024, were $10.9 million and $5.8 million, respectively. We currently plan to spend between $38.0 million and $42.0 million in maintenance capital expenditures for the year 2025, including parts consumed from inventory.

Current wording

We classify capital expenditures as maintenance or expansion on an individual-asset basis. Over the long term, we expect that our maintenance capital expenditure requirements will continue to increase as the overall size and age of our fleet increases. Our aggregate maintenance capital expenditures for the six months ended June 30, 2025 and 2024, were $22.6 million and $14.6 million, respectively. We currently plan to spend between $38.0 million and $42.0 million in maintenance capital expenditures for the year 2025, including parts consumed from inventory.

Previous wording

Without giving effect to any equipment that we may acquire pursuant to any future acquisitions, we currently plan to spend between $120.0 million and $140.0 million in expansion capital expenditures for the year 2025. Our expansion capital expenditures for the three months ended March 31, 2025 and 2024, were $22.2 million and $104.8 million, respectively.

Current wording

Without giving effect to any equipment that we may acquire pursuant to any future acquisitions, we currently plan to spend between $120.0 million and $140.0 million in expansion capital expenditures for the year 2025. Our expansion capital expenditures for the six months ended June 30, 2025 and 2024, were $40.3 million and $171.8 million, respectively.

Previous wording

As of March 31, 2025, we had binding commitments to purchase $44.7 million worth of additional compression units and serialized parts, all of which is expected to be settled within the next 12 months.

Current wording

As of June 30, 2025, we had binding commitments to purchase $44.9 million worth of additional compression units and serialized parts, all of which is expected to be settled within the next 12 months.

Previous wording

The following table summarizes our sources and uses of cash for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

The following table summarizes our sources and uses of cash for the six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Net cash used in investing activities. The $80.5 million decrease in net cash used in investing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to an $80.2 million decrease in capital expenditures, for purchases of new compression units, overhauls and major improvements, and purchases of other equipment.

Current wording

Net cash used in investing activities. The $106.3 million decrease in net cash used in investing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to a $105.6 million decrease in capital expenditures for purchases of new compression units, overhauls and major improvements, and purchases of other equipment.

Previous wording

Net cash used in financing activities. The $69.3 million increase in net cash used in financing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily was due to (i) a $1.0 billion decrease in proceeds from the issuance of the Senior Notes 2029 and (ii) a $7.7 million increase in common unit distributions, partially offset by (iii) a $748.8 million decrease in investments in government securities purchased in connection with the Defeasance of the Senior Notes 2026, (iv) a $168.2 million increase in net borrowings under the Credit Agreement, (v) a $16.9 million decrease in deferred financing costs driven by the issuance of the Senior Notes 2029 in the prior period, and (vi) a $6.8 million decrease in Preferred Unit distributions.

Current wording

Net cash used in financing activities. The $122.6 million increase in net cash used in financing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily was due to (i) a $1.0 billion decrease in proceeds from the issuance of the Senior Notes 2029 and (ii) a $7.9 million increase in common unit distributions, partially offset by (iii) a $748.8 million decrease in investments in government securities purchased in connection with the Defeasance of the Senior Notes 2026, (iv) a $114.1 million increase in net borrowings under the Credit Agreement, (v) an $18.4 million decrease in deferred financing costs driven by the issuance of the Senior Notes 2029 in the prior period, and (vi) a $6.8 million decrease in Preferred Unit distributions.

Previous wording

As of March 31, 2025, we had outstanding borrowings under the Credit Agreement of $804.6 million and, after accounting for outstanding letters of credit in the amount of $0.8 million, $794.6 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $739.8 million was available to be drawn. As of March 31, 2025, we were in compliance with all of our covenants under the Credit Agreement.

Current wording

As of June 30, 2025, we had outstanding borrowings under the Credit Agreement of $770.6 million and, after accounting for outstanding letters of credit in the amount of $0.8 million, $828.6 million of remaining unused availability, of which, due to restrictions related to compliance with the applicable financial covenants, $735.1 million was available to be drawn. As of June 30, 2025, we were in compliance with all of our covenants under the Credit Agreement.

Previous wording

As of May 1, 2025, we had outstanding borrowings under the Credit Agreement of $774.9 million and outstanding letters of credit of $0.8 million.

Current wording

As of August 1, 2025, we had outstanding borrowings under the Credit Agreement of $730.7 million and outstanding letters of credit of $0.8 million.

Previous wording

During the three months ended March 31, 2025, distributions of $0.1 million were reinvested under the DRIP resulting in the issuance of 2,244 common units. Such distributions are treated as non-cash transactions in the accompanying unaudited condensed consolidated statements of cash flows included under Part I, Item 1 “Financial Statements” of this report.

Current wording

During the six months ended June 30, 2025, distributions of $0.1 million were reinvested under the DRIP resulting in the issuance of 4,706 common units. Such distributions are treated as non-cash transactions in the accompanying unaudited condensed consolidated statements of cash flows included under Part I, Item 1 “Financial Statements” of this report.

Previous wording

Adjusted gross margin is a non-GAAP financial measure. We define Adjusted gross margin as revenue less cost of operations, exclusive of depreciation and amortization expense. We believe Adjusted gross margin is useful to investors as a supplemental measure of our operating profitability. Management uses adjusted gross margin to assess operating performance as compared to historical results, budget and forecast amounts, expected return on capital investment, and our competitors. Adjusted gross margin primarily is impacted by the pricing trends for service operations and cost of operations, including labor rates for service technicians, volume, and per-unit costs for lubricant oils, quantity and pricing of routine preventative maintenance on compression units, and property tax rates on compression units. Adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin or any other measure presented in accordance with GAAP. Moreover, our Adjusted gross margin, as presented, may not be comparable to similarly titled measures of other companies. Because we capitalize assets, depreciation and amortization of equipment is a necessary element of our cost structure. To compensate for the limitations of Adjusted gross margin as a measure of our performance, we believe it is important to consider gross margin determined under GAAP, as well as Adjusted gross margin, to evaluate our operating profitability.

Current wording

Adjusted gross margin primarily is impacted by the pricing trends for service operations and cost of operations, including labor rates for service technicians, volume, and per-unit costs for lubricant oils, quantity and pricing of routine preventative maintenance on compression units, and property tax rates on compression units. Adjusted gross margin should not be considered an alternative to, or more meaningful than, gross margin or any other measure presented in accordance with GAAP. Moreover, our Adjusted gross margin, as presented, may not be comparable to similarly titled measures of other companies. Because we capitalize assets, depreciation and amortization of equipment is a necessary element of our cost structure. To compensate for the limitations of Adjusted gross margin as a measure of our performance, we believe it is important to consider gross margin determined under GAAP, as well as Adjusted gross margin, to evaluate our operating profitability.

Previous wording

(1)For the three months ended March 31, 2025 and 2024, unit-based compensation expense included $0.7 million and $1.0 million, respectively, of cash payments related to quarterly payments of DERs on outstanding phantom unit awards. For the three months ended March 31, 2025, unit-based compensation included $2.2 million related to the cash portion of the settlement of phantom unit awards upon vesting. The remainder of unit-based compensation expense for all periods was related to non-cash adjustments to the unit-based compensation liability and other non-cash unit-based compensation expense.

Current wording

For the three and six months ended June 30, 2025, unit-based compensation included $1.0 million and $3.2 million, respectively, related to the cash portion of the settlement of phantom unit awards upon vesting. The remainder of unit-based compensation expense for all periods was related to non-cash adjustments to the unit-based compensation liability and other non-cash unit-based compensation expense.

Previous wording

(3)Severance charges and other employee costs includes (i) severance payments to former employees of the Partnership, (ii) retention payments to employees of the Partnership that have executed agreements to maintain operations during the shared services integration but do not intend to remain employed with the Partnership after their retention period, and (iii) relocation payments to employees of the Partnership for relocation resulting from the shared services integration and the change in location of the Partnership’s headquarters to Dallas, Texas. These retention payments are incremental to the affected employees’ base pay. For the three months ended March 31, 2025, severance charges and other employee costs included $0.4 million and $0.1 million related to retention payments and relocation payments, respectively.

Current wording

(3)Severance charges and other employee costs includes (i) severance payments to former employees of the Partnership, (ii) retention payments to employees of the Partnership that have executed agreements to maintain operations during the shared services integration but do not intend to remain employed with the Partnership after their retention period, and (iii) relocation payments to employees of the Partnership for relocation resulting from the shared services integration and the relocation of the Partnership’s headquarters to Dallas, Texas. These retention payments are incremental to the affected employees’ base pay. For the three and six months ended June 30, 2025, severance charges and other employee costs included $0.0 million and $0.4 million related to retention payments, respectively, and $0.2 million and $0.3 million related to relocation payments, respectively.

Previous wording

(1)For the three months ended March 31, 2025 and 2024, unit-based compensation expense included $0.7 million and $1.0 million, respectively, of cash payments related to quarterly payments of DERs on outstanding phantom unit awards. For the three months ended March 31, 2025, unit-based compensation included $2.2 million related to the cash portion of the settlement of phantom unit awards upon vesting. The remainder of unit-based compensation expense for all periods was related to non-cash adjustments to the unit-based compensation liability and other non-cash unit-based compensation expense.

Current wording

For the three and six months ended June 30, 2025, unit-based compensation included $1.0 million and $3.2 million, respectively, related to the cash portion of the settlement of phantom unit awards upon vesting. The remainder of unit-based compensation expense for all periods was related to non-cash adjustments to the unit-based compensation liability and other non-cash unit-based compensation expense.

Previous wording

(3)Severance charges and other employee costs includes (i) severance payments to former employees of the Partnership, (ii) retention payments to employees of the Partnership that have executed agreements to maintain operations during the shared services integration but do not intend to remain employed with the Partnership after their retention period, and (iii) relocation payments to employees of the Partnership for relocation resulting from the shared services integration and the change in location of the Partnership’s headquarters to Dallas, Texas. These retention payments are incremental to the affected employees’ base pay. For the three months ended March 31, 2025, severance charges and other employee costs included $0.4 million and $0.1 million related to retention payments and relocation payments, respectively.

Current wording

(3)Severance charges and other employee costs includes (i) severance payments to former employees of the Partnership, (ii) retention payments to employees of the Partnership that have executed agreements to maintain operations during the shared services integration but do not intend to remain employed with the Partnership after their retention period, and (iii) relocation payments to employees of the Partnership for relocation resulting from the shared services integration and the relocation of the Partnership’s headquarters to Dallas, Texas. These retention payments are incremental to the affected employees’ base pay. For the three and six months ended June 30, 2025, severance charges and other employee costs included $0.0 million and $0.4 million related to retention payments, respectively, and $0.2 million and $0.3 million related to relocation payments, respectively.

Previous wording

(4)Represents cash income tax expense accrued for the three months ended March 31, 2025, which we believe is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the federal tax years 2019 and 2020.

Current wording

(4)Represents cash income tax expense accrued for the six months ended June 30, 2025, which we believe is a reasonable estimate of the potential loss from the aggregate final imputed underpayment for the federal tax years 2019 and 2020.