| Segments |
19. Segments We manage our business segments primarily based on the type of product or service provided. We have two segments that we operate within the U.S.: contract operations and aftermarket services. Our contract operations segment primarily provides natural gas compression services to meet specific customer requirements. Our aftermarket services segment provides a full range of services to support the compression needs of customers, from parts sales and normal maintenance services to full operation of a customer’s owned assets. Our CODM is our President & Chief Executive Officer. Our CODM evaluates the performance of our segments and allocates resources primarily based on adjusted gross margin, defined as revenue less cost of sales, exclusive of depreciation and amortization, which are key components of segment operations. Adjusted gross margin is the primary measure used by our CODM to evaluate segment performance because it focuses on the current performance of segment operations and excludes the impact of the prior historical costs of assets acquired or constructed that are utilized in those operations, the indirect costs associated with our SG&A activities, our financing methods and income taxes. Our CODM considers adjusted gross margin forecast to actual results and period over period financial variances in conjunction with product and customer service metrics and market trends when assessing segment performance and deciding how to allocate resources. Summarized financial information for our reporting segments is shown below: | | | | | | | | | | | | Contract | | Aftermarket | | | | (in thousands) | | Operations | | Services | | Total | Three months ended June 30, 2026 | | | | | | | | | | Revenue(1) | | $ | 329,260 | | $ | 41,978 | | $ | 371,238 | Cost of sales, exclusive of depreciation and amortization | | | 94,672 | | | 32,054 | | | 126,726 | Adjusted gross margin | | | 234,588 | | | 9,924 | | | 244,512 | | | | | | | | | | | Three months ended June 30, 2025 | | | | | | | | | | Revenue(1) | | $ | 318,327 | | $ | 64,825 | | $ | 383,152 | Cost of sales, exclusive of depreciation and amortization | | | 96,152 | | | 49,886 | | | 146,038 | Adjusted gross margin | | | 222,175 | | | 14,939 | | | 237,114 | | | | | | | | | | | Six months ended June 30, 2026 | | | | | | | | | | Revenue(1) | | $ | 660,140 | | $ | 84,865 | | $ | 745,005 | Cost of sales, exclusive of depreciation and amortization | | | 187,943 | | | 65,127 | | | 253,070 | Adjusted gross margin | | | 472,197 | | | 19,738 | | | 491,935 | | | | | | | | | | | Six months ended June 30, 2025 | | | | | | | | | | Revenue(1) | | $ | 618,724 | | $ | 111,591 | | $ | 730,315 | Cost of sales, exclusive of depreciation and amortization | | | 185,951 | | | 85,143 | | | 271,094 | Adjusted gross margin | | | 432,773 | | | 26,448 | | | 459,221 |
| (1) | Segment revenue includes only sales to external customers. |
The following table reconciles gross margin, the most directly comparable GAAP measure, to adjusted gross margin: | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | (in thousands) | | 2026 | | 2025 | | 2026 | | 2025 | Total revenues | | $ | 371,238 | | $ | 383,152 | | $ | 745,005 | | $ | 730,315 | Cost of sales, exclusive of depreciation and amortization | | | (126,726) | | | (146,038) | | | (253,070) | | | (271,094) | Depreciation and amortization | | | (71,478) | | | (63,139) | | | (141,212) | | | (120,759) | Gross margin | | | 173,034 | | | 173,975 | | | 350,723 | | | 338,462 | Depreciation and amortization | | | 71,478 | | | 63,139 | | | 141,212 | | | 120,759 | Adjusted gross margin | | $ | 244,512 | | $ | 237,114 | | $ | 491,935 | | $ | 459,221 |
The following table reconciles adjusted gross margin to income before income taxes: | | | | | | | | | | | | | | | Three Months Ended | | Six Months Ended | | | June 30, | | June 30, | (in thousands) | | 2026 | | 2025 | | 2026 | | 2025 | Adjusted gross margin | | $ | 244,512 | | $ | 237,114 | | $ | 491,935 | | $ | 459,221 | Less: | | | | | | | | | | | | | Selling, general and administrative | | | 39,641 | | | 36,244 | | | 84,872 | | | 73,451 | Depreciation and amortization | | | 71,478 | | | 63,139 | | | 141,212 | | | 120,759 | Long-lived and other asset impairment | | | 4,881 | | | 10,847 | | | 10,140 | | | 11,819 | Restructuring charges | | | 125 | | | 144 | | | 261 | | | 809 | Debt extinguishment gain | | | (687) | | | — | | | (687) | | | — | Interest expense | | | 37,016 | | | 41,711 | | | 76,526 | | | 79,452 | Transaction-related costs | | | 328 | | | 6,127 | | | 924 | | | 10,062 | Gain on sale of assets, net | | | (297) | | | (4,297) | | | (10,413) | | | (11,632) | Other income, net | | | (967) | | | (2,841) | | | (1,572) | | | (3,525) | Income before income taxes | | $ | 92,994 | | $ | 86,040 | | $ | 190,672 | | $ | 178,026 |
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