Kodiak Gas Services, Inc. (KGS)

Interest coverage

		Jun 30, 2025	Mar 31, 2025	Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	327,143	281,989	273,052	225,540	249,324	272,474	235,017	264,105	304,821	269,000	288,813
Interest expense (ttm)	US$ in thousands	198,250	204,628	197,144	186,348	172,067	180,898	199,881	164,372	174,521	150,386	117,303
Interest coverage		1.65	1.38	1.39	1.21	1.45	1.51	1.18	1.61	1.75	1.79	2.46

June 30, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $327,143K ÷ $198,250K
= 1.65

The analysis of Kodiak Gas Services, Inc.’s interest coverage ratios over the specified periods reveals a trend of declining capacity to meet interest obligations. At the end of 2022, the interest coverage ratio stood at 2.46, indicating that earnings before interest and taxes (EBIT) were approximately 2.46 times the interest expense, reflecting a relatively comfortable safety margin. However, over the subsequent quarters, this ratio consistently declined, falling to 1.79 by March 31, 2023, and further decreasing to 1.75 by June 30, 2023, and 1.61 by September 30, 2023.

The downward trend intensified in the subsequent year, with the ratio dropping to 1.18 at the end of 2023, suggesting that EBIT was only slightly more than the interest expense, thereby raising concerns about the company's ability to service its debt under current earnings levels. During the first quarter of 2024, there was a modest improvement to 1.51; nonetheless, this ratio remained below the commonly accepted threshold of 2.0, indicating ongoing strain on interest coverage.

Further fluctuations are observed in the subsequent periods, with ratios of 1.45 in June 2024, 1.21 in September 2024, and a slight recovery to 1.39 at the year's end. The ratios in early 2025 depict a similar pattern of modest recovery and fluctuation, with 1.38 in March 2025 and 1.65 in June 2025. These movements suggest some stabilization but overall reflect limited capacity to comfortably cover interest expenses solely from operating earnings.

In summary, Kodiak Gas Services, Inc. has experienced a notable decline in its interest coverage ratio from a healthy level near 2.5 in late 2022 to approximately 1.18 at the end of 2023, with intermittent marginal improvements thereafter. The ratios remaining predominantly below 2.0 indicate heightened financial risk and potential challenges in meeting interest obligations without additional earnings or changes in debt structure. This trend warrants careful monitoring of the company's earnings volatility and liquidity position to assess ongoing financial stability.