USAC

Does the net income dip reflect higher tax expense, non‑recurring items, or increased depreciation/amortization?

Created August 06, 2025 at 07:32 PM

Short answer:

The press‑release excerpt you provided does not break out the components that drove the change in net income, so we cannot say with certainty whether the dip is due to a higher tax bill, a non‑recurring charge, or simply higher depreciation/amortization (or a combination of any of these).

Below is a structured look at what the information does and does not tell us, together with the typical factors that could explain a net‑income decline in a quarter that otherwise posted record revenue.

1. What the news release actually tells us

Metric	Q2 2025	Q2 2024	Δ (Change)
Total revenues	$250.1 M	$235.3 M	+6.3 %
Net income	$28.6 M	$31.2 M	–$2.6 M (≈ ‑8.3 %)
Net cash from operating activities	$124.2 M	(not disclosed for Q2 2024)	–

Key take‑aways from the data

Revenue grew ≈ 6 % year‑over‑year, yet net income fell ≈ 8 %.
Operating cash flow is strong (over $124 M) and actually higher than the net‑income figure, suggesting the cash‑generation side of the business remains robust.
No line‑item details (tax, depreciation, amortization, one‑time gains/losses, interest expense, etc.) are provided in the brief.

Because the release does not disclose a “bottom‑line reconciliation” (the usual “Net income reconciliation” table that many public companies include in their earnings releases), we lack the direct evidence needed to pinpoint the driver of the net‑income dip.

2. Common reasons a net‑income figure can fall despite higher revenue

Potential driver	How it works	Typical impact on net income
Higher tax expense	If pre‑tax earnings rise but the effective tax rate also rises (e.g., due to a change in jurisdictional mix, loss of tax‑benefit carryforwards, or a one‑off tax provision), the dollar amount of tax paid can increase enough to offset the revenue boost.	Reduces net income; may be reflected in a “Income tax expense” line that is higher than the prior year.
Non‑recurring items	One‑off costs such as restructuring charges, asset‑write‑downs, litigation settlements, or the reversal of a prior‑year gain can be recorded in the quarter. These are usually shown as “Other income (expense)” or “Non‑operating items.”	Can cause a net‑income swing that is unrelated to core operations.
Higher depreciation & amortization (D&A)	If the partnership added new capital assets (e.g., new compression equipment, pipelines, or acquisition‑related goodwill) during the year, the straight‑line or units‑of‑production depreciation schedule will generate larger quarterly D&A charges.	D&A is an expense on the income statement, lowering operating income and thus net income.
Higher interest expense	New debt financing, higher interest rates, or a larger debt balance can increase the interest‑expense line.	Directly reduces pre‑tax income, thereby net income.
Other operating cost increases	Labor, materials, or service‑provider cost inflation can outpace revenue growth, squeezing margins.	Reduces operating income, which flows through to net income.
Changes in accounting estimates	Adjustments to allowance for doubtful accounts, inventory write‑downs, or changes in the useful‑life estimates for assets can affect expense levels.	May affect net income without a cash outlay.

Because USA Compression Partners reported record revenue but lower net income, any of the above could be at play, and the net‑income dip could be a blend of several factors.

3. How to determine the exact cause

Locate the full earnings release – The complete press release (or the Form 10‑Q/10‑K filing for the quarter) typically includes a “Reconciliation of Net Income” table that item‑by‑item explains:
- Net income (GAAP) vs. Adjusted EBITDA
- Income‑tax expense (and effective tax rate)
- Depreciation & amortization
- Non‑recurring or “special” items
Read the MD&A section – Management’s discussion often calls out a “higher tax expense due to X” or “a $Y M non‑recurring charge for Z.”
Check the footnotes to the financial statements – These disclose any changes in accounting estimates, asset‑valuation adjustments, or tax provision details.
Compare the “Operating expenses” line – If total operating expenses grew faster than revenue, the net‑income dip is likely cost‑driven (including D&A).
Look at the “Effective tax rate” – A higher effective tax rate in Q2 2025 versus Q2 2024 would point directly to tax as a primary driver.

4. What we can infer from the limited data

Revenue growth (+6 %) suggests the core business is expanding.
Net cash from operations (+$124 M) is sizable relative to net income, indicating that the cash‑generation side is not being eroded by the net‑income dip. This often happens when a company incurs non‑cash expenses (e.g., higher depreciation, amortization, or a tax provision) that reduce GAAP net income but do not affect operating cash flow.
Net income fell by $2.6 M while revenue rose by $14.8 M. The magnitude of the decline is modest relative to the revenue increase, hinting that the dip is probably not due to a major operating loss but rather to a modest increase in expenses—which could be higher D&A, a slightly higher tax rate, or a small non‑recurring charge.

5. Bottom line for the original question

Does the net income dip reflect higher tax expense, non‑recurring items, or increased depreciation/amortization?

Based on the information in the excerpt, we cannot definitively attribute the net‑income decline to any single factor. The press release does not disclose a breakdown of tax expense, non‑recurring items, or depreciation/amortization. However, the fact that operating cash flow remains strong while net income slipped modestly suggests that non‑cash or non‑operating items (such as higher depreciation/amortization or a tax provision) are plausible contributors. To know for sure, you would need to review the full earnings release or the SEC filing that contains the detailed income‑statement reconciliation and footnotes.

Quick checklist for you (or an analyst) to verify the driver:

Step	What to look for	What it would indicate
1.	Effective tax rate in the “Income tax expense” line	Higher tax expense → dip likely tax‑driven.
2.	Depreciation & amortization amount vs. Q2 2024	Larger D&A → dip could be due to new capital assets.
3.	Non‑operating/Other income (expense) line for one‑off items	Presence of a special charge → dip is non‑recurring.
4.	Management commentary on “special items” or “tax provision”	Direct confirmation of the cause.
5.	Cash‑flow statement – compare “Net cash from operating activities” to “Net income”	A large cash‑flow vs. net‑income gap often signals non‑cash expenses (e.g., D&A, tax).

If you can locate the full filing, those items will let you answer the question with certainty. Until then, the safest answer is: the press release does not specify, so the dip could stem from any of the typical factors listed above.