Correction: Natural Gas Services Group, Inc. Reports Year End and Fourth Quarter 2020 Earnings
NGS Corrects Start Time for Year End and Fourth Quarter 2020 Earnings Call
Midland, TX, March 30, 2021 (GLOBE NEWSWIRE) --
Natural Gas Services Group, Inc. (NYSE:NGS) (the "Company" or "NGS"), a leading provider of gas compression equipment and services to the natural gas and oil industry, announces its financial results for the three months and full year ended December 31, 2020. Financial results contained herein reflect the unaudited consolidated financial statements included in the Company's Form 10-K that will be filed on March 31, 2021.
2020 Highlights
- NGS generated strong cash flow and utilization in 2020 despite market turmoil
- The Company's cash balance as of December 31, 2020 was
$28.9 million , an increase of approximately150% from$11.6 million on December 31, 2019, a result of robust operating cash flow, reduced capital expenditures, and a$3.9 million federal income tax refund. - Full-year cash flow from operating activities was
$32.6 million , an increase of approximately11% when compared to$29.4 million in 2019.
- The Company's cash balance as of December 31, 2020 was
- Rental fleet utilization declined modestly measured by both horsepower (
65.6% at year-end 2020 vs.69.8% at year-end 2019) and units (57.3% at year-end 2020 vs.61.6% at year-end 2019). - 2020 rental revenue was
$60.8 million , an increase of7.3% when compared to 2019 rental revenue of$56.7 million . - GAAP net income for the year ended December 31, 2020 was
$1.8 million or$0.14 per basic and diluted share. - Adjusted EBITDA for the year ended December 31, 2020 was
$22.7 million . Please see Non-GAAP Financial Measures - Adjusted EBITDA, below.
Financial and Operating Details for the Three and Twelve Months Ended December 31, 2020
Revenue: Total revenue decreased by
Operating Loss: The Company posted an operating loss for the year ended December 31, 2020 of
Gross Margins: Total gross margins decreased to
Net Income (Loss): The Company reported net income of
Earnings per share: For the year ended December 31, 2020, the Company reported income per basic and diluted share of
Adjusted EBITDA: Adjusted EBITDA decreased
Cash flow: At December 31, 2020, cash and cash equivalents were approximately
Commenting on fourth quarter and year-end 2020 results, Stephen C. Taylor, President and CEO, said:
“Given a year defined by the debilitating pandemic, global economic shutdown and the worst contraction in oilfield activity in my 40-year career, Natural Gas Services Group posted solid results and continued to differentiate itself with its strong balance sheet and growing cash position. Our cash balance increased from just under
Our financial and operating results over the past year, especially given the myriad of challenges, were satisfying and are an indication of the importance of a strong balance sheet in the oilfield. As commodity prices and oilfield activity are slowly recovering, we believe 2021 should provide opportunities for growth, although we expect such opportunities to be more prevalent as the year progresses. We continue to see new opportunities in the larger horsepower market with both existing and prospective customers with execution of those opportunities likely to occur later in the year. Our industry-leading liquidity position provides us with the flexibility to swiftly respond to prospects to grow our company both intrinsically and through other strategic opportunities.”
Selected data: The tables below show, for the three months and year ended December 31, 2020 and 2019 revenues and percentage of total revenues, along with our gross margin and adjusted gross margin (exclusive of depreciation and amortization), as well as, related percentages of revenue for each of our product lines. Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation and amortization.
Revenue | |||||||||||||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||
Rental | $ | 14,734 | 87 | % | $ | 15,308 | 78 | % | $ | 60,826 | 89 | % | $ | 56,701 | 72 | % | |||||||||||
Sales | 1,663 | 10 | % | $ | 3,947 | 20 | % | 5,657 | 8 | % | 19,763 | 25 | % | ||||||||||||||
Service & Maintenance | 598 | 4 | % | $ | 451 | 2 | % | 1,572 | 2 | % | 1,980 | 3 | % | ||||||||||||||
Total | $ | 16,995 | $ | 19,706 | $ | 68,055 | $ | 78,444 |
Gross Margin | |||||||||||||||||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||
Rental | $ | 1,417 | 10 | % | $ | 1,447 | 9 | % | $ | 8,065 | 13 | % | $ | 6,522 | 12 | % | |||||||||||||||
Sales | (22 | ) | (1 | ) | % | $ | 287 | 7 | % | (835 | ) | (15 | ) | % | 3,391 | 17 | % | ||||||||||||||
Service & Maintenance | 231 | 39 | % | $ | 283 | 63 | % | 816 | 52 | % | 1,313 | 66 | % | ||||||||||||||||||
Total | $ | 1,626 | 10 | % | $ | 2,017 | 10 | % | $ | 8,046 | 12 | % | $ | 11,226 | 14 | % |
Adjusted Gross Margin (1) | |||||||||||||||||||||||||||||
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||
Rental | $ | 7,514 | 51 | % | $ | 7,265 | 47 | % | $ | 32,320 | 53 | % | $ | 29,118 | 51 | % | |||||||||||||
Sales | 48 | 3 | % | $ | 358 | 9 | % | (554 | ) | (10 | ) | % | 3,666 | 19 | % | ||||||||||||||
Service & Maintenance | 247 | 41 | % | $ | 291 | 65 | % | 858 | 55 | % | 1,350 | 68 | % | ||||||||||||||||
Total | $ | 7,809 | 46 | % | $ | 7,914 | 40 | % | $ | 32,624 | 48 | % | $ | 34,134 | 44 | % |
(1) For a reconciliation of adjusted gross margin to its most directly comparable financial measure calculated and presented in accordance GAAP, please read "Non-GAAP Financial Measures - Adjusted Gross Margin" below.
Non-GAAP Financial Measure - Adjusted Gross Margin: “Adjusted Gross Margin” is defined as total revenue less cost of sales (excluding depreciation and amortization expense). Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key operating components. Adjusted gross margin differs from gross margin in that gross margin includes depreciation expense. We believe adjusted gross margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations. Depreciation expense reflects the systematic allocation of historical property and equipment values over the estimated useful lives.
Adjusted gross margin has certain material limitations associated with its use as compared to gross margin. Depreciation expense is a necessary element of our costs and our ability to generate revenue. Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of the company's performance. As an indicator of operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, operating income as determined in accordance with GAAP. Adjusted Gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate adjusted gross margin in the same manner.
The following table calculates gross margin, the most directly comparable GAAP financial measure, and reconciles it to adjusted gross margin:
Three months ended December 31, | Year ended December 31, | ||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Total revenue | $ | 16,995 | $ | 19,706 | $ | 68,055 | $ | 78,444 | |||||||||||
Costs of revenue, exclusive of depreciation and amortization | (9,186 | ) | (11,792 | ) | (35,431 | ) | (44,310 | ) | |||||||||||
Depreciation allocable to costs of revenue | (6,183 | ) | (5,897 | ) | (24,578 | ) | (22,908 | ) | |||||||||||
Gross margin | 1,626 | 2,017 | 8,046 | 11,226 | |||||||||||||||
Depreciation allocable to costs of revenue | 6,183 | 5,897 | 24,578 | 22,908 | |||||||||||||||
Adjusted Gross Margin | $ | 7,809 | $ | 7,914 | $ | 32,624 | $ | 34,134 |
Non-GAAP Financial Measures - Adjusted EBITDA: “Adjusted EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization, impairment of goodwill, an increase in inventory allowance and write-off and retirement of rental equipment. Adjusted EBITDA is a measure used by management, analysts and investors as an indicator of operating cash flow since it excludes the impact of movements in working capital items, non-cash charges and financing costs. Therefore, Adjusted EBITDA gives the investor information as to the cash generated from the operations of a business. However, Adjusted EBITDA is not a measure of financial performance under accounting principles GAAP, and should not be considered a substitute for other financial measures of performance. Adjusted EBITDA as calculated by NGS may not be comparable to Adjusted EBITDA as calculated and reported by other companies. The most comparable GAAP measure to Adjusted EBITDA is net (loss) income.
The following table reconciles our net (loss) income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:
Three months ended December 31, | Year ended December 31, | ||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Net income (loss) | $ | (1,877 | ) | $ | (1,710 | ) | $ | 1,808 | $ | (13,864 | ) | ||||||||
Interest expense | 1 | 3 | 14 | 15 | |||||||||||||||
Income tax expense (benefit) | (139 | ) | 450 | (4,792 | ) | (693 | ) | ||||||||||||
Depreciation and amortization | 6,339 | 6,051 | 25,198 | 23,268 | |||||||||||||||
Impairment of goodwill | — | — | — | 10,039 | |||||||||||||||
Inventory allowance | 184 | 408 | 184 | 3,758 | |||||||||||||||
Retirement of rental equipment | 291 | — | 291 | 1,512 | |||||||||||||||
Adjusted EBITDA | $ | 4,799 | $ | 5,202 | $ | 22,703 | $ | 24,035 |
Conference Call Details:
Teleconference: Tuesday, March 30, 2021 at 10:00 a.m. Central (11:00 a.m. Eastern). Live via phone by dialing 877-358-7306, pass code “Natural Gas Services”. All attendees and participants to the conference call should arrange to call in at least 5 minutes prior to the start time.
Live Webcast: The webcast will be available in listen only mode via our website www.ngsgi.com, investor relations section.
Webcast Reply: For those unable to attend or participate, a replay of the conference call will be available within 24 hours on the NGS website at www.ngsgi.com.
Stephen C. Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing the financial results for the three months and year ended December 31, 2020.
About Natural Gas Services Group, Inc. (NGS): NGS is a leading provider of gas compression equipment and services to the energy industry. The Company manufactures, fabricates, rents, sells and maintains natural gas compressors and flare systems for oil and natural gas production and plant facilities. NGS is headquartered in Midland, Texas, with fabrication facilities located in Tulsa, Oklahoma and Midland, Texas, and service facilities located in major oil and natural gas producing basins in the U.S. Additional information can be found at www.ngsgi.com.
Cautionary Note Regarding Forward-Looking Statements:
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause NGS's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS's products and services; and new governmental safety, health and environmental regulations and social initiatives which could require NGS to make significant capital expenditures or reduce our customers' demand for our products and services. Any forward-looking statements included in this press release are only made as of the date of this press release, and NGS undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
For More Information, Contact: | Alicia Dada, Investor Relations |
(432) 262-2700 Alicia.Dada@ngsgi.com | |
www.ngsgi.com |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (unaudited) | |||||||||
December 31, | |||||||||
2020 | 2019 | ||||||||
ASSETS | |||||||||
Current Assets: | |||||||||
Cash and cash equivalents | $ | 28,925 | $ | 11,592 | |||||
Trade accounts receivable, net of allowance for doubtful accounts of | 11,884 | 9,106 | |||||||
Inventory | 19,926 | 21,080 | |||||||
Prepaid income taxes | 66 | 40 | |||||||
Prepaid expenses and other | 379 | 597 | |||||||
Total current assets | 72,718 | 42,415 | |||||||
Long-Term Inventory, net of allowance for obsolescence of | 1,065 | 1,068 | |||||||
Rental equipment, net of accumulated depreciation of | 207,585 | 217,742 | |||||||
Property and equipment, net of accumulated depreciation of | 21,749 | 21,869 | |||||||
Right of use assets - operating leases, net of accumulated amortization | 483 | 604 | |||||||
Intangibles, net of accumulated amortization of | 1,151 | 1,276 | |||||||
Other assets | 2,050 | 1,603 | |||||||
Total assets | $ | 306,801 | $ | 286,577 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current Liabilities: | |||||||||
Accounts payable | $ | 2,373 | $ | 1,975 | |||||
Accrued liabilities | 6,770 | 2,287 | |||||||
Line of credit | 417 | 417 | |||||||
Current operating leases | 198 | 189 | |||||||
Deferred income | 1,103 | 640 | |||||||
Total current liabilities | 10,861 | 5,508 | |||||||
Deferred income tax liability | 41,890 | 31,243 | |||||||
Long-term operating leases | 285 | 415 | |||||||
Other long-term liabilities | 2,221 | 1,718 | |||||||
Total liabilities | 55,257 | 38,884 | |||||||
Commitments and contingencies | |||||||||
Stockholders’ Equity: | |||||||||
Preferred stock, 5,000 shares authorized, no shares issued or outstanding | — | — | |||||||
Common stock, 30,000 shares authorized, par value | 133 | 132 | |||||||
Additional paid-in capital | 112,615 | 110,573 | |||||||
Retained earnings | 139,286 | 137,478 | |||||||
Treasury shares, at cost, 38 shares | (490 | ) | (490 | ) | |||||
Total stockholders' equity | 251,544 | 247,693 | |||||||
Total liabilities and stockholders' equity | $ | 306,801 | $ | 286,577 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited) | |||||||||
For the Years Ended December 31, | |||||||||
2020 | 2019 | ||||||||
Revenue: | |||||||||
Rental income | $ | 60,826 | $ | 56,701 | |||||
Sales | 5,657 | 19,763 | |||||||
Service and maintenance income | 1,572 | 1,980 | |||||||
Total revenue | 68,055 | 78,444 | |||||||
Operating costs and expenses: | |||||||||
Cost of rentals, exclusive of depreciation stated separately below | 28,506 | 27,583 | |||||||
Cost of sales, exclusive of depreciation stated separately below | 6,211 | 16,097 | |||||||
Cost of service and maintenance, exclusive of depreciation stated separately below | 714 | 630 | |||||||
Selling, general and administrative expenses | 10,550 | 10,710 | |||||||
Depreciation and amortization | 25,198 | 23,268 | |||||||
Impairment of goodwill | — | 10,039 | |||||||
Inventory allowance | 184 | 3,758 | |||||||
Retirement of rental equipment | 291 | 1,512 | |||||||
Total operating costs and expenses | 71,654 | 93,597 | |||||||
Operating loss | (3,599 | ) | (15,153 | ) | |||||
Other income (expense): | |||||||||
Interest expense | (14 | ) | (15 | ) | |||||
Other income | 629 | 611 | |||||||
Total other income, net | 615 | 596 | |||||||
Loss before income taxes: | (2,984 | ) | (14,557 | ) | |||||
(Provision for) benefit from income taxes: | |||||||||
Current | 15,438 | 31 | |||||||
Deferred | (10,646 | ) | 662 | ||||||
Total income tax benefit | 4,792 | 693 | |||||||
Net income (loss) | $ | 1,808 | $ | (13,864 | ) | ||||
Earnings (loss) per share: | |||||||||
Basic | $ | 0.14 | $ | (1.06 | ) | ||||
Diluted | $ | 0.14 | $ | (1.06 | ) | ||||
Weighted average shares outstanding: | |||||||||
Basic | 13,224 | 13,114 | |||||||
Diluted | 13,261 | 13,114 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share amounts) (unaudited) | |||||||||
For the Years Ended December 31, | |||||||||
2020 | 2019 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net (loss) income | $ | 1,808 | $ | (13,864 | ) | ||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 25,198 | 23,268 | |||||||
Deferred taxes | 10,647 | (662 | ) | ||||||
Gain on disposal of assets | (284 | ) | (55 | ) | |||||
Retirement of rental equipment | 291 | 1512 | |||||||
Bad debt allowance (recovery) | 329 | 664 | |||||||
Inventory allowance | 184 | 3758 | |||||||
Impairment of goodwill | — | 10,039 | |||||||
Stock-based compensation | 2,195 | 2,582 | |||||||
(Gain) loss on company owned life insurance | (168 | ) | (219 | ) | |||||
Changes in operating assets and liabilities: | |||||||||
Trade accounts receivables | (3,107 | ) | (2,550 | ) | |||||
Inventory | 1,033 | 8,256 | |||||||
Prepaid income taxes and prepaid expenses | (11,346 | ) | 3,288 | ||||||
Accounts payable and accrued liabilities | 4,880 | (7,225 | ) | ||||||
Deferred income | 463 | 559 | |||||||
Other | 526 | 61 | |||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 32,649 | 29,412 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Purchase of rental equipment, property and other equipment | (15,257 | ) | (69,938 | ) | |||||
Purchase of company owned life insurance | (296 | ) | (302 | ) | |||||
Proceeds from insurance claim | — | 35 | |||||||
Proceeds from sale of property and equipment | 394 | 30 | |||||||
NET CASH USED IN INVESTING ACTIVITIES | (15,159 | ) | (70,175 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Proceeds of other long-term liabilities | (5 | ) | (16 | ) | |||||
Proceeds from exercise of stock options | — | 506 | |||||||
Purchase of treasury shares | — | (490 | ) | ||||||
Taxes paid related to net share settlement of equity awards | (152 | ) | (273 | ) | |||||
NET CASH USED IN FINANCING ACTIVITIES | (157 | ) | (273 | ) | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 17,333 | (41,036 | ) | ||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 11,592 | 52,628 | |||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 28,925 | $ | 11,592 | |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||
Interest paid | $ | 14 | $ | 39 | |||||
Income taxes paid | $ | 105 | $ | 275 | |||||
NON-CASH TRANSACTIONS | |||||||||
Transfer of rental equipment to inventory | $ | — | $ | 836 | |||||
Transfer of inventory to rental equipment | $ | — | $ | 1,184 | |||||
Transfer of prepaids to rental equipment and inventory | $ | — | $ | 958 | |||||
Right of use asset acquired through an operating lease | $ | 77 | $ | 762 |