Natural Gas Services Group, Inc. Reports First Quarter 2021 Financial and Operating Results
Natural Gas Services Group, Inc. (NGS) announced its Q1 2021 results, highlighting a 6.1% increase in cash balance to $30.7 million. Total revenue rose to $18.4 million, up 8.2% sequentially, driven by increased compressor sales. However, rental revenue dipped 4.7% year-over-year to $15.3 million. Adjusted EBITDA grew 3.5% to $6.5 million. The company reported a net loss of $394,000, a significant decrease from the prior year, influenced by a prior tax benefit. NGS also secured a new $20 million credit agreement and improved its gross margin by 19.1% year-on-year.
- Cash balance increased 6.1% to $30.7 million.
- Total revenue increased 8.2% sequentially to $18.4 million.
- Adjusted EBITDA rose 21.2% sequentially to $6.5 million.
- Total gross margins improved 19.1% year-over-year.
- Net loss of $394,000 compared to a net income of $4.1 million in Q1 2020.
- Rental revenue decreased 4.7% year-over-year.
Midland, TX, May 13, 2021 (GLOBE NEWSWIRE) --
First Quarter 2021 Highlights
- The Company continued to generate free cash flow with steady utilization
- Cash balance increased
6.1% to$30.7 million in the first quarter of 2021 from$28.9 million at year end 2020 due to strong operating cash flow and reduced capital expenditures. - Utilization remained steady on both a horsepower (
65.2% at March 31, 2021 vs.65.6% at December 31, 2020) and a unit (56.5% at March 31, 2021 vs.57.3% at December 31, 2020) basis.
- Cash balance increased
- Rental revenue of
$15.3 million , an increase of4.1% when compared to the fourth quarter of 2020. - Net loss of
$394,000 ($0.03 loss per basic and diluted share) a reduction of$1.5 million when compared to the fourth quarter of 2020. - Total Adjusted Gross Margins increased
5.5% and9.8% from the first and fourth quarter of 2020, respectively. - Adjusted EBITDA of
$6.5 million . Please see Non-GAAP Financial Measures - Adjusted EBITDA, below. - Entered into a new five year
$20 million Credit Agreement with Texas Capital Bank, N.A. as Sole Lender and Administrative Agent.
MIDLAND, Texas May 13, 2021 - Natural Gas Services Group, Inc. (“NGS” or the “Company”) (NYSE:NGS), a leading provider of natural gas compression equipment and services to the energy industry, today announced financial results for the three months ended March 31, 2021.
Revenue: Total revenue for the three months ended March 31, 2021 increased to
Gross Margins: Total gross margins increased
Operating Loss: Operating loss for the three months ended March 31, 2021 was
Net (Loss) Income: Net loss for the three months ended March 31, 2021 was
Adjusted EBITDA: Adjusted EBITDA increased
Cash flows: At March 31, 2021, cash and cash equivalents were approximately
Commenting on First Quarter 2021 results, Stephen C. Taylor, President and CEO, said:
"Our first quarter results continue to trend toward a more stable oilfield and increasing levels of activity as we move further away from the impacts of the coronavirus pandemic, including reduced demand and weak pricing for energy companies.
Our rental revenue increased
We also announced the appointment of our new Chief Financial Officer, Micah Foster, and the closing of our new credit facility with Texas Capital Bank, strengthening our financial team and further strengthening our financial flexibility and liquidity. Our Board of Directors appointed Nigel Jenvey to replace Frank Hughes who is retiring. Nigel is a recognized authority on energy environmental issues, including two decades focused on developing carbon capture technologies. Coincident with Nigel's appointment, the Board announced its decision to transform the former Governance Committee into the Environmental, Social and Governance Committee with Nigel as the chairman, another step in support of the Company's commitment to continuous improvement in environmental, social and governance issues, including strong sponsorship for such initiatives from our Board."
Selected data: The tables below show, for the three months ended March 31, 2021 and 2020, 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.
Revenue | |||||||||||||
Three months ended March 31, | |||||||||||||
2021 | 2020 | ||||||||||||
(in thousands) | |||||||||||||
Rental | $ | 15,341 | 83 | % | $ | 16,100 | 90 | % | |||||
Sales | 2,711 | 15 | % | 1,450 | 8 | % | |||||||
Service & Maintenance | 345 | 2 | % | 340 | 2 | % | |||||||
Total | $ | 18,397 | $ | 17,890 |
Gross Margin | |||||||||||||||
Three months ended March 31, | |||||||||||||||
2021 | 2020 | ||||||||||||||
(in thousands) | |||||||||||||||
Rental | 2,123 | 14 | % | 2,197 | 14 | % | |||||||||
Sales | 23 | 1 | % | (361 | ) | (25 | ) | % | |||||||
Service & Maintenance | 288 | 83 | % | 207 | 61 | % | |||||||||
Total | $ | 2,434 | 13 | % | $ | 2,043 | 11 | % |
Adjusted Gross Margin (1) | |||||||||||||||
Three months ended March 31, | |||||||||||||||
2021 | 2020 | ||||||||||||||
(in thousands) | |||||||||||||||
Rental | $ | 8,185 | 53 | % | $ | 8,203 | 51 | % | |||||||
Sales | 95 | 4 | % | (289 | ) | (20 | ) | % | |||||||
Service & Maintenance | 297 | 86 | % | 215 | 63 | % | |||||||||
Total | $ | 8,577 | 47 | % | $ | 8,129 | 45 | % |
(1) For a reconciliation of adjusted gross margin to its most directly comparable financial measure calculated and presented in accordance with 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 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 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, gross margin 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 March 31, | |||||||||
2021 | 2020 | ||||||||
(in thousands) | |||||||||
Total revenue | 18,397 | $ | 17,890 | ||||||
Costs of revenue, exclusive of depreciation | (9,820 | ) | (9,761 | ) | |||||
Depreciation allocable to costs of revenue | (6,143 | ) | (6,086 | ) | |||||
Gross margin | 2,434 | 2,043 | |||||||
Depreciation allocable to costs of revenue | 6,143 | 6,086 | |||||||
Adjusted Gross Margin | $ | 8,577 | $ | 8,129 |
Non-GAAP Financial Measures - Adjusted EBITDA: “Adjusted EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization, non-cash stock compensation expense, impairment of goodwill, increases in inventory allowance 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 income (loss).
The following table reconciles our net (loss) income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:
Three months ended March 31, | |||||||||
2021 | 2020 | ||||||||
(in thousands) | |||||||||
Net (loss) income | $ | (394 | ) | $ | 4,082 | ||||
Interest expense | 1 | 3 | |||||||
Income tax expense (benefit) | 125 | (4,543 | ) | ||||||
Depreciation and amortization | 6,297 | 6,240 | |||||||
Non-cash stock compensation expense | 474 | 502 | |||||||
Adjusted EBITDA | $ | 6,503 | $ | 6,284 |
Conference Call Details:
Teleconference: Thursday, May 13, 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 ended March 31, 2021.
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 combustion 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 potential impacts of the COVID-19 pandemic on the Company’s business; a prolonged, substantial reduction in oil and natural gas prices which could cause a decline in the demand for NGS's products and services; the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; and new governmental safety, health and environmental regulations which could require NGS to make significant capital expenditures. The 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, as well as the Company’s Form 10-Q for the quarterly period ended March 31, 2021, as 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, except per share amounts) (unaudited) | |||||||||
March 31, 2021 | December 31, 2020 | ||||||||
ASSETS | |||||||||
Current Assets: | |||||||||
Cash and cash equivalents | $ | 30,683 | $ | 28,925 | |||||
Trade accounts receivable, net of allowance for doubtful accounts of | 12,724 | 11,884 | |||||||
Inventory | 19,982 | 19,926 | |||||||
Federal income tax receivable | 11,538 | 11,538 | |||||||
Prepaid income taxes | 62 | 66 | |||||||
Prepaid expenses and other | 81 | 379 | |||||||
Total current assets | 75,070 | 17890000 | 72,718 | ||||||
Long-term inventory, net of allowance for obsolescence of | 1,105 | 1,065 | |||||||
Rental equipment, net of accumulated depreciation of | 206,436 | 207,585 | |||||||
Property and equipment, net of accumulated depreciation of | 21,601 | 21,749 | |||||||
Right of use assets - operating leases, net of accumulated amortization of | 429 | 483 | |||||||
Intangibles, net of accumulated amortization of | 1,119 | 1,151 | |||||||
Other assets | 2,158 | 2,050 | |||||||
Total assets | $ | 307,918 | $ | 306,801 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current Liabilities: | |||||||||
Accounts payable | $ | 1,181 | $ | 2,373 | |||||
Accrued liabilities | 10,483 | 6,770 | |||||||
Line of credit | — | 417 | |||||||
Current operating leases | 169 | 198 | |||||||
Deferred income | 34 | 1,103 | |||||||
Total current liabilities | 11,867 | 10,861 | |||||||
Deferred income tax liability | 42,013 | 41,890 | |||||||
Long-term operating leases | 260 | 285 | |||||||
Other long-term liabilities | 2,378 | 2,221 | |||||||
Total liabilities | 56,518 | 55,257 | |||||||
Commitments and contingencies | |||||||||
Stockholders’ Equity: | |||||||||
Preferred stock, 5,000 shares authorized, no shares issued or outstanding | — | — | |||||||
Common stock, 30,000 shares authorized, par value | 134 | 133 | |||||||
Additional paid-in capital | 112,864 | 112,615 | |||||||
Retained earnings | 138,892 | 139,286 | |||||||
Treasury Shares, at cost, 38 shares | (490 | ) | (490 | ) | |||||
Total stockholders' equity | 251,400 | 251,544 | |||||||
Total liabilities and stockholders' equity | $ | 307,918 | $ | 306,801 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited) | |||||||||
Three months ended | |||||||||
March 31, | |||||||||
2021 | 2020 | ||||||||
Revenue: | |||||||||
Rental income | $ | 15,341 | $ | 16,100 | |||||
Sales | 2,711 | 1,450 | |||||||
Service and maintenance income | 345 | 340 | |||||||
Total revenue | 18,397 | 17,890 | |||||||
Operating costs and expenses: | |||||||||
Cost of rentals, exclusive of depreciation stated separately below | 7,156 | 7,897 | |||||||
Cost of sales, exclusive of depreciation stated separately below | 2,616 | 1,739 | |||||||
Cost of service and maintenance, exclusive of depreciation stated separately below | 48 | 125 | |||||||
Selling, general and administrative expenses | 2,649 | 2,162 | |||||||
Depreciation and amortization | 6,297 | 6,240 | |||||||
Total operating costs and expenses | 18,766 | 18,163 | |||||||
Operating loss | (369 | ) | (273 | ) | |||||
Other income (expense): | |||||||||
Interest expense | (1 | ) | (3 | ) | |||||
Other income (expense), net | 101 | (185 | ) | ||||||
Total other income (expense), net | 100 | (188 | ) | ||||||
Loss before provision for income taxes | (269 | ) | (461 | ) | |||||
Income tax (expense) benefit | (125 | ) | 4,543 | ||||||
Net (loss) income | $ | (394 | ) | $ | 4,082 | ||||
(Loss) earnings per share: | |||||||||
Basic | $ | (0.03 | ) | $ | 0.31 | ||||
Diluted | $ | (0.03 | ) | $ | 0.30 | ||||
Weighted average shares outstanding: | |||||||||
Basic | 13,263 | 13,157 | |||||||
Diluted | 13,263 | 13,416 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||||
Three months ended | |||||||||
March 31, | |||||||||
2021 | 2020 | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
Net (loss) income | $ | (394 | ) | $ | 4,082 | ||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 6,297 | 6,240 | |||||||
Deferred income taxes | 123 | 337 | |||||||
Stock-based compensation | 474 | 502 | |||||||
Bad debt allowance | 15 | 21 | |||||||
Gain on sale of assets | — | (68 | ) | ||||||
Loss (gain) on company owned life insurance | (98 | ) | 262 | ||||||
Changes in operating assets and liabilities: | |||||||||
Trade accounts receivables | (855 | ) | (1,434 | ) | |||||
Inventory | (100 | ) | 1,616 | ||||||
Federal income tax receivable | — | (14,992 | ) | ||||||
Prepaid expenses and prepaid income taxes | 301 | 344 | |||||||
Accounts payable and accrued liabilities | 2,523 | 1,013 | |||||||
Deferred income | (1,069 | ) | 550 | ||||||
Deferred tax liability increase due to tax law change | — | 10,103 | |||||||
Other | 164 | (301 | ) | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 7,381 | 8,275 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
Purchase of rental equipment, property and other equipment | (4,965 | ) | (6,679 | ) | |||||
Purchase of company owned life insurance | (17 | ) | (54 | ) | |||||
Proceeds from sale of property and equipment | — | 68 | |||||||
NET CASH USED IN INVESTING ACTIVITIES | (4,982 | ) | (6,665 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
Payments of other long-term liabilities, net | — | (2 | ) | ||||||
Repayments of line of credit | (417 | ) | — | ||||||
Taxes paid related to net share settlement of equity awards | (224 | ) | (149 | ) | |||||
NET CASH USED IN FINANCING ACTIVITIES | (641 | ) | (151 | ) | |||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 1,758 | 1,459 | |||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 28,925 | 11,592 | |||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 30,683 | $ | 13,051 | |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||
Interest paid | $ | 1 | $ | 3 | |||||
Income taxes paid | $ | — | $ | 40 | |||||
NON-CASH TRANSACTIONS | |||||||||
Right of use asset acquired through an operating lease | $ | — | $ | 4 |
FAQ
What were Natural Gas Services Group's Q1 2021 financial results?
How did NGS's rental revenue perform in Q1 2021?
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How much did NGS's cash balance increase in Q1 2021?