Natural Gas Services Group, Inc. Reports First Quarter 2023 Financial and Operating Results
Midland, TX, May 15, 2023 (GLOBE NEWSWIRE) --
First Quarter 2023 Highlights
- Rental revenue of
$22.7 million , an increase of33% when compared to the first quarter of 2022 and11% when compared to the fourth quarter of 2022. - Net income of
$370,000 ($0.03 per basic share), an increase of$33,000 when compared to the first quarter of 2022 and an increase of$1.1 million when compared to the fourth quarter of 2022. - Adjusted EBITDA of
$7.8 million , an increase of14% when compared to the first quarter of 2022 and flat when compared to the fourth quarter of 2022. Please see Non-GAAP Financial Measures - Adjusted EBITDA, below.
MIDLAND, Texas May 15, 2023 (GLOBE NEWSWIRE) 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, 2023.
Commenting on the quarter, Stephen C. Taylor our Interim President and Chief Executive Officer, added “This quarter marked the ninth quarter in a row of rental revenue growth. For the current sequential quarters, rental revenue alone grew almost
“As mentioned in the last earnings call, NGS closed on a substantial line of credit from our bank at the end of February,” Taylor noted. “This was to fund the additional high horsepower equipment we have already contracted as we continue to execute on our growth plan. NGS had a solid and growing quarter. We have added more committed contracts over the past couple of months, our utilization continues to increase and pre-contracted activity remains at a high level for the rest of the year resulting in an estimated capital expenditure budget of approximately
Revenue: Total revenue for the three months ended March 31, 2023 increased to
Gross Margins: Total gross margins increased to
Operating Income: Operating income for the three months ended March 31, 2023 was
Net Income: Net income for the three months ended March 31, 2023, was
Adjusted EBITDA: Adjusted EBITDA increased to
Cash flows: At March 31, 2023, cash and cash equivalents were approximately
Selected data: The tables below show, the three months ended March 31, 2023 and 2022, 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, | |||||||||||
2023 | 2022 | ||||||||||
(in thousands) | |||||||||||
Rental | $ | 22,723 | 86 | % | $ | 17,129 | 84 | % | |||
Sales | 2,992 | 11 | % | 2,893 | 14 | % | |||||
Service & Maintenance | 905 | 3 | % | 314 | 2 | % | |||||
Total | $ | 26,620 | $ | 20,336 |
Gross Margin | |||||||||||||
Three months ended March 31, | |||||||||||||
2023 | 2022 | ||||||||||||
(in thousands) | |||||||||||||
Rental | $ | 5,137 | 23 | % | $ | 2,063 | 12 | % | |||||
Sales | (312 | ) | (10) % | 836 | 29 | % | |||||||
Service & Maintenance | 289 | 32 | % | 134 | 43 | % | |||||||
Total | $ | 5,114 | 19 | % | $ | 3,033 | 15 | % |
Adjusted Gross Margin (1) | ||||||||||||
Three months ended March 31, | ||||||||||||
2023 | 2022 | |||||||||||
(in thousands) | ||||||||||||
Rental | $ | 11,078 | 49 | % | $ | 7,899 | 46 | % | ||||
Sales | (245 | ) | (8) % | 905 | 31 | % | ||||||
Service & Maintenance | 296 | 33 | % | 141 | 45 | % | ||||||
Total | $ | 11,129 | 42 | % | $ | 8,945 | 44 | % |
(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, | |||||||
2023 | 2022 | ||||||
(in thousands) | |||||||
Total revenue | $ | 26,620 | $ | 20,336 | |||
Costs of revenue, exclusive of depreciation | (15,491 | ) | (11,391 | ) | |||
Depreciation allocable to costs of revenue | (6,015 | ) | (5,912 | ) | |||
Gross margin | 5,114 | 3,033 | |||||
Depreciation allocable to costs of revenue | 6,015 | 5,912 | |||||
Adjusted Gross Margin | $ | 11,129 | $ | 8,945 |
Non-GAAP Financial Measures - Adjusted EBITDA: “Adjusted EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization, non-cash stock compensation expense, severance expenses, 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 income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:
Three months ended March 31, | ||||||
2023 | 2022 | |||||
(in thousands) | ||||||
Net income | $ | 370 | $ | 337 | ||
Interest expense | — | 24 | ||||
Income tax benefit | 150 | (11 | ) | |||
Depreciation and amortization | 6,165 | 6,061 | ||||
Non-cash stock compensation expense | 487 | 423 | ||||
Severance expenses | 612 | — | ||||
Adjusted EBITDA | $ | 7,784 | $ | 6,834 |
Conference Call Details: The Company will host its earnings conference call on Tuesday, May 16, 2023, at 11:00AM EDT (10:00am CDT). To participate in the call, participants should access the webcast on www.ngsgi.com under the Investor Relations section. To connect telephonically, call (800) 715-9871 using conference ID 2421165 approximately five minutes prior to the start of the call. Following the conclusion of the conference call, a recording of the call will be available on the Company’s website.
About Natural Gas Services Group, Inc. (NGS): NGS is a leading provider of gas compression technology and services to the energy industry. The Company manufactures, fabricates, rents, sells, and maintains natural gas compression technology for oil and natural gas upstream providers and midstream facilities. NGS is headquartered in Midland with manufacturing and fabrication facilities located in Tulsa, and Midland. The Company maintains service facilities in major energy 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: 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, 2023, as filed with the Securities and Exchange Commission.
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited) | |||||||
March 31, 2023 | December 31, 2022 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 7,412 | $ | 3,372 | |||
Trade accounts receivable, net | 14,971 | 14,668 | |||||
Inventory | 25,077 | 23,414 | |||||
Federal income tax receivable (Note 4) | 11,538 | 11,538 | |||||
Prepaid income taxes | 10 | 10 | |||||
Prepaid expenses and other | 648 | 1,145 | |||||
Total current assets | 59,656 | 54,147 | |||||
Long-term inventory, net of allowance for obsolescence of | 1,588 | 1,557 | |||||
Rental equipment, net of accumulated depreciation of | 287,181 | 246,450 | |||||
Property and equipment, net of accumulated depreciation of | 22,420 | 22,176 | |||||
Right of use assets - operating leases, net of accumulated amortization | 309 | 349 | |||||
Intangibles, net of accumulated amortization of | 869 | 900 | |||||
Other assets | 4,784 | 2,667 | |||||
Total assets | $ | 376,807 | $ | 328,246 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 24,835 | $ | 6,481 | |||
Accrued liabilities | 16,946 | 23,726 | |||||
Current operating leases | 123 | 155 | |||||
Deferred income | 114 | 37 | |||||
Total current liabilities | 42,018 | 30,399 | |||||
Long-term debt | 61,011 | 25,000 | |||||
Deferred income tax liability | 39,946 | 39,798 | |||||
Long-term operating leases | 186 | 194 | |||||
Other long-term liabilities | 2,897 | 2,779 | |||||
Total liabilities | 146,058 | 98,170 | |||||
Commitments and contingencies | |||||||
Stockholders’ Equity: | |||||||
Preferred stock, 5,000 shares authorized, no shares issued or outstanding | — | — | |||||
Common stock, 30,000 shares authorized, par value | 135 | 135 | |||||
Additional paid-in capital | 115,714 | 115,411 | |||||
Retained earnings | 129,904 | 129,534 | |||||
Treasury shares, at cost, 1,310 shares, respectively | (15,004 | ) | (15,004 | ) | |||
Total stockholders' equity | 230,749 | 230,076 | |||||
Total liabilities and stockholders' equity | $ | 376,807 | $ | 328,246 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited) | |||||||
Three months ended | |||||||
March 31, | |||||||
2023 | 2022 | ||||||
Revenue: | |||||||
Rental income | $ | 22,723 | $ | 17,129 | |||
Sales | 2,992 | 2,893 | |||||
Service and maintenance income | 905 | 314 | |||||
Total revenue | 26,620 | 20,336 | |||||
Operating costs and expenses: | |||||||
Cost of rentals, exclusive of depreciation stated separately below | 11,645 | 9,230 | |||||
Cost of sales, exclusive of depreciation stated separately below | 3,237 | 1,988 | |||||
Cost of service and maintenance, exclusive of depreciation stated separately below | 609 | 173 | |||||
Selling, general and administrative expenses | 4,562 | 2,502 | |||||
Depreciation and amortization | 6,165 | 6,061 | |||||
Total operating costs and expenses | 26,218 | 19,954 | |||||
Operating income | 402 | 382 | |||||
Other income (expense): | |||||||
Interest expense | — | (24 | ) | ||||
Other income (expense), net | 118 | (32 | ) | ||||
Total other income, net | 118 | (56 | ) | ||||
Income before provision for income taxes | 520 | 326 | |||||
Income tax benefit | (150 | ) | 11 | ||||
Net income | $ | 370 | $ | 337 | |||
Loss per share: | |||||||
Basic | $ | 0.03 | $ | 0.03 | |||
Diluted | $ | 0.03 | $ | 0.03 | |||
Weighted average shares outstanding: | |||||||
Basic | 12,213 | 12,537 | |||||
Diluted | 12,354 | 12,698 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||
Three months ended | |||||||
March 31, | |||||||
2023 | 2022 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 370 | $ | 337 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 6,165 | 6,061 | |||||
Amortization of debt issuance costs | 52 | 12 | |||||
Deferred income tax (benefit) expense | 148 | (11 | ) | ||||
Stock-based compensation | 487 | 423 | |||||
Bad debt allowance | 48 | — | |||||
Gain on sale of assets | (25 | ) | (36 | ) | |||
Loss (gain) on company owned life insurance | (18 | ) | 130 | ||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivables | (351 | ) | (2,494 | ) | |||
Inventory | (986 | ) | 2,085 | ||||
Prepaid expenses and prepaid income taxes | 497 | 238 | |||||
Accounts payable and accrued liabilities | 11,574 | (349 | ) | ||||
Deferred income | 77 | (1,312 | ) | ||||
Other | 184 | (89 | ) | ||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 18,222 | 4,995 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchase of rental equipment, property and other equipment | (47,792 | ) | (8,212 | ) | |||
Purchase of company owned life insurance | (50 | ) | (47 | ) | |||
Proceeds from sale of property and equipment | — | 37 | |||||
NET CASH USED IN INVESTING ACTIVITIES | (47,842 | ) | (8,222 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from loan | 36,011 | — | |||||
Payments of other long-term liabilities, net | (36 | ) | (2 | ) | |||
Payments of debt issuance cost | (2,131 | ) | — | ||||
Purchase of treasury shares | — | (2,928 | ) | ||||
Taxes paid related to net share settlement of equity awards | (184 | ) | (359 | ) | |||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 33,660 | (3,289 | ) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 4,040 | (6,516 | ) | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 3,372 | 22,942 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 7,412 | $ | 16,426 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Interest paid | $ | 855 | $ | 12 | |||
NON-CASH TRANSACTIONS | |||||||
Right of use asset acquired through an operating lease | $ | — | $ | 91 | |||
Transfer of rental equipment to inventory | $ | 708 | $ | — |