Natural Gas Services Group, Inc. Reports First Quarter 2024 Financial and Operating Results
On May 15, 2024, Natural Gas Services Group (NYSE: NGS) reported its financial results for Q1 2024. The key highlights include:
Rental revenue increased by 48% YoY to $33.7 million, and net income surged to $5.1 million ($0.41 per share) from $0.4 million ($0.03 per share) in Q1 2023. Adjusted EBITDA more than doubled to $16.9 million from $7.8 million in the prior-year period.
Total revenue for Q1 2024 rose by 38.6% YoY to $36.9 million. The company also noted an increase in gross margin to $14.2 million and operating income to $9.3 million. Cash and cash equivalents were $5.2 million with a working capital of $54.4 million.
Debt stands at $172 million with a leverage ratio of 2.57. The company reaffirmed its full-year 2024 outlook for adjusted EBITDA between $61 million and $67 million.
- Rental revenue increased by 48% YoY to $33.7 million.
- Net income rose significantly to $5.1 million ($0.41 per share) from $0.4 million ($0.03 per share) in Q1 2023.
- Adjusted EBITDA more than doubled to $16.9 million from $7.8 million in Q1 2023.
- Total revenue increased by 38.6% YoY to $36.9 million.
- Gross margin increased to $14.2 million from $5.1 million in Q1 2023.
- Operating income rose to $9.3 million from $0.4 million in Q1 2023.
- Cash and cash equivalents were $5.2 million with a working capital of $54.4 million.
- Reaffirmed full-year 2024 adjusted EBITDA outlook between $61 million and $67 million.
- Outstanding debt is high at $172 million.
- Cash flows used in investing activities were $10.9 million, driven by capital expenditures.
- Leverage ratio is at 2.57, indicating significant debt relative to EBITDA.
Insights
Natural Gas Services Group, Inc. (NGS) has reported robust financial performance for the first quarter of 2024, reflecting significant growth across key metrics. The most notable highlight is the 48% increase in rental revenue to
Net income also exhibited a striking rise, climbing to
For investors, these results are promising in the short term, as evidenced by the sequential growth in rental revenue and adjusted EBITDA. The updated full-year 2024 outlook, projecting adjusted EBITDA between
Overall, the financial results suggest a positive outlook for NGS, primarily driven by operational efficiencies and strategic focus on high horsepower units. Investors should monitor ongoing debt levels and capital expenditure plans to gauge the sustainability of the company's growth.
Natural Gas Services Group's performance in Q1 2024 underscores the strength of the natural gas compression market, which has been buoyed by increasing demand for high horsepower compression units linked to crude oil production. The company’s rental revenue, which makes up 91% of total revenue, grew impressively by 48.5% year-over-year, reflecting favorable pricing and market demand.
Total gross margins also saw substantial improvement, with the rental segment’s margin rising to 41% from 23% year-over-year. This suggests that NGS has successfully capitalized on operational efficiencies and market positioning. The adjusted gross margin, exclusive of depreciation, increased to 61% from 49%, further indicating robust operational performance.
The company’s strategic focus on rental revenues appears well-placed, given the high margins and growing demand in the sector. However, the market for natural gas compression equipment can be volatile, subject to fluctuations in the broader energy market. Investors should consider the potential risks of over-reliance on a single revenue stream and the impact of industry-wide changes in energy production and regulations.
In conclusion, the first-quarter results and strategic outlook for 2024 suggest NGS is well-positioned to benefit from current market conditions. Investors should remain vigilant about external market risks and the company's ability to maintain its operational efficiencies.
Midland, Texas, May 15, 2024 (GLOBE NEWSWIRE) --
Natural Gas Services Group, Inc. (“NGS” or the “Company”) (NYSE:NGS), a leading provider of natural gas compression equipment, technology and services to the energy industry, today announced financial results for the three months ended March 31, 2024.
First Quarter 2024 Highlights
- Rental revenue of
$33.7 million , an increase of48% when compared to the first quarter of 2023 and7% when compared to the fourth quarter of 2023. - Net income of
$5.1 million , or$0.41 per basic share, as compared to a net income of$0.4 million , or$0.03 per basic share in the first quarter of 2023 and net income of$1.7 million , or$0.14 per basic share in the fourth quarter of 2023. - Adjusted EBITDA of
$16.9 million , compared to$7.8 million in the first quarter of 2023 and$16.3 million in the fourth quarter of 2023. Please see Non-GAAP Financial Measures - Adjusted EBITDA, below.
“The first quarter of 2024 continued our string of strong results,” said Justin Jacobs, Chief Executive Officer. “Our first quarter rental revenue of
Revenue: Total revenue for the three months ended March 31, 2024 increased
Gross Margins: Total gross margins, including depreciation increased to
Operating Income: Operating income for the three months ended March 31, 2024 was
Net Income: Net income for the three months ended March 31, 2024, was
Adjusted EBITDA: Adjusted EBITDA increased
Cash flows: At March 31, 2024, cash and cash equivalents were approximately
Debt: Outstanding debt on our revolving credit facility as of March 31, 2024 was
2024 Updated Outlook
NGS’s full year 2024 Outlook is as follows:
| FY 2024 Outlook | |
| Adjusted EBITDA | |
| New Unit Capital Expenditures | |
| Maintenance Capital Expenditures | |
| Target Return on Invested Capital | At least |
Our current outlook for 2024 Fiscal Year adjusted EBITDA is a range of
Selected data: The tables below show, the three months ended March 31, 2024 and 2023, revenues and percentage of total revenues, along with our gross margin and adjusted gross margin (exclusive of depreciation and amortization), as well as, related percentages of revenue for each of our product lines. Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation.
| Revenue | |||||||||||
| Three months ended | |||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| ($ in 000) | % of rev | ($ in 000) | % of rev | ||||||||
| Rental | $ | 33,734 | 91 | % | $ | 22,723 | 86 | % | |||
| Sales | 2,503 | 7 | % | 2,992 | 11 | % | |||||
| Aftermarket services | 670 | 2 | % | 905 | 3 | % | |||||
| Total | $ | 36,907 | $ | 26,620 | |||||||
| Revenue | |||||||||||
| Three months ended | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| ($ in 000) | % of rev | ($ in 000) | % of rev | ||||||||
| Rental | $ | 33,734 | 91 | % | $ | 31,626 | 87 | % | |||
| Sales | 2,503 | 7 | % | 2,921 | 8 | % | |||||
| Aftermarket services | 670 | 2 | % | 1,674 | 5 | % | |||||
| Total | $ | 36,907 | $ | 36,221 | |||||||
| Gross Margin | ||||||||||||
| Three months ended March 31, | ||||||||||||
| 2024 | 2023 | |||||||||||
| ($ in 000) | % margin | ($ in 000) | % margin | |||||||||
| Rental | $ | 13,761 | 41 | % | $ | 5,137 | 23 | % | ||||
| Sales | 253 | 10 | % | (312 | ) | (10) % | ||||||
| Aftermarket services | 163 | 24 | % | 289 | 32 | % | ||||||
| Total | $ | 14,177 | 38 | % | $ | 5,114 | 19 | % | ||||
| Gross Margin | |||||||||||
| Three months ended | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| ($ in 000) | % margin | ($ in 000) | % margin | ||||||||
| Rental | $ | 13,761 | 41 | % | $ | 12,368 | 39 | % | |||
| Sales | 253 | 10 | % | 553 | 19 | % | |||||
| Aftermarket services | 163 | 24 | % | 419 | 25 | % | |||||
| Total | $ | 14,177 | 38 | % | $ | 13,340 | 37 | % | |||
| Adjusted Gross Margin (1) | ||||||||||||
| Three months ended March 31, | ||||||||||||
| 2024 | 2023 | |||||||||||
| ( $ in 000) | % margin | ( $ in 000) | % margin | |||||||||
| Rental | $ | 20,620 | 61 | % | $ | 11,078 | 49 | % | ||||
| Sales | 323 | 13 | % | (245 | ) | (8) % | ||||||
| Aftermarket services | 170 | 25 | % | 296 | 33 | % | ||||||
| Total | $ | 21,113 | 57 | % | $ | 11,129 | 42 | % | ||||
| Adjusted Gross Margin (1) | |||||||||||
| Three months ended | |||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||
| ( $ in 000) | % margin | ( $ in 000) | % margin | ||||||||
| Rental | $ | 20,620 | 61 | % | $ | 19,199 | 61 | % | |||
| Sales | 323 | 13 | % | 620 | 21 | % | |||||
| Aftermarket services | 170 | 25 | % | 440 | 26 | % | |||||
| Total | $ | 21,113 | 57 | % | $ | 20,259 | 56 | % | |||
(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, | |||||||
| 2024 | 2023 | ||||||
| (in thousands) | |||||||
| Total revenue | $ | 36,907 | $ | 26,620 | |||
| Costs of revenue, exclusive of depreciation | (15,794 | ) | (15,491 | ) | |||
| Depreciation allocable to costs of revenue | (6,936 | ) | (6,014 | ) | |||
| Gross margin | 14,177 | 5,115 | |||||
| Depreciation allocable to costs of revenue | 6,936 | 6,014 | |||||
| Adjusted Gross Margin | $ | 21,113 | $ | 11,129 | |||
| Three months ended | |||||||
| March 31, 2024 | December 31, 2023 | ||||||
| (in thousands) | |||||||
| Total revenue | $ | 36,907 | $ | 36,221 | |||
| Costs of revenue, exclusive of depreciation | (15,794 | ) | (15,962 | ) | |||
| Depreciation allocable to costs of revenue | (6,936 | ) | (6,919 | ) | |||
| Gross margin | 14,177 | 13,340 | |||||
| Depreciation allocable to costs of revenue | 6,936 | 6,919 | |||||
| Adjusted Gross Margin | $ | 21,113 | $ | 20,259 | |||
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 expenses, 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, | |||||
| 2024 | 2023 | ||||
| (in thousands) | |||||
| Net income | $ | 5,098 | $ | 370 | |
| Interest expense | 2,935 | — | |||
| Income tax expense (benefit) | 1,479 | 150 | |||
| Depreciation and amortization | 7,087 | 6,165 | |||
| Non-cash stock compensation expense | 274 | 487 | |||
| Severance expenses | — | 612 | |||
| Retirement of rental equipment | 5 | — | |||
| Adjusted EBITDA | $ | 16,878 | $ | 7,784 | |
| Three months ended | |||||
| March 31, 2024 | December 31, 2023 | ||||
| (in thousands) | |||||
| Net income | $ | 5,098 | $ | 1,702 | |
| Interest expense | 2,935 | 2,297 | |||
| Income tax expense (benefit) | 1,479 | 431 | |||
| Depreciation and amortization | 7,087 | 7,160 | |||
| Non-cash stock compensation expense | 274 | 228 | |||
| Inventory allowance | — | 3,965 | |||
| Retirement of rental equipment | 5 | 505 | |||
| Adjusted EBITDA | $ | 16,878 | $ | 16,288 | |
Conference Call Details: The Company will host a conference call to review first-quarter financial results on Thursday, May 16, 2024 at 8:30 a.m. (EST), 7:30 a.m. (CST). To join the conference call, kindly access the Investor Relations section of our website at www.ngsgi.com or dial in at (800) 550-9745 and enter conference ID 167298 at least five minutes prior to the scheduled start time. Please note that using the provided dial-in number is necessary for participation in the Q&A section of the call. A recording of the conference will be made available on our Company's website following its conclusion. Thank you for your interest in our Company's updates.
About Natural Gas Services Group, Inc. (NGS): NGS is a leading provider of natural gas compression equipment, technology and services to the energy industry. The Company manufactures, fabricates, rents, sells and maintains natural gas compressors for oil and natural gas production and plant facilities. NGS is headquartered in Midland, Texas, with a fabrication facility located in Tulsa, Oklahoma, a rebuild shop located in 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.
Forward-Looking Statements
Certain statements herein (and oral statements made regarding the subjects of this release) constitute “forward-looking statements” within the meaning of the federal securities laws. Words such as “may,” “might,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “predict,” “forecast,” “project,” “plan,” “intend” or similar expressions, or statements regarding intent, belief, or current expectations, are forward-looking statements. These forward-looking statements are based upon current estimates and assumptions.
These forward–looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of the Company. Forward–looking information includes, but is not limited to statements regarding: guidance or estimates related to EBITDA growth, projected capital expenditures; returns on invested capital, fundamentals of the compression industry and related oil and gas industry, valuations, compressor demand assumptions and overall industry outlook, and the ability of the Company to capitalize on any potential opportunities.
While the Company believes that the assumptions concerning future events are reasonable, investors are cautioned that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Some of these factors that could cause results to differ materially from those indicated by such forward-looking statements include, but are not limited to: (i) achieving increased utilization of assets, including rental fleet utilization and unlocking other non-cash balance sheet assets; (ii) failure of projected organic growth due to adverse changes in the oil and gas industry, including depressed oil and gas prices, oppressive environmental regulations and competition; (iii) inability to finance capital expenditures; (iv) adverse changes in customer, employee or supplier relationships; (v) adverse regional and national economic and financial market conditions, including in our key operating areas; (vi) impacts of world events, including pandemics; the financial condition of the Company’s customers and failure of significant customers to perform their contractual obligations; (vii) the Company’s ability to economically develop and deploy new technologies and services, including technology to comply with health and environmental laws and regulations; and (viii) failure to achieve accretive financial results in connection with any acquisitions the Company may make.
In addition, these forward-looking statements are subject to other various risks and uncertainties, including without limitation those set forth in the Company’s filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2023. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise, except as required by law.
| For More Information, Contact: | Anna Delgado, Investor Relations |
| (432) 262-2700 ir@ngsgi.com | |
| www.ngsgi.com |
| NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited) | |||||||
| March 31, 2024 | December 31, 2023 | ||||||
| ASSETS | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | 5,239 | $ | 2,746 | |||
| Trade accounts receivable, net of allowance for doubtful accounts of | 42,341 | 39,186 | |||||
| Inventory, net of allowance for obsolescence of | 18,811 | 21,639 | |||||
| Federal income tax receivable | 11,512 | 11,538 | |||||
| Prepaid expenses and other | 938 | 1,162 | |||||
| Total current assets | 78,841 | 76,271 | |||||
| Long-term inventory, net of allowance for obsolescence of | 879 | 701 | |||||
| Rental equipment, net of accumulated depreciation of | 377,999 | 373,649 | |||||
| Property and equipment, net of accumulated depreciation of | 20,071 | 20,550 | |||||
| Intangibles, net of accumulated amortization of | 744 | 775 | |||||
| Other assets | 7,642 | 6,783 | |||||
| Total assets | $ | 486,176 | $ | 478,729 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts payable | $ | 12,431 | $ | 17,628 | |||
| Accrued liabilities | 11,995 | 15,085 | |||||
| Total current liabilities | 24,426 | 32,713 | |||||
| Long-term debt | 172,000 | 164,000 | |||||
| Deferred income tax liability | 43,092 | 41,636 | |||||
| Other long-term liabilities | 5,392 | 4,486 | |||||
| Total liabilities | 244,910 | 242,835 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ Equity: | |||||||
| Preferred stock, 5,000 shares authorized, no shares issued or outstanding | — | — | |||||
| Common stock, 30,000 shares authorized, par value | 137 | 137 | |||||
| Additional paid-in capital | 116,754 | 116,480 | |||||
| Retained earnings | 139,379 | 134,281 | |||||
| Treasury shares, at cost, 1,310 shares | (15,004 | ) | (15,004 | ) | |||
| Total stockholders' equity | 241,266 | 235,894 | |||||
| Total liabilities and stockholders' equity | $ | 486,176 | $ | 478,729 | |||
| NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited) | ||||||||
| Three months ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue: | ||||||||
| Rental income | $ | 33,734 | $ | 22,723 | ||||
| Sales | 2,503 | 2,992 | ||||||
| Aftermarket services | 670 | 905 | ||||||
| Total revenue | 36,907 | 26,620 | ||||||
| Operating costs and expenses: | ||||||||
| Cost of rentals, exclusive of depreciation stated separately below | 13,114 | 11,645 | ||||||
| Cost of sales, exclusive of depreciation stated separately below | 2,180 | 3,237 | ||||||
| Cost of aftermarket services, exclusive of depreciation stated separately below | 500 | 609 | ||||||
| Selling, general and administrative expenses | 4,702 | 4,562 | ||||||
| Depreciation and amortization | 7,087 | 6,165 | ||||||
| Retirement of rental equipment | 5 | — | ||||||
| Total operating costs and expenses | 27,588 | 26,218 | ||||||
| Operating income | 9,319 | 402 | ||||||
| Other income (expense): | ||||||||
| Interest expense | (2,935 | ) | — | |||||
| Other income, net | 193 | 118 | ||||||
| Total other income (expense), net | (2,742 | ) | 118 | |||||
| Income before provision for income taxes | 6,577 | 520 | ||||||
| Income tax benefit (expense) | (1,479 | ) | (150 | ) | ||||
| Net income (loss) | $ | 5,098 | $ | 370 | ||||
| Earnings (loss) per share: | ||||||||
| Basic | $ | 0.41 | $ | 0.03 | ||||
| Diluted | $ | 0.41 | $ | 0.03 | ||||
| Weighted average shares outstanding: | ||||||||
| Basic | 12,380 | 12,213 | ||||||
| Diluted | 12,465 | 12,354 | ||||||
| NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) | |||||||
| Three months ended | |||||||
| March 31, | |||||||
| 2024 | 2023 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income | $ | 5,098 | $ | 370 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 7,087 | 6,165 | |||||
| Amortization of debt issuance costs | 150 | 52 | |||||
| Deferred income tax expense | 1,456 | 148 | |||||
| Stock-based compensation | 274 | 487 | |||||
| Bad debt allowance | 110 | 48 | |||||
| Gain on sale of assets | — | (25 | ) | ||||
| Retirement of rental equipment | 5 | — | |||||
| Loss (gain) on company owned life insurance | (184 | ) | (18 | ) | |||
| Changes in operating assets and liabilities: | |||||||
| Trade accounts receivables | (3,265 | ) | (351 | ) | |||
| Inventory | 2,650 | (986 | ) | ||||
| Prepaid expenses and prepaid income taxes | 250 | 497 | |||||
| Accounts payable and accrued liabilities | (7,962 | ) | 11,574 | ||||
| Deferred income | (418 | ) | 77 | ||||
| Other | 358 | 184 | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 5,609 | 18,222 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Purchase of rental equipment, property and other equipment | (10,932 | ) | (47,792 | ) | |||
| Purchase of company owned life insurance | (9 | ) | (50 | ) | |||
| NET CASH USED IN INVESTING ACTIVITIES | (10,941 | ) | (47,842 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Proceeds from loan | 8,000 | 36,011 | |||||
| Payments of other long-term liabilities, net | (175 | ) | (36 | ) | |||
| Payments of debt issuance cost | — | (2,131 | ) | ||||
| Taxes paid related to net share settlement of equity awards | — | (184 | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 7,825 | 33,660 | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 2,493 | 4,040 | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 2,746 | 3,372 | |||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 5,239 | $ | 7,412 | |||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
| Interest paid | $ | 6,220 | $ | 855 | |||
| NON-CASH TRANSACTIONS | |||||||
| Transfer of rental equipment components to inventory | $ | — | $ | 708 | |||
| Right of use asset acquired through a finance lease | $ | 532 | $ | — | |||
FAQ
What were the Q1 2024 financial results for Natural Gas Services (NGS)?
How did NGS perform in terms of revenue in Q1 2024?
What was the adjusted EBITDA for NGS in Q1 2024?
What is NGS's outlook for adjusted EBITDA in FY 2024?
What is the leverage ratio of NGS as of March 31, 2024?
