First Quarter 2022 Highlights
- Net income of $0.3 million ($0.03 income per basic and diluted
share) an improvement of $6.0 million when compared to the fourth
quarter of 2021 and an increase of $0.7 million when compared to
the first quarter of 2021.
- Rental revenue of $17.1 million, an increase of 4% when
compared to the fourth quarter of 2021 and 12% when compared to the
first quarter of 2021.
- Adjusted EBITDA of $6.8 million an increase of 191% when
compared to the fourth quarter of 2021 and an increase of 5% when
compared to the first quarter of 2021. Please see Non-GAAP
Financial Measures - Adjusted EBITDA, below.
- Increased unit-based and horsepower utilization to 63% and 73%,
respectively, as of March 31, 2022 from 62% and 71%, respectively,
as of December 31, 2021.
MIDLAND, Texas May 16, 2022 - 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, 2022.
"The first quarter of 2022 was the fifth
consecutive quarter of rental revenue growth. While we are still
facing inflationary pressures and supply chain challenges, we were
pleased to see our costs decline from the fourth quarter” said
Stephen C. Taylor, Chairman, President and Chief Executive Officer.
“Compression rental revenue grew 4% sequentially and 12% on an
annual basis, driven by both an increase in rental horsepower as
well as modest pricing improvement. As mentioned last quarter, we
have instituted broad price increases with the majority of our
customers and those revenue increases will be reflected in our
second quarter financials.”
“While producers remain conservative in capital
commitments for purchased compression equipment, we continue to see
steady demand for our large horsepower rental fleet,” Taylor noted.
“We expect that trend to continue throughout the year, resulting in
a revised capital expenditure budget of approximately $30-$35
million for fiscal year 2022.”
“We are optimistic about our opportunities in 2022,” Taylor
concluded. “and we continue to believe our strong balance sheet
provides meaningful flexibility to create durable value for our
shareholders."
Revenue: Total revenue for the three
months ended March 31, 2022 increased to $20.3 million from $18.4
million for the three months ended March 31, 2021. This increase
was due to an increase in rental and sales revenues. Rental revenue
increased 11.7% to $17.1 million in the first quarter of 2022 from
$15.3 million in the first quarter of 2021 due to the increased
deployment of rental units, primarily higher horsepower packages.
As of March 31, 2022 we had 1,276 rented units (306,834 horsepower)
compared to 1,265 rented units (287,914 horsepower) as of March 31,
2021. Sequentially, total revenue increased 12.8% to $20.3
million in the first quarter of 2022 compared to $18.0 million in
the fourth quarter of 2021 primarily due to a $1.8 million increase
in sales revenues as well as a $0.7 million increase in rental
revenues during the three months ended March 31, 2022.
Gross Margins: Total gross margins
increased to $2.7 million for the three months ended March 31, 2022
compared to $2.4 million for the same period in 2021. Total
adjusted gross margin, exclusive of depreciation, for the three
months ended March 31, 2022, increased to $8.9 million from $8.6
million for the same period ended March 31, 2021. This increase was
primarily attributable to increased compressor sales and associated
gross margins during the current quarter. Sequentially, total gross
margin increased to $2.7 million for the three months ended March
31, 2022 compared to a negative $(1.9) million for the three months
ended December 31, 2021. Excluding depreciation, total
adjusted gross margin increased to $8.9 million during the first
quarter of 2022 compared to $4.3 million during the fourth quarter
of 2021. This sequential increase was primarily due to higher
rental margins this quarter driven by a significant reduction in
costs associated with rental mobilization, commissioning, start-up
and maintenance. Please see discussions of Non-GAAP Financial
Measures - Adjusted Gross Margin, below.
Operating Income (Loss): Operating income
for the three months ended March 31, 2022 was $382,000 compared to
an operating loss of $(369,000) for the three months ended March
31, 2021. Operating income increased due to higher compressor sales
margins. Similarly, operating income increased due to greater
revenue and rental margins in the first quarter of 2022 to $382,000
from an $8.2 million loss during the fourth quarter of 2021.
Net Income (Loss): Net income for the
three months ended March 31, 2022 was $337,000 ($0.03 per basic and
diluted shares) compared to net loss of $394,000 ($(0.03) per basic
and diluted shares) for the three months ended March 31, 2021. The
increase in net income during the first quarter of 2022 was mainly
due to increased sales margins partially offset by a decrease in
rental margins. Sequentially, net income during the first quarter
of 2022 of $337,000 ($0.03 per basic and diluted shares) compares
to net loss of $5.6 million ($0.42 per basic and diluted shares)
during the fourth quarter of 2021. This sequential improvement was
primarily due to (i) a $3.1 million charge incurred in the fourth
quarter of 2021 related to fleet retirements, (ii) a $3.0 million
increase in rental gross margins and (iii) a $1.7 million increase
in sales gross margins. These increases were partially offset by a
$2.2 million reduction in income tax benefit.
Adjusted EBITDA: Adjusted EBITDA
increased to $6.8 million for the three months ended March 31, 2022
from $6.5 million for the same period in 2021. This increase was
primarily attributable to higher sales margins. Sequentially,
adjusted EBITDA increased to $6.8 million for the three months
ended March 31, 2022 from $2.3 million in the previous quarter.
This increase was primarily attributable to higher rental and sales
margins.
Cash flows: At March 31, 2022, cash and
cash equivalents were approximately $16.4 million, while working
capital was $40.2 million with no outstanding debt. For the three
months of 2022, cash flows from operating activities was $5.0
million, while cash flows used in investing activities was $8.2
million. Cash flows used in investing activities included $8.2
million in capital expenditures, of which $8.1 million was
dedicated to rental capital expenditures. In addition, the Company
used $2.9 million in cash to repurchase 246,488 shares of common
stock on the open market.
Selected data: The tables below show, for
the three months ended March 31, 2022 and 2021, 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, |
|
2022 |
|
2021 |
|
(in thousands) |
Rental |
$ 17,129 |
|
84 % |
|
$ 15,341 |
|
83 % |
Sales |
2,893 |
|
14 % |
|
2,711 |
|
15 % |
Service &
Maintenance |
314 |
|
2 % |
|
345 |
|
2 % |
Total |
$ 20,336 |
|
|
|
$ 18,397 |
|
|
|
Gross Margin |
|
Three months ended March 31, |
|
2022 |
|
2021 |
|
(in thousands) |
Rental |
$ 1,761 |
|
10 % |
|
$ 2,123 |
|
14 % |
Sales |
836 |
|
29 % |
|
23 |
|
1 % |
Service &
Maintenance |
126 |
|
40 % |
|
288 |
|
83 % |
Total |
$ 2,723 |
|
13 % |
|
$ 2,434 |
|
13 % |
|
Adjusted Gross Margin (1) |
|
Three months ended March 31, |
|
2022 |
|
2021 |
|
(in thousands) |
Rental |
$ 7,899 |
|
46 % |
|
$ 8,185 |
|
53 % |
Sales |
905 |
|
31 % |
|
95 |
|
4 % |
Service &
Maintenance |
141 |
|
45 % |
|
297 |
|
86 % |
Total |
$ 8,945 |
|
44 % |
|
$ 8,577 |
|
47 % |
(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, |
|
2022 |
|
2021 |
|
(in
thousands) |
Total
revenue |
20,336 |
|
$
18,397 |
Costs of revenue,
exclusive of depreciation |
(11,391) |
|
(9,820) |
Depreciation
allocable to costs of revenue |
(6,222) |
|
(6,143) |
Gross margin |
2,723 |
|
2,434 |
Depreciation
allocable to costs of revenue |
6,222 |
|
6,143 |
Adjusted Gross
Margin |
$
8,945 |
|
$
8,577 |
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, |
|
2022 |
|
2021 |
|
(in
thousands) |
Net (loss)
income |
$
337 |
|
$
(394) |
Interest
expense |
24 |
|
1 |
Income tax
benefit |
(11) |
|
125 |
Depreciation and
amortization |
6,061 |
|
6,297 |
Non-cash stock
compensation expense |
420 |
|
474 |
Adjusted
EBITDA |
$
6,831 |
|
$
6,503 |
Conference Call Details:
Teleconference: Tuesday, May 17, 2022 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 and three months ended March
31, 2022.
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, 2022, as filed with
the Securities and Exchange Commission.
For More Information, Contact: |
Alicia Dada, Investor Relations |
|
(432) 262-2700Alicia.Dada@ngsgi.com |
|
www.ngsgi.com |
NATURAL GAS SERVICES GROUP, INC.CONDENSED
CONSOLIDATED BALANCE SHEETS(in thousands, except par
value)(unaudited) |
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
ASSETS |
|
|
|
Current
Assets: |
|
|
|
Cash and cash equivalents |
$
16,426 |
|
$
22,942 |
Trade accounts receivable, net of allowance for doubtful accounts
of $1,126 and $1,129, respectively |
12,882 |
|
10,389 |
Inventory |
17,331 |
|
19,329 |
Federal income tax receivable (Note 4) |
11,538 |
|
11,538 |
Prepaid income taxes |
54 |
|
51 |
Prepaid expenses and other |
613 |
|
854 |
Total current assets |
58,844 |
|
65,103 |
Long-term
inventory, net of allowance for obsolescence of $37 and $64,
respectively |
1,495 |
|
1,582 |
Rental equipment,
net of accumulated depreciation of $178,038 and $172,563,
respectively |
209,587 |
|
206,985 |
Property and
equipment, net of accumulated depreciation of $16,305 and $15,784,
respectively |
20,407 |
|
20,828 |
Right of use
assets - operating leases, net of accumulated amortization of $602
and $555, respectively |
329 |
|
285 |
Intangibles, net
of accumulated amortization of $2,165 and $2,134, respectively |
994 |
|
1,025 |
Other assets |
2,610 |
|
2,698 |
Total assets |
$
294,266 |
|
$
298,506 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
Current
Liabilities: |
|
|
|
Accounts payable |
$
5,604 |
|
$
4,795 |
Accrued liabilities |
12,945 |
|
14,103 |
Line of credit |
— |
|
— |
Current operating leases |
120 |
|
68 |
Deferred income |
— |
|
1,312 |
Total current liabilities |
18,669 |
|
20,278 |
Deferred income tax
liability |
39,278 |
|
39,288 |
Long-term
operating leases |
210 |
|
217 |
Other long-term
liabilities |
2,726 |
|
2,813 |
Total liabilities |
60,883 |
|
62,596 |
Commitments and
contingencies |
|
|
|
Stockholders’
Equity: |
|
|
|
Preferred stock,
5,000 shares authorized, no shares issued or outstanding |
— |
|
— |
Common stock,
30,000 shares authorized, par value $0.01; 13,473 and 13,394 shares
issued, respectively |
135 |
|
134 |
Additional paid-in
capital |
114,080 |
|
114,017 |
Retained
earnings |
130,440 |
|
130,103 |
Treasury Shares,
at cost, 1,022 and 775 shares, respectively |
(11,272) |
|
(8,344) |
Total stockholders' equity |
233,383 |
|
235,910 |
Total liabilities and stockholders' equity |
$
294,266 |
|
$
298,506 |
NATURAL GAS SERVICES GROUP, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except earnings per
share)(unaudited) |
|
|
|
Three months ended |
|
March 31, |
|
2022 |
|
2021 |
Revenue: |
|
|
|
Rental
income |
$ 17,129 |
|
$ 15,341 |
Sales |
2,893 |
|
2,711 |
Service and
maintenance income |
314 |
|
345 |
Total revenue |
20,336 |
|
18,397 |
Operating
costs and expenses: |
|
|
|
Cost of rentals,
exclusive of depreciation stated separately below |
9,230 |
|
7,156 |
Cost of sales,
exclusive of depreciation stated separately below |
1,988 |
|
2,616 |
Cost of service
and maintenance, exclusive of depreciation stated separately
below |
173 |
|
48 |
Selling, general
and administrative expenses |
2,502 |
|
2,649 |
Depreciation and
amortization |
6,061 |
|
6,297 |
Total operating costs and expenses |
19,954 |
|
18,766 |
Operating
income (loss) |
382 |
|
(369) |
Other income
(expense): |
|
|
|
Interest
expense |
(24) |
|
(1) |
Other income
(expense), net |
(32) |
|
101 |
Total other income (expense), net |
(56) |
|
100 |
Income (loss)
before provision for income taxes |
326 |
|
(269) |
Income tax
benefit |
11 |
|
(125) |
Net
loss |
$
337 |
|
$ (394) |
Loss per
share: |
|
|
|
Basic |
$
0.03 |
|
$ (0.03) |
Diluted |
$
0.03 |
|
$ (0.03) |
Weighted average shares outstanding: |
|
|
|
Basic |
12,537 |
|
13,263 |
Diluted |
12,698 |
|
13,263 |
NATURAL GAS SERVICES GROUP, INC.CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(in thousands)(unaudited) |
|
Three months ended |
|
March 31, |
|
2022 |
|
2021 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net income
(loss) |
$
337 |
|
$
(394) |
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
|
|
|
Depreciation and amortization |
6,061 |
|
6,297 |
Amortization of debt issuance costs |
12 |
|
— |
Deferred income tax (benefit) expense |
(11) |
|
123 |
Stock-based compensation |
423 |
|
474 |
Bad debt allowance |
— |
|
15 |
Gain on sale of assets |
(36) |
|
— |
Loss (gain) on company owned life insurance |
130 |
|
(98) |
Changes in operating assets and liabilities: |
|
|
|
Trade accounts receivables |
(2,494) |
|
(855) |
Inventory |
2,085 |
|
(100) |
Prepaid expenses and prepaid income taxes |
238 |
|
301 |
Accounts payable and accrued liabilities |
(349) |
|
2,523 |
Deferred income |
(1,312) |
|
(1,069) |
Other |
(89) |
|
164 |
NET CASH PROVIDED
BY OPERATING ACTIVITIES |
4,995 |
|
7,381 |
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchase of rental equipment, property and other equipment |
(8,212) |
|
(4,965) |
Purchase of company owned life insurance |
(47) |
|
(17) |
Proceeds from sale of property and equipment |
37 |
|
— |
NET CASH USED
IN INVESTING ACTIVITIES |
(8,222) |
|
(4,982) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Payments of other long-term liabilities, net |
(2) |
|
— |
Repayments of line of credit |
— |
|
(417) |
Purchase of treasury shares |
(2,928) |
|
— |
Taxes paid related to net share settlement of equity awards |
(359) |
|
(224) |
NET CASH USED
IN FINANCING ACTIVITIES |
(3,289) |
|
(641) |
NET CHANGE IN
CASH AND CASH EQUIVALENTS |
(6,516) |
|
1,758 |
CASH AND CASH
EQUIVALENTS AT BEGINNING OF PERIOD |
22,942 |
|
28,925 |
CASH AND CASH
EQUIVALENTS AT END OF PERIOD |
$
16,426 |
|
$
30,683 |
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
Interest paid |
$
12 |
|
$
1 |
NON-CASH
TRANSACTIONS |
|
|
|
Right of use asset acquired through an operating lease |
$
91 |
|
$
— |
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