First Quarter
2023 Highlights
- Rental revenue
of $22.7 million, an increase of 33% when compared to the first
quarter of 2022 and 11% 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 of 14% 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 11%
while higher rental and sales revenues grew total revenues by 18%.
Adjusted rental gross margins slipped 2% due to higher field
expenses and a one-time non-cash adjustment, but our total adjusted
gross margin increased 4% sequentially. SG&A declined 4% and
our bottom-line net income had a positive swing of almost a million
dollars from last quarter as we posted positive GAAP earnings”.
“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 $150 million
for the fiscal year 2023 almost of all of which will support
project already under contracts with customers.”
Revenue: Total revenue for the
three months ended March 31, 2023 increased to $26.6 million from
$20.3 million for the three months ended March 31, 2022. This
increase was due primarily to an increase in rental revenues.
Rental revenue increased 32.7% to $22.7 million in the first
quarter of 2023, from $17.1 million in the first quarter of 2022
due to higher horsepower packages and modest pricing improvements.
As of March 31, 2023, we had 1,245 rented units (335,314
horsepower) compared to 1,276 rented units (306,834 horsepower) as
of March 31, 2022, reflecting an 9.3% increase in average
horsepower deployed. Sequentially, total revenue increased 18.2% to
$26.6 million in the first quarter of 2023 compared to $22.5
million in the fourth quarter of 2022 primarily due to increases in
both rental revenues and sales revenues during the three months
ended March 31, 2023.
Gross Margins: Total gross
margins increased to $5.1 million for the three months ended March
31, 2023, compared to $3.0 million for the same period in 2022.
Total adjusted gross margin, exclusive of depreciation, for the
three months ended March 31, 2023, increased to $11.1 million from
$8.9 million for the same period ended March 31, 2022. This
increase was primarily attributable to increased rental revenues
and associated gross margins during the current quarter.
Sequentially, total gross margin increased to $5.1 million for the
three months ended March 31, 2023, compared to $4.9 million for the
three months ended December 31, 2022. Excluding depreciation,
total adjusted gross margin increased to $11.1 million during the
first quarter of 2023 compared to $10.7 million during the fourth
quarter of 2022. This sequential increase was primarily due to
higher compressor sales.
Operating Income: Operating
income for the three months ended March 31, 2023 was $402,000
compared to an operating income of $382,000 for the three months
ended March 31, 2022. Operating income increased in the first
quarter of 2023 to $402,000 from an operating loss of $316,000
during the fourth quarter of 2022.
Net Income: Net income for the
three months ended March 31, 2023, was $370,000 ($0.03 per basic
share) compared to net income of $337,000 ($0.03 per basic share)
for the three months ended March 31, 2022. The increase in net
income during the first quarter of 2023 was mainly due to increased
rental margins partially offset by an increase in selling, general
and administrative expenses. Sequentially, net income during the
first quarter of 2023 was $370,000 ($0.03 per basic share) compared
to net loss of $756,000 ($0.06 per basic share) during the fourth
quarter of 2022. This sequential improvement of $1.1 million was
primarily due to higher rental activity and associated gross margin
and a non cash charge for fleet retirements in the fourth quarter
of 2022.
Adjusted EBITDA: Adjusted
EBITDA increased to $7.8 million for the three months ended March
31, 2023, from $6.8 million for the same period in 2022. This
increase was primarily attributable higher adjusted gross margins.
Sequentially, adjusted EBITDA was flat at $7.8 million for the
three months ended March 31, 2023, and in the previous quarter.
Cash flows: At March 31, 2023,
cash and cash equivalents were approximately $7.4 million, while
working capital was $17.6 million with $61.0 million outstanding on
our revolving credit facility. For the three months of 2023, cash
flows from operating activities were $18.2 million, while cash
flows used in investing activities was $47.8 million. Cash flows
used in investing activities included $47.8 million in capital
expenditures, of which $47.0 million was dedicated to rental
capital expenditures.
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 $40 and $120, respectively |
|
1,588 |
|
|
|
1,557 |
|
Rental equipment, net of
accumulated depreciation of $182,560 and $177,729,
respectively |
|
287,181 |
|
|
|
246,450 |
|
Property and equipment, net of
accumulated depreciation of $17,554 and $16,981, respectively |
|
22,420 |
|
|
|
22,176 |
|
Right of use assets -
operating leases, net of accumulated amortization $760 and $721,
respectively |
|
309 |
|
|
|
349 |
|
Intangibles, net of
accumulated amortization of $2,290 and $2,259, respectively |
|
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 $0.01; 13,548 and 13,519 shares issued,
respectively |
|
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 |
|
|
$ |
— |
|
Investor Relations
(432) 262-2753
Ir@ngsgi.com
www.ngsgi.com
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