EX-99 2 ngsq12022earningsreleaseex.htm EX-99 Document






FOR IMMEDIATE RELEASE
          NEWS
May 16, 2022
NYSE: NGS
Exhibit 99.1
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Natural Gas Services Group, Inc.
Reports First Quarter 2022 Financial and Operating Results

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
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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,
20222021
(in thousands)
Rental$17,129 84 %$15,341 83 %
Sales2,893 14 %2,711 15 %
Service & Maintenance314 %345 %
Total$20,336 $18,397 

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Gross Margin
Three months ended March 31,
20222021
(in thousands)
Rental$1,761 10 %$2,123 14 %
Sales836 29 %23 %
Service & Maintenance126 40 %288 83 %
Total$2,723 13 %$2,434 13 %


Adjusted Gross Margin (1)
Three months ended March 31,
20222021
(in thousands)
Rental$7,899 46 %$8,185 53 %
Sales905 31 %95 %
Service & Maintenance141 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,
20222021
(in thousands)
Total revenue20,336 $18,397 
Costs of revenue, exclusive of depreciation(11,391)(9,820)
Depreciation allocable to costs of revenue(6,222)(6,143)
Gross margin2,723 2,434 
Depreciation allocable to costs of revenue6,222 6,143 
Adjusted Gross Margin$8,945 $8,577 
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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,
20222021
(in thousands)
Net (loss) income$337 $(394)
Interest expense24 
Income tax benefit(11)125 
Depreciation and amortization6,061 6,297 
Non-cash stock compensation expense420 474 
Adjusted EBITDA$6,831 $6,503 




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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) 262-2700
Alicia.Dada@ngsgi.com
www.ngsgi.com
 

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 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, respectively12,882 10,389 
Inventory17,331 19,329 
Federal income tax receivable (Note 4)11,538 11,538 
Prepaid income taxes54 51 
Prepaid expenses and other613 854 
Total current assets58,844 65,103 
Long-term inventory, net of allowance for obsolescence of $37 and $64, respectively1,495 1,582 
Rental equipment, net of accumulated depreciation of $178,038 and $172,563, respectively209,587 206,985 
Property and equipment, net of accumulated depreciation of $16,305 and $15,784, respectively20,407 20,828 
Right of use assets - operating leases, net of accumulated amortization of $602 and $555, respectively329 285 
Intangibles, net of accumulated amortization of $2,165 and $2,134, respectively994 1,025 
Other assets2,610 2,698 
Total assets
$294,266 $298,506 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable$5,604 $4,795 
Accrued liabilities12,945 14,103 
Line of credit— — 
Current operating leases120 68 
Deferred income— 1,312 
Total current liabilities18,669 20,278 
Deferred income tax liability39,278 39,288 
Long-term operating leases210 217 
Other long-term liabilities2,726 2,813 
Total liabilities60,883 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, respectively135 134 
Additional paid-in capital
114,080 114,017 
Retained earnings130,440 130,103 
Treasury Shares, at cost, 1,022 and 775 shares, respectively(11,272)(8,344)
Total stockholders' equity233,383 235,910 
Total liabilities and stockholders' equity$294,266 $298,506 

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NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
(unaudited)
Three months ended
March 31,
20222021
Revenue:
Rental income$17,129 $15,341 
Sales2,893 2,711 
Service and maintenance income314 345 
Total revenue20,336 18,397 
Operating costs and expenses:
Cost of rentals, exclusive of depreciation stated separately below9,230 7,156 
Cost of sales, exclusive of depreciation stated separately below1,988 2,616 
Cost of service and maintenance, exclusive of depreciation stated separately below173 48 
Selling, general and administrative expenses2,502 2,649 
Depreciation and amortization6,061 6,297 
Total operating costs and expenses19,954 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 taxes326 (269)
Income tax benefit11 (125)
Net loss$337 $(394)
Loss per share:
Basic$0.03 $(0.03)
Diluted$0.03 $(0.03)
Weighted average shares outstanding:
Basic12,537 13,263 
Diluted12,698 13,263 



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NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended
March 31,
20222021
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 amortization6,061 6,297 
Amortization of debt issuance costs12 — 
Deferred income tax (benefit) expense(11)123 
Stock-based compensation423 474 
Bad debt allowance— 15 
Gain on sale of assets(36)— 
Loss (gain) on company owned life insurance130 (98)
Changes in operating assets and liabilities:
Trade accounts receivables(2,494)(855)
Inventory2,085 (100)
Prepaid expenses and prepaid income taxes238 301 
Accounts payable and accrued liabilities(349)2,523 
Deferred income(1,312)(1,069)
Other(89)164 
NET CASH PROVIDED BY OPERATING ACTIVITIES4,995 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 equipment37 — 
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 PERIOD22,942 28,925 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$16,426 $30,683 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid$12 $
NON-CASH TRANSACTIONS
Right of use asset acquired through an operating lease$91 $— 

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