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CST: 17/08/2019 13:18:07   

Natural Gas Services Group, Inc. Reports Second Quarter 2019 Financial and Operating Results

11 Days ago

Midland, Aug. 06, 2019 (GLOBE NEWSWIRE) --

 

MIDLAND, Texas August 6, 2019 - Natural Gas Services Group, Inc. (“NGS” or the “Company”) (NYSE:NGS), a leading provider of gas compression equipment and services to the energy industry, today announced financial results for the three and six months ended June 30, 2019.

For the quarter ended June 30, 2019, NGS reported rental revenue of $13.6 million compared to $11.4 million for the quarter ended June 30, 2018. Sequentially, rental revenue increased from $13.4 million.

The Company reported net income for the second quarter of $573,000 compared to $247,000 in the same quarter in 2018 and $357,000 in the prior quarter. Earnings per diluted share for the quarter ended June 30, 2019 was 4 cents.

Highlights of the quarter include:

Revenue: Total revenue for the three months ended June 30, 2019 was $19.9 million, an increase from $18.2 million compared to the three months ended June 30, 2018. This increase was primarily driven by a greater number of units on rent, with increased average rental rates. Sequentially, total revenue increased by $1.9 million to $19.9 million from $18.0 million, mainly due to higher compressor sales.

Operating Income: Operating income for the three months ended June 30, 2019 increased to $593,000 from $226,000 compared to the same period in 2018, mainly driven by an increase in rental revenue. Sequentially, operating income increased to $593,000 from $209,000 mainly due to an increase in compressor sales for the three months ended June 30, 2019.

Adjusted Gross Margins: Total adjusted gross margin for the three months ended June 30, 2019 increased $974,000 to $9.0 million from $8.0 million for the same period ended June 30, 2018. As a percentage of revenue, total adjusted gross margin slightly increased to 45% for the three months ended June 30, 2019 compared to 44% for the same period ended June 30, 2018. This increase is a result of a $2.0 million increase in rental revenues. Sequentially, adjusted gross margin of $9.0 million for the three months ending June 30, 2019 increased from $8.3 million for the three months ended in March 31, 2019. Adjusted gross margin as a percentage of revenue decreased slightly to 45% from 46% from the previous quarter, partially driven by the shift in revenues towards lower margin sales from higher margin rentals. Please see discussion of Non-GAAP Financial Measures - Adjusted Gross Margin at the conclusion of this release.

Net Income: Net income for the three months ended June 30, 2019 increased to $573,000 compared to net income of $247,000 for the same period in 2018. Sequentially, net income also increased to $573,000 from $357,000.

Earnings Per Share: Comparing the second quarter of 2019 versus 2018, earnings per diluted share was 4 cents, up 2 cents from the same period of 2018. Sequentially, diluted earnings per share increased to 4 cents from 3 cents.

Adjusted EBITDA: Adjusted EBITDA increased to $6.5 million compared to the same period ended June 30, 2018 of $5.8 million and remained flat as a percentage of revenue at 32% for both the three months ended June 30, 2019 and June 30, 2018. Adjusted EBITDA increased approximately $385,000 in the sequential quarters but decreased slightly as a percentage of revenue to 32% from 34%. Please see discussion of Non-GAAP Financial Measures - Adjusted EBITDA at the conclusion of this release.

Cash Flow: At June 30, 2019, cash and cash equivalents were $30.0 million with a bank debt level of $417,000, all classified as non-current. We had positive net cash flow from operating activities of $6.4 million during the six months ended of 2019.


Commenting on Second Quarter 2019 results, Stephen C. Taylor, President and CEO, said:

“The second quarter of 2019 represented another strong operational quarter of performance for NGS. Rental revenues continue to increase, up 19% over the comparative prior year quarter, as demand for our higher horsepower units remains robust.  Additionally, we saw significant sales for the quarter, with the highest adjusted gross margin percentage for that segment since the first quarter of 2018. Quarterly, cash flow from operations was $10.3 million, or 52% of revenue. We ended the quarter with nearly $30 million in cash, virtually zero debt and remain in an enviable financial position when compared to other competitors operating in the oilfield services sector.  

“While we continue to survey the oilfield landscape for strategic opportunities, we also remain disciplined in our approach with a focus on strategic fit and value. We will continue to look for opportunities to grow our operating portfolio but will also continue to be vigilant in protecting our balance sheet which has served us well, especially in periods of market volatility and uncertainty.”

Selected data: The tables below show revenues and percentage of total revenues, along with our adjusted gross margin, exclusive of depreciation and amortization, and related percentages of each of our product lines for the three and six months ended June 30, 2019 and 2018.  Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation and amortization.

  Revenue   Adjusted Gross Margin(1)
  Three months ended June 30,   Three months ended June 30,
  2019   2018   2019   2018
  (in thousands)
Rental $ 13,572   68 %   $ 11,427   63 %   $ 7,213   53 %   $ 6,232   55 %
Sales 5,814   29 %   6,383   35 %   1,395   24 %   1,459   23 %
Service & Maintenance 509   3 %   394   2 %   350   69 %   293   74 %
Total $ 19,895       $ 18,204       $ 8,958   45 %   $ 7,984   44 %


  Revenue   Adjusted Gross Margin(1)
  Six months ended June 30,   Six months ended June 30,
  2019   2018   2019   2018
  (in thousands)
Rental $ 26,959   71 %   $ 22,898   70 %   $ 14,715   55 %   $ 12,999   57 %
Sales 9,939   26 %   9,381   28 %   1,821   18 %   2,266   24 %
Service & Maintenance 988   3 %   643   2 %   682   69 %   477   74 %
Total $ 37,886       $ 32,922       $ 17,218   45 %   $ 15,742   48 %

(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 and amortization 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 and amortization expense), which are key operating components. Depreciation expense is a necessary element of costs and the ability to generate revenue and selling, general and administrative expense is a necessary cost to support operations and required corporate activities. 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, operating income 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 reconciliation of operating income to adjusted gross margin is as follows:

  Three months ended June 30,   Six months ended June 30,
  (in thousands)   (in thousands)
2019   2018   2019   2018
Operating Income $ 593   $ 226   $ 802   $ 576
Depreciation and amortization 5,683   5,449   11,241   10,836
Selling, general, and administration expenses 2,682   2,309   5,175   4,330
Adjusted Gross Margin $ 8,958   $ 7,984   $ 17,218   $ 15,742

Non GAAP Financial Measures - Adjusted EBITDA: Adjusted EBITDA: “Adjusted EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization. Adjusted EBITDA is a measure used by 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.

The reconciliation of net income to Adjusted EBITDA and gross margin is as follows:

  Three months ended June 30,   Six months ended June 30,
  (in thousands)   (in thousands)
  2019   2018   2019   2018
Net income $ 573   $ 247   $ 930   $ 472
Interest expense 4   3   8   6
Provision for income taxes 197   54   350   103
Depreciation and amortization 5,683   5,449   11,241   10,836
Adjusted EBITDA $ 6,457   $ 5,753   $ 12,529   $ 11,417


Conference Call Details:

Teleconference: Tuesday, August 6, 2019 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 six months ended June 30, 2019.

About Natural Gas Services Group, Inc. (NGS): NGS is a leading provider of gas compression equipment to the natural gas industry with a primary focus on the non-conventional gas and oil industry, i.e., coalbed methane, gas and oil shales and tight gas. The Company manufactures, fabricates, rents, sells and maintains natural gas compressors and flare systems for gas and oil 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 gas and oil 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 loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS's products and services; 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 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


 NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
       
  June 30,
2019
  December 31, 2018
ASSETS      
Current Assets:      
Cash and cash equivalents $ 29,911   $ 52,628
Trade accounts receivable, net of allowance for doubtful accounts of $333 and $291,  respectively 11,383   7,219
Inventory 30,302   30,974
Prepaid income taxes 3,146   3,148
Prepaid expenses and other 1,880   2,430
Total current assets 76,622   96,399
Long-term inventory, net of allowance for obsolescence of $21 and $19, respectively 3,873   3,980
Rental equipment, net of accumulated depreciation of $173,282 and $165,428, respectively 190,704   175,886
Property and equipment, net of accumulated depreciation of $11,777 and $11,556, respectively 20,146   16,587
Right of use assets - operating leases, net of accumulated amortization $83 494  
Goodwill 10,039   10,039
Intangibles, net of accumulated amortization of $1,821 and $1,758, respectively 1,338   1,401
Other assets 1,339   1,109
Total assets $ 304,555   $ 305,401
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current Liabilities:      
Accounts payable $ 2,579   $ 2,122
Accrued liabilities 3,999   8,743
Current operating leases 129  
Deferred income 113   81
Total current liabilities 6,820   10,946
Line of credit, non-current portion 417   417
Deferred income tax liability 32,514   32,158
Long-term operating leases 365  
Other long-term liabilities 1,869   1,699
Total liabilities 41,985   45,220
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; 13,138 and 13,005 shares issued and outstanding, respectively 131   130
Additional paid-in capital 109,218   107,760
Retained earnings 153,221   152,291
Total stockholders' equity 262,570   260,181
Total liabilities and stockholders' equity $ 304,555   $ 305,401


NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except earnings per share)
(unaudited)
       
  Three months ended   Six months ended
  June 30,   June 30,
  2019     2018     2019     2018  
Revenue:              
Rental income $ 13,572     $ 11,427     $ 26,959     $ 22,898  
Sales 5,814     6,383     9,939     9,381  
Service and maintenance income 509     394     988     643  
Total revenue 19,895     18,204     37,886     32,922  
Operating costs and expenses:              
Cost of rentals, exclusive of depreciation and amortization stated separately below 6,359     5,195     12,244     9,899  
Cost of sales, exclusive of depreciation and amortization stated separately below 4,419     4,924     8,118     7,115  
Cost of service and maintenance 159     101     306     166  
Selling, general, and administrative expense 2,682     2,309     5,175     4,330  
Depreciation and amortization 5,683     5,449     11,241     10,836  
Total operating costs and expenses 19,302     17,978     37,084     32,346  
Operating income 593     226     802     576  
Other income (expense):              
Interest expense (4 )   (3 )   (8 )   (6 )
Other income, net 181     78     486     5  
Total other income (expense), net 177     75     478     (1 )
Income before provision for income taxes 770     301     1,280     575  
Income tax expense 197     54     350     103  
Net income $ 573     $ 247     $ 930     $ 472  
Earnings per share:              
Basic $ 0.04     $ 0.02     $ 0.07     $ 0.04  
Diluted $ 0.04     $ 0.02     $ 0.07     $ 0.04  
Weighted average shares outstanding:              
Basic 13,134     12,963     13,100     12,941  
Diluted 13,462     13,261     13,368     13,215  


NATURAL GAS SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
  Six months ended
  June 30,
  2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 930     $ 472  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 11,241     10,836  
Deferred income taxes 356     170  
Stock-based compensation 1,137     1,076  
Bad debt allowance (recovery) 55     (102 )
Gain on sale of assets (37 )   (49 )
(Gain) loss on company owned life insurance (131 )   55  
Changes in operating assets and liabilities:      
Trade accounts receivables, net (4,219 )   (739 )
Inventory 1,200     2,673  
Prepaid expenses and prepaid income taxes (22 )   321  
Accounts payable and accrued liabilities (4,287 )   (4,327 )
Deferred income 32     302  
Other 192     172  
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,447     10,860  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchase of property and equipment (29,402 )   (16,945 )
Purchase of company owned life insurance (111 )   (191 )
Proceeds from sale of property and equipment 26     49  
Proceeds from insurance claims of property and equipment 11      
NET CASH USED IN INVESTING ACTIVITIES (29,476 )   (17,087 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Payments from other long-term liabilities, net (10 )   (19 )
Proceeds from exercise of stock options 505     157  
Taxes paid related to net share settlement of equity awards (183 )   (629 )
NET CASH  PROVIDED BY (USED IN) FINANCING ACTIVITIES 312     (491 )
NET CHANGE IN CASH AND CASH EQUIVALENTS (22,717 )   (6,718 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 52,628     69,208  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,911     $ 62,490  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:      
Interest paid $ 8     $ 6  
Income taxes paid $ 45     $ 66  
NON-CASH TRANSACTIONS      
Transfer of rental equipment components to inventory $ 347     $ 144  
Transfer of prepaids to rental equipment and inventory $ 574     $  
Right of use acquired through an operating lease $ 126     $  

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