Natural Gas Services Group, Inc. Reports Fourth Quarter and Year-End 2024 Financial and Operating Results; Provides 2025 Guidance
Midland, Texas, March 17, 2025 (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 and year-ended December 31, 2024. The Company also provided guidance for its full year 2025, anticipating significant top- and bottom-line growth with strong momentum moving into 2026.
Fourth Quarter and Full Year 2024 Highlights
Rental revenue of $38.2 million for the fourth quarter and $144.2 million for the full year 2024, representing increases of 21% and 36%, respectively, compared to the prior year comparable periods.
Net income of $2.9 million or $0.23 per diluted share for the fourth quarter and $17.2 million or $1.37 per diluted share for the full year 2024, representing increases of 68% and 263%, respectively, compared to the prior fourth quarter and full year 2023 periods.
Cash flow generated from operating activities of $9.4 million for the fourth quarter and $66.5 million for the full year 2024. This compares to net cash used in operating activities of $7.7 million for the fourth quarter and cash generated of $18.0 million for the full year 2023.
Adjusted EBITDA of $18.0 million for the fourth quarter and $69.5 million for the full year 2024; 2024 Adjusted EBITDA was 52% higher than 2023 and represented the highest level in the Company's history. Please see Non-GAAP Financial Measures - Adjusted EBITDA, below.
Management Commentary and Outlook
"2024 was a transformational year for Natural Gas Services Group as we executed against our strategic objectives and significantly improved our market presence and financial performance," stated Justin Jacobs, Chief Executive Officer. "During the year, we enhanced our team and infrastructure, further diversified and expanded our customer base, organically expanded into large horsepower electric units, maintained our industry-leading service levels, and materially increased the size of our overall fleet. I am quite proud of the NGS team as their unwavering dedication to our customers and their passion to excel are the driving forces of our results."
"2024 was also a record year for NGS as our utilized rental fleet approached 500,000 horsepower and our Adjusted EBITDA increased by over 50% compared to 2023. Equally important, our business became significantly more capital efficient: our total debt increased by only $6 million over the course of 2024 and our leverage declined from 2.53x at the end of 2023 to 2.36x at 2024 year-end. The reduction of working capital was a material driver in the improvement in capital efficiency, and we believe there is more opportunity to monetize non-cash assets in the near term."
"Looking forward, we see continued strength in the market. We believe our organic growth rate leads the industry and we are taking market share. This was made possible by the hard work of our service technicians and field service team, our leading compressor technology, and strong partnerships with our customers. We expect 2025 will be another year of significant growth in new large horsepower units and we have already signed material new unit contracts for 2026. We are excited for the future and believe we are well positioned to continue to increase shareholder value."
Corporate Guidance, 2025 Outlook
In November 2024, the Company noted it expected 2024 Adjusted EBITDA to be in the range of $67 - $69 million, total growth capital expenditures for the year to be in the range of $65 - $75 million, and total maintenance expenditures for the year to be in the range of $8 - $11 million. For the full year 2024, the Company reported Adjusted EBITDA of $69.5 million, growth capital expenditures of $60.5 million and maintenance capital expenditures of $11.4 million. Additionally, as of December 31, 2024, rented horsepower stood at 491,756, representing year-over-year growth of 17%.
The Company today provides the following commentary regarding its financial expectations for the 2025 Fiscal Year. For the year ending December 31, 2025, the Company expects growth capital expenditures, which are mostly comprised of new units (essentially all of which are under contract), to be in the range of $95 - $120 million. Once all these units are deployed with customers, which is expected by early 2026, the Company expects its rented horsepower to increase by approximately 90,000 horsepower, which represents an increase of approximately 18% versus year-end 2024. The timing of unit deployments is very heavily weighted to the second half of 2025 and early 2026. Accordingly, the majority of the impact of 2024 and 2025 growth capital expenditures will start to be reflected in Adjusted EBITDA in the second half of 2025 and the first quarter of 2026.
Based on the timing of contractual orders and deployments in 2025, the Company expects 2025 Adjusted EBITDA to be in the range of $74 - $78 million, which at the mid-point of the range, represents a 9% increase over 2024. This range is reflective of the timing of anticipated unit deployments.
Outlook
FY 2025 Adjusted EBITDA
$74 - $78 million
FY 2025 Growth Capital Expenditures
$95 - $120 million
FY 2025 Maintenance Capital Expenditures
$10 - $13 million
Target Return on Invested Capital
At least 20%
The Company further notes that once all the 2025 growth capital expenditures are spent and the units are deployed, its "run rate" Adjusted EBITDA should increase at a rate (when compared to the fourth quarter of 2024) well in excess of the Company's anticipated horsepower growth of 18% as noted above. The Company expects 2025 maintenance capital expenditures of $10 - $13 million and its targeted return on invested capital of at least 20% remains unchanged.
2024 Fourth Quarter Financial Results
Revenue: Total revenue for the three months ended December 31, 2024 increased 12% to $40.7 million from $36.2 million for the three months ended December 31, 2023. This increase was due primarily to an increase in rental revenues. Rental revenue increased 21% to $38.2 million in the fourth quarter of 2024 from $31.6 million in the fourth quarter of 2024 due to the addition of higher horsepower packages and pricing improvements. As of December 31, 2024, we had 491,756 horsepower (1,208 rented units) compared to 420,432 horsepower (1,247 rented units) as of December 31, 2023, reflecting a 17% increase in total utilized horsepower. Sequentially, total revenue was essentially flat for the comparable periods, primarily related to lower sales revenue offset by an increase in rental revenue.
Gross Margins: Total gross margins, including depreciation expense increased to $14.6 million for the three months ended December 31, 2024, compared to $13.3 million for the same period in 2023 and decreased from $14.9 million for the three months ended September 30, 2024. Total adjusted gross margin, exclusive of depreciation expense, for the three months ended December 31, 2024, increased to $23.0 million compared to $20.3 million for the three months ended December 31, 2023, and $22.9 million for the three months ended September 30, 2024. For a reconciliation of Gross Margin, see Non-GAAP Financial Measures, Adjusted Gross Margin, below.
Operating Income: Operating income for the three months ended December 31, 2024 was $6.0 million compared to operating income of $4.4 million for the three months ended December 31, 2023 and operating income of $9.5 million, during the third quarter of 2024.
Net Income: Net income for the three months ended December 31, 2024, was $2.9 million, or $0.23 per diluted share compared to net income of $1.7 million or $0.14 per diluted share for the fourth quarter of 2023, and $5.0 million or $0.40 per diluted share for the third quarter of 2024. The increase in net income year-over-year was primarily related to higher rental revenue and rental gross margin, while the sequential decline was primarily related to the inventory allowance and decrease in sales gross profit related to the closure of our Midland fabrication operations, the intangible asset impairment, an increase in stock-based compensation, and an increase in depreciation.
Cash Flows: At December 31, 2024, cash and cash equivalents were approximately $2.1 million, while working capital was $30.8 million. For the twelve months of 2024, cash flows provided by operating activities were $66.5 million, while cash flows used in investing activities was $71.4 million. This compares to cash flows provided by operating activities of $18.0 million and cash flows used in investing activities of $153.9 million for the comparable twelve-month period in 2023. Cash flow used in investing activities during 2024 included $71.9 million in capital expenditures.
Adjusted EBITDA: Adjusted EBITDA increased 11% to $18.0 million for the three months ended December 31, 2024, from $16.3 million for the same period in 2023. This increase was primarily attributable to higher rental revenue and rental adjusted gross margin. Sequentially, adjusted EBITDA declined by 1% when compared to $18.2 million for the three months ended September 30, 2024.
Debt: Outstanding debt on our revolving credit facility as of December 31, 2024 was $170 million. Our leverage ratio at December 31, 2024 was 2.36x and our fixed charge coverage ratio was 2.44x. The Company is in compliance with all terms, conditions and covenants of the credit agreement.
Selected data: The tables below show revenue by product line, gross margin and adjusted gross margin for the trailing five quarters. Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation.
Revenues
Three months ended
December 31,
March 31,
June 30,
September 30,
December 31,
2023
2024
2024
2024
2024
(in thousands)
Rental
$ 31,626
$ 33,734
$ 34,926
$ 37,350
$ 38,226
Sales
2,921
2,503
2,270
1,843
997
Aftermarket services
1,674
670
1,295
1,493
1,435
Total
$ 36,221
$ 36,907
$ 38,491
$ 40,686
$ 40,658
Gross Margin
Three months ended
December 31,
March 31,
June 30,
September 30,
December 31,
2023
2024
2024
2024
2024
(in thousands)
Rental
$ 12,366
$ 13,761
$ 13,211
$ 15,043
$ 14,865
Sales
553
253
(50)
(258)
(531)
Aftermarket services
421
163
269
151
296
Total
$ 13,340
$ 14,177
$ 13,430
$ 14,936
$ 14,630
Adjusted Gross Margin (1)
Three months ended
December 31,
March 31,
June 30,
September 30,
December 31,
2023
2024
2024
2024
2024
(in thousands)
Rental
$ 19,199
$ 20,620
$ 20,698
$ 22,908
$ 23,107
Sales
620
323
21
(185)
(449)
Aftermarket services
440
170
283
169
321
Total
$ 20,259
$ 21,113
$ 21,002
$ 22,892
$ 22,979
Adjusted Gross Margin %
Three months ended
December 31,
March 31,
June 30,
September 30,
December 31,
2023
2024
2024
2024
2024
Rental
60.7 %
61.1 %
59.3 %
61.3 %
60.4 %
Sales
21.2 %
12.9 %
0.9 %
(10.0) %
(45.0) %
Aftermarket services
26.3 %
25.4 %
21.9 %
11.3 %
22.4 %
Total
55.9 %
57.2 %
54.6 %
56.3 %
56.5 %
Compression Units (at end of period)
Three months ended
December 31,
March 31,
June 30,
September 30,
December 31,
2023
2024
2024
2024
2024
Rented horsepower
420,432
444,220
454,568
475,534
491,756
Fleet horsepower available
520,365
542,256
552,599
579,699
598,840
Horsepower utilization
80.8 %
81.9 %
82.3 %
82.0 %
82.1 %
Units utilized
1,247
1,245
1,242
1,229
1,208
Fleet units
1,876
1,894
1,899
1,909
1,912
Unit utilization
66.5 %
65.7 %
