Core Insights - Natural Gas Services (NGS) reported quarterly earnings of $0.41 per share, exceeding the Zacks Consensus Estimate of $0.32 per share, and up from $0.34 per share a year ago [1] - The earnings surprise for the quarter was +28.13%, following a previous surprise of +40.74% [2] - The company achieved revenues of $41.38 million for the quarter, surpassing the Zacks Consensus Estimate by 0.42% and increasing from $38.49 million year-over-year [3] Earnings Performance - NGS has surpassed consensus EPS estimates in all four of the last quarters [2] - The current consensus EPS estimate for the upcoming quarter is $0.33, with expected revenues of $43.1 million, and for the current fiscal year, the estimate is $1.40 on revenues of $171.47 million [8] Market Position - NGS shares have underperformed the market, losing about 7.5% since the beginning of the year, while the S&P 500 has gained 8.6% [4] - The Zacks Industry Rank for Oil and Gas - Mechanical and Equipment is in the bottom 39% of over 250 Zacks industries, indicating potential challenges for the sector [9] Future Outlook - The earnings outlook and estimate revisions will be crucial for NGS's stock performance in the near future [5] - The current Zacks Rank for NGS is 3 (Hold), suggesting that the shares are expected to perform in line with the market [7]

Core Viewpoint - Natural Gas Services Group, Inc. (NGS) reported strong financial results for Q2 2025, with record Adjusted EBITDA and increased guidance for the full year, driven by robust demand for compression services and strategic deployments of large horsepower units [1][3][4]. Financial Performance - Total revenue for Q2 2025 increased by 7.5% to $41.4 million compared to $38.5 million in Q2 2024, primarily due to a 13.3% rise in rental revenue [7][12]. - Adjusted EBITDA reached a record $19.7 million in Q2 2025, reflecting a 19.5% year-over-year increase [17]. - Net income for Q2 2025 was $5.2 million, or $0.41 per diluted share, compared to $4.3 million, or $0.34 per diluted share, in the same period last year [15][36]. Guidance and Outlook - The company raised its full-year 2025 Adjusted EBITDA guidance to $76 - $80 million, up from the previous range of $74 - $79 million, citing strong first-half performance and expected large horsepower unit deployments [4][8]. - Growth capital expenditures for 2025 are projected to be between $95 - $115 million, primarily for new units under contract [5][8]. Operational Highlights - Utilized rental horsepower reached an all-time high of 499,000, with a total of 498,651 rented horsepower as of June 30, 2025, marking a 9.7% increase from the previous year [3][12]. - The company initiated a quarterly cash dividend of $0.10 per share and authorized a share repurchase program of up to $6 million, indicating confidence in cash generation and capital allocation strategy [7][11]. Strategic Initiatives - NGS is focusing on deploying large-horsepower gas engine and electric motor units in key basins, with expectations of continued momentum through 2025 and into 2026 [3][4]. - The company maintains a competitive financial position with the lowest leverage among public peers at 2.31x, allowing for flexibility in pursuing organic growth and potential M&A opportunities [3][18].

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited condensed consolidated financial statements and comprehensive notes for Natural Gas Services Group, Inc [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' equity | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $325 | $2,142 | | Trade accounts receivable, net | $13,742 | $15,626 | | Inventory, net | $18,334 | $18,051 | | Total current assets | $48,882 | $48,176 | | Rental equipment, net | $446,952 | $415,021 | | Total assets | $525,526 | $492,528 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current liabilities | $24,788 | $17,358 | | Long-term debt | $182,000 | $170,000 | | Total liabilities | $259,312 | $237,471 | | Total stockholders' equity | $266,214 | $255,057 | | Total liabilities and stockholders' equity | $525,526 | $492,528 | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) This statement reports the Company's revenues, expenses, and net income over specific periods | Metric (in thousands, except EPS) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $41,382 | $38,491 | $82,765 | $75,398 | | Total operating costs and expenses | $31,458 | $29,985 | $63,334 | $57,573 | | Operating income | $9,924 | $8,506 | $19,431 | $17,825 | | Net income | $5,188 | $4,250 | $10,042 | $9,348 | | Basic EPS | $0.42 | $0.34 | $0.81 | $0.75 | | Diluted EPS | $0.41 | $0.34 | $0.80 | $0.75 | - Net income increased by **22.1%** for the three months ended June 30, 2025, and by **7.4%** for the six months ended June 30, 2025, compared to the prior year periods[13](index=13&type=chunk) [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This statement details changes in the Company's equity accounts, including net income and stock-based compensation | Stockholders' Equity (in thousands) | January 1, 2025 | June 30, 2025 | | :---------------------------------- | :-------------- | :------------ | | Total Stockholders' Equity | $255,057 | $266,214 | | Change in Stockholders' Equity | | +$11,157 | - Total stockholders' equity increased by **$11.157 million** from January 1, 2025, to June 30, 2025, primarily due to net income and stock-based compensation[15](index=15&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities | Cash Flow Activity (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $32,263 | $31,119 | | Net cash used in investing activities | $(44,962) | $(27,881) | | Net cash provided by (used in) financing activities | $10,882 | $(2,368) | | Net change in cash and cash equivalents | $(1,817) | $870 | | Cash and cash equivalents at end of period | $325 | $3,616 | - Operating cash flows increased by **$1.1 million**, while investing activities saw a significant increase in cash used, primarily for rental equipment purchases[18](index=18&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Financing activities shifted from net cash used to net cash provided, mainly due to increased credit facility borrowings[18](index=18&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [1. Description of Business](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A1.%20Description%20of%20Business) This note outlines Natural Gas Services Group, Inc.'s core business as a provider of compression equipment and services - Natural Gas Services Group, Inc. (NGS) is a leading provider of natural gas and electric compression equipment, technology, and services to the energy industry, headquartered in Midland, Texas, with operations across major U.S. oil and gas basins[19](index=19&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A2.%20Summary%20of%20Significant%20Accounting%20Policies) This note details the key accounting principles and policies used in preparing the financial statements - The financial statements are prepared in accordance with GAAP, include the Company and its subsidiary, and all significant intercompany transactions are eliminated[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - The Company operates in one business segment, as resource allocation and performance assessment are based on the entire entity[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - ASU 2024-03, effective January 1, 2027, for annual periods, will expand disclosures for certain income statement expenses but is not expected to materially impact financial statements[25](index=25&type=chunk) [3. Trade Accounts Receivable](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A3.%20Trade%20Accounts%20Receivable) This note provides a breakdown of trade accounts receivable and the provision for credit losses | Trade Accounts Receivable (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :------------ | :---------------- | | Rentals | $12,525 | $14,218 | | Sales and aftermarket services | $1,735 | $2,657 | | Less: Provision for credit losses | $(518) | $(1,249) | | Total trade accounts receivable, net | $13,742 | $15,626 | - Occidental Permian, LTD. (Oxy) accounted for **47%** and **51%** of revenue for the six months ended June 30, 2025 and 2024, respectively, and **50%** and **52%** of accounts receivable as of June 30, 2025 and December 31, 2024, respectively, indicating significant customer concentration[27](index=27&type=chunk) | Provision for Credit Losses (in thousands) | Six months ended June 30, 2025 | Year ended December 31, 2024 | | :--------------------------------------- | :----------------------------- | :--------------------------- | | Beginning balance | $1,249 | $823 | | Provision for credit losses | $208 | $433 | | Write-offs | $(939) | $(7) | | Ending balance | $518 | $1,249 | - A substantial write-off of **$939 thousand** in credit loss provision occurred during the six months ended June 30, 2025, reflecting certain aged receivables no longer deemed collectible[28](index=28&type=chunk) [4. Inventory](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A4.%20Inventory) This note details the composition of inventory and the allowance for obsolescence | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Raw materials, net | $17,576 | $17,706 | | Work-in-process | $758 | $345 | | Inventory - current | $18,334 | $18,051 | | Total inventory | $18,334 | $18,051 | | Allowance for Obsolescence (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------------- | :------------ | :---------------- | | Beginning balance | $5,867 | $4,004 | | Allowance for obsolescence | $61 | $1,863 | | Write-offs | $(3,409) | $0 | | Ending balance | $2,519 | $5,867 | - A significant write-off of **$3.409 million** in the allowance for obsolescence during the six months ended June 30, 2025, was due to the disposal of inventory items from the former Midland, Texas fabrication facility[30](index=30&type=chunk) [5. Assets Held for Sale](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A5.%20Assets%20Held%20for%20Sale) This note describes assets reclassified for sale, including the Midland facility, and related impacts - The Company reclassified its Midland, Texas fabrication, repair, and overhaul facility (industrial building and land) with a net carrying value of **$2.2 million** to assets held for sale as of June 30, 2025, following the termination of operations and disposal of inventory[31](index=31&type=chunk)[32](index=32&type=chunk) - The closure of the Midland Facility resulted in the termination of eight employees and **$0.1 million** in severance and termination benefits paid in April 2025[33](index=33&type=chunk) [6. Rental Equipment](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A6.%20Rental%20Equipment) This note provides details on the Company's rental equipment, including its net value and depreciation | Rental Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Compressor units | $627,823 | $579,373 | | Work-in-progress | $41,207 | $51,662 | | Accumulated depreciation | $(222,078) | $(216,014) | | Rental equipment, net | $446,952 | $415,021 | - Depreciation expense for rental equipment was **$8.0 million** and **$6.9 million** for the three months ended June 30, 2025 and 2024, respectively, and **$15.7 million** and **$13.4 million** for the six months ended June 30, 2025 and 2024, respectively[34](index=34&type=chunk) [7. Property and Equipment](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A7.%20Property%20and%20Equipment) This note outlines the Company's property and equipment, including land and buildings, net of depreciation | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Land | $1,562 | $1,680 | | Building | $16,135 | $19,140 | | Total, net of accumulated depreciation | $22,664 | $22,989 | - During Q2 2025, **$2.2 million** of property and equipment from the former Midland Facility was reclassified to assets held for sale[36](index=36&type=chunk) [8. Supplemental Balance Sheet Disclosures](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A8.%20Supplemental%20Balance%20Sheet%20Disclosures) This note provides additional details on accrued liabilities and other balance sheet items | Accrued Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Accrued purchases | $3,529 | $2,085 | | Compensation | $3,395 | $3,483 | | Other | $2,752 | $1,343 | | Total | $10,297 | $7,688 | [9. Long-Term Debt](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A9.%20Long-Term%20Debt) This note details the Company's long-term debt, including credit facility terms and outstanding balances | Long-Term Debt (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Credit facility | $182,000 | $170,000 | - On April 18, 2025, the Company amended its Credit Facility, increasing the total commitment to **$400.0 million** (from $300.0 million) with an expanded accordion feature of **$100.0 million**, reducing interest rates by **50-75 basis points**, and providing more flexible leverage covenants from June 30, 2026[38](index=38&type=chunk)[39](index=39&type=chunk) - As of June 30, 2025, **$182.0 million** was outstanding under the Credit Facility with a weighted average interest rate of **7.23%**, and **$172.3 million** was available for borrowing[40](index=40&type=chunk)[121](index=121&type=chunk) - The Company was in compliance with all financial covenants[40](index=40&type=chunk)[121](index=121&type=chunk) [10. Income Taxes](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A10.%20Income%20Taxes) This note discusses the Company's income tax position, including a federal income tax refund claim - The Company has an outstanding federal income tax refund claim of approximately **$11.4 million** related to 2019 NOL carrybacks under the CARES Act[45](index=45&type=chunk)[46](index=46&type=chunk) - The refund request was formally submitted to the Joint Committee on Taxation (JCT) for review in Q2 2025[45](index=45&type=chunk)[46](index=46&type=chunk) [11. Commitments and Contingencies](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A11.%20Commitments%20and%20Contingencies) This note addresses potential future obligations and legal matters that could impact the Company - The Company is not currently a party to any material legal proceedings and believes that any potential claims will not have a material adverse effect on its financial condition, results of operations, or cash flows[47](index=47&type=chunk) [12. Revenues from Customers](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A12.%20Revenues%20from%20Customers) This note disaggregates revenue by source, including rental, sales, and aftermarket services | Revenue Disaggregation (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Rental | $39,580 | $34,926 | $78,490 | $68,660 | | Sales | $750 | $2,270 | $2,677 | $4,773 | | Aftermarket services | $1,052 | $1,295 | $1,598 | $1,965 | | Total revenue | $41,382 | $38,491 | $82,765 | $75,398 | - Rental revenue increased by **13.3%** and **14.3%** for the three and six months ended June 30, 2025, respectively, compared to the prior year, while sales and aftermarket services revenue declined[48](index=48&type=chunk) [13. Stock-Based and Other Long-Term Incentive Compensation](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A13.%20Stock-Based%20and%20Other%20Long-Term%20Incentive%20Compensation) This note details the Company's stock-based compensation plans and related expenses | Stock-Based Compensation Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Equity-classified | $579 | $242 | $938 | $516 | | Liability-classified | $137 | $16 | $137 | $16 | | Total | $716 | $258 | $1,075 | $532 | - Stock-based compensation expense significantly increased in 2025, primarily due to a higher mix of performance-based share unit (PSU) awards for executive officers, which generally have a higher grant-date fair value[52](index=52&type=chunk)[95](index=95&type=chunk) - As of June 30, 2025, unrecognized compensation cost for unvested options was approximately **$0.6 million** (expected over 2.33 years), for RSUs was **$2.1 million** (expected over 2.12 years), and for PSUs was **$1.8 million** (expected over 2.13 years)[54](index=54&type=chunk)[56](index=56&type=chunk)[61](index=61&type=chunk) - Stockholders approved an amendment to the 2019 Equity Incentive Plan on June 5, 2025, increasing available shares by **500,000** to **1,650,000** and extending the term to June 20, 2034[55](index=55&type=chunk) [14. Earnings per Share](index=15&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A14.%20Earnings%20per%20Share) This note presents the basic and diluted earnings per share calculations for the Company | Earnings per Common Share | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic | $0.42 | $0.34 | $0.81 | $0.75 | | Diluted | $0.41 | $0.34 | $0.80 | $0.75 | | Anti-Dilutive Awards Excluded (shares) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock options | 94,000 | 92,417 | 94,000 | 92,417 | | Restricted stock and RSUs | 20,963 | 5,750 | 7,595 | 18,635 | | PSUs | 47,029 | — | 47,029 | — | | Total | 161,992 | 98,167 | 148,624 | 111,052 | [15. Subsequent Events](index=16&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements%3A15.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period but before financial statement issuance - On July 30, 2025, the Board declared a cash dividend of **$0.10 per share**, payable August 22, 2025[64](index=64&type=chunk) - On August 5, 2025, Brian Tucker, President and COO, announced his transition out of the role by October 31, 2025, due to an unexpected family loss[65](index=65&type=chunk) - On August 8, 2025, the Board approved a **$6 million** share repurchase program, expiring August 6, 2027[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial performance, liquidity, capital resources, and critical accounting estimates [Overview](index=18&type=section&id=Overview) This section provides a general description of the Company's business model and operational focus - The Company's primary focus is on the rental of natural gas and electric compressors, with contracts typically ranging from 12 to 60 months[74](index=74&type=chunk) - Substantially all compressor assembly is outsourced, with limited in-house work at the Tulsa facility[74](index=74&type=chunk) - **77%** of rental revenue is generated from the Permian Basin, and approximately **75%** supports oil production, primarily gas lift operations[75](index=75&type=chunk) - The Company operates in one reporting segment across five states[75](index=75&type=chunk) [Operating Highlights](index=18&type=section&id=Operating%20Highlights) This section presents key operational metrics and their year-over-year performance trends | Operating Metric | June 30, 2025 | June 30, 2024 | | :----------------- | :------------ | :------------ | | Rented horsepower (at period end) | 498,651 | 454,568 | | Horsepower utilization (at period end) | 83.6 % | 82.3 % | | Rental revenues | $39,580 | $34,926 | | Total revenues | $41,382 | $38,491 | | Rental revenues as a percent of total revenues | 95.6 % | 90.7 % | - Rented horsepower increased by **9.7%** year-over-year, and horsepower utilization improved to **83.6%**[76](index=76&type=chunk) - Rental revenues now constitute **95.6%** of total revenues, up from **90.7%** in the prior year[76](index=76&type=chunk) [Our Performance Trends and Outlook](index=19&type=section&id=Our%20Performance%20Trends%20and%20Outlook) This section discusses current performance trends and the Company's future market expectations - Demand for the existing compressor fleet is expected to remain positive, assuming crude oil prices stay within reasonable bands[78](index=78&type=chunk) - The market outlook for U.S. natural gas production remains steady, with opportunities for increased utilization of small and medium horsepower units in the Permian basin and Marcellus Shale[79](index=79&type=chunk) [Non-GAAP Financial Measures](index=19&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures used by management to assess performance - The Company uses Adjusted Gross Margin (total revenue less cost of revenues excluding depreciation and amortization) and Adjusted EBITDA (net income before interest, taxes, depreciation, amortization, inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges, and non-cash equity-classified stock-based compensation) as non-GAAP financial measures to analyze performance[81](index=81&type=chunk)[85](index=85&type=chunk) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Adjusted gross margin | $24,223 | $21,002 | $48,479 | $42,115 | | Adjusted EBITDA | $19,665 | $16,456 | $38,955 | $33,334 | - Adjusted Gross Margin increased by **15.3%** for the three months and **15.1%** for the six months ended June 30, 2025, year-over-year[84](index=84&type=chunk)[87](index=87&type=chunk) - Adjusted EBITDA increased by **19.5%** for the three months and **16.9%** for the six months ended June 30, 2025, year-over-year[84](index=84&type=chunk)[87](index=87&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's revenues, costs, and expenses by segment [Rentals](index=22&type=section&id=Rentals) This section analyzes revenue and costs associated with the Company's compressor rental business | Rental Performance (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Rental revenue | $39,580 | $34,926 | $78,490 | $68,660 | | Cost of rentals (excluding D&A) | $15,528 | $14,228 | $30,368 | $27,342 | | Rental adjusted gross margin | $24,052 | $20,698 | $48,122 | $41,318 | | Rental adjusted gross margin percentage | 60.8 % | 59.3 % | 61.3 % | 60.2 % | | Rented horsepower (period end) | 498,651 | 454,568 | 498,651 | 454,568 | | Horsepower utilization (period end) | 83.6 % | 82.3 % | 83.6 % | 82.3 % | - Rental revenue increased by **13.3%** (QoQ) and **14.3%** (YoY) due to higher rented horsepower, particularly larger units, despite a decrease in the number of units and customers[89](index=89&type=chunk)[90](index=90&type=chunk) - The adjusted gross margin percentage improved due to efficient maintenance activities supported by SMART and telemetry software[89](index=89&type=chunk)[90](index=90&type=chunk) [Sales](index=23&type=section&id=Sales) This section examines the performance of the Company's compressor sales activities | Sales Performance (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales revenue | $750 | $2,270 | $2,677 | $4,773 | | Cost of sales (excluding D&A) | $911 | $2,249 | $2,927 | $4,429 | | Sales adjusted gross margin | $(161) | $21 | $(250) | $344 | | Sales adjusted gross margin percentage | (21.5)% | 0.9 % | (9.3)% | 7.2 % | - Sales revenue declined significantly by **67.0%** (QoQ) and **43.9%** (YoY)[92](index=92&type=chunk) - Sales adjusted gross margin turned negative due to lower business volume and fixed overhead costs, including severance from the Midland facility closure, as the Company shifts focus from new compressor sales to rentals[92](index=92&type=chunk) [Aftermarket Service](index=23&type=section&id=Aftermarket%20Service) This section reviews the revenue and profitability of aftermarket services provided by the Company | Aftermarket Services Performance (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Aftermarket services revenue | $1,052 | $1,295 | $1,598 | $1,965 | | Cost of aftermarket services (excluding D&A) | $720 | $1,012 | $991 | $1,512 | | Aftermarket services adjusted gross margin | $332 | $283 | $607 | $453 | | Aftermarket services adjusted gross margin percentage | 31.6 % | 21.9 % | 38.0 % | 23.1 % | - Aftermarket services revenue declined by **18.8%** (QoQ) and **18.7%** (YoY) due to lower unit commissioning work and freight costs[93](index=93&type=chunk) - Adjusted gross margins and percentages improved significantly, reflecting better cost management[93](index=93&type=chunk) [Selling, General and Administrative Expenses](index=24&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) This section details the trends and components of the Company's SG&A expenses | SG&A Expenses (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Primary SG&A expenses | $4,875 | $4,778 | $9,894 | $9,206 | | Stock-based compensation | $579 | $242 | $938 | $516 | | Total SG&A expenses | $5,454 | $5,020 | $10,832 | $9,722 | | SG&A as % of total revenues | 13.2 % | 13.0 % | 13.1 % | 12.9 % | - Total SG&A expenses increased by **8.6%** (QoQ) and **11.4%** (YoY), driven by higher information technology support costs, public company costs, occupancy, and office costs, partially offset by lower credit loss expenses and professional fees[95](index=95&type=chunk) - Equity-classified stock-based compensation saw a significant increase due to a higher mix of performance-based share unit awards[95](index=95&type=chunk) [Depreciation and Amortization](index=24&type=section&id=Depreciation%20and%20Amortization) This section analyzes the Company's depreciation and amortization expenses and their drivers | Depreciation and Amortization (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Allocable to cost of revenues | $8,873 | $7,572 | $17,412 | $14,508 | | Corporate depreciation | $96 | $98 | $193 | $218 | | Intangible asset amortization | $0 | $35 | $0 | $66 | | Total | $8,969 | $7,705 | $17,605 | $14,792 | | As a percent of total revenues | 21.7 % | 20.0 % | 21.3 % | 19.6 % | - Depreciation and amortization expense increased by **16.4%** (QoQ) and **19.0%** (YoY), primarily due to the depreciation of high horsepower units placed in service since the second half of 2024, aligning with the Company's strategy to focus on higher-margin applications[98](index=98&type=chunk) [Inventory Allowance](index=25&type=section&id=Inventory%20Allowance) This section discusses changes in the allowance for inventory obsolescence and related write-offs | Inventory Allowance (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Inventory allowance | $0 | $0 | $61 | $0 | - A nominal increase in inventory allowance was recorded in Q1 2025 due to inventory transfers from the closed Midland facility[99](index=99&type=chunk) - The inventory obsolescence balance decreased from **$5.9 million** at December 31, 2024, to **$2.5 million** at June 30, 2025, following write-offs[99](index=99&type=chunk) [Retirement of Rental Equipment](index=25&type=section&id=Retirement%20of%20Rental%20Equipment) This section reports on the gains or losses from the disposal of rental equipment | Retirement of Rental Equipment (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Retirement of rental equipment | $0 | $0 | $728 | $5 | - The Company retired certain small and medium horsepower compressor units during the six months ended June 30, 2025, resulting in a charge of **$728 thousand**, significantly higher than the minimal retirements in the comparable 2024 period[100](index=100&type=chunk) [Gain on the Sale of Assets](index=25&type=section&id=Gain%20on%20the%20Sale%20of%20Assets) This section details the net gains or losses recognized from the sale of various assets | Gain on Disposition of Assets, net (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gain on the disposition of assets, net | $124 | $229 | $178 | $229 | - Gains on asset disposition primarily resulted from the sale of trucks after their useful lives, with lower gains recognized in 2025 compared to 2024[101](index=101&type=chunk) [Interest Expense](index=25&type=section&id=Interest%20Expense) This section analyzes the Company's interest expenses, including borrowings and capitalized interest | Interest Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest on borrowings, finance leases and related fees | $3,464 | $4,037 | $6,996 | $7,980 | | Amortization of debt issue costs | $294 | $165 | $506 | $315 | | Capitalized interest | $(515) | $(1,270) | $(1,089) | $(2,428) | | Total | $3,243 | $2,932 | $6,413 | $5,867 | | Weighted-average interest rates on borrowings | 7.46 % | 8.92 % | 7.68 % | 9.00 % | - Interest expense increased by **10.6%** (QoQ) and **9.3%** (YoY), primarily due to lower capitalized interest and increased amortization of debt issue costs from Credit Facility amendments[104](index=104&type=chunk) - This occurred despite lower weighted-average interest rates on borrowings[104](index=104&type=chunk) [Other Income (Expense), net](index=26&type=section&id=Other%20Income%20%28Expense%29%2C%20net) This section reports on non-operating income and expenses, including unrealized gains or losses | Other Income (Expense), net (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Other income (expense), net | $104 | $(30) | $103 | $163 | - Other income (expense), net improved for the three months ended June 30, 2025, due to non-operating credits and unrealized gains from corporate-owned life insurance (COLI) policies[105](index=105&type=chunk) - However, it declined for the six-month period compared to 2024 due to higher unrealized COLI gains in the prior year[105](index=105&type=chunk) [Provision for Income Taxes](index=26&type=section&id=Provision%20for%20Income%20Taxes) This section details the Company's income tax expense and effective tax rates | Income Tax Provision (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $1,597 | $1,294 | $3,079 | $2,773 | | Effective income tax rate | 23.5 % | 23.3 % | 23.5 % | 22.9 % | - Income tax expense increased by **23%** (QoQ) and **11%** (YoY), with effective tax rates of **23.5%** for both periods in 2025[106](index=106&type=chunk) - This differs from the U.S. federal statutory rate due to certain non-deductible expenses[106](index=106&type=chunk) [Financial Condition](index=27&type=section&id=Financial%20Condition) This section assesses the Company's overall financial health, including liquidity and capital structure [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to meet short-term and long-term financial obligations - Primary liquidity sources are operating activities and the Credit Facility, which has a **$400.0 million** commitment and an additional **$100.0 million** accordion feature[107](index=107&type=chunk) - As of June 30, 2025, **$172.3 million** was available under the Credit Facility[107](index=107&type=chunk) - The Company believes current cash, operating cash flows, and Credit Facility borrowings will be sufficient to meet capital, dividend, and liquidity requirements for at least the next twelve months[110](index=110&type=chunk) [Cash flows](index=28&type=section&id=Cash%20flows) This section details cash generated and used across operating, investing, and financing activities | Cash Flows (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $32,263 | $31,119 | | Net cash used in investing activities | $(44,962) | $(27,881) | | Net cash (used in) provided by financing activities | $10,882 | $(2,368) | | Net increase in cash and cash equivalents | $(1,817) | $870 | - Operating cash flows increased by **$1.1 million** due to growth in accounts payable, improved billing/collection processes, and higher margins from high horsepower unit rentals[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Investing activities used **$45.1 million**, primarily for rental equipment[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Financing activities provided **$10.9 million**, mainly from net borrowings under the Credit Facility[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) [Capitalization](index=28&type=section&id=Capitalization) This section outlines the Company's capital structure, including debt and equity components | Capitalization (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Credit facility borrowings | $182,000 | $170,000 | | Total stockholders' equity | $266,214 | $255,057 | | Total capitalization | $448,214 | $425,057 | | Debt as a percent of total capitalization | 40.6 % | 40.0 % | - Total capitalization increased to **$448.2 million** as of June 30, 2025, with debt representing **40.6%** of total capitalization[119](index=119&type=chunk) - The Credit Facility has a **$400.0 million** commitment and a maturity date of February 28, 2028[119](index=119&type=chunk)[120](index=120&type=chunk) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) This section highlights critical accounting estimates that require significant judgment and could materially impact results - There have been no changes to the critical accounting estimates disclosed in the Company's Form 10-K for the year ended December 31, 2024[124](index=124&type=chunk) [Recently Issued Accounting Pronouncements](index=29&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section discusses new accounting standards and their potential impact on the Company's financials - Refer to Note 2, 'Summary of Significant Accounting Policies,' for a discussion of recently issued accounting pronouncements[125](index=125&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) This section describes contractual obligations not on the balance sheet that could affect financial condition - The Company has entered into off-balance sheet purchase agreements for compressor unit components, consistent with capital expenditure plans, which are not expected to materially affect liquidity or capital resources[126](index=126&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section confirms no material changes to market risks previously disclosed in the Company's 2024 Form 10-K - There have been no changes in the market risks disclosed in the Company's Form 10-K for the year ended December 31, 2024[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management's evaluation of disclosure controls and internal control over financial reporting, concluding effectiveness - Management concluded that the Company's internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework[130](index=130&type=chunk) - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[131](index=131&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not involved in material legal proceedings or aware of threatened litigation impacting its financials - The Company is not currently a party to any material legal proceedings and is not aware of any threatened material litigation[133](index=133&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Readers are referred to the Company's 2024 Form 10-K for a comprehensive discussion of risk factors - Readers are referred to Item 1A, Risk Factors, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, for a discussion of risks[134](index=134&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - There were no unregistered sales of equity securities or use of proceeds to report[135](index=135&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company has not defaulted on any senior securities during the reporting period - There were no defaults upon senior securities[136](index=136&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there are no mine safety disclosures required for the Company - There are no mine safety disclosures[137](index=137&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) A Rule 10b5-1 trading agreement for common stock sales was adopted by a Board member, effective August 2025 - On May 16, 2025, Stephen C. Taylor, a Board member, adopted a Rule 10b5-1 trading agreement for the sale of up to **100,000 shares** of common stock, effective August 15, 2025, and terminating September 30, 2026[138](index=138&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including key amendments and certifications - Key exhibits include the Fourth Amendment to the Amended and Restated Credit Agreement (April 18, 2025) and the Natural Gas Services Group, Inc. 2019 Equity Incentive Plan, as amended[141](index=141&type=chunk) [Signatures](index=33&type=section&id=Signatures) Signatures of the CEO and CFO certify the report on behalf of Natural Gas Services Group, Inc - The report is signed by Justin C. Jacobs, Chief Executive Officer and Director, and Ian M. Eckert, Chief Financial Officer, on August 11, 2025[143](index=143&type=chunk)

Announces 2025 Second Quarter Earnings Release and Conference Call Schedule Certain statements in this release regarding future cash dividends may be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Future dividends or dividends at any particular rate is subject to the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requi ...

Core Insights - The primary purpose of a business is to generate profits for reinvestment or shareholder rewards, with net profit margin being a key metric for measuring profitability [1][3] - A higher net profit margin indicates a company's efficiency in converting sales into actual profits and reflects operational management [2][4] Net Profit Margin Analysis - Net profit margin is calculated as Net Profit/Sales * 100, representing the amount retained after all expenses [3] - Companies like Natural Gas Services Group, Ardmore Shipping, Adtalem Global Education, and RGC Resources exhibit strong net profit margins, indicating solid profitability [2][9] Investment Criteria - A healthy net profit margin and solid earnings per share (EPS) growth are essential for a robust business model [7] - Screening parameters include a net margin of at least 0%, positive EPS growth, and a broker rating of 1, indicating strong bullish sentiment [8] Company Performance - Natural Gas Services (NGS) has a Zacks Rank of 1 and a VGM Score of A, with a revised earnings estimate of $1.40 per share for 2025, reflecting an 18.6% upward revision [12][11] - Ardmore Shipping (ASC) also holds a Zacks Rank of 1, with a revised earnings estimate of $1.36 per share, showing a 5.2% average surprise in earnings [13][14] - Adtalem Global Education (ATGE) has a Zacks Rank of 2 and a revised earnings estimate of $6.52 per share, with an 18.4% average surprise [15] - RGC Resources has a Zacks Rank of 2, with a revised earnings estimate of $1.25 per share and a 34.9% average surprise [16]

Group 1 - The article highlights the appeal of companies with straightforward and highly profitable business models, specifically mentioning Natural Gas Services (NYSE: NGS) as an example [1] - Natural Gas Services provides equipment and services that support oil and gas operations, indicating a focus on the energy sector [1] Group 2 - The author emphasizes the belief in the efficiency of financial markets, suggesting that most stocks reflect their true current value [1] - The best investment opportunities are identified as those in less-followed stocks or those that do not accurately represent existing market opportunities [1]

Mr. Taylor reflected, "It has been a great privilege to serve Natural Gas Services Group over the past 20 years. I am proud of the progress we have made—from a small, regional provider to a trusted leader in natural gas compression. That progress is a credit to the people of NGS, whose integrity, technical excellence, and commitment to service have always defined our success. I want to thank our customers, employees, partners, and shareholders for their support. With a strong executive team, a clear strateg ...

Core Insights - Palo Alto Networks (PANW) achieved a significant milestone in Q3 of fiscal 2025, with annual recurring revenues (ARR) for its next-generation security (NGS) solutions reaching $5.09 billion, marking a year-over-year growth of 34% [1][9] - The company reported a substantial increase in high-value customers, with 130 customers generating over $5 million in NGS ARR, a 41% increase year-over-year, and 44 customers exceeding $10 million, a growth of 63% [2] - AI-related ARR has surged to approximately $400 million, which is 2.5 times higher than the same quarter last year, driven by the success of the XSIAM platform [2] NGS Platform Performance - XSIAM, an AI-powered NGS platform, saw bookings approach $1 billion on a trailing 12-month basis, with around 270 customers and an average ARR per customer exceeding $1 million [3] - The ARR from XSIAM grew over 200% year-over-year in Q3, just 30 months after its general availability [3] Future Growth Projections - Management has set an ambitious target of $15 billion in ARR by fiscal 2030, with NGS ARR expected to contribute approximately 60-70% of the total targeted ARR for fiscal 2023 [4] Competitive Landscape - Competitors like CrowdStrike and SentinelOne are also experiencing growth, with CrowdStrike reporting $4.44 billion in ARR (22% year-over-year growth) and SentinelOne reaching $948 million (24% year-over-year growth) [5][6] Valuation and Earnings Estimates - PANW's shares have increased by 6.7% year-to-date, compared to the industry's growth of 19.4% [7] - The company trades at a forward price-to-sales ratio of 12.6, which is below the Zacks Security industry's ratio of 14.47 [11] - The Zacks Consensus Estimate for PANW's fiscal 2025 earnings indicates a year-over-year increase of approximately 15%, while fiscal 2026 estimates suggest an 11% increase [14]

Group 1: Stock Performance and Price Targets - Natural Gas Services (NGS) closed at $24.51, with a 27.3% gain over the past four weeks, and a mean price target of $36.25 suggests a 47.9% upside potential [1] - The mean estimate includes four short-term price targets with a standard deviation of $5.97, indicating variability; the lowest estimate of $32 suggests a 30.6% increase, while the highest target of $45 indicates an 83.6% surge [2] - A tight clustering of price targets, represented by a low standard deviation, indicates a high degree of agreement among analysts regarding the stock's price movement [9] Group 2: Analyst Sentiment and Earnings Estimates - Analysts show strong agreement in revising earnings estimates higher for NGS, which correlates with potential stock price upside [11] - The Zacks Consensus Estimate for the current year has increased by 18.6% over the past month, with no negative revisions [12] - NGS holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimates, indicating strong potential for near-term upside [13]

Market Overview - A recent ruling by the U.S. trade court declared President Trump's global tariffs illegal, contributing to a new wave of market uncertainty [1] - The Federal Reserve's current wait-and-see approach adds to the uncertainty regarding future interest rate directions [1] Investment Strategy - Creating a curated portfolio of low-beta stocks is recommended as a strategy to navigate market volatility [1] - Low-beta stocks are less volatile than the market, providing a safeguard against uncertainty [1] Stock Recommendations - Suggested stocks include Natural Gas Services Group Inc (NGS), Stride Inc. (LRN), AptarGroup Inc. (ATR), and Philip Morris International Inc. (PM) [2] Stock Characteristics - Beta measures the volatility of a stock relative to the market, with a beta of 1 indicating movement in line with the market [3][4] - Stocks with a beta between 0 and 0.6 are screened for lower volatility [5] Screening Criteria - Stocks must have a positive price change over the last four weeks [5] - Average 20-day trading volume should exceed 50,000 to ensure liquidity [6] - Stocks must be priced at $5 or higher [6] - Zacks Rank of 1 indicates strong buy potential, suggesting significant outperformance over the next one to three months [6] Company Insights - **Natural Gas Services (NGS)**: Increased demand for liquefied natural gas (LNG) exports is driving the need for compression equipment, benefiting NGS as more pipelines are built [7] - **AptarGroup (ATR)**: Positioned for growth due to trends in healthcare moving towards home settings and rising demand for drug delivery systems [8] - **Stride Inc. (LRN)**: Focuses on innovative educational solutions, benefiting from the growing demand for school choice and tutoring services [10] - **Philip Morris International (PM)**: Transitioning from traditional cigarettes to smoke-free products, with a focus on shareholder rewards and cost-cutting initiatives [11]