Industry Overview - The Zacks Oil and Gas - Mechanical and Equipment industry provides essential oilfield equipment, including production machinery, pumps, and drilling appliances, to exploration and production companies, which is closely tied to upstream energy expenditures [3] - The industry is currently facing challenges due to rising oil production that may exceed yearly demand growth, leading to a potential decline in prices and reduced demand for drilling and production equipment [1][4] Future Outlook - The U.S. Energy Information Administration (EIA) projects West Texas Intermediate Spot Average prices to be $61.81 per barrel in 2025 and $55.24 per barrel in 2026, significantly lower than the $76.60 per barrel price for 2024, which is expected to discourage exploration and production activities [4] - Exploration and production companies are becoming more conservative in capital spending, prioritizing capital returns over increased production spending, which is likely to further diminish demand for drilling and production equipment [5] Industry Performance - The Zacks Oil and Gas - Mechanical and Equipment industry has a Zacks Industry Rank of 206, placing it in the bottom 16% of over 250 Zacks industries, indicating gloomy near-term prospects [7][8] - Over the past year, the industry has declined by 3.9%, outperforming the broader Zacks Oil - Energy sector's decline of 4.6% but lagging behind the S&P 500's increase of 10.8% [9] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 5.66X, lower than the S&P 500's 16.39X but higher than the sector's 4.59X [11] - Historically, the industry has traded as high as 43.82X and as low as 1.11X over the past five years, with a median of 10.37X [11] Company Insights - Natural Gas Services Group, Inc. (NGS) is benefiting from increased demand for compression equipment due to higher exports of Liquefied Natural Gas (LNG) [14] - Solaris Energy Infrastructure, Inc. (SEI) has maintained stable activity levels despite lower oil prices, with a 25% increase in system activity in the first quarter [18] - Oil States International, Inc. (OIS) is experiencing growth from international customers, particularly in deep ocean extraction, with new orders exceeding deliveries by 1.5 times in the last quarter [20]

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Core Viewpoint - Natural Gas Services (NGS) shares have increased by 38% recently, with analysts suggesting a potential upside of 45.3% based on a mean price target of $36.25 [1] Price Targets and Analyst Estimates - The mean estimate consists of four short-term price targets with a standard deviation of $5.97, indicating variability among analysts [2] - The lowest price target of $32 suggests a 28.3% increase, while the highest target of $45 indicates an 80.4% potential surge [2] - A low standard deviation signifies a high degree of agreement among analysts regarding price movement direction [9] Earnings Estimates and Market Sentiment - Analysts are optimistic about NGS's earnings prospects, as indicated by a positive trend in earnings estimate revisions [4][11] - The Zacks Consensus Estimate for the current year has risen 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 [13]

Group 1: Wheaton Precious Metals Corp. (WPM) - Wheaton Precious Metals has a Zacks Rank 1 and its current year earnings estimate increased by 11.9% over the last 60 days [1] - The company's shares gained 18% over the last three months, outperforming the S&P 500, which declined by 1% [2] - Wheaton possesses a Momentum Score of A [2] Group 2: Royal Gold, Inc. (RGLD) - Royal Gold also holds a Zacks Rank 1, with a 9.8% increase in the current year earnings estimate over the last 60 days [2] - The shares of Royal Gold increased by 16.6% in the last three months, again outperforming the S&P 500's decline of 1% [3] - The company has a Momentum Score of A [3] Group 3: Natural Gas Services Group, Inc. (NGS) - Natural Gas Services Group has a Zacks Rank 1, with a 6.1% increase in the current year earnings estimate over the last 60 days [3] - The company's shares surged by 38% over the past month, significantly outperforming the S&P 500's advance of 15.5% [4] - Natural Gas Services possesses a Momentum Score of A [4]

Revenue Performance - Total revenue for Q1 2025 increased by 12% to $41.4 million compared to $36.9 million in Q1 2024, driven by higher rental revenues [10] - Rental revenue reached $38.9 million in Q1 2025, representing a 15% year-over-year increase and a 2% sequential increase [6] - Total revenue for Q1 2025 was $41,383,000, an increase of 12.0% from $36,907,000 in Q1 2024 [36] Profitability Metrics - Adjusted EBITDA for Q1 2025 was $19.3 million, a 14% increase year-over-year and a 7% increase sequentially [15] - Net income for Q1 2025 was $4.9 million, or $0.38 per diluted share, compared to $5.1 million, or $0.41 per diluted share, in Q1 2024 [13] - Operating income for Q1 2025 was $9,507,000, slightly up from $9,319,000 in Q1 2024, reflecting a 2.0% increase [36] - Net income for Q1 2025 decreased to $4,854,000, down 4.8% from $5,098,000 in Q1 2024 [36] - Earnings per share (diluted) for Q1 2025 was $0.38, down from $0.41 in Q1 2024 [36] Cash Flow and Expenses - Cash flows from operating activities for Q1 2025 were $21.3 million, significantly higher than $5.6 million in the same period of 2024 [14] - Cash provided by operating activities significantly increased to $21,267,000 in Q1 2025, compared to $5,609,000 in Q1 2024 [38] - Total cost of revenues for Q1 2025 was $17,127,000, up 8.4% from $15,794,000 in Q1 2024 [36] - Selling, general and administrative expenses rose to $5,378,000 in Q1 2025, an increase of 14.4% from $4,702,000 in Q1 2024 [36] - The company incurred interest expense of $3,170,000 in Q1 2025, compared to $2,935,000 in Q1 2024, reflecting an increase of 8.0% [36] Guidance and Future Outlook - The company raised its full-year 2025 Adjusted EBITDA guidance to a range of $74 million to $79 million, reflecting strong business momentum [4] - The company anticipates growth capital expenditures of $95 million to $120 million for 2025, primarily for new units under contract [5] - The company is focused on capitalizing on opportunities in the compression industry, with forward-looking statements regarding EBITDA growth and capital expenditures [29] Asset and Liability Management - Total assets increased to $501,691,000 as of March 31, 2025, up from $492,528,000 at the end of 2024 [34] - Current liabilities rose to $22,445,000 as of March 31, 2025, compared to $17,358,000 at the end of 2024, indicating increased short-term obligations [34] - The company reported a retained earnings increase to $156,362,000 as of March 31, 2025, up from $151,508,000 at the end of 2024 [34] Strategic Focus - The company is focused on fleet optimization, asset utilization, and potential mergers and acquisitions to drive growth [9] - The rented horsepower fleet is expected to increase by approximately 90,000 horsepower, an 18% increase compared to year-end 2024 [5] Risks and Challenges - The company acknowledges risks including oil and gas price volatility and competition, which could impact future performance [30] Conference Call Announcement - The company plans to host a conference call on May 13, 2025, to discuss fourth-quarter and year-end financial results, indicating ongoing transparency with investors [26]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $41.4 million, a 12% increase from $36.9 million in Q1 2024 [18] - Rental revenue reached a record $38.9 million, up 15% year-over-year and 2% sequentially [6][18] - Adjusted EBITDA for the quarter was $19.3 million, a 14% increase compared to Q1 2024 and 7% sequentially [20] - Net income for the quarter was $4.9 million, or $0.38 per diluted share, compared to $5.1 million or $0.41 per diluted share in the prior year [19] - Adjusted gross margin percentage was 58.6%, reflecting a 140 basis point improvement over Q1 2024 [19] Business Line Data and Key Metrics Changes - Rented adjusted gross margin reached 61.9%, marking one of the highest levels in the past decade [19] - Rented horsepower totaled approximately 493,000, representing an 11% year-over-year increase [20] - Utilization rate was 81.7%, essentially unchanged from a year ago [20] Market Data and Key Metrics Changes - Natural gas prices are currently hovering in the mid-threes after peaking above four [9] - Market demand for compression remains strong, with ongoing discussions for growth in 2026 [5][8] Company Strategy and Development Direction - The company is focused on three growth drivers: asset utilization, fleet expansion, and mergers & acquisitions [10][15] - Significant progress has been made in monetizing non-cash assets, including an $11 million income tax receivable [11] - The company is maintaining a strong balance sheet and has expanded its revolving credit facility to support growth initiatives [16][21] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the ability to perform despite market volatility and has not seen material impacts from tariffs [8][26] - The company is cautiously optimistic about future growth, with a focus on maintaining strong customer relationships and technological innovation [13][27] Other Important Information - The company has a strong focus on customer diversification, with the largest customer accounting for 46% of revenue, down from 54% [14] - Capital expenditures for the quarter totaled $19.3 million, including $16.7 million for growth capital [22] Q&A Session Summary Question: Current demand environment and volatility - Management indicated that there has not been a significant change in the demand environment, with 2025 contracts locked in and ongoing discussions for 2026 growth [33] Question: Gross margins and unusual factors - Management noted that the increase in gross margins is consistent and attributed to a mix of high horsepower units, with no unusual factors impacting the quarter [35][36] Question: Future margin sustainability - Management expressed that while there could be temporary fluctuations in rental adjusted gross margins, they do not foresee significant impacts [42][44] Question: Monetization plans and use of proceeds - Proceeds from monetization efforts will primarily be used to pay down debt and fund organic growth initiatives [46] Question: Impact of crude oil volatility on smaller compression providers - Management stated that while crude oil prices primarily affect large horsepower, there are modest positive trends for small horsepower driven by natural gas prices [54] Question: Lead times for engines and frames - Lead times remain unchanged, with engines taking six to nine months and compressor frames taking nine to twelve months [58] Question: Potential sale proceeds from Midland assets - Management clarified that the potential sale proceeds from Midland assets are part of a broader strategy to improve capital efficiency [63][65] Question: Percentage of horsepower rented on a month-to-month basis - Management indicated that the percentage of horsepower rented on a month-to-month basis is expected to continue trending down as more large horsepower units are deployed [66]

Financial Data and Key Metrics Changes - Rental revenue reached a quarterly record of $38.9 million, a 15% increase year-over-year and a 2% sequential increase [6][20] - Adjusted EBITDA for the quarter was $19.3 million, marking a 14% increase compared to the first quarter of the previous year and a 7% sequential increase [7][22] - Net income for the quarter was $4.9 million, or $0.38 per diluted share, compared to $5.1 million, or $0.41 per diluted share in the prior year [21] - Total revenue for Q1 2025 was $41.4 million, a 12% increase from $36.9 million in Q1 2024 [20] Business Line Data and Key Metrics Changes - Adjusted rental gross margin was 61.9%, an increase of 80 basis points year-over-year and 150 basis points sequentially [21] - Rented adjusted gross margin reached 61.9%, marking one of the highest levels achieved in the past decade [21] Market Data and Key Metrics Changes - Natural gas prices are currently hovering in the mid-threes after peaking above four, with forecasts showing potential upside due to LNG export growth and new pipeline projects [10] - The company has observed modest CapEx reductions from customers, but these have not materially impacted its business [9] Company Strategy and Development Direction - The company is focusing on three growth and value drivers: asset utilization, fleet expansion, and mergers and acquisitions [11] - There is a strong emphasis on customer diversification, with the largest customer accounting for 46% of revenue, down from 54% in the previous fiscal year [15] - The company is maintaining its growth CapEx guidance of $95 million to $120 million, heavily weighted towards the second half of the year [29] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the ability to perform despite market volatility and has not seen significant changes in the demand environment [35] - The company is cautiously optimistic about the future, with ongoing discussions about growth in 2026 and a strong pipeline of contracted units [5][9] - Management is closely monitoring macroeconomic conditions and their potential impact on the business [28] Other Important Information - The company ended the quarter with $168 million outstanding on its revolving credit facility, with a leverage ratio of 2.18 times [23] - Significant progress has been made in monetizing an $11 million income tax receivable, which is expected to be collected in the near future [12] Q&A Session Summary Question: Current demand environment and volatility - Management indicated that there has not been a significant change in the demand environment, with 2025 contracts essentially locked in and ongoing discussions for 2026 growth [35] Question: Gross margins and unusual factors - Management explained that the increase in gross margins is consistent with the mix of high horsepower units and that some natural volatility is expected [38][40] Question: Plans for monetization of assets - Proceeds from monetization efforts will primarily be used to pay down debt and fund organic growth initiatives [47] Question: Impact of crude oil volatility on smaller compression providers - Management noted that while crude oil prices primarily affect large horsepower, there are modest positive trends for small horsepower driven by natural gas prices [54] Question: Lead times for engines and frames - Lead times remain unchanged, with engines taking approximately six to nine months and compressor frames taking up to twelve months [58]

Core Insights - Natural Gas Services (NGS) reported quarterly earnings of $0.38 per share, exceeding the Zacks Consensus Estimate of $0.27 per share, but down from $0.41 per share a year ago [1] - The company achieved a 40.74% earnings surprise and has surpassed consensus EPS estimates in all four of the last quarters [2] - NGS posted revenues of $41.38 million for the quarter, surpassing the Zacks Consensus Estimate by 1.53% and up from $36.91 million year-over-year [3] Financial Performance - The earnings surprise of 40.74% indicates strong performance relative to expectations [2] - Revenue growth of 12.6% year-over-year from $36.91 million to $41.38 million demonstrates positive sales momentum [3] - The company has consistently exceeded revenue estimates, achieving this in three of the last four quarters [3] Market Position and Outlook - NGS shares have declined approximately 23.7% year-to-date, contrasting with the S&P 500's decline of 3.8% [4] - The current Zacks Rank for NGS is 4 (Sell), indicating expectations of underperformance in the near future [7] - The consensus EPS estimate for the upcoming quarter is $0.28, with projected revenues of $41.51 million, and for the current fiscal year, the EPS estimate is $1.18 on revenues of $171.3 million [8] Industry Context - The Oil and Gas - Mechanical and Equipment industry, to which NGS belongs, is currently ranked in the bottom 8% of over 250 Zacks industries, suggesting a challenging environment [9] - The performance of NGS may be influenced by broader industry trends, as top-ranked industries tend to outperform lower-ranked ones significantly [9]

Core Viewpoint - Natural Gas Services Group, Inc. ("NGS") reported strong financial results for Q1 2025, raising its full-year Adjusted EBITDA guidance to a range of $74 million to $79 million due to robust business performance and increasing demand [1][4]. Financial Performance - Total revenue for Q1 2025 increased by 12% to $41.4 million compared to $36.9 million in Q1 2024, driven primarily by a 15% rise in rental revenue [10]. - Rental revenue reached $38.9 million in Q1 2025, up from $33.7 million in the same period last year [10]. - Adjusted EBITDA for Q1 2025 was $19.3 million, reflecting a 14% year-over-year increase and a 7% sequential increase [15][8]. - Net income for Q1 2025 was $4.9 million, or $0.38 per diluted share, compared to $5.1 million, or $0.41 per diluted share, in Q1 2024 [13]. Operational Highlights - The company had 492,679 rented horsepower as of March 31, 2025, an 11% increase from 444,220 horsepower a year earlier [10]. - The leverage ratio as of March 31, 2025, was 2.18x, indicating a stable financial position [16]. - The company anticipates growth capital expenditures for 2025 to be between $95 million and $120 million, primarily for new units [5]. Management Outlook - The CEO expressed confidence in the company's ability to navigate market uncertainties and maintain growth, emphasizing disciplined capital allocation and operational excellence [3]. - The company expects its rented horsepower fleet to increase by approximately 90,000 horsepower, representing an 18% increase compared to year-end 2024 [5][6]. Guidance and Future Expectations - NGS has increased its high-end Adjusted EBITDA guidance for 2025 to $79 million, reflecting strong Q1 performance and positive business outlook [4]. - The company reaffirms its target return on invested capital of at least 20% [5].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number 1-31398 NATURAL GAS SERVICES GROUP, INC. (Exact name of registrant as specified in its charter) Colorado 75-2811855 (State or oth ...