Natural Gas Services Group, Inc. Q3 FY2025 earnings call

• NGS delivered record Q3 results, extending momentum and valuing customers through high unit run time and service. • Thanks the entire team, especially field service technicians. • Fleet optimization with continued improvement in rental revenue per horsepower, integrating data for better decisions. • Real estate monetization efforts to convert nonproductive assets to productive horsepower. • Confident in delivering improved performance despite market volatility, tied to growing compression needs in oil production, electricity demand, LNG infrastructure, and AI/data centers.

In the third quarter, NGS delivered a record quarter. Total rental revenue grew 11.1% year-over-year to $41.5 million, with a 4.9% sequential increase. Rental adjusted gross margin was $25.5 million, up $2.6 million year-over-year and $1.5 million sequentially, with a percentage of 61.5%. Adjusted EBITDA for the quarter was $20.8 million, up 15% year-over-year and 6% sequentially. Rented horsepower ended the quarter at approximately 526,000, an 11% year-over-year increase and 5% sequential increase. Fleet utilization reached a record 84.1%, up 204 basis points year-over-year and 45 basis points sequentially.

• Raised full year 2025 adjusted EBITDA guidance to $78 million to $81 million from prior $76 million to $80 million. • 2025 growth CapEx expected to be $95 million to $110 million, with modest tightening of range due to improved visibility. • Preliminary expectation for 2026 growth CapEx is $50 million to $70 million. • 2025 maintenance CapEx remains $11 million to $14 million, ROIC target unchanged.

• Risks described in filings, including materialization of risks or incorrect assumptions could materially affect results. • Discussion of non-GAAP financial measures with reference to GAAP reconciliations needed.

Q: Selman Akyol asked about the 2026 outlook, customer hesitancy, and supply chain lead times for new units.

A: Justin Jacobs said customers aren't hesitant, saw strong interest in contracts, and while new unit fabrication has lead times, they expect to fill some in the second half of 2026.

Q: Tate Sullivan inquired about end market uses of larger natural gas compressors and reconciliation with data center demand.

A: Justin Jacobs stated majority demand is gas lift in the Permian, but data center compression creates incremental opportunity with same basic equipment.

Q: Robert Brown asked about the 2026 CapEx outlook and what moves the number.

A: Justin Jacobs said it's early, with opportunities in the second half of 2026, and better clarity expected in future calls.

Q: Nate Pendleton asked about the dividend increase and balancing return of capital with growth.

A: Justin Jacobs said it's a balance, they signaled a growing dividend while continuing to grow the business at a higher rate than competitors.

Q: Nate Pendleton also asked about NGS' inroads with Devon.

A: Justin Jacobs said it's a long-time relationship, expanded due to NGS' technology, service, and data capabilities.

Q: James Rollyson asked about new customer opportunities and CapEx outlook.

A: Justin Jacobs said it's an ongoing effort, engaging with customers through demonstrations, and 2026 CapEx is expected to be in line with 2024, with growth expected in 2027.