NGS - Earnings call transcript Q2 2019 | Natural Gas Services Group, Inc.

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Operator

Good morning ladies and gentlemen, and welcome to the Natural Gas Services Group Second Quarter Earnings Call. [Operator Instructions] Your call leaders for today's call are Alicia Dada, IR Coordinator and Steve Taylor, Chairman, President and CEO.

I will now turn the call over to Miss. Alicia Dada.

You may begin.

Alicia Dada

good and Ross you morning, listeners. Thank me statement prior allow a call. moment forward-looking following the read to to Please commencing earnings our Except Litigation forward-looking contained morning's information provisions as to for statements the Harbor of the this Private XXXX. in in Securities the herein, Safe conference Act are and the are outlined made Reform pursuant call historical

differ or the other known Gas loss of Forward-looking capital otherwise, safety, statements future which market the materially cause new and Natural Services and Natural of Services share uncertainties, health risks by other significant through actual risk forecasted Group include, periods as technologies require environmental you things, make from regulations, to and competition may Those could results. expenditures. competing which unknown know, governmental or introduction companies in Gas Group's involve results among may to

this statements such events the call, of this included forward-looking as obligation or made publicly The Gas no of in reflect call subsequent date statements undertakes to to Natural conference and circumstances. are Services forward-looking update

under recent risk the Form release could annual XX-K to that from Securities differ Exchange factors materially the not forward-looking and reflected in on but in results Commission. factors the described in our to the factors cause statements also limited and actual and include, Important the report expectations cash are press company's filed with

President, will Chairman stated, that Services I the who turn of and Steve? CEO call Stephen Natural is all Having Mr. Group. to Taylor, Gas

Steve Taylor

good second XXXX quarter and Thank NGSG’s and earnings Ross, morning. And you, to welcome Alicia review.

when our segment. performance. the year, with second Rental results, strong same period by our financial last and are compared performance reported we the XXXX pleased we morning, on horsepower quarter to This revenues large grew XX% led operational and

margin, comparative percentage compressor quarter Gross the have in quarter all EBITDA all being since this margin with a gross periods. of on the XXXX. income dollars pace have net and improved first Our highest good the the sales continued

for $XX the our operations or from at of flow revenue, $XX.X sheet million million. XX% quarter Cash strong was balance remained and cash

a continue these financial parameters, comments. I million related through of of The further total in and drop sales As make discuss quarter by increase market X% compared the will [ph] the revenues, compared we for call same a $XX.X to of the by XXXX, revenues increase second a as revenue as operating additional primarily NGS well XXXX. driven in results. increase in to quarter was reported XX% year-over-year offset rental detail total

in XXXX.Sequentially, sales. compressor perspective, to when the rental same compared increased mainly XXXX XXXX. quarter to over period a Rental when by quarter the increased the compared revenues From of first we XXXX, the second XXX units running an increase X% of first due quarter more to of of had total revenue XX% in

six XXXX same the Comparing our in XXXX, $X months revenues period the period increased or approximately XX%. to year-to-date million

a June comparable margin period three Adjusted XXXX, does as for percentage June months for was the months or XX, of to XX% the ended XX%, million gross adjusted XX, gross $X million XX% XX, Total for include from not $X three increased from period XXXX. the XXXX, which an of for margin, same revenue the increase ended ended XXXX. depreciation, June

margin of adjusted in was the from XXXX almost $X.X revenue quarter. of XX% X% a gross for compared second prior quarter in XX% prior to quarter. the margin quarter as $X to or this Sequentially, gross million, increased million percentage the from Adjusted

quarter, administrative six June for the $XXX,XXX and the Year-to-date, $XX.X previous million to to to million expenses Selling, margin ended compared XXXX, the adjusted same the to $X.X up quarter. in months compared $XX.X XX, compared XXXX. for X% $XXX,XXX and gross year-over-year million for period increased up were general

to Compared XX% than doubled to XX% all more quarter. quarter of periods. $XXX,XXX in income income XXXX operating operating and to at run to this first in second continues XXXX, $XXX,XXX total for the of $XXX,XXX SG&A quarter the of revenue

For when XXXX. the June income to six months six-month ended XX% compared $XXX,XXX XX, in period same the up XXXX, was operating $XXX,XXX, or

Net all has comparable in increased periods. income

months net June three XX, ended XXXX. XXXX, ended the period the $XXX,XXX income For for from $XXX,XXX, June of reported we XX, same up

tax Sequentially, primarily share net comparative increase $XXX,XXX. up $X.XX quarter. caused a which were year-over-year by credits income by This earnings negatively our Income dramatically period, of was quarter. increased taxes lack in the affected this R&D this per

months twice six For first months $XXX,XXX, XX, income almost June XXXX, of the XXXX. we reported of reported $XXX,XXX ended the six the for net we

quarter diluted XXXX. XXXX, $X.XX, compared second per to the posted the share in of earnings company For $X.XX

per earnings $X.XX. diluted share increased Sequentially,

For ended $X.XX, earnings compared months same to six-month -- share per XX, period the XXXX. of we for the for reported the diluted June in $X.XX same six period XXXX,

of taxes, XXXX. amortization, $X.X three was a XXXX, ended interest, before depreciation Earnings EBITDA, period million, same for and the increase the XX, or June from $X.X for months million XX%

June over for ended margins to in XXXX, periods. comparative was million, ended revenue six million ranged robust, period EBITDA the $XX.X same remain increased have XX, and XX% all to the between EBITDA of X% XXXX. XX% for sequentially. months EBITDA compared continue in $XX.X to

sales. of revenues, sales which revenue increased compressor an to or are our million XX%, business. most and activities, Total can due the compressors, somewhat volatile include be aftermarket $X.X Sequentially, and flares in unpredictable increase largely segment sales

primarily a of XX. the was June down NGS for six-month periods decline X% revenues $XXX,XXX because sales by Year-to-date year-over-year or X% On revenue ended in sales basis, increased the flares.

the margin ago. the was compared sales quarter segments in Second XXXX. of the highest XX% since This and margin first XXXX for quarter the XX% total first sales to a quarter of percentage XXXX of gross gross is revenue, XX% year

XX% For to six we XX% of for XXXX, the the six of the compared reported months months margin period, year-to-date gross of for comparative XXXX.

from of quarters. essentially this compressor-only of quarter sales XX%. increase million sales Second-quarter an $X.X to for $X.X comparative year-over-year the XXXX flat XXXX Compressor-only million million revenues first increased the quarter, in almost $X.X were at

from normalized for freight was XX% months during XX% amount margin sales three breakeven XXXX. to quarter's were the compared XX% year to for June sales expenses, quarter June a last and call. XXXX, explained XX, high last more $XXX,XXX a for the up the period were million ago, XX, compressor-only which to months ended same Year-to-date Compressor-only situation to a ended $X.X or due increased six

of we Our XXXX, also sales backlog billed include sale backlog to that does sales only $X.X the do quarter June was packages includes of building. I and compressor want year. backlog approximately in as being first for gas are not rental units of XX, million our the million, $XX contracted to tremendous mention compared this approximately

revenue. rental to Moving

quarters. $XX.X pleased XXXX and increased quarter in rental million the of periods year-over-year revenue to to We the second past have rental XX%. and continue year-to-date. be million with for with rental for our increased XXXX, revenues XXXX $XX increased Rental results, comparative Comparing four quarter-over-quarter revenue all

XXXX, Sequentially, June revenues we saw a XXXX, increased months six increase. XX%. XX, to X% rental ended And comparing

or direction a one. rental we correct rates, XXXX, XX% our the was, an June quarter and, was classified XX, in strategic average-per-horsepower as a chose of our again, fleet represents increased then basis. basis, of first As on in fact, demonstrates on XXXX, down X% makeup were X% of the past horsepower the years over large. This shift Compared per-unit couple the utilized our average significant to

due to associated lower reflect revenues in cost per-horsepower large the A set relatively expected and the being rates slight economies horsepower. per magnitude is horsepower of decrease to of

unit we X.X% units. rate an quarters entrance some year-over-year average horsepower larger our but on medium to horsepower increased rates due of into on Rental the also been to by per increases able in the mainly class, have capitalize

XX%, is labor quarter associated to were cost margins quarter this a grown, first impact greater the XXXX last overtime and margins large installing XX%. volume attributable units gross our year's contracted of and fabrication The quarter higher rental of margin gross horsepower these Rental decrease and units. and primarily commissioning expenses with XX% from has of

of Fleet compressors, XXXX size second units X,XXX a of X,XXX over the the little addition horsepower June totaled during or eight quarter. at end an

Over X% the units This XX% XX,XXX that those with months, classified of XX in an XX fleet horsepower, have increase horsepower in we totaled total large represents of category. fleet horsepower. past added new

last to from horsepower, climbed XX% by quarter. measured this as utilization XX% Our quarter

Our remains somewhat our Activity horsepower year. the large to robust. utilization was but our mid-range beginning fleet volatile unit continues since the the activity segment, of XX%. the in horsepower of based rental positive, be portion In

with In year-over-year producing spite July. at running this utilization, to more in had more of a more in sequentially. units essentially We're field year-to-date but horsepower revenue horsepower segment respect this, XX% in XX% we breakeven the X% and increase we have good seen and running

quarter's last range that our to expense for rental in call capital $XX.X I in the compression to this $XX million. be million anticipate fleet we of noted year

million equipment requirements to between our million increasing XXXX. capital are for and We estimated $XX $XX

with the horsepower we being out is commitments of increase Approximately of. we received rental addition have for sold equipment, to attributable equipment XX% additional specialized this larger the that are of balance

XXXX, Looking balance at our XX, debt total bank at the and June sheet, balance our of $XXX,XXX million. cash remains $XX is strong as

This rental represents office, horsepower horsepower positive and majority majority XX% quarter operating is high of compression $XX had new million equipment, $XX.X cash being new the net high from the since quarterly about activities in the the of flow amount vast XXXX, of end This this with in the invested our down equipment. our our million. revenue. corporate cash being of We

industry there's it's are in a sales don't anyone of and to service closing, in our a our businesses. progress rental, right now. pleased think In with the that I volatility lot we secret

Commodity activity and and of levels prices there and are always down degree is up uncertainty. a

forward company I opportunities positioned that advantage the of themselves. However, may move our and best present one to any take is think potentially

and balance best large and year horsepower remain good a among the fabrication our liquidity We our of We ahead peers. of balance still for have of statement, of the the units. the rental view overall positively. us contracted And backlog sheet income

our service possibilities, be in lot broad in options continue and do sheet of array a of explored We've ways. kicked and tires, a so. presented the of complementary at and look deploy We to potentially we'll and a product to to our expand number cash to continue balance with menu

uncertainty discipline opportunities. in vigilant in even our However, important to conservative in more commodity in cash our deploying remain makes of and continued volatility the and activity it new oilfield assessment prices in

eager are without not opportunities opportunities execute lured a ideas said, be from to however, into on reasonable we will for are That company. We growth. or future and forecast offer not our those eager

continue will protect time, we served during Our us conservative these of sheet approach has toward over balance cash periods our to well just and uncertainty. managing

we with businesses. are of prepared phone my lines conclusion, end activity in the please the open the so Ross, of remarks, pleased that's in continued all our questions. progress In for

Operator

[Operator first Capital. Lake go from comes question Street Brown ahead, Please Instructions] from Rob Our Rob.

Rob Brown

Steve HI,

Steve Taylor

Hi, Rob.

Rob Brown

segment? that uptick. the in in large You backlog in horsepower, horsepower your uptick talked of guess CapEx and market demand and terms Maybe characterize in you're driving just, about that's the business you seeing large the I an what could

Steve Taylor

Well, is is, what through now. shops volume going its right it increased the

that come we've We've increase some essentially So somewhat. rental had some medium additional horsepower stuff. seen volume orders and large in, high-pressure

requirement So anticipated that's what quarter. driven last had we even CapEx up that over

pretty much backlog So, the are these it next We business have as interim. just year, continues that QX in additional that the usual that and along till stretches come out some got orders in, large on XXXX, of still horsepower.

Rob Brown

that Okay, setting side, in future? gross place just activity and great. it and on margin get you I the And gross additional in depressed think color any rental margin need in of the will talked improvement on gross recover? How Or the the the lower can margin do you that in interim the recovers units margin. potential? put see about the maybe to some Or then

Steve Taylor

and potential, mean, is the do equipment. got pretty some pretty on to different working this try I set, big trying quick. And things improvement easy the methods, we're remains, of to medium different there's on But We're fact that. small you've overtime. Well, horsepower our certainly, and

horsepower take running, may day, pounds to equipment a it. In XXX,XXX four and three under to XXX have you do. is set it to huge. trucks equipment or creates pretty easy move It it can weighs This set and else everything and

the a it get out troubleshoot, So it light -- et you're mean, it's set, a cetera. cetera., commissioned, get up, into there, pretty this stuff get time not it long et start to of period switch. I

in once And that wanting a cash So we've the to part takes you running the too. of is, it obviously customer start to because got more get say, just I time. XX equipment operator continue they're hours mean, and flow stop. can't well, to deadline, and fruition, you stuff up, on you got

now we right customer of these it's how I better get differently. things with things one So on evil we it's I -- the Like just on are to can do guess, those working say, necessarily mitigate bigger of some that, too managed, a horsepower. working that

in a component equipment, we've that We some more have going orders And out, of right? problem, don't have saw that's points and to up going get volume of had more you a margin setting so this this once as do have are need But those there couple we long bad interim. think I the no And But for all higher because depression we're not climb stuff. you depression mean a you that as time. a here once more this -- got people will then upfront naturally then there, because -- out labor. stuff we period, diminished in get back say I we

gets -- expenses I initial its and that say then don't just depressed the and improve margin, So, to it's set set. for I expect want a it as will equipment to margin

keep to that -- frankly, contracts, much to we kind too setting equipment. and want we it's don't want Although, of improve because

Rob Brown

And uptick rate on to the as is Is still each Or an that is now market great. of that of happening I horsepower, improving said medium increase early think looks basis? to quarter in on you it more utilization an tell? Okay. well. kind Oka, too

Steve Taylor

slowed on classes, get and it back. large more in we one, equipment XXXX number And the but fair take somewhat. this couple medium Well, in The the this small. the and first of obviously, declined business amount. getting same it's quarters, showed be comes a you're then setting And than an rate rates going kind growth termination think set of our basis. in first about we real from, movement of down couple improving and of year good quarters all some to

of put the QX based of XXXX, on properties so comes shows the think the and that stayed part down flat. couple still utilization And volatility of this some of out margin on then there's a hopefully, a And that. amount little some bit of year things. a a changing movement and And kind is I one, obviously, it there, obviously, little July activity chill fair coming hands. into Number

always -- operators new some and out efficiencies you always on look economy. That drop for in little stuff there's that because a net of going

So we're seeing both things. those

it's dropped continues. primarily hoping so had good, looks in activity the somewhat. now think I July we're field pretty just that But the

out big that. units guarantee going number able stuff it, like but the but set, horsepower Now even been and I'm we've to overall, with overall, if to not some medium of of the small, horsepower, revenues, going and increase

first of the we've that So slowdown in spite of still the some of year forward of and out, some medium on we're the seen horsepower getting in moving part positive it. on

Rob Brown

I'll you. over. it Thank great. turn Okay,

Steve Taylor

Thanks, Rob.

Operator

Partners. Our next Longport question Please comes Dearnley go ahead. from Richard from

Richard Dearnley

Good morning.

Steve Taylor

Hi, Dick.

Richard Dearnley

given this talking Given regards How's that your green flare customers to worried And your and what so -- the gas industry and other -- saying the and us? in are at Hi. are about problem this, in coming movement? about? flare the everything? -- the what about the issue or Is your folks the a

Steve Taylor

consider it I the don't yes. I bias Well, assume -- problem -- a toward don't presume industry. here a I energy I really.

City, from probably something unfortunately, don't point but necessary problem produce at you're the change my York the and outlets wells New drilling got the gas times to of, yes, and that it's to for tune, a have when oil. with Now it's gas we do I'd

So a on. and result that's phenomena just natural going

of it Now but And and sensationalized. a is lot talk flare there's that. had forgive press, about like lot some been -- obviously, here stuff of gone me, a all just there's

Rob Brown

course. Yes, of

Steve Taylor

typically They're can. those But They have the operating on and minimal operators long. flare, of they do as they possible very as well to do basis as aware an it. don't are efficiently last it flares as

certainly, flaring, everybody's been mind the about everything, Now if bigger has flaring lately. on you're typically you here not but in even put flares

you're like, it's not just -- thing. sort just operators I need a mean, it, it's the much, guess, I seeing damn yes, flare I So of

down we're Nobody -- things wants actually yes, in are maintenance to a but some waste the seeing seeing picking activity bit. some that. like any resource, up flare We're sales flare and

up and we until a I as will in pipelines, year, think, on coming. So still go for some these toward, and are some some through of us, I the activity pick the think bit are

phenomena it's more right of I just about now. pumping oil think natural the So

Rob Brown

Right.

Thank Okay. you.

Steve Taylor

Thanks Dick.

Operator

Our question go Mike Seaport Urban comes from next Global. Mike. ahead, Please from

Mike Urban

wanted I that on Again, a increase want couple large to around small it's of to morning. follow and here. specifically horsepower you month But much maybe too improvements. given seen Good mid that much I'm don't up the that's that a is there. guessing in on horsepower saw really well hasn't -- in just that Thanks. questions, sold into July previous out primarily range read the given been and pretty it deployed stuff you're

horsepower the So that been mid range? in primarily

Steve Taylor

Yes. is. Yes, it

Mike Urban

just margin rentals. kind then, the on for following And of Okay. up commentary

you As there this there. that expense a larger that range horsepower is closely? out level? kind that some talked out with you kind normalized improve for about Or of in of about mean, just a some curve, more bit working of I should roll can said, customer, to you think the at little you units it, on terms on learning continue of better as based getting we it the of things

Steve Taylor

Yes.

this in three equipment commissioning, installations, -- a -- get Different times for will the ways out all better a a going different. one when to setting this will to ways, equipment from running, improve you you think versus it's big it's process, just reasons it little maybe on on but some point some row, said. those handle It's once happen, out working things of some that. a like spacing different come it are we of I have of and of -- the little just three

from think we it's it's want and, on. imply going because things to to lot different of backup, don't XX% that be a here to So I

probably we're there, to number a of yes, the I in be I would want mid-XXs -- some going say, setting equipment, of built being see I the course, there's the this got do of specific coming magnitude next lot year. half to of not that's this going we're out rest don't but and improvement. to while I'm out. We've put equipment we'll think and present year. the off will a tail of first course, backlog for of And

see you So together customer more how learn we us can I going flow And then I at we the to to of think coming little cash it. out this lot remember, about -- do these as ways and this improvement some started we on work hasn't back anyway with efficient yet. get and have a forward as think we'll a

very suffering back some of just We're expenses this now, with coming cash little on stuff.

So and once improvement. we to start starts cash flow see But we'll to got equipment just we're of definitely start get the some we into majority XXXX in. rentals this in, be to getting set, roll uplift and come a natural going to yes, more because for

As margin the I range. mid going rest them of through that tag year, this would XX%

we'll year, think back I high the XXs. next Now get into up normal in XXs, our low

Mike Urban

Okay.

changed So like at large that of power all generally equal, should it else I kind really carry nothing's percentage, look sounds there, front. that a -- units, you mix? if the large on higher-margin horsepower mean,

Steve Taylor

will. it generally Yes, Yes.

Now see We'll it. basis. we won't an see it on individual

You a fleet. one, units get number it the yes, won't more gets out running. from all a basis until, we're for this and And into -- stuff frankly, see bit company we

about of -- horse, XX% we've is Now now large. active horsepower horsepower the got is large

Yes. rentals but are started. when see horsepower mid-XXXX, of this margins. is we uplift, some should contribution to out, anticipate XXXX, So We the before part the overall, certainly we'll first all see start about from and some large equipment

Mike Urban

that your what is out. and you seeing horsepower, for given hesitancy large effectively still some what units It Or Okay. in orders it's CapEx, additional some sold demand like we're the there rental there there, the for that on -- there in side. on And were the increase any are the you in for there the just to spec then you of there, given said coming going kind case? Is build just sounded you're last market the me customers? one

Steve Taylor

Yes.

was the -- that I increase of stuff. quarters contracted Some about three like of mentioned,

is is we're spec, About building larger and start -- right horsepower. making down and quarter so So of we it'll that do spec it go a it, money.

say horsepower but because I'm right XXX what going sizes of Now classify larger those. exactly a not out sold to and higher, we're as -- we and

we're think committing good we the capital that's a the larger that, on and market for spec to still So and about not overly horsepower building that. concerned units

going of and We up units Yes, couple right the watch think over we range. now, horsepower build to reacts. market some by will, but more in it likely, will see pretty the continue how the spec next that closely now we'll obviously, quarters. quarter we to and But quarter XXXX larger shapes take we're into

Mike Urban

Okay.

Thank good. Sounds all you. That's for me.

Steve Taylor

Mike. Thanks,

Operator

[Operator Instructions] at no there further And Steve, this are time, questions.

Steve Taylor

and with you. joining appreciate us call, to forward visit Well, quarter. everybody Okay. well, I for again I look Thank next the you

Operator

attending. This concludes Thank today's conference call. for you

Natural Gas Services (NGS) 10 Aug 192019 Q2 Earnings call transcript