NGS - Earnings call transcript Q2 2021 | 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 2021 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions].

Your call leader for today's call are Alicia Dada, IR Coordinator; Steve Taylor, Chairman, President and CEO. I'll now turn the call over to Miss Dada.

begin. may You

Alicia Dada

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

Gas to Steve. Factors who also factors reflect to in materially Group. reflected that Securities such now companies; update unknown this obligation President, to Risk health this statements events will date you capital Stephen described significant in risks press conference Annual Natural in forward-looking Those stated, as undertakes statements know, from on to the all over by under of governmental and things, require call may new of as share could other forward-looking and which are may actual technologies the and factors included known not or in and the Natural regulations, the The the CEO Gas competing Services forecasted no among is uncertainties, circumstances. of caption statements cause to, to the introduction market and Having Forward-looking safety, Natural with or our from are Important through company's made Gas Taylor, this call could Natural results to involve which call, Services in limited results differ forward-looking results. and Group's publicly or actual Chairman statements Services competition turn XX-K Commission. include, the expectation of cause loss Services subsequent other Gas differ the Group future but environmental Report release, risks include, periods Form expenditures. make recent the and materially of Exchange otherwise; filed I

Steve Taylor

And Alicia welcome earnings you, Thank in everyone. Services Gas Natural review. morning, second to XXXX for our the Group's to you tuning Thank good and Erica call. and quarter

profits As company. but activity reinforce horsepower prices horsepower these higher deployment to for and point XX press in our revenue continue off earnings evolve sell units second strategy compression future activity especially overall, important deployed and our NGS, to our this toward majority noted our high all high for the sales status. only Not success quarterly of a the release, Texas, record represent quarter represented being We inflection quarter horsepower a of packages an in production these to for new provide new in our energy of of additional positive units, horsepower with higher units XX standby of the all business. including return West commodity units a environment high Clearly, fleet. the

second are that are of may half new environment the will the of opportunities continued the we it Coronavirus impact provide we macro any year. and While economy, overall watching on the cautiously carefully in the have optimistic variants

the We Permian rental of many does on for will the This not everyday and of The next and units expense, revenues are Certainly timing this units issues new oil starting were the set mismatch more of setting are a Basin, consumables quarters. are than XX rental ahead the had some equipment. and realizing which such on that set, couple units. antifreeze. the quarter. many quarterly horsepower naturally half packages occur labor costs, our of progress commissioning the and in that as the those well progress, XX pleased which compressor progress Setting record increased costs, of of come as impact. in resolve over partial number in of fleet themselves of over between with an our large Of higher without as horsepower resulted revenues such cost

The not deliberately level the third will saw an manage anticipate quarter us opportunity this expenses. to be quarter, at give to we active, those we but which operational

In addition, in than non-critical catching during maintenance of costs at that up quarter the some result and higher the on pandemic. repair were deferred request maintenance were normal customer's

to pressures which the this also half have We of last rental by adjusting seen rates inflationary mitigate we in plan year. our

presently year resulted with customers as As in well noted ensure protocols, preventive we discussions, maintenance of third team light half their first members previous with our the we level are into year past quarter. lingering which some the progresses to cases met we made schedules, we during in tirelessly modest as Significant protecting worked a the which safety own our addressing. in of in the more

the service decreased and driven our While sequentially sequentially services revenues and grew higher rental revenues of total maintenance sales over quarter. revenue a rental Rental decrease in our and to revenue, XX%. X% revenues by units increased deployment X% this both maintenance due improved

Additionally, we million during of $X.X quarter. cash of operating the EBITDA flow and generated adjusted $X.X million

at the look quarter greater Now in the detail. details of let's financial

Looking revenues, million result XX% the XXXX increase decrease further X% about as and quarter This at in a a a same for increase $XXX,XXX rental from revenues. balanced revenues, quarter sales NGS of or XXXX. against is a in reported total second the in revenue $XX.X X%

is of and component in nearly absence sales million during a service the revenues total revenue, decrease largest we This sales and by $XXX,XXX. maintenance compressor is When which is quarters, realized of the was it comparing decrease had due rental of This X% or revenue $XXX,XXX. our sales offset know, of sales, to growth period. and the sales compressor about volatile. revenues historically primarily consecutive in by is you decrease only partially in As driven $X.X

real our in decreased revenue depreciation for increases our contrary months have capital quarters over from the grown in XXXX million XX% quarters. XX, respectively, three which While XX, same year sequential million total rental into both both $X.X include sales margin this not in and to XXXX. with margin revenues Total NGS and ended Significantly, revenue to was customers ended needs, X% gross June revenue. fluctuates of three trends, for period months X% of our Adjusted does the year June industry in had XX $X.X June adjusted gross year. the

were margins higher impacted prior decreased million $X.X earlier, labor Sequentially, from gross the maintenance in in expenses noted repair of for related growth million quarter rental the margins and commissioning As XXXX startup to second $X.X quarter. by setting adjusted and costs, and compression the deployment. increased to cost

XXXX. in the the of of XXXX. administrative million, X% first expenses, in loss year sales, rental compared loss XX% quarter to operating increased loss XXXX compared As $XXX,XXX the aforementioned and for operating over a loss percentage sequential greater both loss and were of sales decreased due margin in second line. to loss periods. a in quarter. second quarter a general compressor in the the by expenses $XXX,XXX gross year to Sequentially, in down the primarily commissioning to and was revenue, quarter compared both of and prior of this an XX% has of $X.X SG&A adjusted from decreased million Operating Operating higher quarter product or $X.X quarters our

loss the defined adjusted EBITDA for net per reported XXXX. quarter is to second of diluted compensation in inventory second share of of compares the tax allowances, interest, this income depreciation to of $X.XX net after first year. stock per quarter retirements, to quarter last in a diluted loss excludes share quarter EBITDA year's of in reported the income a $X.XX our second million. $XXX,XXX charges first $X.XX $XXX,XXX taxes, this a and and XXXX. loss an before loss as for due net is fleet XXXX We quarter quarter and the we share in Our $X.X incurred Sequentially, diluted amortization This of compared expense. and per earnings

is million June This quarter All quarter. three EBITDA of the this last provide XXXX from approximately decrease comparable of have $X.X includes $X.X in to non-cash expenses. driven players the $X.X million year. a due and Total by adjusted EBITDA was as last in reminder compressors $X.X expenses million million are to have which XXXX, million, equity back also compensation ended in year down primarily comparisons. to from a million a first margins. million Adjusted data for both Sales our quarter $X.X quarter sales period quarter. is The Revenue, decrease we and year to product this adjusted was decreased sequentially lower XX, last million sales. same from which over non-cash EBITDA calculation decrease was added from the and of Beginning higher $X.X Adjusted accurate resulting months for $X primarily compressor quarters quarterly comparative lower $X.X

positive to of compares year. sales the quarter, gross quarter total had gross For $XX,XXX second of of XXXX the This of this gross in the $XXX,XXX margins adjusted loss quarter first current margin and of $XXX,XXX. margins we in positive

Although lead million to of on, we million quarter. second sales in the in second being sales XXXX. the to worked quarter This of three to of last have revenue for quarter a of quarter. loss the margin $XXX,XXX longer $XXX,XXX period and we compared any last XXXX, revenues supposed ago, recorded the some $XXX,XXX $X.X no recorded currently projects of compressor XXXX June sales a compared for loss revenues year this $X.X and compressor to loss absence cost, months same absorb quarter and compressor an a ended the only XX, of of Due

But seeing backlog of year. sales exceed for possess the over in-house quarter Rental this to currently be will as this $XX.X gas year. fabrication those quarter we're $X expertise backlog work And these quarter natural of employed of in a an equipment the second bit those have of come does million, increase known becoming wellhead traditional these $XXX,XXX technical to of compared markets approximately second compression work. energy gas that June in with was inquiries million, we the three transition since of Our revenue participate will and Interestingly, this type XXXX X% current for approximately to markets. Not inquiries NGS time type was development the more XXXX for volatility. The is compared million, past. projects. of XX, last first surprisingly, quite $XX.X of of our as approximately quarters in in the than

to quarters, grew $XX.X revenue million sequential last $XX.X the from year. rental For million

quarter consecutive rental is second been is high customers. compression negative While a to and revenue generally industry this adaptation growth, have testament from revenue and horsepower of efforts year, this our our our trends

pre per unit in around year total quarters XXXX. our gain the recall, results our quarter rental success due X.X% continued of revenues revenues to the revenue impacts horsepower, Rental and set second recorded of the to test this In - last our rates prior XXXX average over the in year months horsepower exceeded fact almost of to net of that QX horsepower. rental increased sequentially, part of level The grow the If mainly quarter that our market. strategic primary XX,XXX by last the in pandemic an penetration XX,XXX XX horsepower. growth quarter, and in over have a which in and significant a business. Terminated you related of the lower X.X% XX,XXX over horsepower larger XX,XXX of was we this

does so carrying the of coincide You we to the or basis, quarter the change utilization already additional because on set majority horsepower were added horsepower may notice the standby is of horsepower is that fleet record in newly our the set utilization numbers. calculations. no amount That's with the there utilized not

conditions. the With horsepower rental mismatch in increased from timing started yard some rental the much a our the expenses incremental quarters. due location up, quarterly had to therefore move between partial revenues to partial while set, setting and being of and rate expenses units this increases and We commissioned revenues. incurred only Just new recorded

full year were a such, expense. comparative more lower quarter Permian and the able margin, were our both from XX% XX%, year, detail, quarter Reported scenario full Basin. expense which full alone the units but the unit worth did We in gross adjusted sequentially. a XX% of sale anticipated. decrease quarter, was rental weren't revenue quarter over in As We margins experienced this record this quarter. from gross To in to a little explain than majority quarter's Permian we XX the sold the over second Basin of experience in of

oil to and expenses single company, commissioning insignificant of vehicles a it starting fleet. and horsepower the which we is set are in parts, then Along takes have and most drove of in service equipment a expense. number amount the volume. of this quarter a this For and of Setting, antifreeze lot manpower, we've technicians that, with lot adding hired the not

last from delayed costs have our of Some year. been

example, of were expense a cost parts the this XXXX quarter. engine delayed large our pressures was fluids catalysts. these exacerbated points higher similar due a increases testing to are For emissions that performances magnitude This had XX% number with we in by This customers labor, been couple metals increase. in a large precious from contained than of antifreeze the alone oil ago, inflationary quarters facing also out is parts has to resurrected shown

volume against of For over more we and were the or end isn't our included traditional this of back XXXX are the horsepower of June approximately which XX expenses backlog at but quarters, margins contracts horsepower in of us. have over perspective, initial when a addition totaled experience expenses are us. dollar same next commission largely the entails being third XXXX revenue of per quarters quarters, a And will scenario. a larger hitting XXX,XXX That setting or expenses in Revenues next of phenomena. substantial itself Fleet quarter. in bearish still high good full of said, the and are net higher increased large four have really the quarters. behind was we equipment and perspective. should But correct we the is horsepower long, timing Setting these anomaly us to commissioned in a second climbing the will we new little expense units XX%, mostly most size the expenses, This expense up, show the than quarter. levels cost couple behind couple as anticipate compressors horsepower, of this XXXX

utilized As our of is classified horsepower June XXXX XX% as of XX, large.

that in have our being under past units For added horsepower of we horsepower totaling XX,XXX fleet large months, XX the new XX where classified category. just horsepower, XX%

was XX% XXXX. utilization horsepower approximately XX, Our bit as over of unit base June is XX% a and utilization

expense in in was which We million projected of year of Our progress track year. million capital previously to expense units, quarter, on with not projections million completed the $XX fleet second the work $XX we're in million does $X.X first $X capital well rental the for equipment. this half quarter first with rental approximately and include this our pretty for capitalized the budget

balance Moving to sheet. the

we $XX established borrowings quarter, last credit mentioned a with new base, As borrowing a no with million outstanding. but facility

to $XX.X Our cash our million. and in This The last ample untapped XX% the a at of end cash quarter in or balance liquidity quarter second any generated balance year million line ago million. quarter a nearly credit $XX.X cash of scenario. of the flow and cash quarterly to was $XX.X We provide million of compared of net conceivable continues revenue. positive this from operating our $X.X activities combination

buybacks We million also quarter. through common this the $X.X into stock company back reinvested

and with of cash position, public that consistently we will conclusion, also cash no fair a is the operating We continue positive flow. significant the and in the recurring remains a strong repurchase believe value to debt, above well as of stream, ability enterprise currently reflected generate markets. shares, In revenue few one companies to NGS the

of from new the the revenue provide and new trough cycle, should opportunities our we business growth. for As profit emerge

as energy remain has While business. are our half constantly helped about the we and of year, optimistic energy are vigilant watching trends second we underlying and macro markets, demand that stabilize industry impact can the

We that sheet value. will term opportunities balance strength on and will long create continue to focus

the members satisfied our of As certain appreciated. the is before, team of to and NGS make I a commitment result are success our said of all customers

We thanks Our is ability sheet the for a half business. deserve have the responsible second of Erica, job our in among well and end as appreciation of challenges They the year to XXXX. we meet proven the responsiveness forward done. look look best stewardship, past our remarks. the growth, our that's to and to continuing of my pending forward stakeholders to prepared balance team our

for would if So, lines any you please phone open questions. the

Operator

your Capital. and question. we Ladies Please the Instructions] time, at Our Street question from state Rob will session. first from Lake this Brown [Operator comes gentlemen, question-and-answer conduct

Rob Brown

Morning, Steve.

Steve Taylor

Hey, Rob.

Rob Brown

wanted bit pricing Just into a little get the environment. to

the maybe pass pricing but that up able the some kind up. point? your going You the was pricing moving how of pricing Are talked at you this or environment costs to of about tabling into

Steve Taylor

have Well, we've We pretty environment of started effect the but we're going the inflationary balance slightly the some to has really quick. price up in increases to some moving environment - year. been take the

now, one on steel new catalysts and by And up we is this middle I'm So, magnitude obviously, hopefully been much exact we're matter planning we're impacted mitigates too on are the so right another has mean, pretty itself. but doesn't of stuff supply with expected board steel But on rental antifreeze I I not as the these stuff increases builds. But going mentioned, seeing planning balance some especially across everything. up Well, the of except of one, like that going so well chains. oil sure. year.

so, what And from attitude we're prices that an to we a taking a standpoint, we're to going on is which some take inflationary got we've see increase, and from standpoint, to do. see not wait have but wait and

Rob Brown

of then Okay, do than fleet? coming a now? in great. lower how QX, but about market QX what unit terms in And new happening at talked the placement the entering unit demand maybe after new sort you of placements see is QX you rate kind And some of

Steve Taylor

QX out that, lower which going parts took busy of and than extremely equipment to just and that. do to actually is bad, a level cetera everybody's of is be was lots et high a manpower, just in volume because QX QX, people such not going

costs. kind bad chance gives and lower us and little revenue concentrated little a manage breath a level been QX a of somewhat So, get take a not to of is increases thing, on

is QX level. to going think I that's So, good have

seeing like right a and little now when a But, they'll we we in now and But anything, being projections that's time. natural big QX as going have we busy a gas real of muted sort than going little going not over still energy transition funny pretty that. constricted we August. from I projects actually QX some is high put wellhead don't QX, from equipment kind equipment to pretty standpoint, But Yeah, rental sitting that, are perspective sales mentioned, on, we businesses. anticipate from here added point, we're think, and standard we're the of from level. more Beyond sounds traditional out. grow and sales we certainly, being think think And right sales aspect. that is more more out, certainly, now hard lot finger a of stuff of whole to between for some know scheduled be

So, better projects the the activity on certainly operators than that up lot we now. a have, what like commodity put is with are last year, things think so forward though I think that level, was. and people constraints on of were it drilling is lately surprised their picking for and have activity, even hold it thoughtless going Certainly, a it's lot still low that from

good a a right to we QX put anticipate of finger on closer to little it. get the hard we now balance a year. just So, It's until

Rob Brown

then that is you And rental types one transition energy projects be loopback of the that? just that that good. that role well? Okay, are project market Can as of comment, in a doing what

Steve Taylor

standpoint. it project to could going I'm of nascent be just tell its in kind see. evolution. what from pretty market, It's not we'll And a a rental you exactly competitive

kind have where this to received markets these of jobs word engineered, mean, and cetera. of compressor with that we've projects know like quarter. we've we our mentioned inquiries tend there these do now the some be and this the got relationships lot can off a But, that. from, highly exotic participate, there, little of the different. coming working why I is et been of out actually work. we hard know start work tell, done name some can the of And, well of we've jobs when on some and getting fairly We've gases out it's that's I done we a It's mouth, you we And just out so blue, projects. and just hot. pretty So, right to things and

completed, not stuff. some have recognized procurement We build taken fairly a to time long engineering from the but in they're UK has that to of on

those pretty is we of It's at volatile, So, see opposed necessarily this each are project, least us customers projects. quarter the it, kind sell here markets in two, and get certainly, another we on what maybe and not depends too. lonely substantial. Rental, see finish term there the that, do I going thing think the be out or don't starting But on focused some of we the we But We're or for quarter REITs. to of And right to certainly to once it's now. whatever. anything can maybe. and is some

market started quarters that's for that's best on last a prognostication my the So, really just us. couple

Rob Brown

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

Steve Taylor

Rob. Thanks, Yeah.

Operator

Group. next Our Tate question. from from comes question state Sullivan Please your Maxim

Tate Sullivan

most you. of energy energy that thank up million most you what wellhead, $X comment and just last following Steve, from your of the to transition, those the transition, kinds is are Hi, Hi, referred of away clarify, that on projects? to is as backlog, the

Steve Taylor

yeah, Yeah, of it. quarters three

So, is million. the about $X backlog

$X.X million projects buzzword have using exactly recoveries. And, what now. energy is it to I'm And is the I one you are. number right great approximately projects. tell energy So two, don't a transition the obviously, Number transition of

Tate Sullivan

Okay.

replacement it then timing in business word is I or with a rental is know to don't in normal if the is lower of clarify all, is to you time business? all compared that what's excluding or And do understood. happened the last operating usually that. work COVID more of a usually the Yup, contract year, the parts at fixed the right environment margin Just the it's

Steve Taylor

business you of Now, parts? which said part the

Tate Sullivan

that emission that is talked parts work You the you about? compressors? to the standards mentioned work service backup replacement, some related replacing on or Or

Steve Taylor

deferred and just point stuff. from more year, of, Obviously, everybody down of a Yeah, careful requested was lot slowed be COVID customer primarily the things maintenance. that last and

different that emissions customers an of absolutely a environment of of one we've into stronger purchases, was coming seen start testing, And expensive to a some And the inflationary lot at it say little which due a just I maintenance else, now this either things. these some on some which it a rescheduled lot of year, or to quite and opted through metals. to hit in back. necessary anything we're equipment we've kind requirements but are of And catalyst that drove push with,

was on catching maintenance, costs up there, some some too. parts primarily some just it deferred and labor so, And

Tate Sullivan

Okay, equipment did not quarter that? hear - but correctly, and quarter rates were then did prices from down, that deployed is I calculation I the on quarter? over this quarter on Or here your based the burning the full from the second miss

Steve Taylor

talking rental prices? prices, you're No about

Tate Sullivan

per yeah. Yes, the price, price across The yes, fleet? rental average unit your

Steve Taylor

It went over and it No, sequentially. at to year up. was remember I X% up, X% year

primarily again, large out. driven that by and So horsepower going that's

Tate Sullivan

with then were And or it's efforts, levels comment on before deferred are you maintenance, to that hiring and you you that? maybe back where to COVID, related Yup. the can

Steve Taylor

As headcount? far as

Tate Sullivan

Headcount. the These field? worked hours in are

Steve Taylor

Yeah, we're above that from a headcount standpoint.

guess is about because are field is count differences due lower, little pandemic the The to count employment I of some just that headcount overall then fabrication and pre higher. being QX revenues employment a is shift Well, in facility X% the fabrication But up. down the been now. our activity, field lower headcount. a would So, above and year it's last QX XXXX so

Tate Sullivan

rest Thank great. Steve. great the you, of a Okay, Have day.

Steve Taylor

Tate. thanks Yeah,

Operator

questions. have Instructions] no At [Operator time, we further this

Steve Taylor

next Thank quarter. joining appreciate for And look Thanks, us you. and you call. again I forward this this your morning thanks time everyone to visiting on Okay. with Erica.

Operator

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

You disconnect. now may

Natural Gas Services (NGS) 12 Aug 212021 Q2 Earnings call transcript