NGS - Earnings call transcript Q3 2021 | Natural Gas Services Group, Inc.

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Operator

Good morning ladies and gentlemen, and welcome to The Natural Gas Services Group Third 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 Ms. Dada.

begin. may You

Alicia Dada

contained and pursuant moment Paul 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

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

Steve Taylor

Group's XXXX And welcome and review. Quarter you Third Thank morning you, Alicia Gas everyone, Paul. in. thank and you earnings Thank tuning good Services to Natural for

in maintenance was rental, of noted sequentially revenues business Sequentially, revenue in As year-over-year sales and year-over-year up the every total earnings our our and $XXX,XXX. growing service that and and the business, improvement. basis. is XX% both In it quarters, almost segment on segment X% relatively overall our was only a total comparative a and was by showed declined increased sales one minor release,

operating revenue third revenue sequentially basis, business on recover in grow of quarter million continued as rental in horsepower, Compression core a rental quarter, increase consecutive quarter, from XX% We Our to pricing growth. quarter, grew increase for up a EBITDA the and increase rental of an by this both our flow $X.X an compression improvements. the X% to driven annual active generated in third X% million. and quarter, adjusted well as last $X.X XX% and cash

we outlook and and As certainly pricing, flow you overriding the our capital temper that realism domestic mantra likely will the grow with discipline enter New positive. and production but is exploration incrementally, Year. enthusiasm producers, a remains We bit think we spending the because the good of optimistic revenue, to energy a we quarter markets cash a growth was complete EBITDA and about as opportunities maintain remain and relatively tell, perspective. from XXXX provide can this Stronger improve

approximately In share, represents $XX.XX repurchased through Year-to-date, repurchase continued have our addition the we per X.X% of at September an average programs. quarter, price share these we our of which operating XXX,XXX XX, shares during roughly to outstanding over highlights, shares.

at let's details the the of Now, financial look quarter.

increase revenues. and of million in $XXX,XXX same for million about rental revenue increase of sales quarter as from XXXX. revenue streams, or million and in the third a due a $X.X reported in an NGS increase is total the to revenue XX.X% XXXX revenues, all mostly Looking This $XX.X quarter in a $X.X further result of increase

component As largest our revenue you and it know, historically is the sales sales of is volatile. compressor

in in we parts quarter sales third saw quarters, for XXXX compressor While increase offset we only comparing current in XXXX, almost we an total sales in revenues or significant a $XXX,XXX. or increase either a reported during When quarter. a $XXX,XXX by by This had equipment no of sales was consecutive which X% X.X% the is of almost in rental $XXX,XXX. increase driven or revenue, decrease partially

inflationary have year's margin quarter we not XXXX increased of has to gross revenues in this of and seen labor fluctuate NGS customers' deployment, the revenues capital grown every needs, margin was expenses sales X.X% gross But $X.X and adjusted repair with comparative ended to quarters. total by parts. an million ended XX, XXXX higher $X.X the both does rental in periods. revenue and for along $X.X growth quarter. from to in include mention lubricants costs through setting XX, This $X.X prior depreciation with and same have to year-over-year Total the commissioning margin, revenue Sequentially, our increase last rental second costs months compared revenues in reported increased also our in million, sequential While posted Significantly, is not start period respectively, XX% September September which or for compression the of X% from related driven rental three adjusted year. decrease million XXXX. gross quarter million XX% a the

costs repair quarter revenue, margin prior a expenses. gross and start to adjusted compared due This As quarter. XX% of this increased to maintenance levels increase was the in XX% and to percentage reduced of

If of drove a margins. inordinately and expenses number high quarter higher you record set correspondingly which last units depressed we recall, horsepower in the

still rental revenue this grew quarter. Our

XXXX quarter cost increases of and counteract quarter by wasn't great. upfront general diligently primarily a higher These as to we increased the control but As expense are the cost over remaining were administrative generated accruals. incurred magnitude X.X% expenses Sales, environment second the and the of from inflationary growing predicted pressures The over those. in and expenses X% third working XXXX.

percentage lower rental to and of offset loss compared due in in loss decrease This quarter XX% of million last However, revenue as loss rental second margins. margins $X.X $X.X were costs the by sales was by an comparative expense. operating to loss operating increase of in Operating SG&A quarters This third decreased an reduced XXXX. an well is as the the of revenues a aforementioned higher from to increase and flat as compared in in quarter XXXX. increase $XXX,XXX the Sequentially, primarily a revenue, of of $XXX,XXX from of quarter margins million due is third SG&A to quarter. year revenue XX% of last XXXX at for

is XXXX September diluted improvement compares quarter net compared a share ended million, months increase XX%, last lower Our decrease the to of $X.XX million last this revenue, resulting diluted $X.XX from EBITDA third and down of a up margins. net quarter. quarter share flares period as to $X.X a in This loss year. primarily reported marginally a less year. overall per adjusted in from than second per for third primarily sales. of $XXX,XXX $XXX,XXX higher XXXX. $X.XX was million almost due this increase an three includes XXXX We share last loss loss quarter in which for $XXX,XXX same this after-tax the $X.X and third in was from increased in for diluted the was is of volatility revenue in quarters quarter. loss compressors for the reminder, loss higher Total year-over-year an million. quarter. Sequentially, $X.X sales due reported million, the loss was this EBITDA or sales expenses This quarter. million per change XX, quarter's last in $X.X last quarter and of the $X.X $X.X was over almost from product The is Sequentially, comparative year's to of $X.X This a both parts to $XXX,XXX million Adjusted of

margins margin our For had a in higher of sales margin a this gross gross and This to the total compressor $XXX,XXX XXXX, of losses reduced negative These quarter $XXX,XXX compares approximately of expenses part third we sales in sales $XX,XXX. gross primarily gross are the improvements negative quarter, combination of second XXXX. loss and margin quarter business. in current adjusted a of

business quarters. comparative have in projects our fabrication Although, compressor all slow progress, be sales to with in some continues compressor we revenue recognized sales no

costs lack our the of sales total we customers' despite capital fabrication compressor rental revenues built. more new units have from However, fleet decreasing higher and lowered our part by absorbing spending, margin sales, posting losses flare and being expenses, gross

the compared approximately as in sales the as to September million, XXXX Rental Our was XX, of million, X%, increase third prior since $XX.X quarter quarter of third is $X last of an XXXX million revenue quarter. same of backlog was the $XX.X year. the which

$XXX,XXX on decrease increase horsepower into gross third larger from gross trough our rates during X.X% from unit margin quarter of horsepower, Rental last quarter. our a rental net end million our X,XXX Significantly, to average or quarters, which of were uncertain grew last in increased sequentially, adjusted penetration per gross September markets. a high-horsepower traversed strategy replaced units exceeded very XX million continued XXXX compressors over and sequential start execution successfully an revenue due mainly during successful rental this margins of per pre-pandemic was rental quarter. increase. basis, XX% or the the of pandemic, quarter, X% $XXX,XXX the revenues an XX% the $XX.X but since to a For a rental year-over-year horsepower $XX.X X,XXX of XXX,XXX of the Rental the quarter of revenue the almost margin quarter an at totaled our We this from XXXX the approximately period. XX%, due first size which Lease horsepower a quarter. the addition revenues by X% this

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

made XX, September of in up of XX% excess is unit. units XXXX, per horsepower horsepower our XXX are compressor that of about of As utilized

end basis was is at utilization unit-based a approximately bit horsepower on the and quarter. XX% Our a XX% over utilization horsepower the of

early year the timing XX% for progress with expense rental work a But spending. completed by demand cash into note, in approximately budget will our cash the perspective, issues we fleet units impact at our was credit line possibility balance scenario. With in On quarter expenses and of $XX of end outstanding program, expenses due have XXXX. year. has liquidity have with of untapped positive Earlier $XX Stronger-than-anticipated in for to our $X.X the our capital XXXX our at expense debt we sheet continue the projection. year, we flows. demand no the and this these From The of the flow projected the budget with our three our the continued an this operating of third not quarterly believe capital comparative quarter this us a leads end equipment balance capital of balance $XX.X first every third quarter which revenue. capital a above acceleration we $X.X lease stock in a include balance to committed net our strong purchase quarters, gas the the delivery ample the quarter Our generated cash to of we'd relatively in we cash end $XX.X our added capitalized deliver one last million does million million. steady In year for compressor spending increase of or to could intact, million. capital million. almost compares combination ability $XX some of rental activities from quarters there's consumable that of delayed in of million capital ago cash to equipment this all precautionary to operating nearly of at and XX% estimated of with customers, continues spite cash place provide XX%. to program, high-end third to a buyback of We on $XX.X our million This of and quarter only strong million

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

which as X.X% end XXXX, of our initial Our the buyback October additional outstanding an purchased million shares X, repurchase October. $X Board our we common stock in or of of our of million $XX of XXX,XXX On the have through September total for totaled authorized XX, of XXXX. an $X.X stock authorization million stock

as shares repurchase the above enterprise markets. value in reflected to public the is well continue believe currently will the that we We of fair

renewal Form this S-X A renew of we our price Our well per on us of debt financial Securities existing will exploration time Commission, history our registration equity This nine renewal for value $XX.XX which calculated average purchase the additional weeks, and share using intrinsic months needed, with our allows In over our without effectively our filings our issue securities Exchange shelf if first and second would final is current to note. the the us filings. current and extend year allow to market the to is housekeeping couple or fees. prior next below in values. US S-X

one with final the Natural pleased Group to profitability the service are a revenue cash consistently operating into months we of cash stream, recurring ability quarter improving focused the margins remains we oil debt, the While position, on year. results, and meaningful enter new a companies as Gas we generate XXXX remain strong few no flow. field with Services and significant of third the

we result benefit well-positioned activity incremental impact that higher in fourth holidays optimistic remain quarter, to pressures. to in company, feeling prices some intact increase the backdrop rolling production are energy Like to the services will inflationary chain industrial issues is activity, impact our While due we in XXXX. a and commodity are other that business we believe and rental from every invariably supply

are control we fabrication own in We our process. that fortunate

We related we disruptions likely supply some said, steps raw material inflation. and are see That to challenges have to chain any disruption. and mitigate taken minimize to

thankful As that make creating expectations focus work I'm prepared customers able the all we truly day certain of for of stakeholders. of our the my of we the our enter remarks. every NGS exceed Thanksgiving to to that's the members Paul, value season, the and for remarkable on end family

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

Operator

comes Capital. gentlemen, time, this Ladies Street Instructions] conduct we Rob first will from session. Lake a question [Operator And question-and-answer our from at Brown and

Your line is open.

Rob Brown

Hi Steve.

Steve Taylor

Hi Rob.

Rob Brown

the Just pulling know of equipment this of are price happening kind of but seeing price and follow-up end extended Are to your out gas how more it customers right with environment's the what's I want the of Are drillers -- kind commodity seeing sort the on of in, impact thinking commodity about you now changes? you the or cautious, at durations? putting are you rental kind sort point? seeing

Steve Taylor

feel two progress year. there's be next of see quarter I It's worlds, would into price that the -- any up expect different I it's gas oil the also change some it's oil The But operators at the to this mentioned and through price. terms as we'll to as exhibiting. not due some increase price, think fairly rip-roaring conservation We're I From the you mix that confident price hold incremental going we'll the and see real capital and level are oil that from from think in the because standpoint, way. activity incremental kind going standpoint. to we activity seeing not in

it's Gas think oil usual as business an I standpoint. So, interesting. from just is

hesitation or to but gas of compared prices real getting not we've seen a have high gas recent on the the to long. relatively Of that's the recently high to historically world up $X course going been last that But some side there's $X.

coming winter certainly we're seeing think on. I

seeing get the too. going and storage a country price there's LNG some out always You of issues increases lot of then. We're

to So, the -- from all coming pandemic. of demand the combined those increased plus have out

as there's real So, that to all long combined going how those gas have but to increase to a price last. that's concern

I think The will So, pricing et up warm wintertime, get you obviously, weather a past over cetera. once catch bit. time depresses supply

we And little terms going et longer a whole gas So seeing not the of money go cetera. with do drilling, production, into to hesitant a operators side. lot operator you're see on

I long just there's equipment good with price question to move real will I and a last. the relatively them. out you're as to there, agree to If putting gas, And tend hesitation, just some how think

starting we'll we'll see going not through the but some season and lower shoulder some prices year horrible prices, summer. think next – I see

on pushback So go with don't we are to okay people seeing longer – the it want on gas on terms the side. They're side. oil

Rob Brown

Yeah. Yeah.

Okay.

know, are then how standby And of sort still Is maybe or area you sales? more moved market active, that Okay – good. new changes in from recently? market how terms to seen that committed, is I what of is some of high-horsepower fully that equipment the kind an but you've have

Steve Taylor

good. centralized again, lot due high-horsepower gas for the oil to oil that's to going Yeah. We And – the it's everybody driving That's prices. and lift what's market volumes a us, and think a the permanent. the is be of

Permian result And equation, from standpoint. related the high-horsepower a is far as again, as the So lift. horsepower the happens of primarily is gas centralized what high to

So the active. right now. a thing is little going The to stay opaque visibility more is

had area. that through in not the some in not out, our of which from period see, Everybody's we're cards like good. what But think stuff think going we coming over yet. uneven to just everybody of is to see what to – this I We that particularly close just we've it way. hey think we long-term generally, and period year projections natural yet. this we it's this – growth of continued and not growth We're their look full I build are pretty to to and is up coming quantify like like, generally, put pretty the going – know making a whole so the place. half. to in and looks So it's that be want really projection budgets just optimistic we're the And last this But their time year some full lot committing to hard pretty vest out sector keeping operator

Rob Brown

Yeah.

Thank Okay. it over. turn you. Great. I’ll

Steve Taylor

Thanks, Rob.

Operator

Thank you.

Tate Maxim from Sullivan Our Group. the comes next from question

Your line open. is

Tate Sullivan

Steve. Hi, Thank Hi. you.

Steve Taylor

Tate. Hi,

Tate Sullivan

you the can I full comment for – XX%, so increased it I the to guidance you it Did to is relative missed to – by that. year? or the say XX% hey. still XX% just previous for you or XX% CapEx XXXX on missed -- on your your comment

Steve Taylor

million we're yeah, projected yeah – $XX No $XX But million million for that over it's XX% is to it to confusion, $XX range now. XX% $XX the million guess. in year. we're million. No. And to – full projecting going million increase to was Well, XX% to we $XX yeah, a the XX% $XX million apply to $XX originally obviously, I to

Tate Sullivan

of to then of sorry is by spoken And rent? how clients? pro a years – available spec already of year with I might in the similar previous a or for a is many couple forma Is dynamic end units I'm environment, there. on have in of Perfect. higher spending it mean, you building for some the by for or questions it the equipment this higher-horsepower that

Steve Taylor

From spec a one only probably or standpoint, it's about two.

a not whole lot. So

will likely we're we side, Now, is have activity that going you've on got that the increase next right because if to that stuff available. year, high-horsepower to the increase

You X, to typically. People to rent months can't X want wait something. it do

had situation committed that program or on a program two we had X-year essentially term. build obviously a we last a long that's Now where years that was But variable build over. is three

to I regular back guess the per now So, se. it's the market

So X probably end anyway is a we're right some of going spec, the X us now year, good is the -- to probably is have probably but what to X end to up we're have level for to to with going by X.

of So X anything units X outside that we spec with now identified. by XXXX end of committed. we're we'll is other anticipate to the committed And in we're see building now we've Right so year. along more the the any right

Tate Sullivan

-- have What were earlier. Great. the the number the in -- or or you XQ? XXXX of of number end what rented I know may mentioned it be out you mentioned And of of have compressors but are XQ, then Q, will it you rent -- current

Steve Taylor

total the Of fleet?

Tate Sullivan

please. Yes

Steve Taylor

about and utilization XX% was utilization was Unit XX%. horsepower

XXXX had units. I think we

-- So that right.

Tate Sullivan

I been every XXX, for fleet? to units your number higher of single horsepower whole then are And looking you're tracking units, mean or rented it's horsepower terms higher compressors? how been dynamic total it you I you that question, may. just quarter the with expect modeling building -- I've in building in number just and that can proceeding the a the What up get the do the at that with average of if that at

Steve Taylor

unit? per horsepower average The

Tate Sullivan

Yes.

Steve Taylor

increased now in unit. the over third And horsepower horsepower quarter like per Well, right year, per XXX we unit. about it's looks XX this it

get to the fleet basis. per-average-unit So, whole it takes a up a on while

say maybe So, from showing had. the I year wouldn't and at we'd XXX a growth be now XXX same we

just XX XXXX rate that the I like it's to compressors. unit. hard to move the say, almost exact per hard on on But continue It's climb. average -- we to average anticipate So predict horsepower

Tate Sullivan

accept at about when last more I'd do Great. $X conversations pricing, and just passing from hear dynamic almost to the disruptions. mean we'll in quarter -- the unchanged turn the now? current or orders to will and do over you the it prior or on you lubricant from is you your a sales saying currently And when higher you customer costs sales supply are When you sales for just take -- to you love higher what I understanding me ending chain those quarter it million Are away? this the backlog decide take like

Steve Taylor

a and it's months Yes, making -- was little were X, X months better ago up. than six quoted Jobs this I'm ago. it not

XX some you -- tough packages steel quote requirements -- for only there's valid a days. suppliers some -- XX stainless literally XX to only hold would hours the quotes the stainless quote That the hold If quote typically it steel makes quote are little on hours. We they stuff. had and the we

somewhat rein maybe free whatever. kind stuff of of issue there's when abating because increase it's of you we're on give have attention things point obviously of So that. by try things an some to were going orders that. you what that up not or certainly or costs But those or we to go reluctant like time we to are through back orders adders comes back what paying and or give you optional margin -- quoted. And We in you bring of and the there's pass that cost some that impact to tried to or and But on can able need obviously we from quote. can and closer did absorbed we at that us We operators now along like an goods. change the what change

Now increases engines on seeing we are compressors. price

capital general But -- expenses in operating form oil them seeing of are some We're seen latter more of You've in expenses. the in parts. those those that. expenses

just got we lead -- So in put to we some orders. the got of stuff to longer

to where a some you you to around It's and shop thing cost And pricing a got and economize keep more you to up. twofold can. where other little can keep trying prices just down raise and the try the

Tate Sullivan

Great. for Thank my you, Thanks question. Steve. answering

Steve Taylor

Tate. Thanks,

Operator

[Operator Melas Instructions] And MKH next Management. George our from question comes from

Your line is open.

George Melas

you. Steve. Thank Great. morning, Good

Steve Taylor

Hi, George.

George Melas

bit how maybe you that more a next Can some sense of to talk year have what much about CapEx? you little from would like already of purchase the And their And program that the lease CapEx that one CapEx be. -- where has with and CapEx customer be one you been of have composition might equipment?

Steve Taylor

quite Yes. have to program, going last one-third accelerated to a six one-fourth total. months. $X number, million estimate. the The don't to leaseback this but I It's It's to bit the the CapEx the year million in the attributable of range exact I'm $X probably

So more we anticipated. had it's than originally what

go conversations reason probably speak. some trying year in we're will that to see what project we start more definitive Certainly, as the into us a just tell if word the next we they're published this some hence operators year. anything little to CapEx Maybe on million range. $X will little that or to get a give next for going up information little earlier. gather early won't further us not to and planning. But yet. We until I'm on a -- what So million is need see probably quarter to $X It's capital.

I So know exactly don't yet.

which XXXX our the update we'll will end-of-the-year So probably on the be next full perspective call call.

George Melas

little sort of Okay. who maybe a a but that of financially. updates some your competitors distressed have from environment? competitive about talk Great. in You larger Thanks you can And that. the for maybe bit perspective. are And respect number

Steve Taylor

competitors Yes. not to but us. at George, look by them just like the gets drift public generally name at look they because everybody just primarily

And looking standpoint. good the increasing per in the a mentioned that's We've revenues only I the pandemic. rental levels. circumvented above up we've revenue. to pre-pandemic we're shape on rental As of trough about just three-fourth a from a se we're that one the had back little the And of rental bit at globe from

and our compress sales, -- don't is Now up fabricate. obviously have sales. or don't they but down They're they

that out of we'll discussion. So pull the

standpoint, the a a a They more pandemic and from more we're lost doing well standpoint, than percentage we unit to generalization. a during rental lost relatively and from say, standpoint it's on -- and I So a horsepower did, compared They equipment competitors. they basis.

know And equipment's know unattractive equipment, move move that. see we will trying and share. that But unattractive Now, some ahead And that gain to And drive some utilization. we to price we're we've they're seen there. relatively low prices. still of we'll out think we prices at they it, of and stay able already

new out stuff that's or when emissions technology from a bad is old XX years XX you years and five, certainly profiles, standpoint now us, tend I'm maybe the get rooting is five of standpoint But the everybody the -- stuff sound technology; like for the latest it's no, -- all stuff commission's older, not cheaper better XX it difference. So because we -- It's our big a brand-new equipment the a which horsepower market ours, XX, not years. certainly And there for necessarily. compressor competition years marketed for stuff. our lot to is capitalize doesn't the is from but sooner a they the too have cetera. rid big age being of But this to equipment standpoint old that over makes et latest

they can pretty from the it that good better public the compared we get that just to So, out can rid the doing, older of we're filings off all there see and it are. sooner stuff and But leave get out cheap competition. somebody we generally, [indiscernible]

George Melas

Okay, Thank great. you. Congratulations.

Steve Taylor

Thanks George.

Operator

further time. we this at questions have in And no queue

Steve Taylor

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

Operator

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

Natural Gas Services (NGS) 11 Nov 212021 Q3 Earnings call transcript