NGS - Earnings call transcript Q3 2024 | Natural Gas Services Group, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group, Inc. Quarter 3 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ms. Anna Delgado. Please begin.

Anna Delgado

good and Luke, you, morning, everyone. Thank

those of begin, during or may the we will forward-looking making the statements from I cautioned guarantees differ Investors call, and would that you be those meaning the within forward-looking statements future remind are to forward-looking securities course that developments in statements. projected company laws. are like the Before federal of of performance not conference this results actual materially

no yesterday's assurance be September a give any section with filings for risks the documents statements. forward-looking website found such place forward-looking XXXX. These press are Investors Services the Finally, disclaims events prove to the in XXXX, can can Form other our located be the whether December our described and or result These revise that XX, XX-K XX, statements period will in information, Form our not SEC, future undue update in in release and or correct. Group reliance as www.ngsgi.com. Form company new XX-Q forward-looking statements, the and or Gas our otherwise. on at of ended Natural of year-end should obligation Accordingly, earnings including any for intention to you X-K

materialize or that one actual these underlying vary risks more materially. results or Should of assumptions may prove incorrect,

will gross discussion certain financial EBITDA, non-GAAP today our reference others. among margin, adjusted In EBITDA addition, and measures, including adjusted

For measures yesterday's release. earnings these reconciliations financial see Please comparable under GAAP. of non-GAAP directly the to measures most

over Executive to now Justin call Jacobs, Officer. I will Chief turn the our

Justin?

Justin Jacobs

the team. I morning. good start and introducing by Anna, you, Thank will

us unable is Officer, our fourth Officer; Chief President Tucker, me on and call. but earnings Chief back join on be Brian morning is John our Bittner, Interim call this we'll Financial Joining today quarter the our Operating to morning, this

our quarter after I by now market we close. review results, had to yesterday chance which you've third trust a announced

significant delivering EBITDA, top and I quarter line as higher the performance cash adjusted growth growth. against We outlined had results reported net and with pleased revenue, our while are line tangible we drivers on and We last call. bottom of value another key our operations from

a awards focus growth innovative technology, our portion remain compression new our our then large dynamics customer and relatively growth. customer remarks asset horsepower optimizing continue value improving fleet, unit these drive strong compression expansion today and eventually in driving drivers, M&A. on utilization, horsepower growth, will significant leverage and we I my strong, coming significant for particularly we of to demand, and to and years. announced low opportunities relations for strong With the our leverage large recently Market see

growth to the Bittner, and guidance the in the a which with team. our who of quite remains what start and quarter, few with against comments increased quick high-level an we're remarks call over followed update to drivers John and our some more for detail. I'll the additions as outlook, well then end turn review our give longer-term on I'll value the recap as XXXX closing discussing bullish. I'll progress around seeing. on today industry quarter then some I'll will new by a

our by For XX.X% XX% Adjusted the growth year. the [ rental XXXX in a of XX% increases. with quarter XXXX of million midpoint Adjusted million XX.X% QX a $XX.X and we million. was was of increased up rate ]. of outlook we horsepower this from year's XX.X% $XX to EBITDA last million increased last last the in year, and final compared X% third range selected third compared last increase to $XX to higher reported as quarter the implies percentage outlook growth At rental to increase approximately of growth and QX. after fiscal to year-over-year our updated quarter over XX% year. posting EBITDA XX% favorable XX% $XX million Based well the and from year-to-date adjusted revenue on $XX the quarter, sequentially into as driven our of results a moving range, rented

As call, back. I Services different noted a just it last Natural on than Gas few our is a was years company

We are CapEx supply taking advantage demand constraints XXXX. and our customer strong increase in of growth to

is XXXX new XXXX provided our is contracts growth horsepower support Our we newly new will guidance large for signed, compression to of I the investments. horsepower will CapEx electric Approximately motor CapEx, add, guidance driven. with entirely growth for and XX% along be

and concentration will diversify customer accounts. we larger our reduce units, new with these mix With

flow, contracts rental horsepower these help earnings the increasing importantly, More while growth of drive cash will significantly business. revenue and our

WTI conditions, XXs and is market still to oil. high are at several XXs for months. in is we to has a production for seeing I'll first significant the level the compression. look This been needs strong which for last incremental low As driving

market could strong a oil. received that and generally, questions are change we oil on the factors administration bring we While prices. down, numerous of mindful WTI for coming regarding impact I've macro see

will macro Republican growth believe from oil companies capital was the and my the personal the are factors of regardless administration. whether it new a of administration Democratic regulatory larger prices, view the materially burden, While oil significantly ease I or is driver that

demand. impacts on and is remain I and do fleet. this compression a ease market demand gas, be the weak, have that our permitting LNG This gas Trump Natural favorable drive different prices volumes production more small story. activity natural materially gas will particularly administration for is for positive ultimately should believe muted, up. natural compression The impact the a

up? I Now will prices don't this know. drive

plans. We are our that in including not

XXXX reviewing for outlook and our leading results, we shift I X now expectations. of will to a our our our several as our to strategy So and relative it happens, well strong the I'd positive if value increased by current like XXXX showed impact as against drivers. these growth progress to have to ahead. drivers years quarterly demonstrable guidance it believe bullish

first the start I'll with driver, optimization. fleet

price which basis, which per the is I monthly is The metric increase metric quarter units. the over ago. function by in metric horsepower mix the X in of Our That $XX.XX increased for revenue in a Rental monthly a more to revenue the divided XX% a same quarter since and this at year. utilized per The as shift and industry increase meaningfully horsepower, revenue QX calculate QX average year of per of horsepower then. increases standard. to look on installed calculation This of a average yields same units from is QX horsepower a by with modest divided horsepower Rental increases XXXX, higher average in

million cash parts: the our of assets respect It receivable which the into former, utilization, fleet. utilization converting at accounts noncash continued and X increasing asset is driver was second The existing With decline. the encompasses to $XX to over of $XX.X QX. $X.XX went QX cash at million million end in end This $XX less per quarters than end the or of is and QX, at approximately created the share. $XX of to X now million

inventory growth to of the in will levels in used believe sheet, take estate are with including capital. off return cash real and there turn which higher new We areas invested invest balance unit anticipated on additional be to

And exactly going I'm to more shareholders. noncash We what returns for were assets I quarters. over we into you coming of see the do leading are you'll we told to converted our execute cash, confident against that as higher delivering

and and execute. upgrades on As initiative last XXXX an ongoing call, priority rental fully we through respect perform of conversions our span to our utilized will of is to as initiative medium-term this is technology With us, but increasing fleet, a likely our more I this fleet. key noted utilization for a of

driver is third The fleet expansion.

with driver more progress We to this have made consistent come. significantly on

As units approximately of XX% rented end rented of QX This we've XXXX, a the had is XXX,XXX year-over-year. horsepower in increase totaling horsepower.

horsepower. large increase XXXX, approximately we of to compared XXX,XXX represents QX looking as a Just This horsepower our had at XXX,XXX in horsepower XX% the units, horsepower, QX XXXX. approximately large at

is As units. of the rented large XXXX, our XX% QX horsepower of in

Over capital that the are that to pricing by to with these I XX% on units above we currently coming returns expect expect XXX,XXX invested target. typically return rental customers, with horsepower. terms blue will nearly X-year increase on additional contracted large all to we reiterate our our fleet X- quarters, horsepower chip yield X

XXXX, be with in mix an drives focused large units a and are that on We with horsepower now exclusive natural beginning units motor focus electric will almost on of entirely again, once gas set engines.

Our fourth driver is accretive M&A.

I and great position than we looking deals, at are will While that on the want potential being believe reiterate we a position in transaction to disciplined our in active Any front. needs to already potential remain better our shareholders the remain in. we in M&A I result company

I summarize need that feel don't acquisition. I an to do we would

experience, X makes shareholders. Officer, recent January at NGS sense advances will has broad only the and strategic Ian I financial public priorities like Chief to to would X, XXXX. NGS do operational highlight price team. of if analysis join than deal of as a the will it our Financial for that a additions financial the company improvement. business, later including Ian accounting, Eckert a no range We

We join our team. have are very to excited him

all would served instrumental date, continue Ian provide like Financial our I start role Chief October who transition as has in opportunity John the worked past have to in thank who and success. at have his us and our this Accordion with thereafter. interim that since John Bittner, will been Officer of services team, XXXX we'll and to year colleagues over take the until then

Gene's of I I year. working Director with that effective look her our using a and November a implementing rental experience as experience Officer. former outside Gene facets Gene as the Chief forward as well equipment opportunity all a substantial towards Holly business. of technical strategies additional was Board, of believe have our Information to goal. data other is as energy of this added companies X additive improve with to space to we NGS, substantial

looking these employees second our as our to the To think joined well is look should results has I their of Steve a to we Board delivered on to field, our all sunglasses NGS power opportunity Taylor, the put level, our as and XX a I Chairman, thank we And NGS. that to trusting at want on our ahead. management over as of paraphrase take the for our us for with talent the story future last shareholders, and months, all thank great of business. who the in at customers lies it also of indication the the that ahead

John. my turn pleasure now over to it With to the is call that,

John Bittner

Thank you, good Justin, morning, everyone. and

quarter up of Let me million to and $XX.X sequentially Total to quickly for third was X% up X.X% revenue quarter. $XX.X highlights rental by financial revenue the our hit the was million.

Our gross for by sequentially quarter. margin $X.X adjusted million by increased gross the margin percentage in a driven which at rental came margin, total million a XX.X% gross ] in [ adjusted $X.X increase of

margin the quarters X Rental in straight compressor recently XX%, which adjusted generating horsepower to margin of million income above quarter gross realized our or potential high Net our share. now $X $X.XX boost units. near for or We've with installed the percentages was continues per confidence

adjusted was EBITDA was sequentially. which or Our million increase third $X.X a XX% million, quarter $XX.X

XX, units, had X,XXX rented as XXXX, to June units September At ] [ At of units XXXX, the to QX end we as XX, rented ] [ of XXXX. June XX, XXX,XXX-horsepower represented of compared XXX,XXX-horsepower X,XXX XXXX. rented compared

the from revolving with restated and to And X.XXx We Turning was ended the of ratio amended at outstanding balance $XXX quarter leverage agreement, QX. X.XXx, the million in our financial down our looking credit covenants sheet. credit contained facility. as X on our

the quarter. coverage [ at third in end compliance both of ] meaning charge ratio fixed Our were comfortably financial that was of the our we with X.XX QX covenants for

Our million, high balance XX million accounts at QX. from balance our decrease as end receivable of $XX.X of the $XX.X was a September

DSO ultimately levels, over think recent remains achievable. significant this Let's a higher it we around XX is while And our at put improvement days. than

progress in of date certain will is We are quarters. an the but our this investment the require metric there further to that to But likely to substantial systems. pleased opportunity over with believe improve coming continue improvement upgrading

generated of flow in $XX operations million from XXXX. cash We year-to-date

on $XX.X net remaining million Rental CapEx million Our restated a We the new $X.X $X balance paid in amended out same to totaled upgrades during for of the CapEx. XXXX. growth the can broken that by facility maintenance down $XX.X being months credit which unit our million, CapEx period and with first of be million

turn that, back over to With I'll Justin closing it for remarks.

Justin Jacobs

our on the first $X of of generating compressor moved midpoint results We based and up the guidance, our $XX Thanks, XXXX John. prior marks increase by of units. by EBITDA from our the We adjusted in which million. range to an year confidence this the $X the X million, $XX is guidance. tightened to our XXXX the for the through range With and outlook margin our did current quarters rented potential million million respect

We're improving to of our generating lower as are there that and costs, cash we noncore said, flow initiatives. With to incremental relates efficiency some to investments and can being reallocate growth scalability mindful expenses looking that flow where and necessary improve efficiencies, it operations. are of cash

have some potential holiday to happen namely unit transitions, related also with We CFO as that incremental as expenses the new onetime season. our and set costs associated activity well professional in significant service related people some new could fees, labor

to respect expect to expenditures, spend reflecting $XX new to With large million million growth between horsepower compression. capital XXXX we in investments $XX in

For to the likely tightened indicate the the number. kept XXXX, midpoint we've same range but of our expectation the

For have markets well ranges, to view growth million growth significant in increase of our million we $XX CapEx increased XX%. for as more low and XXXX, our range is operations. leverage At $XXX relative midpoint This expected our flexibility capital and of of good million, cash due both a between our the the million. is the by $XXX indication as than $XX and from

unchanged maintenance million outlook related trucks equipment. smaller of of and for Our units XXXX compression to amounts CapEx $XX with $X the to other equipment, and expenditures including Rental million, at remains field our majority

target In terms of least invested capital, on remains XX%. return at our

advantage taking we our the are and leveraging we where relationships position closing, market of In and can.

are increasing are horsepower capture we share certainly than positioned our an and well public large compression to We the the growing market. of faster ones, peers,

net continue generate We to our to are business. from profitable operating in activities reinvest and high cash

losing and increasing strategy remains near- NGS sight quite years. both can while remain executing value. All balance our long-term flow and and cash Our shareholder on the excited are drive never sheet in, I earnings, in strong, about we on what to coming achieve

concludes This our prepared remarks.

the up of the I'll portion So ask for call. to queue operator the Q&A

Operator

Our Raymond first Jim with James. Instructions] [Operator far X of from question Rollyson so is

James Rollyson

made and margins, kind posting back. a XX-ish great been of Bittner You comment guys indicating percent kind little a while a about right? Congratulations weren't lower quarter. of margins for another plus Mr. maybe to the quite certain. you because Maybe large circling bit XXXX have we've good thinking got contracted Rental shuffle at in But guidance as margin great beyond 'XX, you are How in continue about just you returns. business? profile say, you look the beyond, more that's on and terms horsepower little

Justin Jacobs

say look margin going prior quarters, -- would are as some of I at that we quarter certainly prior to [ we're pleased with units to the on ] compared that had we of -- the some third standby. XX.X% we

pull will And that a so up bit. little margin that

increasing to the little I should higher the that over modestly out previous forward units, levels the levels in past be and mix XXXX kind X as shift the that loaded the see looking past horsepower of that second think comments half which of some quarters higher both throw that as we'll confidence with but of shift levels will kind at a of John's margin this we some on see year, more kind this the not call back-end bit of of the margins? the been seeing calls should that that, be we've just we're going getting quarter that

James Rollyson

And -- front, that you've Got XX% or very XXs, helpful. more trend horsepower type you imagine obviously, as number higher. on utilization range. it. of been contracts, And on kind in this That's add of the large low that's longer-term should I so

us give what large that? you horsepower the color smaller little of about maybe about transition you're some how a like can on a think stuff even that to time. if And looks utilization today, on detail the thinking Just over just on little versus

Justin Jacobs

Sure.

XXX% I the really kind and second utilized. going we're but some and -- or I'll think because about frictional are there will we of high-horsepower quickly. in, when here the a it There on side, you of out kind that, think, how have effectively the come -- really those with back forward. going is drive point So X start unit quite are

horsepower ] XXX,XXX It's for big so number kind that's really down? not that's ranges initiative on the roughly the the And conversations, the really that And us size medium-term utilized. horsepower in in to and as medium. that's that drive of [ And previous driver. the drive small said unutilized entirely those our I've almost and calls

Operator

from comes with Street Capital Mr. question Rob next Brown Lake Our Market.

Robert Brown

the talk little about I environment. bit a It's just want quite demand to strong.

coming of -- visibility I for mix, provide drive the talked kind next, electric in I could color the you think much guess, And decision some do contracts the but have about CapEx? seeing you you how marketplace? ramp any into out years customers signing you X on up maybe 'XX? further to now now Or are

Justin Jacobs

Sure.

that really, units remarks, I I'm terms point. mentioned at saying units there a customers, So in some I this of -- new with contracts, half demand won't as in back at focus on what they're need we're looking really XXXX. in incremental, -- terms we they're providing be of instead but XXXX. larger think -- really shouldn't looking new going the are of XXXX the any XXXX to prepared in really think we're they of And it's in not plans our our -- say of

that's demand of of the that. a generally, we're so little still terms the I kind it's seeing But still And in focus required. of high would business. say early that's really compression incremental level, And strong at for

Robert Brown

fleet prices how you still Obviously, maybe is sense the on Okay. Great. it's is a environment. sort if strong, And looking pricing looking average year-over-year? of the pricing for good. a driver price? And demand of as But at are kind

Justin Jacobs

the certainly not the overall that think, I same think a materially, the we're terms increased but substantial positive we're increases so down in or of magnitude rate of on by so driven pricing, rate. last I the upward has have over inflators seeing equipment price cost at of cost seeing significantly in just bias and market come just whole been on years the other of labor the and still that change X

through able pricing is which significant driven seeing. by and been in We've some go percentage really the fleet there, to the utilized the we're expenses capture that with customers incremental a of conversation

of just past is changes. at So step not positive I happened the see which on function but kind bias years still kind really of so, that a to the on pricing, or X expect levels have over

Robert Brown

Okay. look on on to back QX. And want then your comments I

cost were you're any in sort the a you sense setting there is And you of visibility is Could units said maybe quarter. what some of little there costs that of -- think incur what on in the is? I that bit us going give to a there of terms and cost? the

Justin Jacobs

required The specific And time expense need the that Thanksgiving incremental kind if and short-term the really particular we just make period some service expense, fine. that that challenges amount customers snaps around to if term for costs. that of that is delivering service to that and to delivering want comment that and they And levels cold were incremental short revolves causes make some sure season, that look potential weather is that's labor time exceeding Christmas, and really running of in is potential our sure in year making required, up expect for are can that that occur say, our of those and to a something units we're we're customers servicing, sure we if an incremental at that modest and time. of holiday a

and want going just point, As of make kind I customers' over weeks or we're to expectations. so this that forward just we sure exceed at potential next the said, looking X our it's

Operator

from next Our Selman comes question with Akyol Stifel. Instructions] [Operator

Selman Akyol

quarter. on nice a Congratulations

And that just going is raising XX you your people there? M&A just declined Let customer that Or the I'm and start seeing with really is high-grading, sequentially, curious, prices on me out XX. to count returning?

Justin Jacobs

a point fluctuate reduce nothing I of us. overall, and for count. not to It's I strategy there's particular were There's driver I factor kind customer number such decline to a a a particularly expect from material to small see of don't that we conscient there. it would trying as that around,

Selman Akyol

about be CapEx is then your Okay. of how And but this, -- electric? many next to dedicated may you that I towards year, going how think have for missed much as

Justin Jacobs

looking of the from is of in XX% kind About contracted of half into XXXX really the second and horsepower, that's what XXXX.

Selman Akyol

then And XXXX know I and it. yet. Got guess haven't I -- guidance you for provided

guidance. see CapEx you're to just You how have about trying or provided thinking think the 'XX. But maybe

basis. cash you You activities noted a investing next of so the And the comments get at from capital sort investing sheet. you're your I'm balance of far maybe improvement ops in year, looking in sort flow that the equaled some on more year-to-date

viewing you neutral to As a to outspending it and therefore, be expect of having Or be up to we think would cash about XXXX, leverage that flow you you sort from expect bit? are standpoint? just as

Justin Jacobs

down our will the materially. an absolute number expect leverage levels, covenant go the third leverage modestly quarter will that with the ratio up coming certainly And somewhat on be or the I basis. in expect higher.

-- budgeting the of the XXXX. for going now terms through right we're process In

to activity for of It's XXXX looking ultimately, And earnings terms of going think the that year, calendar is exiting just the kind as that's we because impact much key year. at be kind kind we of in of in of of us will is how set not the about XXXX. that will business exit power how how gets at the the the determinant look are okay, of XXXX all an currently all the units we before kind expect run timing under of of to set It's through those contract much end in of be just that -- are versus captured rate. of which all working out, because those figure EBITDA of units know

Selman Akyol

hit you'd one looking before going know in there last kind what your you're then behavior? you customers' into -- you changes levels just is And it. see I as for me, that XXXX. see But about Got just macro that out to oil, And your we'd have discussions back comments. think there of to having

Justin Jacobs

new it's kind I've what which Feds the going behavior, there with see of And where and see the the some centralized just where I read, lower. I've would much, it's regional That's much kind the lift, Permian you XXs are even of low of in see in operating out and you're publicly changes. marginal some in kind data, larger operators gas production XXs reference available seen changes to of conversation price, the ranges Permian different some XXs prices we start to of at think high customers, Basin in for low Basin. of wells. kind to significant put kind of

to So changes drastic expect behavior changes absent side. I the in WTI see wouldn't production in on

I think it's WTI. kind of looking to really this which incremental a XXXX. saw point, down if the how term demand, on we view, a at dip we're And of out long in to $XX

Would period to or of there production. but to magnitude it a I customers opposed some to start really suspect that, suspect spot change difficult expect I forward bit looking longer-range and change as price more kind -- I I in to because at that's I wouldn't would behavior? know little wouldn't it's of expect would. -- they the a their are a they are The existing they how of to particular of But looking to say gets then see over -- growth once time. see latter, again, behavior. forecasting

Operator

our question Tate comes last And Group. Sullivan Maxim the with from

Tate Sullivan

at yard? units someone the that's assume it offload transportation? to for sending do Is compressor, horsepower just to cost number Or growth results. fully average scrap those that? down Can But Is rented I looking was you per rented horsepower. depreciated I'm compressors drives any XX% you there talk total of and smaller then Certainly, any -- more meaningful the the the quarter-over-quarter. which about there

Justin Jacobs

Sure.

but correct. small not is number medium almost combined. a units, huge unit and the in low that It's primarily you're small a entirely It's on number. utilization, So and

kind where We those the and midst an the to of some in point. Nothing this are units. particularly a in the what opportunity of review a is medium small doing reduce full of full and review at -- of of announced there

back, it the saying decision coming I the some to and units of that. expect these but certainly percentage at don't part fleet, what's the looking be of around economic the smaller as of right significant a horsepower units

even if the scrapped. be looking their percentage assets be And and and they're for them will take us. horsepower existing those and some unutilized could do the some -- of put But unutilized small saying, be use of but small really to of units of it how will fleet, it's a the economic we highest even at sell

Tate Sullivan

lag Okay. I when way door you the is in actually a horsepower of CapEx how going Yes. just going terms it's in units out just terms looking could quarter of depreciated trying assume CapEx like in door? if that units of wondering And are or the terms sort out the then the the monetize in too. was bulk larger deployed, I of many and model it any out of to fully of

Justin Jacobs

may with third is from have in time to lag with order point The that No. start time this the party. a at fabricated confirming we're an putting and unit a

months You're closer of X XX. looking at a to range

spend and of there, Now will kind the capital there's go field. completed being period ready of over that get progress initial spent . It's more X-quarter in units like a of some to series out lag. time. kind of But the payments that we to that make

Operator

don't other I any see questions. And

Justin Jacobs

shareholders forward in progress your call. updating and We you you. the on and our in for and appreciate listening Luke, support, thank those you, and the your potential to on look we our thank to shareholders Well, and Okay. next participation questions all sincerely quarter. Thank you of

Operator

Thank you very much, everyone. And for attending. today's concludes conference Thank you this call.

Natural Gas Services (NGS) 15 Nov 242024 Q3 Earnings call transcript