Executive Summary

Strong Q1 with records in rental revenue ($38.91M) and Adjusted EBITDA ($19.29M), while total revenue grew 12% YoY to $41.38M and net income was $4.85M; diluted EPS of $0.38 declined YoY on higher D&A and inventory adjustments but improved sequentially .
Broad-based beat vs S&P consensus: revenue +2.1%, Adjusted EBITDA +10.5%, EPS +52% versus estimates; management raised the high-end of FY25 Adjusted EBITDA guidance to $79M and reaffirmed capex plans, citing momentum and contracted deployments weighted to 2H25/early 2026 .
Balance sheet and liquidity enhanced: revolver expanded to $400M with 50–75 bps lower rates and more flexible covenants; Q1 leverage 2.18x and $132M availability at quarter-end (before the April upsize) .
Catalyst setup: 2H25-heavy new unit deployments, sustained rental margin in low 60s, asset monetization (tax receivable, Midland real estate) and potential M&A; CEO acknowledged “sandbagging” questions around guidance prudence amid macro volatility .

What Went Well and What Went Wrong

What Went Well

Record rental revenue and Adjusted EBITDA: “Rental revenue hit a quarterly record of $38.9 million… Adjusted EBITDA of $19.3 million… once again, a record number.”
Pricing/margins durable: Rental adjusted gross margin reached 61.9% (one of the highest in a decade); total adjusted gross margin rose to 58.6%, +210 bps sequentially, reflecting pricing discipline and cost control .
Financial flexibility improved: Credit facility expanded to $400M with lower pricing and more flexible leverage covenant; management emphasized optionality for organic growth and M&A .

What Went Wrong

EPS down YoY: Diluted EPS fell to $0.38 from $0.41 amid inventory allowance, retirements of rental equipment, and higher D&A, partially offset by stronger rental gross margin .
Product sales/aftermarket softness: Sales gross margin remained negative (–$0.18M) and aftermarket revenue fell to $0.55M, weighing on reported gross margin mix despite strong rental trends .
Slight utilization drift and concentration risk: HP utilization dipped to 81.7% (from 82.1% in Q4) and largest customer represented 46% of Q1 revenue (down from 54% in FY24 but still elevated) .

Financial Results

P&L and Profitability (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Total Revenue ($M)	$40.686	$40.658	$41.383
Rental Revenue ($M)	$37.350	$38.226	$38.910
Diluted EPS ($)	$0.40	$0.23	$0.38
Operating Income ($M)	$9.457	$6.043	$9.507
Net Income ($M)	$5.014	$2.865	$4.854
Adjusted EBITDA ($M)	$18.186	$18.006	$19.290
Adjusted Gross Margin % (Total)	56.3%	56.5%	58.6%
Rental Adjusted Gross Margin %	61.3%	60.4%	61.9%

Segment Revenue ($M) (oldest → newest)

Segment	Q3 2024	Q4 2024	Q1 2025
Rentals	$37.350	$38.226	$38.910
Sales	$1.843	$0.997	$1.927
Aftermarket Services	$1.493	$1.435	$0.546
Total	$40.686	$40.658	$41.383

KPIs – Fleet and Utilization (oldest → newest)

KPI	Q3 2024	Q4 2024	Q1 2025
Horsepower Utilized	475,534	491,756	492,679
Total Horsepower	579,699	598,840	603,391
HP Utilization %	82.0%	82.1%	81.7%
Units Utilized	1,229	1,208	1,202
Total Units	1,909	1,912	1,916
Unit Utilization %	64.4%	63.2%	62.7%

Actual vs S&P Global Consensus – Q1 2025

Metric	Actual	S&P Consensus	Surprise
Revenue ($M)	$41.383	$40.520*	+$0.863M (+2.1%)
Adjusted EBITDA ($M)	$19.290	$17.459*	+$1.831M (+10.5%)
Diluted EPS ($)	$0.38	$0.25*	+$0.13 (+52.0%)

Values retrieved from S&P Global.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA	FY 2025	$74–$78M	$74–$79M	Raised high-end
Growth Capex	FY 2025	$95–$120M	$95–$120M	Maintained
Maintenance Capex	FY 2025	$10–$13M	$10–$13M	Maintained
Target ROIC	Ongoing	At least 20%	At least 20%	Maintained
Fleet Growth	By early 2026	~~+90,000 HP (~~+18% vs YE’24)	~~+90,000 HP (~~+18% vs YE’24)	Maintained (timing 2H25/early 2026)

Management also reiterated that once 2025 growth capex is deployed, run-rate Adjusted EBITDA growth should be well in excess of (but less than double) the 18% horsepower growth vs Q4’24 baseline .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’24, Q4’24)	Current Period (Q1’25)	Trend
Demand/Pricing	“Compression demand… remains robust”; favorable pricing in Permian . Continued strength, industry-leading organic growth .	2025 “locked in”; 2026 growth discussions ongoing; pricing stable .	Strong/stable
Margins	High rental adjusted GM; mix-driven expansion .	Total adjusted GM 58.6%; rental adjusted GM 61.9%; sustainable “something with a 6 on the front” .	Slightly improving, sustainable
Tariffs/Macro	N/A in Q3; general strength in 2024 .	Minimal direct impact; monitoring indirect effects .	Neutral/monitor
Capital Allocation/Asset Monetization	Strong CFO; working capital monetization in 2024 .	DSOs ~35 days; $11M tax receivable at JCT; Midland HQ/fab monetization targeted .	Ongoing execution
Customer Concentration	Not highlighted .	Largest customer 46% of Q1 rev (down from 54% in FY24); growing 2nd-largest over 10% .	Improving diversification
Growth Capex & 2026	FY25 growth capex $90–$110M indicated; units under LT contracts .	FY25 growth capex $95–$120M reaffirmed; deployments weighted to 2H25/early 2026 .	Building toward 2H25/2026

Management Commentary

“We are taking market share, expanding our presence in key basins, and investing in our fleet, including the deployment of large-horsepower electric motor units.” — CEO Justin Jacobs .
“Rental revenue hit a quarterly record of $38.9 million… Adjusted EBITDA of $19.3 million… once again, a record number.” — CEO .
“We finished the quarter at 2.18x leverage… significant offensive firepower to maintain organic growth and add inorganic growth.” — CEO .
“Rented adjusted gross margin reached 61.9%… one of the highest levels we've achieved in the past decade.” — CFO Ian Eckert .
“Given the current macro uncertainty… I’m going to be… prudent and a little patient… If macro… were more similar to 2024, then the high end of guidance would likely have had an 8 on the front of it.” — CEO .
Credit facility expansion: total commitments to $400M, –50–75 bps rate at comparable leverage, more flexible leverage covenant beginning mid-2026 .

Q&A Highlights

Demand/pricing: 2025 book “essentially all locked in”; 2026 growth discussions ongoing; no material pricing pressure vs 90 days ago .
Margins: Rental adjusted GM sustainable in low-60s; possible temporary installation cost blips around new unit sets, but not significant or lasting .
Asset monetization/returns: DSOs at ~35 days; pursuing $11M tax receivable and Midland real estate monetization; proceeds first to debt paydown, then organic growth; Board actively evaluating return-of-capital timing/methods .
Supply chain: Lead times unchanged—engines 6–8 months (model dependent), frames shorter, fabrication ~9–12 months .
LNG/midstream tailwinds: “Green shoots” for small HP on higher gas volumes; tight large HP market; potential midstream entry could further tighten supply .

Estimates Context

Q1 2025 beat S&P consensus across revenue (+2.1%), Adjusted EBITDA (+10.5%), and diluted EPS (+52.0%), reflecting strong rental growth and margin execution . Consensus detail shown in the “Actual vs S&P Global Consensus” table above.
Forward-looking consensus points to continued growth into 2026, consistent with contracted deployments and 2H25 timing; management’s prudence on guidance reflects macro volatility rather than operational softness . Values retrieved from S&P Global.

Key Takeaways for Investors

2H25 setup is favorable: contracted deployments weighted to the back half should lift revenue/EBITDA trajectory; Q1 already annualized near the top half of the raised range .
Pricing and rental margins appear sustainable in the low 60s, supporting incremental EBITDA conversion on new sets .
Liquidity/optionality improved with $400M facility and lower borrowing costs; leverage at 2.18x provides room for organic and M&A initiatives .
Asset monetization (tax receivable, real estate, inventory) could accelerate deleveraging/fund growth; Board is evaluating return-of-capital options as growth normalizes .
Mix risks (negative sales margins, softer aftermarket) are manageable given rental-led model; watch utilization drift and concentration though diversification is improving .
Near-term trading: positive bias on raised guidance and broad-based beat; incremental upside hinges on pace of 2H deployments and any M&A updates .
Medium-term thesis: secular compression demand, electrification initiatives, and tight large HP supply underpin multi-year growth with potential midstream optionality .

NATURAL GAS SERVICES GROUP INC (NGS)·Q1 2025 Earnings Summary