Sign in

You're signed outSign in or to get full access.

NG

NATURAL GAS SERVICES GROUP INC (NGS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record adjusted EBITDA of $19.7M and diluted EPS of $0.41 on total revenue of $41.4M, driven by rental revenue growth to $39.6M and all‑time high utilized horsepower of ~499k .
  • Versus consensus, EPS beat ($0.41 vs $0.34*), EBITDA beat ($19.7M vs $18.6M*), and revenue was slightly below ($41.4M vs $41.9M*) as aftermarket and sales remained modest; three analysts cover the quarter* .
  • Management raised FY25 adjusted EBITDA guidance to $76–$80M, tightened growth capex to $95–$115M, and lifted maintenance capex to $11–$14M, citing contracted large horsepower deployments in 2H25/early 2026 .
  • Capital return initiated: first quarterly dividend of $0.10/sh and a $6M repurchase authorization; leverage remained low at 2.31x, positioning NGS for organic growth and selective M&A .

Note: Values marked with * are from S&P Global consensus.

What Went Well and What Went Wrong

What Went Well

  • Rental revenue rose 13.3% YoY to $39.6M, with rental adjusted gross margin leading overall profitability; adjusted EBITDA reached a quarterly record $19.7M .
  • Utilized rental horsepower hit an all‑time high (498,651 HP; 83.6% utilization), underpinned by contracted large-horsepower set deployments and improving pricing per HP-month .
  • “We delivered another record-setting quarter… Adjusted EBITDA was a record $19.7 million… We are deploying large-horsepower gas engine and electric motor units… increasingly seeing opportunities to displace our competitors,” CEO Justin Jacobs . “Demand for natural gas is expected to grow by more than 30% over the next five years… LNG exports, AI data centers, and power generation,” supporting compression demand .

What Went Wrong

  • Sales revenue and gross margin remained soft: sales revenue was $0.75M and sales gross margin was a loss of ~$0.25M, reflecting continued wind-down of fabrication and limited sales activity .
  • Sequential adjusted gross margin dipped slightly (total adjusted GM: $24.223M in Q2 vs $24.256M in Q1), with CFO citing idle facility costs tied to Midland closure as the primary driver .
  • Higher depreciation from new unit sets pressured sequential profitability (net income up only ~$0.3M sequentially), and small/medium horsepower continues to require optimization and selective retirements/sales .

Financial Results

Revenue and EPS vs Prior Periods and Consensus

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions) – Actual$40.66 $41.38 $41.38
Revenue ($USD Millions) – ConsensusN/A$40.52*$41.87*
Diluted EPS ($USD) – Actual$0.23 $0.38 $0.41
Diluted EPS ($USD) – ConsensusN/A$0.25*$0.34*

Note: Values marked with * are from S&P Global.

Margins

MetricQ4 2024Q1 2025Q2 2025
Gross Margin ($USD Millions)$14.63 $15.72 $15.35
Adjusted Gross Margin ($USD Millions)$22.98 $24.26 $24.22
Adjusted Gross Margin (%) – Total56.5% 58.6% 58.5%

Adjusted EBITDA vs Consensus

MetricQ4 2024Q1 2025Q2 2025
Adjusted EBITDA ($USD Millions) – Actual$18.01 $19.29 $19.67
EBITDA ($USD Millions) – ConsensusN/A$17.46*$18.63*

Note: Consensus EBITDA definitions may differ from company “Adjusted EBITDA.” Values marked with * are from S&P Global.

Segment Breakdown (Revenue)

Segment Revenue ($USD Millions)Q2 2024Q1 2025Q2 2025
Rental$34.93 $38.91 $39.58
Sales$2.27 $1.93 $0.75
Aftermarket Services$1.30 $0.55 $1.05
Total Revenue$38.49 $41.38 $41.38

KPIs (Compression Statistics at End of Period)

KPIQ2 2024Q1 2025Q2 2025
Horsepower Utilized454,568 492,679 498,651
Total Horsepower552,599 603,391 596,322
Horsepower Utilization (%)82.3% 81.7% 83.6%
Units Utilized1,242 1,202 1,198
Total Units1,899 1,916 1,833
Unit Utilization (%)65.4% 62.7% 65.4%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)FY 2025$74–$79M $76–$80M Raised (midpoint +$2M)
Growth Capex ($USD Millions)FY 2025$95–$120M $95–$115M Tightened lower range
Maintenance Capex ($USD Millions)FY 2025$10–$13M $11–$14M Raised
Rented Horsepower IncreaseThru early 2026+~90,000 HP vs YE24 +~90,000 HP (timing clarity) Maintained (timing refined)
Target ROICOngoing≥20% ≥20% Maintained
DividendQ3 2025N/A$0.10/sh declared; pay 8/22/25 Initiated
Share Repurchase2025–2027N/AAuthorized up to $6M; expires 8/6/27 Authorized

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI/technology & smart-enabled fleetFocus on compressor technology; margin discipline “Smart enabled large horsepower fleet” delivering record results; systems upgrades to optimize uptime and costs Improving execution, tech differentiation strengthening
Tariffs/macroMinimal direct impact expected; monitoring volatility “Do not expect a material impact… vendors largely US-based; exposure limited to raw materials/components” Stable risk view
Pricing/marginsRental adjusted GM low‑60s, sustainable; temporary install cost blips possible Rental margins sustained in low‑60s; slight sequential adjusted GM dip from idle facility costs Stable to slightly improving
Regional/customer mix (Permian, contract tenor)Growth in large HP; % month‑to‑month trending down; contracts 3–5 years Majority opportunities in Permian; ~80% HP on term contracts; avg tenor ~2.5 years Longer tenor, increased contract coverage
Asset monetization (DSO, real estate, tax receivable)DSO ~35 days; plan to monetize tax receivable ($11M) and real estate; comparable to $25M AR unlock in 2024 DSO ~30 days; Midland facility held for sale; expect comparable cash unlock in 2025/early 2026 Progressing; run-rate improving
Capital returns & leverageExpanded revolver; leverage down; explore return of capital Dividend initiated; $6M buyback; leverage 2.3x (lowest among peers per mgmt) New catalyst; balanced with growth

Management Commentary

  • “We delivered another record-setting quarter… Adjusted EBITDA was a record $19.7 million… deploying large‑horsepower gas engine and electric motor units… increasingly seeing opportunities to displace our competitors” — Justin Jacobs, CEO .
  • “Demand for natural gas is expected to grow by more than 30% over the next five years… LNG exports, AI data centers, and power generation” — supporting compression demand .
  • “Our approach to share repurchases will be opportunistic and valuation‑sensitive… expect a growing dividend over time, supported by cash generation” — Ian Eckert, CFO .
  • “With lowest leverage among public peers — 2.31x at quarter‑end — and a demonstrated ability to monetize non‑cash assets” — positioning for growth and M&A .

Q&A Highlights

  • Market share drivers: Larger growth capex relative to peers and displacement wins underpin share gains; emissions performance of newer large‑horsepower fleet helps customer adoption .
  • Margins sustainability: Rental adjusted margins in low‑60s seen as sustainable; sequential adjusted GM down slightly due to idle facility costs; install cost blips can be temporary .
  • Fleet optimization: Ongoing retirements/sales focused on small/medium HP; rented HP up while total HP down modestly from selective pruning .
  • Pipeline and basin exposure: Majority of opportunity dollar volume in Permian; “green shoots” in gassier basins aiding small HP and midstream‑adjacent demand .
  • Risk focus: Labor availability (Permian), utilization improvements in small/medium HP, macro/commodity volatility monitored; emphasis on controlling controllables .

Estimates Context

  • Q2 2025: EPS beat ($0.41 vs $0.34*), EBITDA beat ($19.7M vs $18.6M*), revenue slight miss ($41.4M vs $41.9M*); 3 estimates for both EPS and revenue* .
  • Q1 2025: EPS beat ($0.38 vs $0.25*), revenue beat ($41.4M vs $40.5M*), EBITDA beat ($19.3M vs $17.5M*)* .
  • Implication: Street likely to lift FY25 EBITDA/EPS on stronger rental performance, higher contract coverage (~80% of horsepower on term), and raised FY guidance; note potential definition differences for “Adjusted EBITDA” vs consensus* .

Note: Values marked with * are from S&P Global.

Key Takeaways for Investors

  • Rental‑led model continues to compound: record adjusted EBITDA, durable rental margins in low‑60s, and rising pricing/HP utilization support EPS and cash generation .
  • FY25 outlook improved; contracted 2H25/early 2026 deployments de‑risk near‑term growth trajectory; guidance raised to $76–$80M adjusted EBITDA .
  • Capital return now a tangible catalyst: dividend initiated ($0.10/sh) and opportunistic buyback ($6M), with management signaling potential for growth in returns as cash flow scales .
  • Balance sheet flexibility: 2.31x leverage and significant revolver capacity enable simultaneous organic growth and selective M&A; Midland facility classified held for sale enhances monetization runway .
  • Soft sales/aftermarket are a drag but not thesis‑critical; focus remains on rental economics and fleet optimization (small/medium HP retirements/sales) .
  • Macro/tariffs risk monitored but currently immaterial; secular gas demand drivers (LNG, AI data centers, power gen) favor compression demand tailwinds .
  • Near‑term trading: Expect positive reaction to beats and guidance raise; watch for execution on large HP deployments, any incremental dividend commentary, and opportunistic buybacks as valuation permits .