Midland, tX, August 11, 2021 (GLOBE NEWSWIRE) – Highlights of the second quarter of 2021
- Rental income of $ 15.6 million, an increase of 2% compared to the first quarter of 2021 and 3% compared to the second quarter of 2020.
- 80 new compression units will be discontinued in the second quarter of 2021, including a record of 28 large horsepower units.
- Net loss of $ 1.9 million ($ 0.14 loss per basic and diluted share) a reduction of $ 1.5 million compared to the first quarter of 2021 and a decrease of $ 2.1 million compared to the first quarter of 2021 second quarter of 2020.
- Adjusted EBITDA of $ 4.5 million. See Non-GAAP Financial Measures – Adjusted EBITDA below.
- In the six months ended June 30, 2021, the company purchased 175,007 shares of common stock (approximately 1.3% of the outstanding shares) valued at approximately $ 1.9 million for an average purchase price of $ 10.81 per common share return.
MIDLAND, Texas, August 11, 2021 – Natural Gas Services Group, Inc. ("NGS" or the "Company") (NYSE: NGS), a leading provider of natural gas compression equipment and services to the energy industry, today announced financial results for the three and six months to June 30, 2021.
"The second quarter marked a major turning point for the Natural Gas Services Group," said Stephen C. Taylor, chairman, president and chief executive officer. "As we continue to monitor the effects of the COVID pandemic, higher energy prices and improved manufacturing activities accelerated the rollout of rental compression. We have identified 80 new compressor packages, including a record number of high-performance power packs, that will provide rental income with solid margins over the coming quarters. "
"While the increased activity provides our company with a clear path to increased sales and profitability, it is not without costs and logistical challenges," added Taylor. “A portion of the initial deployment cost is booked before the full quarterly rental income is earned, which impacted the quarter. To ensure we were able to meet the service needs of all existing and new customers, we saw higher employment rates. and higher labor costs, which had an impact on spending particularly related to the use of new rental equipment. "
“Ultimately, customer deferred maintenance as a result of the pandemic and significant price inflation across our business, from rare metals used in emissions catalysts to consumables like oil and antifreeze, also impacted deployment and service costs off, ”said Taylor. "In the future, we should be able to reduce a large part of these costs through rental price and service price improvements."
"We will continue to build and operate new units, albeit at a more moderate pace, which will allow the installed rental base to grow further in the second half of the year," concluded Taylor. “While this also increases our profile's set-up and start-up costs, it is temporary and our vigilance and adjusted pricing should help mitigate the effects of inflation from the logistic and labor challenges posed by increased activity. "
Revenue: Total revenue for the three months ended June 30, 2021 increased to $ 17.7 million from $ 17.4 million for the three months ended June 30, 2020. This increase was primarily due to an increase in rental and service – and maintenance income. Rental income rose 3.2% to $ 15.6 million in the second quarter of 2021 from $ 15.1 million in the second quarter of 2020 due to higher horsepower utilization. As of June 30, 2021, we had 1,245 units (287,365 hp) leased units compared to 1,273 units (284,373 hp) leased units as of June 30, 2020. Sequentially, total revenue in the second quarter of 2021 decreased by 3.5% compared to June 18, 2020 $ .4 million in the first quarter of 2021 primarily due to a $ 1.9 million decrease in compressor sales as we had no compressor sales in the three months ended June 30, 2021.
Gross margins: Total gross margin decreased to $ 473,000 for the three months ended June 30, 2021, compared to $ 2.7 million for the same period in 2020. Adjusted total gross margin excluding depreciation for the three months ended June 30, 2021 decreased to 6, $ 6 million from $ 8.8 million for the same period ended June 30, 2020. This decrease was primarily due to increased rental costs, primarily driven by a significant increase in retooling activities as well as customer-driven parts replacement activities, one of which Much has been delayed by the pandemic. For the newly discontinued units, especially our higher-performance units, the initial installation usually incurs higher costs than our normal monthly operating rates. In the three months up to June 30, 2021, our Perm operating region installed over 50 units, 27 of them with 400 hp or more. These cost increases were partially offset by increased rental income. Sequentially, total gross margin decreased to $ 473,000 for the three months ended June 30, 2021, compared to $ 2.4 million for the three months ended March 31, 2021. Without depreciation, adjusted gross margin decreased to in the second quarter of 2021 $ 6.6 million compared to $ 8.6 million in the first quarter of 2021. This sequential decrease was primarily due to lower rental margins driven by a significant increase in new equipment activity as well as customer-centric spare parts replacement activity, which was largely have been delayed by the pandemic. Please see the explanation of Non-GAAP Financial Measures Adjusted Gross Margin below.
Operating loss: The operating loss for the three months ended June 30, 2021 was $ 2.3 million, compared to an operating loss of $ 148,000 for the three months ended June 30, 2020. Operating loss increased due to lower rental margins, as above described. Similarly, the operating loss in the second quarter of 2021 rose from $ 369,000 in the first quarter of 2021 to $ 2.3 million due to lower rental margins.
Net (loss) income: Net loss for the three months ended June 30, 2021 was $ 1.9 million ($ 0.14 per basic and diluted share) compared to net income of $ 165,000 ($ 0.01 and $ 0.01, respectively) $ 0.01 per basic or diluted share) for the three months ended June 30, 2020. The decrease in net income for the second quarter of 2021 was primarily due to lower rental margins, partly due to an income tax benefit of $ 339,000 related to off an increase in net operating losses that can be used to reduce future taxable income. The net loss of $ 1.9 million ($ 0.14 per basic and diluted share) for the second quarter of 2021 compares to a net loss of $ 394,000 ($ 0.03 per basic and diluted share) in the first quarter of 2021. This sequential decline was primarily due to declining rental margins.
Adjusted EBITDA: Adjusted EBITDA declined to $ 4.5 million for the three months ended June 30, 2021, from $ 7.1 million for the same period in 2020. This decrease was primarily due to lower rental margins as well as to approximately $ 200,000 -Dollars attributed to higher health insurance expenses and higher cash settlement costs. Sequentially, Adjusted EBITDA for the three months ended June 30, 2021 decreased to $ 4.5 million from $ 6.3 million in the previous quarter. This increase is due to lower rental margins combined with higher health insurance expenses.
Cash flows: As of June 30, 2021, cash and cash equivalents were approximately $ 26.2 million and working capital was $ 57.9 million excluding debt. For the six months of 2021, cash flow from operating activities was $ 12.8 million while cash flow from investing activities was $ 12.6 million. Investing cash flow includes $ 12.6 million in capital expenditures, of which $ 12.0 million was spent on rental investments.
"As shown on our balance sheet, we have continued to operate without debt and maintain a strong liquidity profile," added Taylor. "We also made significant investments in our own business, repurchasing over 175,000 common shares during the quarter, which is a judicious use of our capital given our current share value."
Selected dates: The tables below show the sales and percentage of total sales for the three and six months ended June 30, 2021 and 2020, along with our gross margin and adjusted gross margin (excluding depreciation) and the corresponding percentages of sales for each of our product lines. The adjusted gross margin is the difference between sales revenue and cost of sales, excluding depreciation.
| revenue | |||||||||||||||||||||||||||
| Three months to June 30th, | Six months to June 30th, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||
| Rental | $ | 15,613 | 88 | % | $ | 15.131 | 87 | % | $ | 30,954 | 86 | % | $ | 31,231 | 88 | % | |||||||||||
| sales | 1,573 | 9 | % | 2.008 | 12th | % | 4,284 | 12th | % | 3,458 | 10 | % | |||||||||||||||
| Service maintenance | 563 | 3 | % | 266 | 2 | % | 908 | 2 | % | 606 | 2 | % | |||||||||||||||
| total | $ | 17,749 | $ | 17.405 | $ | 36,146 | $ | 35,295 | |||||||||||||||||||
| Gross margin | ||||||||||||||||||||||||||||||||
| Three months to June 30th, | Six months to June 30th, | |||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||
| Rental | $ | 450 | 3 | % | $ | 2,432 | 16 | % | $ | 2,572 | 8th | % | $ | 4,629 | fifteen | % | ||||||||||||||||
| sales | (275 | ) | (17 | ) | % | 78 | 4th | % | (251 | ) | (6 | ) | % | (283 | ) | (8th | )% | |||||||||||||||
| Service maintenance | 298 | 53 | % | 159 | 60 | % | 586 | 65 | % | 365 | 60 | % | ||||||||||||||||||||
| total | $ | 473 | 3 | % | $ | 2,669 | fifteen | % | $ | 2,907 | 8th | % | $ | 4,711 | 13th | % | ||||||||||||||||
| Adjusted gross margin (1) | |||||||||||||||||||||||||||||||||
| Three Months ended June 30th, | Six months to June 30th, | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||||||
| Rental | $ | 6,531 | 42 | % | $ | 8,502 | 56 | % | $ | 14,715 | 48 | % | $ | 16,705 | 53 | % | |||||||||||||||||
| sales | (204 | ) | (13 | ) | % | 148 | 7th | % | (108 | ) | (3 | ) | % | (141 | ) | (4th | ) | % | |||||||||||||||
| Service maintenance | 313 | 56 | % | 166 | 62 | % | 610 | 67 | % | 381 | 63 | % | |||||||||||||||||||||
| total | $ | 6,640 | 37 | % | $ | 8,816 | 51 | % | $ | 15,217 | 42 | % | $ | 16,945 | 48 | % | |||||||||||||||||
(1) To compare Adjusted Gross Margin to its most directly comparable financial measure calculated and presented in accordance with GAAP, see "Non-GAAP Financial Measures – Adjusted Gross Margin" below.
Non-GAAP Financial Measure – Adjusted Grosss margin: “Adjusted Gross Margin” is defined as total revenue minus cost of sales (excluding depreciation expense). Adjusted Gross Margin is included as a supplement as it is a primary metric used by management as it represents the results of sales and cost of sales (excluding depreciation), which are important components of the operation. The adjusted gross margin differs from the gross margin in that the gross margin includes depreciation costs. We believe Adjusted Gross Margin is important because it focuses on the current operating performance of our operations and eliminates the impact of the past historical cost of the assets acquired or built in those operations. The depreciation expense reflects the systematic allocation of historical property, plant and equipment over the estimated useful life.
Adjusted Gross Margin has certain significant limitations related to its use when compared to Gross Margin. The depreciation charge is a necessary part of our costs and our ability to generate income. Management uses this non-GAAP measure as a complementary measure to other GAAP results to provide a more complete understanding of company performance. As an indicator of operating performance, Adjusted Gross Margin should not be viewed as an alternative or more meaningful than GAAP gross margin. Adjusted Gross Margin may not be comparable to a similarly named metric from another company because other companies may not calculate Adjusted Gross Margin in the same way.
The following table calculates the gross margin, the most directly comparable GAAP financial metric, and reconciles it with the adjusted gross margin:
| Three months to June 30th, | Six months to June 30th, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| (in thousands) | (in thousands) | ||||||||||||||||||
| Total sales | 17,749 | $ | 17.405 | $ | 36,146 | 35,295 | |||||||||||||
| Cost of sales, excluding depreciation | (11.109 | ) | (8,589 | ) | (20.929 | ) | (18,350 | ) | |||||||||||
| Depreciation attributable to cost of sales | (6.167 | ) | (6.147 | ) | (12.310 | ) | (12.234 | ) | |||||||||||
| Gross margin | 473 | 2,669 | 2,907 | 4,711 | |||||||||||||||
| Depreciation attributable to cost of sales | 6.167 | 6,147 | 12,310 | 12,234 | |||||||||||||||
| Adjusted gross margin | $ | 6,640 | $ | 8,816 | $ | 15,217 | $ | 16,945 | |||||||||||
Non-GAAP Financials – Adjusted EBITDA: Adjusted EBITDA reflects net income or loss before interest, taxes, depreciation and amortization, non-cash stock-compensation expenses, goodwill impairment, increases in inventory write-downs, and rental equipment shutdown. Adjusted EBITDA is a metric used by management, analysts, and investors as an indicator of cash flow from operations because it excludes the impact of movements in working capital, non-cash expenses, and finance costs. Therefore, Adjusted EBITDA gives the investor information about the cash generated from a company's operations. Adjusted EBITDA, however, is not a measure of financial performance under GAAP and should not be viewed as a substitute for any other financial performance measure. Adjusted EBITDA calculated by NGS may not be comparable to Adjusted EBITDA calculated and reported by other companies. The GAAP measure that best compares to Adjusted EBITDA is net profit (loss).
The following table compares our net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA:
| Three months to June 30th, | Six months to June 30th, | |||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||||
| Net (loss) income | $ | (1.918 | ) | $ | 165 | $ | (2.313 | ) | $ | 4,247 | ||||||||
| Interest expenses | 14th | 8th | 16 | 11 | ||||||||||||||
| Income tax expense (benefit) | (339 | ) | 57 | (213 | ) | (4.486 | ) | |||||||||||
| Depreciation | 6.326 | 6,301 | 12,623 | 12,541 | ||||||||||||||
| Material expenses for share compensation | 422 | 563 | 896 | 1,066 | ||||||||||||||
| Adjusted EBITDA | $ | 4,505 | $ | 7.094 | $ | 11.009 | $ | 13,379 | ||||||||||
Conference call details:
telephone conference: Thursday, August 12, 2021 at 10:00 a.m. in the middle (11:00 a.m. east). Live by phone at 877-358-7306, passcode "Natural Gas Services". All participants and participants in the conference Call should arrange a call at least 5 minutes before the start time.
Live webcast: The webcast will be available in audio-only mode on our website www.ngsgi.com in the Investor Relations section.
Webcast response: For those who are unable or unable to attend, a replay of the conference call will be available within 24 hours on the NGS website at www.ngsgi.com.
Stephen C. Taylor, President and CEO of Natural Gas Services Group, Inc. will host the conference call and discuss financial results for the three and six months ended June 30, 2021.
About the Natural Gas Services Group, Inc. (NGS): NGS is a leading provider of gas compression equipment and services for the energy industry. The company produces, manufactures, rents, sells and services natural gas compressors and combustion systems for oil and natural gas production and plant facilities. NGS is headquartered in Midland, Texas, with manufacturing facilities in Tulsa, Oklahoma and Midland, Texas, and service facilities in major US oil and natural gas wells. More information is available at www.ngsgi.com.
Cautionary Note Regarding Forward-Looking Statements: Except for the historical information contained herein, the statements in this press release are forward-looking and made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that could cause NGS actual results in future periods to differ materially from the projected results. These risks include, but are not limited to: the potential impact of the COVID-19 pandemic on the company's business; a sustained, significant decline in oil and natural gas prices that could lead to a decline in demand for NGS products and services; loss of market share through competition or otherwise; the introduction of competing technologies by other companies; and new government safety, health and environmental regulations that could force NGS to make significant capital expenditures. The forward-looking statements contained in this press release speak only as of the date of this press release, and NGS assumes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the company's most recent annual report on Form 10-K and the company's Form 10-Q for the quarter ended June 30, 2021, which has been filed with the Securities and Exchange Commission.
| For more information contact: | Alicia Dada, Investor Relations |
| (432) 262-2700 [email protected] |
|
| www.ngsgi.com |
| NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, excluding amounts per share) (unchecked) |
|||||||||
| June 30th 2021 |
December 31, 2020 | ||||||||
| FINANCIAL ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 26,173 | $ | 28,925 | |||||
| Trade accounts receivable less allowance for doubtful accounts of $ 1,203 and $ 1,161, respectively | 12,229 | 11,884 | |||||||
| inventory | 21,348 | 19,926 | |||||||
| Federal income tax claim | 11,538 | 11,538 | |||||||
| Prepaid Income Taxes | 39 | 66 | |||||||
| Prepaid expenses and other items | 775 | 379 | |||||||
| Total current assets | 72.102 | 72,718 | |||||||
| Long-term inventory, minus the obsolescence allowance of $ 37 and $ 221, respectively | 1,171 | 1,065 | |||||||
| Equipment rental, less accumulated depreciation of $ 187,087 and $ 175,802, respectively | 208.176 | 207,585 | |||||||
| Property, plant and equipment, less accumulated depreciation of $ 15,103 and $ 13,916, respectively | 21,180 | 21,749 | |||||||
| Rights of Use – Operating leases, less accumulated depreciation of $ 465 and $ 356, respectively | 375 | 483 | |||||||
| Intangible assets less accumulated amortization of $ 2,071 and $ 2,008, respectively | 1,088 | 1,151 | |||||||
| Other assets | 2,507 | 2,050 | |||||||
| total financial assets | $ | 306,599 | $ | 306,801 | |||||
| LIABILITIES AND SHAREHOLDERS EQUITY | |||||||||
| Current liabilities: | |||||||||
| Settlement liabilities | $ | 2,425 | $ | 2,373 | |||||
| accruals | 10,998 | 6,770 | |||||||
| Credit line | – | 417 | |||||||
| Current operating leases | 131 | 198 | |||||||
| Prepaid expenses | 693 | 1.103 | |||||||
| Total short-term liabilities | 14,247 | 10,861 | |||||||
| Deferred income tax liability | 41,666 | 41,890 | |||||||
| Long-term operating leases | 244 | 285 | |||||||
| Other long-term liabilities | 2,541 | 2,221 | |||||||
| Total liabilities | 58,698 | 55,257 | |||||||
| Obligations and contingencies | |||||||||
| Equity capital: | |||||||||
| Preferred shares, 5,000 authorized shares, no shares issued or outstanding | – | – | |||||||
| Common stock, 30,000 authorized shares, face value $ 0.01; 13,394 and 13,296 shares issued | 134 | 133 | |||||||
| Capital reserve | 113.175 | 112,615 | |||||||
| Retained earnings | 136.974 | 139.286 | |||||||
| Treasury shares, at cost, 213 or 38 shares | (2.382 | ) | (490 | ) | |||||
| Total equity | 247.901 | 251,544 | |||||||
| Total liabilities and equity capital | $ | 306,599 | $ | 306,801 | |||||
| NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED PROFIT & SITUATION STATEMENT (in thousands, except earnings per share) (unchecked) |
|||||||||
| Three months completed | |||||||||
| June 30th | |||||||||
| 2021 | 2020 | ||||||||
| Revenue: | |||||||||
| Rental income | $ | 15,613 | $ | 15.131 | |||||
| sales | 1,573 | 2.008 | |||||||
| Service and maintenance income | 563 | 266 | |||||||
| Total sales | 17,749 | 17.405 | |||||||
| Operating costs and expenses: | |||||||||
| Rental costs, excluding depreciation, which are shown separately below | 9,082 | 6,629 | |||||||
| Cost of sales, excluding depreciation, which is shown separately below | 1,777 | 1,860 | |||||||
| Service and maintenance costs, excluding depreciation, which are shown separately below | 250 | 100 | |||||||
| Selling and general administration | 2,607 | 2,663 | |||||||
| Depreciation | 6.326 | 6,301 | |||||||
| Total cost of ownership and expense | 20,042 | 17,553 | |||||||
| Operating loss | (2.293 | ) | (148 | ) | |||||
| Other income (expenses): | |||||||||
| Interest expenses | (14 | ) | (8th | ) | |||||
| Other income (expenses), net | 50 | 378 | |||||||
| Total other income (expenses), net | 36 | 370 | |||||||
| Loss before provision for income taxes | (2.257 | ) | 222 | ||||||
| Income tax (expense) allowance | 339 | (57 | ) | ||||||
| Net (loss) income | $ | (1.918 | ) | $ | 165 | ||||
| (Loss) earnings per share: | |||||||||
| basic | $ | (0.14 | ) | $ | 0.01 | ||||
| Diluted | $ | (0.14 | ) | $ | 0.01 | ||||
| Weighted Average Shares Outstanding: | |||||||||
| basic | 13.305 | 13,237 | |||||||
| Diluted | 13.305 | 13,480 | |||||||
| NATURAL GAS SERVICE GROUP, INC. CONDENSED CONSOLIDATED CASH FLOW STATEMENT (in thousands) (unchecked) |
|||||||||
| Six months ended | |||||||||
| June 30th | |||||||||
| 2021 | 2020 | ||||||||
| THE CASH FLOW FROM OPERATING ACTIVITIES: | |||||||||
| Net (loss) income | $ | (2.313 | ) | $ | 4,247 | ||||
| Adjustments for reconciliation of net (loss) income to Cash generated from operations: | |||||||||
| Depreciation | 12,623 | 12,541 | |||||||
| Amortization of the issuing costs | 7th | – | |||||||
| Deferred income taxes | (224 | ) | 399 | ||||||
| Share-based payment | 896 | 1,066 | |||||||
| Allowance for bad debts | 65 | 63 | |||||||
| Profit from the sale of assets | – | (273 | ) | ||||||
| Loss (profit) on company life insurance | (188 | ) | 92 | ||||||
| Changes in operating assets and liabilities: | |||||||||
| Requests from deliveries and services | (410 | ) | (2.631 | ) | |||||
| inventory | (1.543 | ) | 5,262 | ||||||
| Federal income tax claim | – | (14.992 | ) | ||||||
| Prepaid expenses and prepaid income taxes | (369 | ) | (95 | ) | |||||
| Liabilities and provisions | 4,281 | (536 | ) | ||||||
| Prepaid expenses | (410 | ) | (515 | ) | |||||
| Increase in deferred tax liability due to change in tax law | – | 10,103 | |||||||
| Others | 337 | 71 | |||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 12,752 | 14,802 | |||||||
| CASH FLOW FROM INVESTMENT ACTIVITIES: | |||||||||
| Purchase of rental equipment, real estate and other equipment | (12,567 | ) | (10.989 | ) | |||||
| Purchase of a company's own life insurance | (55 | ) | (196 | ) | |||||
| Proceeds from the sale of property, plant and equipment | – | 383 | |||||||
| Proceeds from the sale of the investment fund with deferred compensation | – | 10 | |||||||
| NET FUNDS USED FOR INVESTMENT ACTIVITIES | (12,622 | ) | (10.792 | ) | |||||
| CASH FLOW FROM FINANCING ACTIVITIES: | |||||||||
| Loan proceeds | – | 4,601 | |||||||
| Repayment of the loan | – | (4.601 | ) | ||||||
| Payments of other long-term liabilities, net | (1 | ) | (2 | ) | |||||
| Paying off long-term debt | (237 | ) | – | ||||||
| Repayment of the line of credit | (417 | ) | – | ||||||
| Purchase of own shares | (1.892 | ) | – | ||||||
| Taxes paid in connection with the net settlement of share awards | (335 | ) | (149 | ) | |||||
| NET FUNDS USED FOR FINANCING ACTIVITIES | (2.882 | ) | (151 | ) | |||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | (2.752 | ) | 3,859 | ||||||
| CASH AND CASH equivalents at the beginning of the period | 28,925 | 11,592 | |||||||
| CASH AND CASH equivalents at the end of the period | $ | 26,173 | $ | 15,451 | |||||
| ADDITIONAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||
| Interest Paid | $ | 9 | $ | 11 | |||||
| Income taxes paid | $ | – | $ | 63 | |||||
| CASHLESS TRANSACTIONS | |||||||||
| Right of use acquired through an operating lease | $ | – | $ | 5 | |||||