NGS

Image source: The Motley Fool. Tuesday, Aug. 11, 2026 at 8:30 a.m. ET Investor Relations - Anna Delgado Chief Executive Officer - Justin Jacobs Chief Financial Officer - Ian Eckert Operator: Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group, Inc. Quarter 2 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ms. Anna Delgado. Please begin. Anna Delgado: Thank you, Luke, and good morning, everyone. Before we begin, I would like to remind you that during the course of this conference call, the company will be making forward-looking statements within the meanings of the federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and are not guaranteed to be effective, that actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Natural Gas Services Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's earnings press release and in our filings with the SEC, including our Form 10-Q for the period ended June 30, 2026, and our Form 8-K. These documents can be found in the Investor Relations section of our website located at www.ngsgi.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. In addition, our discussion today will reference certain non-GAAP financial measures including EBITDA, adjusted EBITDA, adjusted net income, and adjusted gross margin, among others. For reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, please see yesterday's earnings release. I will now turn the call over to Justin Jacobs, Chief Executive Officer. Justin? Justin Jacobs: Thank you, Anna, and good morning, everyone. Joining me today is Ian Eckert, our Chief Financial Officer. As always, I want to begin by thanking the entire NGS team, including our new colleagues from Flatrock. I especially want to recognize our field service team whose focus on customer service and strong operational execution drove another record quarter. I also want to thank everyone across both organizations who helped us complete the Flatrock acquisition and who are now working together to integrate our people, systems, and operations. It's an exciting time for NGS. Our team delivered a record second quarter and a milestone first half of 2026, combining strong execution and organic growth with a strategic, accretive acquisition that materially increased the scale and capabilities of our platform. I usually start these calls by reviewing the details of the quarter. Today, I want to start with strategy. The second quarter results are important, but I think they are best understood in the context of the progress NGS has made over the last several years. We have continually discussed four growth and value drivers with investors: fleet optimization, asset utilization, organic growth, and accretive M&A. These drivers have remained entirely consistent. What has changed is the scale of NGS and the progress we have made against each of them. NGS is a materially larger, stronger, and more capable company than it was 3 years ago, but we do not believe we are close to exhausting the opportunities in front of us. So I want to spend a few minutes on what we have accomplished across each of our four growth and value drivers, and importantly, where we see additional opportunities ahead. Our first growth and value driver is optimization of the fleet we already own. There are several ways we create value here, but two of the most important over the last 3 years have been pricing and fleet mix. In the second quarter of 2026, pro forma rental revenue per average horsepower per month, assuming a full quarter of Flatrock revenue, was $28.06. Three years ago, in the second quarter of 2023, that number was $21.56. That is an improvement of almost $7 per horsepower per month, or more than 30%, representing a compound annual growth rate of nearly 10%. At the same time, we have fundamentally changed the composition of the fleet. Our rented large horsepower fleet now totals 501,000 horsepower and is 99% utilized. Large horsepower represents 75% of our total rented horsepower. At the end of the second quarter of 2023, our rented large horsepower fleet was 228,000 horsepower and represented 61% of the total rented horsepower. That means our rented large horsepower fleet has grown approximately 30% annually over the last 3 years and is now the vast majority of our rented fleet. That mix shift matters. Large horsepower equipment generally provides better economics, longer contract duration, and deeper customer relationships. Increasingly, our large horsepower growth also includes electric motor-drive equipment, which has become an important part of our offering, representing nearly 10% of the rented fleet. Looking ahead, we continue to see opportunity on both price and operating performance. Engine and fabrication lead times remain extended while customer demand remains strong. We believe that combination should support a constructive pricing environment for large horsepower compression. At the same time, we continue to invest in how we capture, integrate, and use data across the organization. This includes financial, operational, and increasingly, real-time unit-level information. Our SMART platform is one example. We are using predictive analytics to anticipate maintenance needs, improve field service execution, increase uptime, and deploy our people and resources more efficiently. Ultimately, the objective is simple: generate more earnings from every horsepower we already own while providing better service to our customers. Our second driver is asset utilization. This is about looking across the entire balance sheet and asking a straightforward question, is this asset producing an adequate return for our shareholders? If the answer is no, we need to improve its productivity or convert it into capital that can be deployed somewhere else. Working capital is probably the best example of what we have already accomplished. When I became CEO in February 2024, we finished that quarter with 108 days of accounts receivable. On a pro forma basis, second quarter 2026 DSO was approximately 33 days, representing approximately $22 million of accounts receivable. Reducing DSOs from 108 days to approximately 33 days has effectively created more than $40 million of cash. This is meaningful capital that was already inside the business. We did not need to issue equity or borrow money to create it. We simply needed to manage the asset more effectively. We applied the same philosophy to our income tax receivable. At year-end 2023, we carried an $11.5 million tax receivable that had first appeared on our balance sheet in Q1 2020. As of June 30, 2026, we had collected $13.8 million of principal and interest, and we subsequently received the remaining $300,000 of interest in July. In total, we converted approximately $14.1 million of a long-standing, non-cash asset into cash and brought that matter to a close. We have also materially improved the utilization of the compression fleet itself. Horsepower utilization increased to a record 88.3% in the second quarter from 78.6% 3 years ago, an improvement of almost 10 percentage points. But there is more to do. We are actively marketing our former Midland headquarters and fabrication facility for sale or lease. Those two properties have a combined book value of approximately $11 million, and we own four other real estate assets with a combined book value of just over $3 million. We also see a meaningful opportunity in inventory. Better procurement, demand planning, and parts standardization should allow us to reduce inventory while improving parts availability, technician productivity, and ultimately fleet uptime. The objective is the same across all of these areas, make every dollar already invested in NGS work harder. Our third growth and value driver is organic growth. The change in the size of NGS over the last 3 years is significant. We ended the second quarter with approximately 759,000 available horsepower compared with approximately 474,000 horsepower in the second quarter of 2023. That represents an increase of approximately 285,000 horsepower. Adjusting for the Flatrock acquisition, our organic annual growth rate over that period is more than 10%. Importantly, that growth has been heavily concentrated in large horsepower equipment, including electric motor-drive units, supported by longer-duration customer commitments. Another way to look at our organic growth is relative to the public compression industry. At the end of 2022, NGS represented roughly 3% of the horsepower among the four publicly traded pure-play compression companies. Despite that relatively small starting position, we have represented approximately 12% of the organic growth capital deployed by those companies in that period. Our large competitors have grown organically in the low to mid-single digits on an annual basis. We are growing organically at a significantly faster rate. That difference is important. We've consistently deployed growth capital at a rate materially above our relative size, and the result has been continued organic market share gains. Importantly, our objective is not growth for growth's sake. We deploy capital where we believe the expected returns justify the investment, generally supported by long-term customer commitments. The combination of attractive unit economics and growth well above our relative market share is what makes organic growth such an important value driver for NGS. Looking ahead, we believe that can continue. The long-term growth in LNG exports, increasing natural gas production, and rapidly growing electricity demand, including behind-the-meter power, should require substantially more compression infrastructure. Our objective is not simply to grow with the industry. We intend to continue growing faster than the industry and taking market share. Our fourth growth and value driver is accretive M&A. With the acquisition of Flatrock in June, we activated the fourth and final value creation lever that we have discussed with investors. Importantly, we did so after several years of significant organic improvement in the underlying NGS business. We acquired Flatrock for approximately $120 million, representing approximately 6.2x last quarter annualized adjusted EBITDA before synergies, a material discount to NGS's multiple. So even before considering potential synergies, we acquired a highly complementary business at a multiple below our own. Flatrock added approximately 87,000 rented horsepower and materially accelerated our electric motor-drive strategy. Approximately 20% of Flatrock horsepower is electric, compared with 7% for legacy NGS prior to the acquisition. Strategically, the transaction also increases our horsepower density in the Midland Basin, establishes critical mass in the Eagle Ford, diversifies our customer mix, and adds two large publicly traded E&P customers in the Midland Basin. Looking ahead, importantly, we retain substantial financial flexibility. Even after completing the transaction, quarter-end leverage was 2.77x with $172 million of unused commitments in our facility. That gives us meaningful capacity to continue investing organically and to evaluate additional inorganic opportunities where the strategic fit and returns are compelling. Taken together, our progress across these four drivers has materially increased the earnings power, utilization, scale, and quality of NGS while preserving balance sheet flexibility. And that stronger platform is particularly valuable because we believe the market opportunity in front of us remains highly attractive. Let me turn to the market outlook. Demand for compression remains strong across our operating footprint, particularly in the Permian Basin, which currently represents approximately 80% of our rental revenue. There continues to be commodity price and geopolitical volatility, but compression demand is ultimately driven by production volumes, throughput, and reliability, and the utilization levels across our fleet demonstrate that the customer environment remains constructive. On the oil side, prices in the mid-70s are supporting improving activity. Rig counts have been moving higher, Permian production remains at record levels, and gas-to-oil ratios continue to increase. That last point is particularly important for compression. As gas-to-oil ratios increase, more natural gas is produced for every barrel of oil. That gas must be gathered, processed, and transported. In each stage, there's a need for compression. On natural gas, the longer-term outlook remains exceptionally strong. Growing LNG exports, increased power generation demand, data center load growth, and behind-the-meter power generation should require substantially more natural gas infrastructure over the coming years. The United States also occupies an advantaged position as the world's largest LNG exporter and a secure source of supply without some of the geographic choke points affecting other major energy exporting regions. So whether we look at associated gas production in the Permian or longer-term growth in natural gas demand, both point toward a greater need for compression. At the same time, the supply of new compression equipment remains constrained. Engine and fabrication lead times have extended significantly. For existing compression providers, that combination of growing demand and constrained equipment supply supports high utilization and disciplined pricing, particularly for large horsepower equipment. We're also operating in an inflationary environment. Labor and parts costs increased during the quarter and we expect continued pressure. Lubricants are a relatively small portion of our cost base, but refinery constraints combined with higher crude prices are likely to drive materially higher lubricant costs. Our increased scale, procurement capabilities, and SMART-enabled operating platform should help us mitigate some of those pressures, but we are not immune to inflation and will remain disciplined on both price and cost. Overall, our view remains highly positive. Industry fundamentals are strong, equipment supply is constrained, pricing remains constructive, and compression is a mission-critical service for our customers. NGS enters that environment with a larger and better fleet, broader customer relationships, increased basin density, technology-enabled service capabilities, and significant financial flexibility. With that context, I'll turn the call over to Ian to discuss what that stronger NGS platform delivered during the second quarter. Ian Eckert: Thank you, Justin, and good morning to those joining us today. We ended June with approximately 759,000 available horsepower and approximately 670,000 rented horsepower. Rented horsepower increased 34.3% year-over-year, reflecting the combination of continued organic deployments and the addition of approximately 87,000 rented horsepower through the acquisition of Flatrock. Organically, we added approximately 5,000 horsepower during the second quarter and approximately 22,000 horsepower during the first half, with electric motor-drive equipment representing well over half of those additions. Based on our contracted deployment schedule and current customer demand, we now expect to deploy at least 55,000 horsepower organically during 2026, up from our previous expectation of 50,000 horsepower. Horsepower utilization reached a record 88.3%, a significant improvement from the sub-80% utilization levels we reported just 3 years ago, which primarily reflects our investment in large horsepower and electric motor-drive equipment. That combination of greater scale, higher utilization, and improved fleet mix translated into record second quarter financial performance. Turning to the income statement, rental revenue was a record $49.4 million in the second quarter, up $9.9 million, or approximately 25% from the prior year quarter, and up $2.3 million, or approximately 5% sequentially. Importantly, that growth was driven by both increased horsepower and continued pricing execution. However, Flatrock contributed only approximately half a month of financial performance during the second quarter, including $1.9 million of rental revenue. As a result, the vast majority of the acquisition's financial contribution will first be reflected in our third quarter results. On a pro forma basis, assuming a full quarter contribution from Flatrock, rental revenue per horsepower per month was approximately $28.06, an increase of more than 5% year-over-year. That performance reflects the quality of our fleet, the value of our service offering, and our ability to capture price in a constructive market. We also converted that revenue growth into higher profitability despite a challenging inflationary environment. Rental adjusted gross margin increased $6.2 million, or 25.6%, year-over-year, to $30.2 million. Rental adjusted gross margin percentage was 61.1%, up approximately 36 basis points from the prior year quarter. I think that margin performance is particularly notable given continued cost pressure across labor, lubricants, parts, and other operating inputs. It reflects the combined benefit of pricing discipline, improved fleet mix, higher utilization, and strong field service level execution. Reported SG&A was $9.9 million during the quarter, which included approximately $3.3 million of transaction costs associated with Flatrock. Excluding those transaction costs and non-cash SG&A, underlying SG&A was approximately $5.8 million, or 11.3% of revenue, compared with 11.6% in the second quarter of 2025. As the business continues to scale, we remain focused on creating additional fixed cost leverage while making the investments necessary to support a larger platform. Adjusted EBITDA reached a record $25.1 million, increasing $5.4 million, or 27.4% year-over-year, and 3.3% sequentially. Importantly, adjusted EBITDA growth year-over-year exceeded revenue growth, demonstrating the operating leverage inherent in the larger platform. Reported net income was $3.8 million, or $0.30 per diluted share, compared with $5.2 million, or $0.41 per diluted share in the prior year quarter. The year-over-year comparison was impacted by the approximately $3.3 million of transaction costs with the Flatrock acquisition. Excluding those transaction costs, adjusted net income was $6.1 million or $0.47 per diluted share, providing a much better view of the underlying earnings performance of the business. There is one additional item on net income that I want to make clear for modeling purposes. Our second quarter effective tax rate was 30.9%, above the approximately 25% to 26% rate we expect for the full year. The higher quarterly rate was primarily driven by a discrete state tax item following a change in Texas franchise tax depreciation rules, which required a one-time remeasurement of certain deferred tax liabilities associated with property and equipment. We do not view the second quarter tax rate as a run rate. For the full year, we still expect approximately 25% to 26% remains the appropriate range. Turning to cash flow and the balance sheet, cash provided by operating activities was approximately $25.4 million during the second quarter and $48.5 million for the first half, an increase of roughly 50% compared to the first half of 2025. And we expect a contribution from Flatrock to further strengthen our cash generation profile. Accounts receivable ended the quarter at approximately $22 million. Reported DSO improved by approximately 4 days sequentially to approximately 39 days. Because the Flatrock receivables are fully included at quarter-end, while only 19 days of Flatrock revenue are included in the quarter, reported DSO is not the best run rate measure. Pro forma, for a full quarter of Flatrock revenue, DSO was approximately 33 days, which is more representative of the performance of the combined business. Second quarter capital expenditures totaled approximately $18.8 million, including approximately $15.3 million of growth capital and $3.4 million of maintenance capital. First half growth capital expenditures totaled approximately $27.6 million. We expect growth capital spending to increase materially during the second half, as we execute against our contracted deployment schedule. Turning to the Flatrock transaction, purchase consideration consisted of approximately $108.9 million (sic) [ $108.7 million ] of cash and $10 million of NGS common stock. In conjunction with the acquisition, we increased our committed credit facility from $400 million to $500 million while retaining a $100 million accordion. The preliminary purchase price allocation also reinforces the tangible nature of what we acquired. Approximately $100.6 million, or roughly 85% of the purchase price, was allocated to the rental fleet, with less than $1 million recorded as goodwill. In other words, the transaction was overwhelmingly an investment in productive, cash-generating equipment. We ended the quarter with approximately $328 million outstanding under the credit facility, approximately $135 million of available borrowing capacity under the borrowing base, and over $170 million of unused facilities. Quarter-end bank covenant leverage was approximately 2.77x, with substantial headroom relative to our 3.5x leverage covenant, even after funding the acquisitions. Finally, we returned approximately $1.9 million to shareholders through our second quarter dividend of $0.15 per share and subsequently announced another $0.15 per share dividend for the third quarter. That quarterly dividend is 50% above the $0.10 per share with which we initiated the program 1 year ago. In summary, the second quarter was another record operating and financial quarter for NGS. The combined platform is larger, more productive, and more diversified. And we have preserved the liquidity and covenant capacity to continue executing our growth and value levers while still returning capital to shareholders. With that, I'll turn the call back to Justin to discuss our updated 2026 guidance and closing comments. Justin Jacobs: Thank you, Ian. Based on our second quarter performance, the Flatrock acquisition, contracted organic fleet additions, and our current visibility into the remainder of the year, we are increasing full-year 2026 adjusted EBITDA guidance to $103 million to $108 million from our previous range of $92.5 million to $97.5 million. The increase reflects roughly a half month from Flatrock in the second quarter, as well as a full second half contribution. To provide some color, we view this as effectively maintaining existing guidance from NGS and layering in the 6.5 months of contribution from the acquisition of Flatrock. We look forward to reporting our third quarter results where we will have a full quarter of contribution from the Flatrock acquisition along with the existing NGS results, and we can adjust our guidance as appropriate. We are also increasing full-year growth capital expenditures guidance to $60 million to $80 million from our previous range of $55 million to $70 million. For clarification, this excludes acquisition consideration. The increase reflects incremental large horsepower and electric motor-drive additions, as well as growth commitments that came to NGS with Flatrock. Maintenance capital expenditure guidance is now $15 million to $19 million. The modest increase reflects the larger combined fleet. Importantly, the Flatrock fleet came to us in very good condition and without a meaningful backlog of deferred maintenance. Our quarterly dividend remains $0.15 per share, reflecting our continued confidence in the durability of the cash flow generated by the business. Before I close, I want to briefly note one additional corporate development. Effective July 20, NGS completed its redomestication from Colorado to Texas and now is a Texas corporation. The primary driver for this change was corporate governance. Our legacy Colorado governing documents included a classified or staggered Board and unusually high voting thresholds that made those provisions difficult to change. Redomesticating to Texas provided the most efficient path to adopt new governing documents that better reflect how we believe a public company should be governed. Most importantly, our new governing documents eliminate the staggered Board. Beginning with our annual meeting next year, every director will stand for election every year. We made this change proactively because we believe it is more shareholder-friendly and in the best interest of NGS and our shareholders. I will close where I started. Over the last 3 years, we have demonstrated our ability to create value across each of our four growth and value drivers. What excites us today is that we continue to see meaningful opportunity across all four. We can generate more earnings from the fleet we already own. We can make underutilized assets and capital more productive. We believe we can continue to grow organically faster than the industry and take market share, and our balance sheet gives us the capacity to pursue additional accretive acquisitions when we find the right opportunities. At the same time, the market backdrop remains very supportive. Compression demand is strong, equipment availability is constrained, and the long-term outlook for natural gas continues to improve. We believe the combination of a stronger platform and significant remaining opportunity across each of our four growth and value drivers positions NGS to continue increasing earnings, cash flow, and long-term value for our shareholders. Luke, we're now ready to open the call for questions. Operator: [Operator Instructions] Our first question comes from Jim Rollyson with Raymond James. James Rollyson: I guess, Justin, you talked about outpacing growth relative to the market, which you guys have been on this trend for a period of time now. If you kind of listen to some of the peers that have kind of talked about the long-term outlook, which continues to be very, very bullish. You've seen some interesting longer-term commitments by others. And my recollection is your growth has been driven in large part by some specific customer opportunities. I'd love to just get an update on how you think about the opportunity set in front of you and what -- over time, what you think a sustainable growth CapEx outlook might look like. Justin Jacobs: Jim, thanks for joining and the question. As I look at the forward -- obviously talked extensively here about the market and the growth that we see going forward and obviously the growth that we've achieved over the last several years. I think that over time, and the Flatrock acquisition is certainly helpful in this particular point, that growth is going to come from a broader set of customers over time. Our several large disclosed customers we'll continue to grow with, but we have more opportunities with existing customers to increase the amount of equipment we have with them and substantially so. And there are new opportunity sets in terms of customers that we think we're going to be able to capture some equipment with going forward. So I think it is continued growth with existing customers, bringing both large and small, and new customer wins out there with, I think we'll be able to hit or be able to capture growth with them. We're not going to set longer-term targets at this point, really going to point to our track record of materially outpacing the industry. And with what I see and what I've seen people disclose, quite comfortable in saying we'll continue to do that in the future. James Rollyson: Got it. I appreciate that. And just as a follow-up, I think it's pretty related. You talked about fleet optimization and kind of unlocking value there. Maybe just your thoughts on what inning you are around optimizing your current fleet and especially with the added customer list of Flatrock, maybe how you think about that over time? Justin Jacobs: I think when it comes to -- I'd break that into a couple of components. And I think we're in different innings on those components. On the pricing side, the numbers I stated earlier, obviously, there's been pretty significant price increases. And so I think that will continue -- may not continue at the same rates because there has been substantial price increases over the last several years. But I think that will continue. And the second part I would look at is the operational optimization opportunity we have. And I think that is centered around data capture analysis and execution or kind of implementation from the learning of that data and then analysis. And that is not just financial. I think that is across a range of different opportunity types or sets of data, whether financial, operating, unit performance. And in that particular area, I think we are much earlier in the game or in the earlier innings. It's not an opportunity we're going to quantify at this point. But I do think that in terms of execution and delivering for our customers and ultimately for our financial performance, I think it is a material opportunity. Operator: Our next question comes from Nate Pendleton with Texas Capital. Nathaniel Pendleton: Good morning and congrats on the great update. I wanted to start on the integration of Flatrock. In the release, you mentioned meaningful opportunities on growth, operating efficiency, and fixed cost leverage. Can you unpack those a bit for us and give us a sense as to how you think about the size of those opportunities? Ian Eckert: In terms of the Flatrock integration, I think the integration is going very well thus far. As it relates to the integration opportunities mentioned on the call, there's clearly some opportunities in terms of route density, procurement scale, commonality in terms of equipment or parts and technician productivity, as well as fixed cost leverage opportunities. We're not going to give a formal synergy target right now. The current guidance that we've provided does not assume material labor application synergies. So those represent potential upside rather than something required to make the deal work. We viewed this deal as an opportunity to acquire very attractive assets and a strong field service organization. And it certainly wasn't reliant on any synergies that we expect to deliver over the course of the next year. Nathaniel Pendleton: And as my follow-up, with lead times continuing to extend for new large equipment and the benefits of scale in this industry, can you talk a bit about how you're looking at the M&A landscape post-Flatrock? Have conversations changed as lead times have extended recently? Justin Jacobs: I don't know that I would say I've seen any real difference in the M&A opportunities as a result of lead times extending. In terms of how we're looking at the M&A landscape, it's really through the exact same kind of framework that we were using previously and have used -- consistently applied in the Flatrock acquisition, will apply going forward. What are the quality of the assets? What are the customers? What are the basins, and ultimately, what's the value? We will look at and have looked at and continue to look at whole company acquisitions, partial acquisitions of competitors or customers' equipment. And -- so really, that framework has been consistent and will remain consistent. And I haven't seen, at least at this point, any real material change or any change that I can think of as it relates directly to the lead time expansions or extensions. Operator: And next is Rob Brown with Lake Street Capital. Robert Brown: Just following up a little bit on the constrained kind of lead times and supply environment. Where are you seeing kind of the constraints? And how are lead times, I guess, extending in those areas? Justin Jacobs: Rob, thanks for joining us. The -- I think it's a consistent story in terms of the drivers of the lead times, long lead times. The engines are typically -- this depends on the size of the particular engine, but engines are typically the longest and it's the largest engines that have the longest lead times. And certainly, the fabrication is still a constrained area, although less than the largest engines are, and then the compressors are behind that. So we're seeing -- for the equipment that we are ordering, we're seeing long lead times, but pretty consistent from 3 months ago, generally. And so that's something that we've been planning for. We feel like our ability to source engines from multiple OEMs provides an advantage for us in terms of procuring equipment to meet our customers' needs in shorter time periods. Robert Brown: And then, kind of in your comments on gross margin, or a question on gross margin, you've had some inflationary pressures, but you also have some scale benefits helping you. Just what's sort of your sense on the gross margin impact overall given the current cross currents? Ian Eckert: Yes, Rob. When I take a look at the margins for the second half of the year, we certainly don't expect the first quarter margin of 63.7% to be permanent, as you saw in the second quarter, but we do expect that the underlying fleet economics will remain strong. We do see some second half pressure as it relates to lubricants and other inputs. But lubricants are a relatively small part of the overall cost base. And offsetting that are pricing on new sets and renewals of existing contracts, and a larger mix of high-return, large horsepower and electric units, as well as some procurement scale and some synergies from the Flatrock acquisition. As those things start to catch up with inflation, I think it sets up a reasonably stable second half of the year from a margin perspective in comparison with what we recognized in the second quarter. Operator: Our next question comes from Josh Jayne with Daniel Energy Partners. Joshua Jayne: I just wanted to follow up on your answer to the last question. So in talking about offsetting inflationary pressures, you talked about the ability to, I guess, reprice some of your equipment. Could you talk about how much of your fleet will reprice in the remainder of '26 and into '27? Or maybe how much of your fleet is priced below where leading-edge pricing is today? Justin Jacobs: Josh, thanks for joining us. I think the way I would answer that question is to point to what we have disclosed publicly. And in our investor presentation, we cite the amount of our -- I believe it's done on rental revenue, that is under a term other than month-to-month. That number is 78%. And so we have 22% that's on month-to-month. And so there's opportunity there. And the weighted average tenor of that under term is 2.2 years. And so that can give you a little bit of sense. And it's obviously not exactly pro rata over that time period. But it gives you a reasonable sense of the fleet that will be coming up off of term and creates repricing opportunities. We have -- with the price increases you've seen over the last several years, we've been, I think, appropriate in going to our customers and saying, listen, the price is really across the board, our costs across the board, those are up and we have to be able to capture an appropriate price for the great service that we're providing. And we've been, I think, relatively at good results related to that, both from a ultimately service level for our customers, but also delivering value for our shareholders and getting the appropriate return. And so it's something that we're constantly looking at in terms of, what price increases we can reasonably capture while still delivering a strong customer relationship or having a strong customer relationship. Obviously, that's always a balance, but it's something we're constantly looking at and looking across the different cost buckets and what we expect in terms of inflation. And those are items that our customers are seeing as well, whether it's labor or parts or lubricants, everyone is seeing that. So it's not a surprise to anybody. Joshua Jayne: And maybe a follow-up to that, are you seeing any change, I guess, over the last 90 and 180 days in contracting terms of customers willing to extend contracts out further? Maybe you could just discuss that a little bit, just given the tightness in the market, the limited equipment availability that's sort of being capped by the engines, just how people are thinking about contracting terms today? Justin Jacobs: Yes, I think it is. It's always customer specific and can be even unit specific. I think that is an opportunity that is out there. The trade-off that invariably occurs with term is less price increase. And so that is a consideration when thinking about extending term of how long do you actually want term extended on equipment. Joshua Jayne: And actually, one more if I could squeeze it in. Sale-leasebacks today, just given where we are in the cycle with engine availability from a large supplier, just -- is something like that when you think about growing your business becoming a more attractive option to grow moving forward? And then I'll turn it back. Justin Jacobs: When you say, just to clarify, when you say sale-leaseback, are you talking about customers selling and leasing it back from us? Joshua Jayne: Yes. Justin Jacobs: I think it's -- I do this it is an opportunity. I think it should be an opportunity really in any market environment, just when we're thinking about from a capital allocation and ultimately the valuation or multiple that different companies get. It is something that we've had conversations with customers about in the past. We will continue to have those. It's difficult to predict how -- if that will occur or to what extent the size of the opportunity specifically for us. But it is a conversation that we have with customers that we would absolutely entertain doing that, including a potential size, but just very difficult to predict. Operator: [Operator Instructions] We don't have any other questions. Justin Jacobs: Thank you, Luke. Thank you, everyone, for your time and your questions today. We are proud of what the NGS team has accomplished, but as I said earlier, we believe there is still substantial opportunity ahead of us across each of our four growth and value drivers. We look forward to continuing to execute and updating you on our progress next quarter. Thank you. Operator: Thank you, everyone. This concludes today's conference call. Thank you for attending. Before you buy stock in Natural Gas Services Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Natural Gas Services Group wasn’t one of them. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. NGS (NGS) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Interested in Natural Gas Services Group, Inc.? Here are five stocks we like better. Record second-quarter performance: Rental revenue rose 25% year over year to $49.4 million, while adjusted EBITDA increased 27.4% to a record $25.1 million. Fleet utilization also reached a record 88.3%, supported by pricing gains and higher deployed horsepower. Flatrock acquisition expanded NGS’s platform: The approximately $120 million deal added scale, electric-drive capabilities and customer density in key producing regions, contributing about $1.9 million of second-quarter rental revenue. 2026 outlook raised: NGS increased adjusted EBITDA guidance to $103 million–$108 million and raised growth capital spending expectations to $60 million–$80 million, reflecting stronger organic expansion and the full-year impact of Flatrock. This Underrated Natural Gas Stock Could Rally Double-Digits Soon Natural Gas Services Group (NYSE:NGS) reported record second-quarter operating and financial results, supported by higher rental revenue, improved fleet utilization, pricing gains and the June acquisition of Flatrock Compression. Chief Executive Officer Justin Jacobs said the company’s growth strategy continues to center on fleet optimization, asset utilization, organic expansion and accretive acquisitions. He said the Flatrock transaction materially expanded NGS’s scale, electric-drive capabilities and customer presence in key producing regions. → SoundHound AI Sends a Loud Signal After Its Q2 Earnings Beat Chief Financial Officer Ian Eckert said second-quarter rental revenue rose 25% year over year to a record $49.4 million, while increasing 5% sequentially. The growth reflected both additional deployed horsepower and pricing execution. Flatrock contributed approximately $1.9 million in rental revenue during the quarter, representing about half a month of results after the acquisition closed. Rental adjusted gross margin increased 25.6% year over year to $30.2 million, and rental adjusted gross margin percentage rose 36 basis points to 61.1%. Eckert said the margin improvement came despite inflationary pressure on labor, lubricants, parts and other operating inputs. → 3 Dividend Champion Utilities for a Market That Can't Sit Still Adjusted EBITDA reached a record $25.1 million, up 27.4% from the year-ago quarter and 3.3% sequentially. Reported net income was $3.8 million, or $0.30 per diluted share, compared with $5.2 million, or $0.41 per diluted share, a year earlier. The comparison included about $3.3 million in Flatrock-related transaction expenses. Excluding those costs, adjusted net income was $6.1 million, or $0.47 per diluted share. The company said its second-quarter effective tax rate was 30.9%, above its expected full-year range of 25% to 26%, because of a one-time state tax item related to changes in Texas franchise tax depreciation rules. → Is Wingstop's Growth Story Losing Steam? NGS ended June with about 759,000 available horsepower and 670,000 rented horsepower. Rented horsepower increased 34.3% year over year, including the addition of approximately 87,000 rented horsepower through Flatrock. Horsepower utilization reached a record 88.3%, compared with 78.6% three years earlier. Jacobs said the company has shifted its fleet toward larger units, which generally carry better economics, longer customer contracts and deeper customer relationships. The company’s rented large-horsepower fleet totaled 501,000 horsepower and was 99% utilized at quarter-end, accounting for 75% of total rented horsepower. On a pro forma basis assuming a full quarter of Flatrock revenue, rental revenue per average horsepower per month was $28.06, up more than 5% from the prior-year period. Jacobs said the measure has increased by more than 30% over the past three years. Electric motor-drive equipment is also becoming a larger component of the fleet. It represented nearly 10% of rented fleet horsepower, and electric units accounted for well over half of NGS’s organic horsepower additions during the first half of 2026. Organic additions totaled approximately 5,000 horsepower in the second quarter. First-half organic additions totaled approximately 22,000 horsepower. NGS now expects to deploy at least 55,000 horsepower organically in 2026, up from a prior expectation of 50,000 horsepower. NGS acquired Flatrock for approximately $120 million, consisting of about $108.9 million in cash and $10 million in NGS common stock. Jacobs said the transaction was valued at approximately 6.2 times Flatrock’s last-quarter annualized adjusted EBITDA before synergies. About $100.6 million, or roughly 85%, of the preliminary purchase price allocation was assigned to the rental fleet, while less than $1 million was recorded as goodwill, according to Eckert. Flatrock increased NGS’s density in the Midland Basin, established a larger presence in the Eagle Ford and added two large publicly traded exploration and production customers in the Midland Basin. About 20% of Flatrock’s horsepower is electric, compared with 7% for legacy NGS before the deal. Eckert said integration was progressing well, with potential opportunities in route density, procurement, equipment and parts standardization, technician productivity and fixed-cost leverage. However, he said the company’s current guidance does not assume material labor-related synergies. NGS raised its full-year 2026 adjusted EBITDA guidance to a range of $103 million to $108 million, from prior guidance of $92.5 million to $97.5 million. Jacobs said the updated range incorporates Flatrock’s partial second-quarter contribution and its expected full second-half contribution. The company also raised its expected growth capital expenditures to $60 million to $80 million, excluding acquisition consideration, from $55 million to $70 million previously. Maintenance capital expenditure guidance was set at $15 million to $19 million, reflecting the larger combined fleet. Second-quarter capital expenditures totaled $18.8 million, including $15.3 million in growth capital and $3.4 million in maintenance capital. Operating cash flow was approximately $25.4 million for the quarter and $48.5 million for the first half, a roughly 50% increase from the first half of 2025. At quarter-end, NGS had approximately $328 million outstanding under its credit facility, about $135 million of available borrowing capacity under its borrowing base and more than $170 million of unused facility capacity. Bank covenant leverage was 2.77 times, below the company’s 3.5-times leverage covenant. The company returned approximately $1.9 million to shareholders through its $0.15-per-share second-quarter dividend and subsequently announced another $0.15-per-share dividend for the third quarter. Jacobs said compression demand remained strong, particularly in the Permian Basin, which represents approximately 80% of rental revenue. He cited rising production, increasing gas-to-oil ratios, LNG export growth, power-generation demand and constrained equipment supply as supportive industry conditions, while noting continued inflationary pressure on labor, parts and lubricants. NGS also completed its re-domestication from Colorado to Texas effective July 20. Jacobs said the new governing documents eliminate the company’s staggered board, with all directors scheduled to stand for election annually beginning at next year’s annual meeting. Natural Gas Services Group, Inc (NYSE: NGS) is an energy infrastructure company specializing in natural gas distribution and compression services across the United States. The company operates two primary lines of business: the Distribution segment provides natural gas delivery to residential, commercial and industrial customers, while the Compression Services segment rents, sells and services a diversified fleet of compression equipment for midstream and industrial applications. In its Distribution segment, Natural Gas Services Group engineers, constructs and maintains local pipeline networks, meters and related apparatus to ensure safe and reliable natural gas supply to municipal utilities and private customers. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Natural Gas Services Group Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Natural Gas Services (NGS) came out with quarterly earnings of $0.47 per share, beating the Zacks Consensus Estimate of $0.37 per share. This compares to earnings of $0.41 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +27.03%. A quarter ago, it was expected that this maker of natural gas compression equipment and industrial flare systems would post earnings of $0.45 per share when it actually produced earnings of $0.53, delivering a surprise of +17.78%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Natural Gas Services, which belongs to the Zacks Oil and Gas - Mechanical and and Equipment industry, posted revenues of $51.4 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 4.73%. This compares to year-ago revenues of $41.38 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Natural Gas Services shares have added about 10% since the beginning of the year versus the S&P 500's gain of 13.3%. While Natural Gas Services has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Natural Gas Services was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #1 (Strong Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.56 on $58.71 million in revenues for the coming quarter and $2.05 on $216.46 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Oil and Gas - Mechanical and and Equipment is currently in the top 32% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, North American Construction (NOA), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 12. This heavy construction and mining services company is expected to post quarterly earnings of $0.29 per share in its upcoming report, which represents a year-over-year change of +2800%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. North American Construction's revenues are expected to be $252.93 million, up 9.2% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Natural Gas Services Group, Inc. (NGS) : Free Stock Analysis Report North American Construction Group Ltd. (NOA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record second quarter results driven by organic growth, improved utilization, and pricing execution, with the Flatrock acquisition contributing only a partial month of performance. and sustained organic growth in large horsepower equipment. Shifted fleet composition significantly over three years, with large horsepower now representing 75% of total rented horsepower compared to 61% in 2023. Realized a 30% improvement in rental revenue per average horsepower per month since 2023, attributed to disciplined pricing and a higher-value equipment mix. Optimized the balance sheet by reducing Days Sales Outstanding (DSO) from 108 days to approximately 33 days, effectively unlocking over $40 million in cash. Leveraged the Flatrock acquisition to accelerate the electric motor-drive strategy, with electric units now comprising nearly 10% of the total rented fleet. Maintained high utilization rates of 99% for large horsepower units, reflecting a constructive market environment where demand outpaces constrained equipment supply. Increased full-year 2026 adjusted EBITDA guidance to $103 million–$108 million, reflecting a full second-half contribution from the Flatrock acquisition. Raised organic deployment expectations to at least 55,000 horsepower for 2026, supported by strong demand for infrastructure related to LNG exports and data centers. Anticipate continued inflationary pressure on labor, parts, and lubricants, which management plans to mitigate through pricing discipline and SMART-enabled operational efficiencies. Projected growth capital expenditures increased to $60 million–$80 million to fund incremental large horsepower and electric motor-drive commitments. Retain significant financial flexibility with $172 million in unused credit facility commitments to pursue further accretive M&A and organic market share gains. Completed redomestication from Colorado to Texas to modernize corporate governance, including the elimination of the staggered board structure. Recorded $3.3 million in transaction costs related to the Flatrock acquisition, which impacted reported net income for the second quarter. Identified approximately $14 million in non-core real estate assets for potential sale or lease to further optimize capital productivity. Noted a one-time discrete state tax item in Q2 that raised the effective tax rate to 30.9%, though full-year expectations remain at 25% to 26%. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management intends to continue outpacing industry growth by expanding relationships with a broader set of customers beyond their large disclosed accounts. Growth will be driven by both existing customer expansions and new customer wins across both large and small customers. Current guidance does not assume material labor synergies, providing potential upside as the company integrates route density and procurement scale. The acquisition was valued primarily for its high-quality assets and field service organization rather than reliance on immediate cost-cutting. Extended lead times for large engines and fabrication remain a constraint for the industry, supporting high utilization and disciplined pricing for existing providers. Management noted that while lead times are long, their ability to source from multiple OEMs provides a competitive advantage in meeting customer needs. Approximately 22% of the fleet is currently on month-to-month terms, providing immediate opportunities to capture leading-edge market pricing. Management balances extending contract terms with the trade-off of potentially lower price increases, depending on specific customer and unit dynamics.

SOUTHLAKE, Texas, Aug. 10, 2026 (GLOBE NEWSWIRE) -- Natural Gas Services Group, Inc. (“NGS” or the “Company”) (NYSE:NGS), a leading provider of natural gas compression equipment, technology, and services to the energy industry, today announced financial results for the three months ended June 30, 2026. Second Quarter 2026 Highlights Rental revenue of $49.4 million for the second quarter of 2026 represents a 24.9% year-over-year increase and a 4.9% sequential increase compared to the first quarter of 2026. Net income of $3.8 million, or $0.30 per diluted share, for the second quarter of 2026 compared to $5.2 million or $0.41 per diluted share for the second quarter of 2025 and $6.8 million, or $0.53 per diluted share for the first quarter of 2026. Adjusted Net Income(1) for the three months ended June 30, 2026, was $6.1 million, or $0.47 per diluted share, compared to Adjusted Net Income of $5.3 million, or $0.42 per diluted share, for the comparable 2025 period. Completed the acquisition of Flatrock Compression Holdings, LLC ("Flatrock") on June 12, 2026, adding 87,233 rented horsepower (the "Flatrock Acquisition"). Adjusted EBITDA(1) of $25.1 million for the second quarter of 2026, represents a 27.4% year-over-year increase and a 3.3% increase sequentially. Returned $1.9 million to shareholders during the second quarter of 2026 through the Company's quarterly dividend of $0.15 per share and announced a third-quarter dividend of $0.15 per share to stockholders of record as of August 19, 2026, expected to be paid on September 2, 2026. Management Commentary and Outlook "NGS delivered a record second quarter and a milestone first half of 2026," said Justin Jacobs, Chief Executive Officer. "Second quarter rental revenue increased 25% year over year, Adjusted EBITDA increased 27% year over year, and horsepower utilization reached a record 88.3%. These results reflect great field execution and strong demand for our fleet." "The acquisition of Flatrock added approximately 92,600 total horsepower to our fleet, improved our unit density in key growth basins, and accelerated our electric motor drive strategy. With only a partial month of Flatrock results included in the quarter, the full financial benefit of the combined platform remains ahead of us. Integration is progressing well, and we already see meaningful opportunities to diversify organic growth, improve field operating efficiency, and enhance fixed cost leverage." "Organic momentum also remains strong. We added 22,200 total horsepower during the first half of 2026, with large horsepower electric motor drive equipment comprising well more than half of those additions, and we now expect to deploy at least 55,000 horsepower organically this year. Industry fundamentals remain constructive, supported by high utilization, constrained equipment supply, and growing compression requirements tied to oil and gas production, LNG exports, and power demand." "Based on our record first-half performance and the Flatrock Acquisition, we are increasing full-year 2026 Adjusted EBITDA guidance to $103 million to $108 million. We ended the quarter with bank covenant leverage of 2.77x and more than $170 million of facility capacity providing flexibility to continue executing our strategic growth levers while returning capital to shareholders." Corporate Guidance — 2026 Outlook The Company now expects 2026 Adjusted EBITDA of $103 million to $108 million, compared to prior guidance of $92.5 million to $97.5 million. The updated guidance reflects record first-half performance, the June 12 acquisition of Flatrock, high utilization, and contracted organic fleet expansion balanced with expected inflationary pressures during the remainder of 2026. The outlook for capital expenditures has been updated to reflect the larger combined fleet and growth commitments following the acquisition of Flatrock. Growth capital expenditures for 2026 are expected in the range of $60 million to $80 million, excluding acquisition consideration, and remain focused on the deployment of large horsepower and electric motor drive compression units. Maintenance capital expenditures for 2026 are expected in the range of $15 million to $19 million. Consistent with prior periods, the Company remains committed to disciplined capital allocation and investing in assets that generate attractive long-term returns. The Company's operating cash flow, expanded $500 million credit facility, and significant borrowing capacity provide flexibility to integrate Flatrock, fund organic growth, pursue accretive acquisitions, and return capital to shareholders. 2026 Second Quarter Financial Results Revenue: Total revenue for the three months ended June 30, 2026, increased 24.2% to $51.4 million from $41.4 million for the three months ended June 30, 2025. This increase was primarily attributable to higher rental revenues for the comparable periods. Rental revenue increased 24.9% to $49.4 million from $39.6 million in the second quarter of 2025 driven by contracted fleet expansion and continued pricing strength across the company's fleet. Revenues provided by Flatrock during the partial month period were $2.2 million. As of June 30, 2026, we had 669,919 rented horsepower (1,521 utilized units) compared to 498,651 horsepower (1,198 utilized units) as of June 30, 2025, reflecting a 34.3% increase in total utilized horsepower. Flatrock accounted for 87,233 rented horsepower from 270 utilized units. Gross Margins and Adjusted Gross Margins(1): Total gross margins, including depreciation expense increased to $20.1 million for the three months ended June 30, 2026, compared to $15.4 million for the same period in 2025. Total Adjusted Gross Margin, exclusive of depreciation expense, increased to $30.8 million for the three months ended June 30, 2026, compared to $24.2 million for the same period in 2025. Operating Income: Operating income for the three months ended June 30, 2026, was $9.9 million and was essentially unchanged from the comparable 2025 period. Net Income and Adjusted Net Income(1): Net income for the three months ended June 30, 2026, was $3.8 million, or $0.30 per diluted share, compared to net income of $5.2 million, or $0.41 per diluted share, for the comparable 2025 period and $6.8 million, or $0.53 per diluted share for the three months ended March 31, 2026. The year-over-year and sequential decline in net income were driven by $3.3 million of strategic transaction costs attributable to the Flatrock Acquisition embedded in selling, general and administrative expenses, partially offset by increases in rental revenue and the associated gross margin impact. Adjusted Net Income for the three months ended June 30, 2026, was $6.1 million, or $0.47 per diluted share, compared to Adjusted Net Income of $5.3 million, or $0.42 per diluted share, for the comparable 2025 period. Cash Flows: For the three months ended June 30, 2026, cash flows provided by operating activities were $25.4 million, while cash flows used in investing activities were $127.5 million which includes $108.7 million for the cash portion of the Flatrock Acquisition, net of cash acquired and $18.8 million of capital expenditures including $15.4 million and $3.4 million for growth and maintenance, respectively. This compares to cash flows from operating activities of $11.0 million and cash flows used in investing activities of $25.7 million for the comparable period in 2025. Adjusted EBITDA(1): Adjusted EBITDA increased 27.4% to $25.1 million for the three months ended June 30, 2026, from $19.7 million for the same period in 2025. The increase was primarily attributable to higher rental revenue and rental adjusted gross margin. Sequentially, Adjusted EBITDA increased 3.3% when compared to $24.3 million for the three months ended March 31, 2026. Debt: Outstanding debt on our revolving credit facility as of June 30, 2026, was $328.0 million with over $170 million available on our facility and $134.8 million of availability, reflecting the applicable borrowing base calculation. Our leverage ratio as of June 30, 2026, was 2.77x and our fixed charge coverage ratio was 4.18x. As of June 30, 2026, the Company was in compliance with all terms, conditions and covenants of the credit agreement. Selected data (unaudited): The tables below show revenue by product line, gross margin and adjusted gross margin for the trailing five quarters. Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation. Non-GAAP Financial Measure - Adjusted Net income: “Adjusted Net Income” is a non-GAAP financial measure that we define as net income (loss) adjusted for nonrecurring interest income attributable to income tax refunds, impairments, nonrecurring restructuring charges including severance and costs directly attributable to strategic transactions, including the Flatrock Acquisition, and income tax effects of these adjustments. We believe that Adjusted Net Income and Adjusted Net Income per share amounts provide meaningful supplemental information regarding our operational performance on a recurring basis. The following tables reconcile our net income and diluted earnings per share, the most directly comparable GAAP financial measure, to Adjusted Net Income and Adjusted Net Income per diluted share: Non-GAAP Financial Measure - Adjusted Gross Margin: “Adjusted Gross Margin” as defined by us is total revenue less costs of revenues (excluding depreciation and amortization expense). Adjusted Gross Margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and costs (excluding depreciation and amortization expense), which are key components of our operations. Adjusted Gross Margin differs from gross margin, in that gross margin includes depreciation and amortization expense. We believe Adjusted Gross Margin is important because it focuses on the current operating performance of our operations and excludes the impact of the prior historical costs of the assets acquired or constructed that are utilized in those operations. Depreciation and amortization expense does not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs from current operating activity. Rather, depreciation and amortization expense reflects the systematic allocation of historical property and equipment costs over their estimated useful lives. Adjusted Gross Margin has certain material limitations associated with its use as compared to gross margin. These limitations are primarily due to the exclusion of depreciation and amortization expense, which is material to our results of operations. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and our ability to generate revenue. In order to compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance. As an indicator of our operating performance, Adjusted Gross Margin should not be considered an alternative to, or more meaningful than, gross margin as determined in accordance with GAAP. Our Adjusted Gross Margin may not be comparable to a similarly titled measure of another company because other entities may not calculate Adjusted Gross Margin in the same manner. The following table calculates our gross margin, the most directly comparable GAAP financial measure, and reconciles it to Adjusted Gross Margin: Non-GAAP Financial Measures - Adjusted EBITDA: “Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, nonrecurring restructuring charges including severance, costs directly attributable to strategic transactions, including the Flatrock Acquisition and non-cash equity-classified stock-based compensation expenses. This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because: (i) it is widely used by investors in the energy industry to measure a company’s operating performance without regard to items excluded from the calculation of Adjusted EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors; (ii) it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating structure; and (iii) it is used by our management for various purposes, including as a measure of operating performance, in presentations to our Board of Directors, and as a basis for strategic planning and forecasting. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows: (i) Adjusted EBITDA does not reflect all our cash expenditures, future requirements for capital expenditures, or contractual commitments; (ii) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (iii) Adjusted EBITDA does not reflect the cash requirements necessary to service interest or principal payments on our debt and finance leases; and (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any capital expenditures for such replacements. The following table reconciles our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA: Conference Call Details: The Company will host a conference call to review its second-quarter results on Tuesday, August 11, 2026 at 8:30 a.m. (EST), 7:30 a.m. (CST). To join the conference call, kindly access the Investor Relations section of our website at www.ngsgi.com or dial in at (800) 550-9745 and enter conference ID 167298 at least five minutes prior to the scheduled start time. Please note that using the provided dial-in number is necessary for participation in the Q&A portion of the call. A recording of the conference call will be made available on our Company's website following its conclusion. Thank you for your interest in our Company's updates. About Natural Gas Services Group, Inc. (NGS): Natural Gas Services Group is a leading provider of natural gas and electric compression equipment, technology and services to the energy industry. The Company rents, designs, installs, services and maintains natural gas and electric compressors for oil and natural gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers along with limited in-house assembly. The Company is headquartered in Southlake, Texas, with administrative offices in Midland, Texas, an assembly facility located in Tulsa, Oklahoma, and service facilities located in major oil and natural gas producing basins in the U.S. Additional information can be found at www.ngsgi.com. Forward-Looking Statements This Release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and information pertaining to us, our industry and the oil and gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management. All statements, other than statements of historical fact included in this Release regarding our strategy, future operations, financial position, estimated revenues and expenses, projected costs, prospects, plans and objectives of management are forward-looking statements. All statements, other than statements of historical facts contained in this Release, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements. We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “guidance,” “forecast,” “believe,” “might,” “continue,” “intend,” “plan,” “project,” “budget” and other similar words to identify forward-looking statements. These forward–looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of the Company. Forward–looking information includes, but is not limited to statements regarding: guidance or estimates related to Adjusted EBITDA growth, projected capital expenditures; returns on invested capital, fundamentals of the compression industry and related oil and gas industry, valuations, compressor demand assumptions and overall industry outlook, the anticipated benefits of the Flatrock Acquisition, expected synergies from the acquisition, the expectation that the acquisition will be immediately and meaningfully accretive, and the ability of the Company to capitalize on any potential opportunities. While the Company believes that the assumptions concerning future events are reasonable, investors are cautioned that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Some of these factors that could cause results to differ materially from those indicated by such forward-looking statements include, but are not limited to: conditions in the oil and gas industry, including the supply and demand for oil and gas and volatility in the prices of oil and gas; changes in general economic and financial conditions, inflationary pressures, the potential for economic recession in the U.S., tariffs and trade restrictions, including the imposition of new and higher tariffs on imported goods and retaliatory tariffs implemented by other countries on U.S. goods, and the potential effects on our financial condition, results of operations and cash flows; our reliance on major customers; failure of projected organic growth due to adverse changes in the oil and gas industry, including depressed oil and gas prices, oppressive environmental regulations and competition; integration of the Flatrock Acquisition with our business; our inability to achieve increased utilization of assets, including rental fleet utilization and monetizing other non-cash balance sheet assets; failure of our customers to continue to rent equipment after expiration of the primary rental term; our ability to economically develop and deploy new technologies and services, including technology to comply with health and environmental laws and regulations; failure to achieve accretive financial results in connection with any acquisitions we may make; fluctuations in interest rates; our ability to make dividends, distributions and share repurchases; changes in regulation or prohibition of new or current well completion techniques; competition among the various providers of compression services and products; changes in safety, health and environmental regulations; changes in economic or political conditions in the markets in which we operate; the inherent risks associated with our operations, such as equipment defects, malfunctions, natural disasters and adverse changes in customer, employee and supplier relationships; our inability to comply with covenants in our debt agreements and the decreased financial flexibility associated with our debt; inability to finance our future capital requirements and availability of financing; cybersecurity threats, including increased use of artificial intelligence and other emerging technologies; capacity availability, costs and performance of our outsourced compressor fabrication providers and overall inflationary pressures; impacts of world events, such as acts of terrorism, the conflicts in Iran, Ukraine, Venezuela and in the greater Middle East, and significant economic disruptions and adverse consequences resulting from possible long-term effects of potential pandemics and other public health crises; and general economic conditions. In addition, these forward-looking statements are subject to other various risks and uncertainties, including without limitation those set forth in the Company’s filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2025, and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2026. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise, except as required by law. For More Information, Contact:Glenn Wiener, Investor Relations(432) [email protected] www.ngsgi.com

Helix Energy (HLX) came out with quarterly earnings of $0.1 per share, beating the Zacks Consensus Estimate of $0.07 per share. This compares to a loss of $0.02 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +42.86%. A quarter ago, it was expected that this offshore oil and gas services contractor would post a loss of $0.09 per share when it actually produced a loss of $0.09, delivering no surprise. Over the last four quarters, the company has surpassed consensus EPS estimates two times. Helix Energy, which belongs to the Zacks Oil and Gas - Field Services industry, posted revenues of $304.02 million for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 5.25%. This compares to year-ago revenues of $302.29 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Helix Energy shares have added about 48.6% since the beginning of the year versus the S&P 500's gain of 12.8%. While Helix Energy has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Helix Energy was unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.19 on $322.16 million in revenues for the coming quarter and $0.28 on $1.18 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Oil and Gas - Field Services is currently in the bottom 26% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Natural Gas Services (NGS), another stock in the broader Zacks Oils-Energy sector, has yet to report results for the quarter ended June 2026. The results are expected to be released on August 10. This maker of natural gas compression equipment and industrial flare systems is expected to post quarterly earnings of $0.37 per share in its upcoming report, which represents a year-over-year change of -9.8%. The consensus EPS estimate for the quarter has been revised 12% higher over the last 30 days to the current level. Natural Gas Services' revenues are expected to be $49.08 million, up 18.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Helix Energy Solutions Group, Inc. (HLX) : Free Stock Analysis Report Natural Gas Services Group, Inc. (NGS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Natural Gas Services (NGS) is expected to deliver a year-over-year decline in earnings on higher revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. The earnings report, which is expected to be released on August 10, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. This maker of natural gas compression equipment and industrial flare systems is expected to post quarterly earnings of $0.37 per share in its upcoming report, which represents a year-over-year change of -9.8%. Revenues are expected to be $49.08 million, up 18.6% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 12% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Natural Gas Services, the Most Accurate Estimate is the same as the Zacks Consensus Estimate, suggesting that there are no recent analyst views which differ from what have been considered to derive the consensus estimate. This has resulted in an Earnings ESP of 0%. On the other hand, the stock currently carries a Zacks Rank of #1. So, this combination makes it difficult to conclusively predict that Natural Gas Services will beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Natural Gas Services would post earnings of $0.45 per share when it actually produced earnings of $0.53, delivering a surprise of +17.78%. Over the last four quarters, the company has beaten consensus EPS estimates three times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Natural Gas Services doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Among the stocks in the Zacks Oil and Gas - Mechanical and and Equipment industry, Kodiak Gas Services (KGS), is soon expected to post earnings of $0.69 per share for the quarter ended June 2026. This estimate indicates a year-over-year change of +40.8%. This quarter's revenue is expected to be $383.35 million, up 18.7% from the year-ago quarter. The consensus EPS estimate for Kodiak Gas has been revised 2% lower over the last 30 days to the current level. However, a lower Most Accurate Estimate has resulted in an Earnings ESP of -7.34%. This Earnings ESP, combined with its Zacks Rank #3 (Hold), makes it difficult to conclusively predict that Kodiak Gas will beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Natural Gas Services Group, Inc. (NGS) : Free Stock Analysis Report Kodiak Gas Services, Inc. (KGS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research