Natural Gas Services Group, Inc. press release

Natural Gas Services Group, Inc. Reports Second Quarter 2026 Financial and Operating Results; Announces Dividend and Provides Updated Guidance

2026-08-10

NYSE - New York Stock Exchange · Natural Gas · Oil · United States · Corporate Finance

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 Quarter2026Highlights

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."

| (1) | For a definition of Adjusted Gross Margin, Adjusted Net Income and Adjusted EBITDA and reconciliation to their most directly comparable financial measures calculated and presented in accordance with GAAP, please see “Non-GAAP Financial Measures - Adjusted Gross Margin,” “Non-GAAP Financial Measures - Adjusted Net Income” and “Non-GAAP Financial Measures - Adjusted EBITDA” below. |

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.

| | | Outlook | | | FY 2026 Adjusted EBITDA | $103 million - $108 million | | | FY 2026 Growth Capital Expenditures | $60 million - $80 million | | | FY 2026 Maintenance Capital Expenditures | $15 million - $19 million |

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.

| | Revenues | | | | | | | | | | | | | | | | Three months ended | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | | (in thousands) | | | | | | | | | | | | | | | Rental | $ | 39,580 | | $ | 41,502 | | $ | 44,334 | | $ | 47,115 | | $ | 49,433 | | Sales | | 750 | | | 471 | | | 844 | | | 491 | | | 980 | | Aftermarket services | | 1,052 | | | 1,428 | | | 971 | | | 861 | | | 988 | | Total | $ | 41,382 | | $ | 43,401 | | $ | 46,149 | | $ | 48,467 | | $ | 51,401 |

| | Gross Margin | | | | | | | | | | | | | | | | | | | | Three months ended | | | | | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | | | | | | (in thousands) | | | | | | | | | | | | | | | | | | | Rental | $ | 15,294 | | | $ | 16,508 | | | $ | 16,346 | | | $ | 19,991 | | | $ | 19,597 | | Sales | | (254 | ) | | | (75 | ) | | | (134 | ) | | | (250 | ) | | | 200 | | Aftermarket services | | 310 | | | | 244 | | | | 283 | | | | 342 | | | | 264 | | Total | $ | 15,350 | | | $ | 16,677 | | | $ | 16,495 | | | $ | 20,083 | | | $ | 20,061 |

| | Adjusted Gross Margin (1) | | | | | | | | | | | | | | | | | | | Three months ended | | | | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | | | | | (in thousands) | | | | | | | | | | | | | | | | | | Rental | $ | 24,052 | | | $ | 25,532 | | $ | 25,940 | | | $ | 30,025 | | | $ | 30,216 | | Sales | | (161 | ) | | | 23 | | | (14 | ) | | | (133 | ) | | | 316 | | Aftermarket services | | 332 | | | | 273 | | | 304 | | | | 356 | | | | 279 | | Total | $ | 24,223 | | | $ | 25,828 | | $ | 26,230 | | | $ | 30,248 | | | $ | 30,811 |

| | Adjusted Gross Margin % | | | | | | | | | | | | | | | | Three months ended | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | Rental | 60.8 | % | | 61.5 | % | | 58.5 | % | | 63.7 | % | | 61.1 | % | | Sales | (21.5 | )% | | 4.9 | % | | (1.7 | )% | | (27.1 | )% | | 32.2 | % | | Aftermarket services | 31.6 | % | | 19.1 | % | | 31.3 | % | | 41.3 | % | | 28.2 | % | | Total | 58.5 | % | | 59.5 | % | | 56.8 | % | | 62.4 | % | | 59.9 | % |

| | Operating Statistics (at end of period): | | | | | | | | | | | | | | | | Three months ended | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | Horsepower Utilized | 498,651 | | | 526,015 | | | 562,676 | | | 574,969 | | | 669,919 | | | Total Horsepower | 596,322 | | | 625,686 | | | 662,542 | | | 661,872 | | | 758,526 | | | Horsepower Utilization | 83.6 | % | | 84.1 | % | | 84.9 | % | | 86.9 | % | | 88.3 | % | | | | | | | | | | | | | | | | | | Units Utilized | 1,198 | | | 1,235 | | | 1,245 | | | 1,243 | | | 1,521 | | | Total Units | 1,833 | | | 1,891 | | | 1,914 | | | 1,801 | | | 2,108 | | | Unit Utilization | 65.4 | % | | 65.3 | % | | 65.0 | % | | 69.0 | % | | 72.2 | % |

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:

| | Three months ended | | | | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | | | | | (in thousands) | | | | | | | | | | | | | | | | | | Net income | $ | 5,188 | | | $ | 5,784 | | $ | 4,102 | | | $ | 6,763 | | $ | 3,830 | | | Interest income | | — | | | | — | | | (2,444 | ) | | | — | | | (36 | ) | | Impairments | | — | | | | — | | | 2,600 | | | | — | | | — | | | Severance and restructuring charges | | 89 | | | | — | | | — | | | | — | | | — | | | Strategic transaction costs | | — | | | | — | | | — | | | | — | | | 3,271 | | | Income tax effects of adjustments | | (21 | ) | | | — | | | (47 | ) | | | — | | | (1,001 | ) | | Adjusted Net Income | $ | 5,256 | | | $ | 5,784 | | $ | 4,211 | | | $ | 6,763 | | $ | 6,064 | | | Net income per diluted share | $ | 0.41 | | | $ | 0.46 | | $ | 0.32 | | | $ | 0.53 | | $ | 0.30 | | | Adjusted Net Income per diluted share | $ | 0.42 | | | $ | 0.46 | | $ | 0.33 | | | $ | 0.53 | | $ | 0.47 | |

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:

| | Three months ended | | | | | | | | | | | | | | | | | | | | | June 30, 2025 | | September 30, 2025 | | December 31, 2025 | | March 31, 2026 | | June 30, 2026 | | | | | | | | | | | | | (in thousands) | | | | | | | | | | | | | | | | | | | | Total revenue | $ | 41,382 | | | $ | 43,401 | | | $ | 46,149 | | | $ | 48,467 | | | $ | 51,401 | | | Costs of revenue, exclusive of depreciation | | (17,159 | ) | | | (17,573 | ) | | | (19,919 | ) | | | (18,219 | ) | | | (20,590 | ) | | Depreciation allocable to costs of revenue | | (8,873 | ) | | | (9,151 | ) | | | (9,735 | ) | | | (10,165 | ) | | | (10,750 | ) | | Gross margin | | 15,350 | | | | 16,677 | | | | 16,495 | | | | 20,083 | | | | 20,061 | | | Depreciation allocable to costs of revenue | | 8,873 | | | | 9,151 | | | | 9,735 | | | | 10,165 | | | | 10,750 | | | Adjusted Gross Margin | $ | 24,223 | | | $ | 25,828 | | | $ | 26,230 | | | $ | 30,248 | | | $ | 30,811 | |

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: