Natural Gas Services Group, Inc. — Second Quarter 2026 Earnings Summary

Financial Performance

• Total revenue for the three months ended June 30, 2026, increased 24.2% to $51.4 million from $41.4 million in the second quarter of 2025.
• Rental revenue increased 24.9% to $49.4 million from $39.6 million in the second quarter of 2025.
• Net income was $3.8 million ($0.30 per diluted share) for the second quarter of 2026, compared to $5.2 million ($0.41 per diluted share) in the second quarter of 2025 and $6.8 million ($0.53 per diluted share) in the first quarter of 2026.
• Adjusted Net Income was $6.1 million ($0.47 per diluted share) for the second quarter of 2026, compared to $5.3 million ($0.42 per diluted share) in the second quarter of 2025.
• Adjusted EBITDA increased 27.4% to $25.1 million for the second quarter of 2026 from $19.7 million in the second quarter of 2025, and increased 3.3% sequentially from $24.3 million in the first quarter of 2026.
• Total gross margins (including depreciation) increased to $20.1 million for the second quarter of 2026 from $15.4 million in the second quarter of 2025.
• Total Adjusted Gross Margin (excluding depreciation) increased to $30.8 million for the second quarter of 2026 from $24.2 million in the second quarter of 2025.
• Operating income was $9.9 million for the second quarter of 2026, essentially unchanged from $9.9 million in the second quarter of 2025.
• Cash flows provided by operating activities were $25.4 million for the second quarter of 2026, compared to $11.0 million in the second quarter of 2025.
• Cash flows used in investing activities were $127.5 million for the second quarter of 2026, including $108.7 million for the Flatrock Acquisition and $18.8 million in capital expenditures.
• Outstanding debt on the revolving credit facility was $328.0 million as of June 30, 2026, with a leverage ratio of 2.77x and a fixed charge coverage ratio of 4.18x.
• The company had over $170 million of facility capacity available as of June 30, 2026.

Guidance and Future Outlook

• Full-year 2026 Adjusted EBITDA guidance was increased to $103 million to $108 million, compared to prior guidance of $92.5 million to $97.5 million.
• Full-year 2026 Growth Capital Expenditures are expected to be $60 million to $80 million.
• Full-year 2026 Maintenance Capital Expenditures are expected to be $15 million to $19 million.
• The company expects to deploy at least 55,000 horsepower organically in 2026.
• Industry fundamentals are described as constructive, supported by high utilization, constrained equipment supply, and growing compression requirements tied to oil and gas production, LNG exports, and power demand.

Business Segments and Product Lines

• The company completed the acquisition of Flatrock Compression Holdings, LLC on June 12, 2026, adding 87,233 rented horsepower.
• Total utilized horsepower reached 669,919 as of June 30, 2026, a 34.3% increase from 498,651 as of June 30, 2025.
• Horsepower utilization reached a record 88.3% in the second quarter of 2026, compared to 83.6% in the second quarter of 2025.
• The company added 22,200 total horsepower organically during the first half of 2026, with large horsepower electric motor drive equipment comprising well more than half of those additions.
• Rental adjusted gross margin percentage was 61.1% in the second quarter of 2026, compared to 60.8% in the second quarter of 2025.
• Sales adjusted gross margin percentage was 32.2% in the second quarter of 2026, compared to (21.5)% in the second quarter of 2025.
• Aftermarket services adjusted gross margin percentage was 28.2% in the second quarter of 2026, compared to 31.6% in the second quarter of 2025.

Market and Competitive Landscape

• Market demand is driven by oil and gas production, LNG exports, and power demand.
• The compression industry faces constrained equipment supply.
• The company operates in major oil and natural gas producing basins in the U.S.

Risks and Challenges

• Strategic transaction costs of $3.3 million related to the Flatrock Acquisition were embedded in selling, general and administrative expenses, impacting net income.
• Forward-looking statements note risks including oil and gas price volatility, inflationary pressures, integration of the Flatrock Acquisition, and potential failure to achieve projected organic growth.
• Risks include inability to comply with debt covenants, changes in safety, health, and environmental regulations, and cybersecurity threats.

Management Commentary and Tone

• CEO Justin Jacobs described the second quarter as a "record second quarter and a milestone first half of 2026."
• Management noted that results reflect "great field execution and strong demand for our fleet."
• Integration of Flatrock is progressing well, with opportunities identified to diversify organic growth, improve field operating efficiency, and enhance fixed cost leverage.
• Management highlighted that the full financial benefit of the combined platform remains ahead due to only a partial month of Flatrock results being included in the quarter.

Other Key Points

• The company returned $1.9 million to shareholders during the second quarter of 2026 through a quarterly dividend of $0.15 per share.
• A third-quarter dividend of $0.15 per share was announced for stockholders of record as of August 19, 2026, expected to be paid on September 2, 2026.
• The acquisition of Flatrock was funded with $108.7 million in cash and $9.999 million in common stock issued.
• Goodwill of $824,000 and intangible assets of $1.139 million were recorded as a result of the Flatrock acquisition.
• The company has a $500 million credit facility.