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Thursday, March 9, 2017 10:00 a.m. CT
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Recent SEC Filings
Recent Press Releases
NGS Reports Fourth Quarter 2016 Earnings of 9 Cents per Diluted Share Full Year 2016 Earnings of 50 Cents per Diluted Share
MIDLAND, Texas March 9, 2017 - Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of gas compression equipment and services to the natural gas and oil industry, announces its financial results for the three months and year ended December 31, 2016. Financial results contained herein are preliminary and subject to the audited consolidated financial statements included in NGS's Form 10-K to be filed on or about March 10, 2017.
Revenue: Total revenue decreased to $16.7 million from $25.8 million, or 35%, for the three months ended December 31, 2016 compared to the same period ended December 31, 2015. This change was attributable to a decrease in rental revenue related to reduced activity in the upstream oil and natural gas industry due to low commodity prices. Total revenue increased between consecutive quarters by approximately $525,000 or 3.2%, to $16.7 million from $16.2 million, primarily due to an increase in compressor unit sales. Total revenue decreased to $71.7 million from $95.9 million, or 25.2%, for the year ended December 31, 2016, compared to the year ended December 31, 2015. This was primarily the result of a 25.8% decrease in rental revenue and a 26.4% decrease in sales revenue. The revenue decrease is due to reduced customer demand, resulting from the drop in oil prices.
Operating Income: Operating income for the three months ended December 31, 2016 was $967,000, compared to the comparative prior year's level of $4.6 million. This decrease was primarily due to a reduction in revenues, a high level of relatively fixed depreciation expense and charges related to the retirement of some rental fleet assets and inventory adjustments. Sequentially, operating income decreased to $967,000 for the three months ended December 31, 2016 from $1.8 million for the three months ended September 30, 2016 primarily due to a decrease in rental gross margins between the periods and our rental equipment retirement and inventory adjustments in the fourth quarter. Operating income for the year ended December 31, 2016 was $8.4 million, down 44% compared to last year's comparative period, primarily due to a decrease in rental revenue.
Adjusted Gross Margins: Total adjusted gross margin, exclusive of depreciation and amortization, for the three months ended December 31, 2016, decreased $3.9 million to $9.1 million from $13.0 million for the same period ended December 31, 2015. Overall adjusted gross margin percentage increased to 55% from 51% for this same comparative period. This increase was the result of higher margins in our total sales. Sequentially, total adjusted gross margin decreased to $9.1 million from $9.4 million due to lower margins on our rentals in the fourth quarter compared to the third quarter of 2016. For the comparative year ended periods, adjusted gross margins decreased from prior year to $39.8 million from $53.3 million and remained steady at 55.5% of revenue. Please see discussions of Non-GAAP Financial Measures - Adjusted Gross Margin, below.
Net Income: Net income for the three months ended December 31, 2016 decreased to $1.2 million compared to net income of $3.3 million for the same period in 2015. Sequentially, net income decreased to $1.2 million for the fourth quarter of 2016 from $1.5 million. In the comparative year ended periods, net income decreased by $3.7 million to $6.5 million. Net income in the fourth quarter was positively impacted by research and development and domestic production tax adjustments.
Earnings per share: Comparing fourth quarter 2016 versus the same quarter 2015, earnings per diluted share was 9 cents down from 26 cents. Sequentially, diluted earnings per share decreased to 9 cents in the fourth quarter of 2016, down from 12 cents.
Adjusted EBITDA: Adjusted EBITDA decreased $3.2 million to $7.0 million or 42% of revenue for the three months ended December 31, 2016 compared to $10.2 million or 40% of revenue for the three months ended December 31, 2015. Adjusted EBITDA decreased by approximately $300,000 for the three months ended December 31, 2016, as compared to the sequential quarter. As a percentage of revenue for the same comparative period Adjusted EBITDA decreased to 42% from 45%. For the year ended December 31, 2016, Adjusted EBITDA decreased 27% to $30.8 million or 43% of revenue compared to the year ended December 31, 2015. Please see discussion of Non-GAAP Financial Measures - Adjusted EBITDA, below.
Cash flow: At December 31, 2016, cash and cash equivalents were approximately $64.1 million; working capital was $93.3 million with a debt level of $417,000 which was classified as current. Positive net cash flow from operating activities was approximately $32.8 million for the year ended December 31, 2016 compared to $41.6 million for 2015. The changes in operating cash flow relate to the cash contribution from net income, reduced capital expenditures on compressor equipment and normal changes in our working capital accounts.
Commenting on fourth quarter and year-end 2016 results, Stephen C. Taylor, President and CEO, said:
"As everyone is well aware, this past year was one of the toughest on record for the energy industry. Crude oil set a low price of $26 in February and the rest of the year reflected a continuing slowdown from the collapse in commodity prices. NGS, however, continued to have positive earnings throughout the year and delivered an enviable flow of free cash. We preserved our margins by maintaining relatively better pricing and stringent cost controls. It appears that utilization is bottoming, but we continue to think that our production-oriented business will experience pricing pressure into mid-year. While I am fairly confident that we are seeing early signs of a recovery, it won't be without its fits and spurts. Longer term, and over the next couple of years in particular, NGS is well positioned in markets that should prosper and, along with our expanded product offerings, we think we can deliver notable incremental earnings."
Selected data: The table below shows revenues and percentage of total revenues, along with our adjusted gross margin, exclusive of depreciation and amortization, and related percentages of each of our product lines for the three months and year ended December 31, 2016 and 2015. Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation and amortization.
(1) For a reconciliation of adjusted gross margin to its most directly comparable financial measure calculated and presented in accordance GAAP, please read "Non-GAAP Financial Measures - Adjusted Gross Margin" below.
Non-GAAP Financial Measure - Adjusted Gross Margin: "Adjusted Gross Margin" is defined as total revenue less cost of sales (excluding depreciation and amortization expense). Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key operating components. Depreciation expense is a necessary element of costs and the ability to generate revenue and selling, general and administrative expense is a necessary cost to support operations and required corporate activities. Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of the company's performance. As an indicator of operating performance, adjusted gross margin should not be considered an alternative to, or more meaningful than, operating income as determined in accordance with GAAP. 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 reconciliation of operating income to adjusted gross margin is as follows:
Non-GAAP Financial Measures - Adjusted EBITDA: "Adjusted EBITDA" reflects net income or loss before interest, taxes, depreciation and amortization and loss on retirement of rental equipment. Adjusted EBITDA is a measure used by management, analysts and investors as an indicator of operating cash flow since it excludes the impact of movements in working capital items, non-cash charges and financing costs. Therefore, Adjusted EBITDA gives the investor information as to the cash generated from the operations of a business. However, Adjusted EBITDA is not a measure of financial performance under accounting principles GAAP, and should not be considered a substitute for other financial measures of performance. Adjusted EBITDA as calculated by NGS may not be comparable to Adjusted EBITDA as calculated and reported by other companies. The most comparable GAAP measure to Adjusted EBITDA is net income.
The reconciliation of net income to Adjusted EBITDA is as follows:
Cautionary Note Regarding Forward-Looking Statements:
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause NGS's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS's products and services; and new governmental safety, health and environmental regulations which could require NGS to make significant capital expenditures. The forward-looking statements included in this press release are only made as of the date of this press release, and NGS undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Conference Call Details:
Teleconference: Thursday, March 9, 2017 at 10:00 a.m. Central (11:00 a.m. Eastern). Live via phone by dialing 800-624-7038, pass code "Natural Gas Services". All attendees and participants to the conference call should arrange to call in at least 5 minutes prior to the start time.
Live Webcast: The webcast will be available in listen only mode via our website www.ngsgi.com, investor relations section.
Webcast Reply: For those unable to attend or participate, a replay of the conference call will be available within 24 hours on the NGS website at www.ngsgi.com.
Stephen C. Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing the financial results for the three months and year ended December 31, 2016.
About Natural Gas Services Group, Inc. (NGS):
Natural Gas Services Group, Inc. Announces Its Fourth Quarter 2016 Earnings Call
Midland, Texas, February 27, 2017 - Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of gas compression equipment and services to the natural gas industry, announces the following conference call information for their fourth quarter 2016 earnings release:
Earnings Release: Thursday, March 9, 2017 before market opens
Conference Call: Thursday, March 9, 2017 at 10:00 a.m. Central, 11:00 a.m. Eastern
Conference Call Replay
Stephen Taylor, Chairman, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing fourth quarter and full year, 2016, financial results.
About Natural Gas Services Group, Inc.
Natural Gas Services Group, Inc.