|IR Corporate Profile|
Proxy & Annual Report
Thursday, March 8, 2018 11:00 a.m. ET
Subscribe to RSS Updates
RSS delivers new content to you on the topics in which you are interested. You can subscribe to RSS feeds through a RSS compatible browser or stand-alone RSS feed reader / aggregator.
Subscribe to e-mail updates
Sign up for e-mail alerts.
You may automatically receive information by e-mail.
To choose your options for e-mail notification, please enter your e-mail address and click Submit.
Recent SEC Filings
Recent Press Releases
Natural Gas Services Group Reports Fourth Quarter 2017 Earnings
MIDLAND, Texas March 8, 2018 - 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 full year ended December 31, 2017. 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 9, 2018.
Revenue: Total revenue held constant at $16.7 million for both the three months ended December 31, 2017 and December 31, 2016. Comparing quarter to quarter there was a shift in the revenue mix with rental revenues contributing only 68% of total revenue compared to 75% during the same period in 2016. Total revenue increased between consecutive quarters by approximately $750,000 or 4.7%, to $16.7 million from $15.9 million, primarily due to an increase in flare and part sales. Total revenue decreased to $67.7 million from $71.7 million, or 5.5%, for the year ended December 31, 2017, compared to the year ended December 31, 2016. This was primarily the result of a 48.4% increase in sales revenue offset by an 18.8% decrease in rental revenue. The rental revenue decrease is due to reduced customer demand, resulting from the continued low oil and natural gas prices.
Operating Income: Operating income for the three months ended December 31, 2017 was $217,000, compared to the comparative prior year's level of $967,000. This decrease was primarily due to a shift in the revenue mix between rentals and sales and a reduction in rental gross margins. Sequentially, operating income decreased to $217,000 for the three months ended December 31, 2017 from $593,000 for the three months ended September 30, 2017 primarily due to a decrease in rental gross margins between the periods and fourth quarter inventory adjustments. Operating income for the year ended December 31, 2017 was $1.6 million, down 81% compared to last year's comparative period, primarily due to a decrease in rental revenue and margins.
Adjusted Gross Margins: Total adjusted gross margin, exclusive of depreciation and amortization, for the three months ended December 31, 2017, decreased $1.3 million to $7.9 million from $9.1 million for the same period ended December 31, 2016. Overall adjusted gross margin percentage decreased to 47.2% from 54.6% for this same comparative period. This decrease was the result of lower margins on our rentals. Sequentially, total adjusted gross margin decreased to $7.9 million from $8.3 million due to lower margins on our rentals in the fourth quarter compared to the third quarter of 2017. For the comparative year ended periods, adjusted gross margins decreased from prior year to $33.0 million from $39.8 million and dropped to 48.7% from 55.5% of revenue. Please see discussions of Non-GAAP Financial Measures - Adjusted Gross Margin, below.
Taxes: On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act ("2017 Tax Act'), which made broad and complex changes to the U.S. tax code. The income tax effects of the 2017 Tax Act include a $18.4 million income tax benefit related to the re-measurement of our deferred tax assets and liabilities at the reduced rate of 21 percent.
Net Income: Net income for the three months ended December 31, 2017 increased to $18.7 million compared to net income of $1.2 million for the same period in 2016. Excluding the $18.4 million tax benefit from the 2017 Tax Act, our adjusted net income for the three months ended December 31, 2017 decreased to $352,000 compared to net income of $1.2 million for the same period in 2016. Sequentially, net income increased to $18.7 million for the fourth quarter of 2017 from $522,000 in the third quarter of 2017; excluding the $18.4 million tax benefit from the 2017 Tax Act we had a decrease of $170,000 between the two periods. In the comparative year ended periods, net income increased by $13.4 million to $19.8 million, without the tax benefit we had a decrease of $5.0 million. Please see discussions of Non-GAAP Financial Measures - Special Items, below.
Earnings per share: Comparing fourth quarter 2017 versus the same quarter 2016, earnings per diluted share was $1.42 up from 9 cents; excluding the tax benefit we were down 6 cents. Sequentially, diluted earnings per share increased $1.38; excluding the tax benefit earnings per share was down 1 cent. Please see discussions of Non-GAAP Financial Measures - Special Items, below.
Adjusted EBITDA: Adjusted EBITDA decreased $1.3 million to $5.6 million or 34% of revenue for the three months ended December 31, 2017 compared to $7.0 million or 42% of revenue for the three months ended December 31, 2016. Adjusted EBITDA decreased by approximately $300,000 for the three months ended December 31, 2017, as compared to the sequential quarter. As a percentage of revenue for the same comparative period Adjusted EBITDA decreased to 34% from 37%. For the year ended December 31, 2017, Adjusted EBITDA decreased 26% to $22.9 million or 34% of revenue compared to the year ended December 31, 2016. Please see discussion of Non-GAAP Financial Measures - Adjusted EBITDA, below.
Cash flow: At December 31, 2017, cash and cash equivalents were approximately $69.2 million; working capital was $100.8 million with a debt level of $417,000 which is due in 2020. Positive net cash flow from operating activities was approximately $17.5 million for the year ended December 31, 2017 compared to $31.8 million for 2016. 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 2017 results, Stephen C. Taylor, President and CEO, said:
"We are pleased with our full-year 2017 results and encouraged that the fourth quarter has shown signs of a recovery in our business. For the first time since the first quarter of 2015, we saw a quarterly increase in rental revenue. Pricing has shown some recent strength and our sales revenue for compressors and after-market parts and services were strong throughout the year. We have an appreciable backlog of contracted rental fleet additions being fabricated in our facilities and our estimated capital expenditures in 2018 are the highest in four years. As you know, we entered the larger horsepower arena 2-3 years ago and have recently accelerated our entry into that market. Our move into this sector is going well and we look for this and the rest of our business to grow in 2018."
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, 2017 and 2016. 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:
Non GAAP Financial Measures - Special Items: From time to time, management may publicly disclose certain "non-GAAP financial measures", such as adjusted operating income and net income, in our earnings releases, financial presentations or earnings conference calls. These non-GAAP measures are not in accordance with, or a substitute for, measures prepared in accordance with GAAP, and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations that would be reflected in measures determined in accordance with GAAP. Adjusted net income reflects net income before the income tax effects of the 2017 Tax Act. The reconciliation of reported net income to adjusted net income for December 31, 2017 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 8, 2018 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, 2017.
About Natural Gas Services Group, Inc. (NGS):