Natural Gas Services Group, Inc. Reports Second Quarter 2019 Financial and Operating Results
For the quarter ended
The Company reported net income for the second quarter of
Highlights of the quarter include:
Revenue: Total revenue for the three months ended
Operating Income: Operating income for the three months ended
Adjusted Gross Margins: Total adjusted gross margin for the three months ended
Net Income: Net income for the three months ended
Earnings Per Share: Comparing the second quarter of 2019 versus 2018, earnings per diluted share was
Adjusted EBITDA: Adjusted EBITDA increased to
Cash Flow: At
Commenting on Second Quarter 2019 results, Stephen C. Taylor, President and CEO, said:
“The second quarter of 2019 represented another strong operational quarter of performance for NGS. Rental revenues continue to increase, up 19% over the comparative prior year quarter, as demand for our higher horsepower units remains robust. Additionally, we saw significant sales for the quarter, with the highest adjusted gross margin percentage for that segment since the first quarter of 2018. Quarterly, cash flow from operations was
“While we continue to survey the oilfield landscape for strategic opportunities, we also remain disciplined in our approach with a focus on strategic fit and value. We will continue to look for opportunities to grow our operating portfolio but will also continue to be vigilant in protecting our balance sheet which has served us well, especially in periods of market volatility and uncertainty.”
Selected data: The tables below show 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 and six months ended
Revenue | Adjusted Gross Margin(1) | ||||||||||||||||||||||
Three months ended June 30, | Three months ended June 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Rental | $ | 13,572 | 68 | % | $ | 11,427 | 63 | % | $ | 7,213 | 53 | % | $ | 6,232 | 55 | % | |||||||
Sales | 5,814 | 29 | % | 6,383 | 35 | % | 1,395 | 24 | % | 1,459 | 23 | % | |||||||||||
Service & Maintenance | 509 | 3 | % | 394 | 2 | % | 350 | 69 | % | 293 | 74 | % | |||||||||||
Total | $ | 19,895 | $ | 18,204 | $ | 8,958 | 45 | % | $ | 7,984 | 44 | % |
Revenue | Adjusted Gross Margin(1) | ||||||||||||||||||||||
Six months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Rental | $ | 26,959 | 71 | % | $ | 22,898 | 70 | % | $ | 14,715 | 55 | % | $ | 12,999 | 57 | % | |||||||
Sales | 9,939 | 26 | % | 9,381 | 28 | % | 1,821 | 18 | % | 2,266 | 24 | % | |||||||||||
Service & Maintenance | 988 | 3 | % | 643 | 2 | % | 682 | 69 | % | 477 | 74 | % | |||||||||||
Total | $ | 37,886 | $ | 32,922 | $ | 17,218 | 45 | % | $ | 15,742 | 48 | % |
(1) For a reconciliation of adjusted gross margin to its most directly comparable financial measure calculated and presented in accordance with 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:
Three months ended June 30, | Six months ended June 30, | ||||||||||
(in thousands) | (in thousands) | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Operating Income | $ | 593 | $ | 226 | $ | 802 | $ | 576 | |||
Depreciation and amortization | 5,683 | 5,449 | 11,241 | 10,836 | |||||||
Selling, general, and administration expenses | 2,682 | 2,309 | 5,175 | 4,330 | |||||||
Adjusted Gross Margin | $ | 8,958 | $ | 7,984 | $ | 17,218 | $ | 15,742 |
Non GAAP Financial Measures - Adjusted EBITDA:Adjusted EBITDA: “Adjusted EBITDA” reflects net income or loss before interest, taxes, depreciation and amortization. Adjusted EBITDA is a measure used by 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 and gross margin is as follows:
Three months ended June 30, | Six months ended June 30, | ||||||||||
(in thousands) | (in thousands) | ||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||
Net income | $ | 573 | $ | 247 | $ | 930 | $ | 472 | |||
Interest expense | 4 | 3 | 8 | 6 | |||||||
Provision for income taxes | 197 | 54 | 350 | 103 | |||||||
Depreciation and amortization | 5,683 | 5,449 | 11,241 | 10,836 | |||||||
Adjusted EBITDA | $ | 6,457 | $ | 5,753 | $ | 12,529 | $ | 11,417 |
Conference Call Details:
Teleconference:
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.
About
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
For More Information, Contact: | Alicia Dada, Investor Relations |
(432) 262-2700 Alicia.Dada@ngsgi.com |
|
www.ngsgi.com |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) |
|||||
June 30, 2019 |
December 31, 2018 | ||||
ASSETS | |||||
Current Assets: | |||||
Cash and cash equivalents | $ | 29,911 | $ | 52,628 | |
Trade accounts receivable, net of allowance for doubtful accounts of $333 and $291, respectively | 11,383 | 7,219 | |||
Inventory | 30,302 | 30,974 | |||
Prepaid income taxes | 3,146 | 3,148 | |||
Prepaid expenses and other | 1,880 | 2,430 | |||
Total current assets | 76,622 | 96,399 | |||
Long-term inventory, net of allowance for obsolescence of $21 and $19, respectively | 3,873 | 3,980 | |||
Rental equipment, net of accumulated depreciation of $173,282 and $165,428, respectively | 190,704 | 175,886 | |||
Property and equipment, net of accumulated depreciation of $11,777 and $11,556, respectively | 20,146 | 16,587 | |||
Right of use assets - operating leases, net of accumulated amortization $83 | 494 | — | |||
Goodwill | 10,039 | 10,039 | |||
Intangibles, net of accumulated amortization of $1,821 and $1,758, respectively | 1,338 | 1,401 | |||
Other assets | 1,339 | 1,109 | |||
Total assets | $ | 304,555 | $ | 305,401 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Current Liabilities: | |||||
Accounts payable | $ | 2,579 | $ | 2,122 | |
Accrued liabilities | 3,999 | 8,743 | |||
Current operating leases | 129 | — | |||
Deferred income | 113 | 81 | |||
Total current liabilities | 6,820 | 10,946 | |||
Line of credit, non-current portion | 417 | 417 | |||
Deferred income tax liability | 32,514 | 32,158 | |||
Long-term operating leases | 365 | — | |||
Other long-term liabilities | 1,869 | 1,699 | |||
Total liabilities | 41,985 | 45,220 | |||
Commitments and contingencies | |||||
Stockholders’ Equity: | |||||
Preferred stock, 5,000 shares authorized, no shares issued or outstanding | — | — | |||
Common stock, 30,000 shares authorized, par value $0.01; 13,138 and 13,005 shares issued and outstanding, respectively | 131 | 130 | |||
Additional paid-in capital | 109,218 | 107,760 | |||
Retained earnings | 153,221 | 152,291 | |||
Total stockholders' equity | 262,570 | 260,181 | |||
Total liabilities and stockholders' equity | $ | 304,555 | $ | 305,401 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands, except earnings per share) (unaudited) |
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Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenue: | |||||||||||||||
Rental income | $ | 13,572 | $ | 11,427 | $ | 26,959 | $ | 22,898 | |||||||
Sales | 5,814 | 6,383 | 9,939 | 9,381 | |||||||||||
Service and maintenance income | 509 | 394 | 988 | 643 | |||||||||||
Total revenue | 19,895 | 18,204 | 37,886 | 32,922 | |||||||||||
Operating costs and expenses: | |||||||||||||||
Cost of rentals, exclusive of depreciation and amortization stated separately below | 6,359 | 5,195 | 12,244 | 9,899 | |||||||||||
Cost of sales, exclusive of depreciation and amortization stated separately below | 4,419 | 4,924 | 8,118 | 7,115 | |||||||||||
Cost of service and maintenance | 159 | 101 | 306 | 166 | |||||||||||
Selling, general, and administrative expense | 2,682 | 2,309 | 5,175 | 4,330 | |||||||||||
Depreciation and amortization | 5,683 | 5,449 | 11,241 | 10,836 | |||||||||||
Total operating costs and expenses | 19,302 | 17,978 | 37,084 | 32,346 | |||||||||||
Operating income | 593 | 226 | 802 | 576 | |||||||||||
Other income (expense): | |||||||||||||||
Interest expense | (4 | ) | (3 | ) | (8 | ) | (6 | ) | |||||||
Other income, net | 181 | 78 | 486 | 5 | |||||||||||
Total other income (expense), net | 177 | 75 | 478 | (1 | ) | ||||||||||
Income before provision for income taxes | 770 | 301 | 1,280 | 575 | |||||||||||
Income tax expense | 197 | 54 | 350 | 103 | |||||||||||
Net income | $ | 573 | $ | 247 | $ | 930 | $ | 472 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.04 | $ | 0.02 | $ | 0.07 | $ | 0.04 | |||||||
Diluted | $ | 0.04 | $ | 0.02 | $ | 0.07 | $ | 0.04 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 13,134 | 12,963 | 13,100 | 12,941 | |||||||||||
Diluted | 13,462 | 13,261 | 13,368 | 13,215 |
NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) |
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Six months ended | |||||||
June 30, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 930 | $ | 472 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 11,241 | 10,836 | |||||
Deferred income taxes | 356 | 170 | |||||
Stock-based compensation | 1,137 | 1,076 | |||||
Bad debt allowance (recovery) | 55 | (102 | ) | ||||
Gain on sale of assets | (37 | ) | (49 | ) | |||
(Gain) loss on company owned life insurance | (131 | ) | 55 | ||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivables, net | (4,219 | ) | (739 | ) | |||
Inventory | 1,200 | 2,673 | |||||
Prepaid expenses and prepaid income taxes | (22 | ) | 321 | ||||
Accounts payable and accrued liabilities | (4,287 | ) | (4,327 | ) | |||
Deferred income | 32 | 302 | |||||
Other | 192 | 172 | |||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 6,447 | 10,860 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchase of property and equipment | (29,402 | ) | (16,945 | ) | |||
Purchase of company owned life insurance | (111 | ) | (191 | ) | |||
Proceeds from sale of property and equipment | 26 | 49 | |||||
Proceeds from insurance claims of property and equipment | 11 | — | |||||
NET CASH USED IN INVESTING ACTIVITIES | (29,476 | ) | (17,087 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Payments from other long-term liabilities, net | (10 | ) | (19 | ) | |||
Proceeds from exercise of stock options | 505 | 157 | |||||
Taxes paid related to net share settlement of equity awards | (183 | ) | (629 | ) | |||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 312 | (491 | ) | ||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (22,717 | ) | (6,718 | ) | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 52,628 | 69,208 | |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 29,911 | $ | 62,490 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Interest paid | $ | 8 | $ | 6 | |||
Income taxes paid | $ | 45 | $ | 66 | |||
NON-CASH TRANSACTIONS | |||||||
Transfer of rental equipment components to inventory | $ | 347 | $ | 144 | |||
Transfer of prepaids to rental equipment and inventory | $ | 574 | $ | — | |||
Right of use acquired through an operating lease | $ | 126 | $ | — |
Source: Natural Gas Services Group, Inc.