Midland, Texas, May 15, 2024 (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 March 31, 2024. First Quarter 2024 Highlights Rental revenue of $33.7 million, an increase of 48% when compared to the first quarter of 2023 and 7% when compared to the fourth quarter of 2023. Net income of $5.1 million, or $0.41 per basic share, as compared to a net income of $0.4 million, or $0.03 per basic share in the first quarter of 2023 and net income of $1.7 million, or $0.14 per basic share in the fourth quarter of 2023. Adjusted EBITDA of $16.9 million, compared to $7.8 million in the first quarter of 2023 and $16.3 million in the fourth quarter of 2023. Please see Non-GAAP Financial Measures - Adjusted EBITDA, below. "The first quarter of 2024 continued our string of strong results," said Justin Jacobs, Chief Executive Officer. "Our first quarter rental revenue of $33.7 million, rental adjusted margin of $20.6 million, and rental adjusted gross margin percentage of 61.1% are sequential increases over the historic performance of the fourth quarter of 2023. We believe this continued strong performance offers further validation of our high horsepower strategy for new units, while also driving the increase in our outlook for 2024 adjusted EBITDA. Our overall industry outlook, particularly for compression related to crude oil production, remains positive, and we believe we can capitalize on additional growth opportunities while maintaining a prudent level of leverage. I want to thank the entire NGS team for another great quarter of results." Revenue: Total revenue for the three months ended March 31, 2024 increased 38.6% to $36.9 million from $26.6 million for the three months ended March 31, 2023. This increase was due primarily to an increase in rental revenues. Rental revenue increased 48.5% to $33.7 million in the first quarter of 2024 from $22.7 million in the first quarter of 2023 due to the addition of higher horsepower packages and pricing improvements. As of March 31, 2024, we had 1,245 rented units (444,220 horsepower) compared to 1,245 rented units (335,314 horsepower) as of March 31, 2023, reflecting a 32.5% increase in total utilized horsepower. Sequentially, total revenue increased to $36.9 million in the first quarter of 2024 compared to $36.2 million in the fourth quarter of 2023 due to a 7% increase in rental revenues. Gross Margins: Total gross margins, including depreciation increased to $14.2 million for the three months ended March 31, 2024, compared to $5.1 million for the same period in 2023 and $13.3 million for the three months ended December 31, 2023. Total adjusted gross margin, exclusive of depreciation, for the three months ended March 31, 2024, increased to $21.1 million compared to $11.1 million for the three months ended March 31, 2023 and $20.3 million for the fourth quarter of 2023. These increases are primarily attributable to increased rental revenues and a continuation of our relatively high rental adjusted gross margin. Operating Income: Operating income for the three months ended March 31, 2024 was $9.3 million compared to operating income of $0.4 million for the three months ended March 31, 2023 and operating income of $4.4 million during the fourth quarter of 2023. Net Income: Net income for the three months ended March 31, 2024, was $5.1 million, or $0.41 per basic share compared to a net income of $0.4 million or $0.03 per basic share for the three months ended March 31, 2023. The increase in net income during the first quarter of 2024 was mainly due to increased rental revenue and rental gross margin. Sequentially, net income was $1.7 million or $0.14 per basic share during the fourth quarter of 2023. This sequential improvement of $3.4 million was primarily due to higher rental revenue and impairment costs related to inventory that were recorded in the fourth quarter of 2023. Adjusted EBITDA: Adjusted EBITDA increased 116.8% to $16.9 million for the three months ended March 31, 2024, from $7.8 million for the same period in 2023. This increase was primarily attributable to higher rental revenue and rental adjusted gross margin. Sequentially, adjusted EBITDA increased 3.6% to $16.9 million for the three months ended March 31, 2024, compared to adjusted EBITDA of $16.3 million for the three months ended December 31, 2023. Cash flows: At March 31, 2024, cash and cash equivalents were approximately $5.2 million, while working capital was $54.4 million. For the three months of 2024, cash flows from operating activities were $5.6 million, while cash flows used in investing activities was $10.9 million. Cash flow used in investing activities included $10.9 million in capital expenditures. Debt: Outstanding debt on our revolving credit facility as of March 31, 2024 was $172 million. Our leverage ratio at March 31, 2024 was 2.57 and our fixed charge coverage ratio was 3.41. The company is in compliance with all terms, conditions and covenants of the credit agreement. 2024 Updated Outlook NGS's full year 2024 Outlook is as follows:   FY 2024 Outlook Adjusted EBITDA $61 million - $67 million New Unit Capital Expenditures $40 million - $50 million Maintenance Capital Expenditures $8 million - $11 million Target Return on Invested Capital At least 20% Our current outlook for 2024 Fiscal Year adjusted EBITDA is a range of $61 million to $67 million, an increase from our previously announced outlook of $58 million to $65 million. We have maintained our outlook range for 2024 new unit capital expenditures of $40 million to $50 million for now, as we continue to review our capital plan. Consistent with the previous outlook, approximately $15 million of the new unit capital expenditures relates to holdover from the 2023 new unit plan. We have also added outlook related to maintenance capital expenditures to aid investors in their understanding of our cash flows. Our target return on invested capital remains unchanged. Selected data: The tables below show, the three months ended March 31, 2024 and 2023, revenues and percentage of total revenues, along with our gross margin and adjusted gross margin (exclusive of depreciation and amortization), as well as, related percentages of revenue for each of our product lines. Adjusted gross margin is the difference between revenue and cost of sales, exclusive of depreciation.   Revenue   Three months ended   March 31, 2024   March 31, 2023   ($ in 000)   % of rev   ($ in 000)   % of rev Rental $         33,734                   91         %   $         22,723                   86         % Sales           2,503                   7         %             2,992                   11         % Aftermarket services           670                   2         %             905                   3         % Total $         36,907               $         26,620               Revenue   Three months ended   March 31, 2024   December 31, 2023   ($ in 000)   % of rev   ($ in 000)   % of rev Rental $         33,734                   91         %   $         31,626                   87         % Sales           2,503                   7         %             2,921                   8         % Aftermarket services           670                   2         %             1,674                   5         % Total $         36,907               $         36,221               Gross Margin   Three months ended March 31,     2024       2023     ($ in 000)   % margin   ($ in 000)   % margin Rental $         13,761                   41         %   $         5,137                     23         % Sales           253                   10         %             (312 )           (10)        % Aftermarket services           163                   24         %             289                     32         % Total $         14,177                   38         %   $         5,114                     19         %                   Gross Margin   Three months ended   March 31, 2024   December 31, 2023   ($ in 000)   % margin   ($ in 000)   % margin Rental $         13,761                   41         %   $         12,368                   39         % Sales           253                   10         %             553                   19         % Aftermarket services           163                   24         %             419                   25         % Total $         14,177                   38         %   $         13,340                   37         %                   Adjusted Gross Margin (1)   Three months ended March 31,     2024       2023     ( $ in 000)   % margin   ( $ in 000)   % margin Rental $         20,620                   61         %   $         11,078                     49         % Sales           323                   13         %             (245 )           (8)        % Aftermarket services           170                   25         %             296                     33         % Total $         21,113                   57         %   $         11,129                     42         %   Adjusted Gross Margin (1)   Three months ended   March 31, 2024   December 31, 2023   ( $ in 000)   % margin   ( $ in 000)   % margin Rental $         20,620                   61         %   $         19,199                   61         % Sales           323                   13         %             620                   21         % Aftermarket services           170                   25         %             440                   26         % Total $         21,113                   57         %   $         20,259                   56         % (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 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 expense), which are key operating components. Adjusted gross margin differs from gross margin in that gross margin includes depreciation 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 expense reflects the systematic allocation of historical property and equipment values over the estimated useful lives. Adjusted gross margin has certain material limitations associated with its use as compared to gross margin. Depreciation expense is a necessary element of our costs and our ability to generate revenue. 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, gross margin 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 following table calculates gross margin, the most directly comparable GAAP financial measure, and reconciles it to adjusted gross margin:   Three months ended March 31,