SEC Form 10-Q filed by Natural Gas Services Group Inc.

8/11/25 4:42:47 PM ET

$NGS

Oilfield Services/Equipment

Energy

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ngs-20250630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number 1-31398

NATURAL GAS SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)


Colorado						75-2811855
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

404 Veterans Airpark Ln., Ste 300

Midland, Texas 79705

(Address of principal executive offices)

(432) 262-2700

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, Par Value $0.01	NGS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes x						No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes x						No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes ☐						No x

As of August 8, 2025 there were 12,542,314 shares of the Registrant’s common stock, $0.01 par value, outstanding.

TABLE OF CONTENTS


						Page
Part I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)
Unaudited Condensed Consolidated Balance Sheets						1
Unaudited Condensed Consolidated Statements of Operations						2
Unaudited Condensed Consolidated Statements of Stockholders’ Equity						3
Unaudited Condensed Consolidated Statements of Cash Flows						4
Notes to Unaudited Condensed Consolidated Financial Statements:						5
1.Description of Business						5
2. Summary of Significant Accounting Policies						5
3. Trade Accounts Receivable						6
4. Inventory						6
5. Assets Held for Sale						7
6. Rental Equipment						7
7. Property and Equipment						7
8. Supplemental Balance Sheet Disclosures						8
9. Long-Term Debt						8
10. Income Taxes						9
11. Commitments and Contingencies						10
12. Revenues from Customers						10
13. Stock-Based and Other Long-Term Incentive Compensation						10
14. Earnings per Share						13
15. Subsequent Events						13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						15
Item 3. Quantitative and Qualitative Disclosures about Market Risk						27
Item 4. Controls and Procedures						28

Part II - OTHER INFORMATION

Item 1. Legal Proceedings						29
Item 1A. Risk Factors						29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						29
Item 3. Defaults Upon Senior Securities						29
Item 4. Mine Safety Disclosures						29
Item 5. Other Information						29
Item 6. Exhibits						30

Signatures						31

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements


NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited)
	June 30,		December 31,
	2025		2024
ASSETS
Current Assets:
Cash and cash equivalents	$	325	$	2,142
Trade accounts receivable, net of provision for credit losses	13,742		15,626
Inventory, net of allowance for obsolescence	18,334		18,051
Federal income tax receivable	11,408		11,282
Prepaid expenses and other	2,846		1,075
Assets held for sale	2,227		—
Total current assets	48,882		48,176
Long-term inventory, net of allowance for obsolescence	—		—
Rental equipment, net of accumulated depreciation	446,952		415,021
Property and equipment, net of accumulated depreciation	22,664		22,989

Other assets	7,028		6,342
Total assets	$	525,526	$	492,528
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	14,491	$	9,670
Accrued liabilities	10,297		7,688
Total current liabilities	24,788		17,358
Long-term debt	182,000		170,000
Deferred income taxes	48,884		45,873
Other long-term liabilities	3,640		4,240
Total liabilities	259,312		237,471
Commitments and contingencies (Note 1 1)
Stockholders’ Equity:
Preferred stock, 5,000 shares authorized, no shares issued or outstanding	—		—
Common stock, 30,000 shares authorized, par value $0.01; 13,811 and 13,762 shares issued, respectively	138		138
Additional paid-in capital	119,530		118,415
Retained earnings	161,550		151,508
Treasury shares, at cost, 1,310 shares for each of the dates presented, respectively	(15,004)		(15,004)
Total stockholders’ equity	266,214		255,057
Total liabilities and stockholders’ equity	$	525,526	$	492,528

See accompanying notes to these unaudited condensed consolidated financial statements.


NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited)
	Three months ended				Six months ended
	June 30,				June 30,
	2025		2024		2025		2024
Revenue:
Rental	$	39,580	$	34,926	$	78,490	$	68,660
Sales	750		2,270		2,677		4,773
Aftermarket services	1,052		1,295		1,598		1,965
Total revenue	41,382		38,491		82,765		75,398
Cost of revenue (excluding depreciation and amortization):
Rental	15,528		14,228		30,368		27,342
Sales	911		2,249		2,927		4,429
Aftermarket services	720		1,012		991		1,512
Total cost of revenues (excluding depreciation and amortization)	17,159		17,489		34,286		33,283
Selling, general and administrative expense	5,454		5,020		10,832		9,722
Depreciation and amortization	8,969		7,705		17,605		14,792

Inventory allowance	—		—		61		—
Retirement of rental equipment	—		—		728		5
Gain on disposition of assets, net	(124)		(229)		(178)		(229)
Total operating costs and expenses	31,458		29,985		63,334		57,573
Operating income	9,924		8,506		19,431		17,825
Other income (expense):
Interest expense	(3,243)		(2,932)		(6,413)		(5,867)
Other income (expense)	104		(30)		103		163
Total other income (expense), net	(3,139)		(2,962)		(6,310)		(5,704)
Income before income taxes	6,785		5,544		13,121		12,121
Provision for income taxes	(1,597)		(1,294)		(3,079)		(2,773)
Net income	$	5,188	$	4,250	$	10,042	$	9,348
Earnings per share:
Basic	$	0.42	$	0.34	$	0.81	$	0.75
Diluted	$	0.41	$	0.34	$	0.80	$	0.75
Weighted average shares outstanding:
Basic	12,483		12,384		12,473		12,392
Diluted	12,625		12,483		12,629		12,484

See accompanying notes to these unaudited condensed consolidated financial statements.


NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited)
	Preferred Stock			Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Shares	Amount						Shares	Amount
January 1, 2024	—	$	—	13,688	$	137	$	116,480	$	134,281	1,310	$	(15,004)	$	235,894
Stock-based compensation	—	—		—	—		274		—		—	—		274


Taxes paid related to net shares settlement of equity awards	—	—		6	—		—		—		—	—		—

Net income	—	—		—	—		—		5,098		—	—		5,098
March 31, 2024	—	$	—	13,694	$	137	$	116,754	$	139,379	1,310	$	(15,004)	$	241,266
Stock-based compensation	—	—		—	—		242		—		—	—		242


Taxes paid related to net shares settlement of equity awards	—	—		33	—		(98)		—		—	—		(98)

Net income	—	—		—	—		—		4,250		—	—		4,250
June 30, 2024	—	$	—	13,727	$	137	$	116,898	$	143,629	1,310	$	(15,004)	$	245,660


	Preferred Stock			Common Stock			Additional Paid-In Capital		Retained Earnings		Treasury Stock			Total Stockholders’ Equity
	Shares	Amount		Shares	Amount						Shares	Amount
January 1, 2025	—	$	—	13,762	$	138	$	118,415	$	151,508	1,310	$	(15,004)	$	255,057
Stock-based compensation	—	—		—	—		359		—		—	—		359
Vesting of restricted stock/units	—	—		22	—		—		—		—	—		—

Taxes paid related to net shares settlement of equity awards	—	—		—	—		(6)		—		—	—		(6)

Net income	—	—		—	—		—		4,854		—	—		4,854
March 31, 2025	—	$	—	13,784	$	138	$	118,768	$	156,362	1,310	$	(15,004)	$	260,264
Stock-based compensation	—	—		—	—		579		—		—	—		579
Vesting of restricted stock/units	—	—		22	—		108		—		—	—		108
Exercise of common stock options	—	—		5	—		75		—		—	—		75


Net income	—	—		—	—		—		5,188		—	—		5,188
June 30, 2025	—	$	—	13,811	$	138	$	119,530	$	161,550	1,310	$	(15,004)	$	266,214

See accompanying notes to these unaudited condensed consolidated financial statements.


NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
	Six months ended
	June 30,
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,042	$	9,348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	17,605		14,792

Inventory allowance	61		—
Retirement of rental equipment	728		5
Gain on disposition of assets, net	(178)		(229)
Amortization of debt issuance costs	506		315
Deferred income taxes	3,011		2,654
Stock-based compensation	938		516
Provision for credit losses	208		287
Gain on company owned life insurance	(17)		(173)
Changes in operating assets and liabilities:
Trade accounts receivables	1,676		5,898
Inventory	(344)		1,149
Prepaid expenses and prepaid income taxes	(1,897)		(825)
Accounts payable and accrued liabilities	513		(2,993)
Other	(589)		375
NET CASH PROVIDED BY OPERATING ACTIVITIES	32,263		31,119
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of rental equipment, property and other equipment	(45,065)		(28,262)
Purchase of company owned life insurance	—		(17)
Proceeds received from insurance for damages to equipment	99		—
Proceeds from disposition of assets, net	4		355
Proceeds from surrender of company owned life insurance	—		43
NET CASH USED IN INVESTING ACTIVITIES	(44,962)		(27,881)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from credit facility borrowings	23,122		8,000
Repayments of credit facility borrowings	(11,122)		(9,000)
Payments of other long-term liabilities	—		(385)
Payments of debt issuance costs	(1,187)		(885)
Proceeds from exercise of stock options	75		—

Taxes paid related to net share settlement of equity awards	(6)		(98)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	10,882		(2,368)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(1,817)		870
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,142		2,746
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	325	$	3,616
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	7,037	$	10,458
Income taxes paid	$	16	$	—
NON-CASH TRANSACTIONS:


Accrued purchases of property and equipment	$	7,254	$	—
Right of use assets acquired through an finance lease	$	—	$	1,751

See accompanying notes to these unaudited condensed consolidated financial statements.

NATURAL GAS SERVICES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts or where otherwise indicated)

(unaudited)

1. Description of Business

Natural Gas Services Group, Inc. (the “Company,” “NGS,” “Natural Gas Services Group,” “we,” “us” or “our”) (a Colorado corporation), is a leading provider of natural gas and electric compression equipment, technology and services to the energy industry. We rent, design, sell, install, service and maintain compressors and related equipment for our customers’ oil and gas production and processing facilities, generally using equipment from OEM suppliers along with limited in-house assembly. We are headquartered in Midland, Texas, with an assembly facility located in Tulsa, Oklahoma and service facilities located in major oil and gas producing basins in the United States (“U.S.”).

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of the Company, its subsidiary, NGSG Properties, LLC, which owns the Company’s headquarters office building, and the rabbi trust associated with our deferred compensation plan. All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation.

These financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for the fair presentation of our financial position as of June 30, 2025, and the results of our operations for the three and six months ended June 30, 2025, and 2024, respectively. As permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”), the accompanying Condensed Consolidated Financial Statements do not include all disclosures normally required by GAAP. These financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. In our opinion, the Condensed Consolidated Financial Statements provide a fair representation of our financial position, results of operations, changes in stockholders’ equity and cash flows for the periods presented.

Although we review our service and product offerings to analyze the nature of our revenue, costs and expenses, the net income and non-GAAP financial measures including EBITDA and Adjusted gross margin are not captured or analyzed by these categories. Our chief executive officer (“CEO”) serves as the chief operating decision maker and does not make resource allocation decisions or assess the performance of the business based on these categories, but rather on the entire entity in the aggregate. Accordingly, the measures of profit and loss and total assets are effectively those of the Company as a whole as reflected in these Condensed Consolidated Financial Statements. Based on these facts and circumstances, we have concluded that we operate in one business segment.

Certain reclassifications have been made to prior periods to conform to the current presentation. In our Condensed Consolidated Statements of Operations, (gains) and losses on the sale of assets have been reclassified from selling, general and administrative expenses to a stand-alone caption included within total operating income.

The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2025.

Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board issued ASU 2024-03 “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense” (“ASU 2024-03”) which expands annual and interim disclosures for certain types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general & administrative expenses, and research and development). ASU 2024-03 is effective for our annual periods beginning January 1, 2027, and for interim periods beginning January 1, 2028, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on our Consolidated Financial Statements or disclosures.

3. Trade Accounts Receivable

The following table summarizes our trade accounts receivable from customers as of the dates presented:


	June 30,		December 31,
	2025		2024
Trade accounts receivable
Rentals	$	12,525	$	14,218
Sales and aftermarket services	1,735		2,657
	14,260		16,875
Less: Provision for credit losses	(518)		(1,249)
Total trade accounts receivable, net	$	13,742	$	15,626

Our trade accounts receivable consist of customer obligations due under normal trade terms for (i) operating leases for the use of our compressor equipment, (ii) the sale of compressors and related equipment and (iii) the performance of aftermarket services.

Major Customers and Concentration of Credit Risk

Rental revenue and sales from Occidental Permian, LTD. (“Oxy”) in the six months ended June 30, 2025 and 2024 amounted to 47 percent and 51 percent of revenue, respectively. No other single customer accounted for more than 10 percent of our revenues during these periods. Likewise, Oxy’s accounts receivable balances amounted to 50 percent and 52 percent of our accounts receivable as of June 30, 2025, and December 31, 2024, respectively. No other customers amounted to more than 10 percent of our accounts receivable as of these dates.

Provision for Credit Losses

The following table summarizes the changes in our provision for credit losses for the periods presented:


	Six months ended		Year ended
	June 30,		December 31,
	2025		2024
Beginning balance	$	1,249	$	823
Provision for credit losses	208		433

Write-offs	(939)		(7)
Ending balance	$	518	$	1,249

Management believes that the provision is adequate; however, actual write-offs may exceed the recorded provision. The substantial write-off of the provision for credit losses during the six months ended June 30, 2025 reflects certain aged receivables that are no longer deemed collectible.

4. Inventory

The following table summarizes the components of our inventory, net of allowance for obsolescence, as of the dates presented:


	June 30,		December 31,
	2025		2024
Raw materials, net of allowance of $1,499 and $4,379, respectively	$	17,576	$	17,706
Work-in-process	758		345
Inventory - current	18,334		18,051
Raw materials - long term, net of allowance of $1,020 and $1,488, respectively	—		—
Total inventory	$	18,334	$	18,051

Our long-term inventory, which is fully reserved for obsolescence, consists of raw materials that remain viable but with limited market opportunities.

The following table summarizes the changes in our allowance for obsolescence for the periods presented:


	June 30,		December 31,
	2025		2024
Beginning balance	$	5,867	$	4,004
Allowance for obsolescence	61		1,863
Write-offs	(3,409)		—
Ending balance	$	2,519	$	5,867

The substantial write-off of the allowance for obsolescence during the six months ended June 30, 2025 reflects the disposal of inventory items, including engines, frames and coolers, among other items that were previously held and reserved at our former Midland, Texas fabrication facility.

5. Assets Held for Sale

During the second quarter of 2025, we completed all activities necessary to terminate operations at our fabrication, repair and overhaul facility in Midland, Texas (the (“Midland Facility”) and prepared the site, which includes an industrial building and land, for sale. Accordingly, depreciation of the facility was suspended and the combined net carrying value of the building and land, or $2.2 million, was reclassified from property and equipment to an asset held for sale included as a component of current assets on our Condensed Consolidated Balance Sheet as of June 30, 2025. We have engaged a broker and are actively marketing the facility. The closure of the Midland Facility was part of our strategy to streamline and outsource our assembly operations and monetize company-owned real estate as disclosed previously. We anticipated that we will complete a sale transaction for the Midland Facility within the next twelve months.

Beginning in the first quarter of 2025, all equipment with continuing productive value was transferred from the Midland Facility to certain of our other regional service centers. By the end of April 2025, the Midland Facility was completely vacant in anticipation of the eventual sale. In addition, we disposed of all inventory items, including engines, frames and coolers, among other items that were fully reserved (see Note 4).

In connection with complete closure of the Midland Facility, we terminated eight employees and incurred $0.1 million of severance and termination benefits all of which were paid and settled during April 2025.

6. Rental Equipment

The following table summarizes our rental equipment and accumulated depreciation as of the dates presented:


	June 30,		December 31,
	2025		2024
Compressor units	$	627,823	$	579,373
Work-in-progress	41,207		51,662
	669,030		631,035
Accumulated depreciation	(222,078)		(216,014)
Rental equipment, net of accumulated depreciation	$	446,952	$	415,021

We evaluated our rental equipment for potential impairments as of June 30, 2025, and December 31, 2024 and determined that none were present. Depreciation expense for rental equipment was $8.0 million and $6.9 million for the three months ended June 30, 2025, and 2024, respectively and $15.7 million and $13.4 million for the six months ended June 30, 2025, and 2024, respectively. We capitalized interest totaling approximately $0.5 million and $1.3 million for the three months ended June 30, 2025, and 2024, respectively, and $1.1 million and $2.4 million, for the six months ended June 30, 2025, and 2024, respectively.

7. Property and Equipment

The following table summarizes our property and equipment as of the dates presented:


	June 30,		December 31,
	2025		2024
Land	$	1,562	$	1,680
Building	16,135		19,140
Leasehold improvements	1,022		1,346
Office equipment and furniture	2,057		2,057
Software	589		589
Machinery and equipment	4,929		4,430
Vehicles	12,998		12,739
Work-in-progress	1,932		168
	41,224		42,149
Less accumulated depreciation	(18,560)		(19,160)
Total	$	22,664	$	22,989

Depreciation expense for property and equipment was $0.9 million and $0.8 million for the three months ended June 30, 2025, and 2024, respectively, and $1.9 million and $1.3 million for the six months ended June 30, 2025, and 2024, respectively.

During the quarter ended June 30, 2025, we reclassified certain items of property and equipment attributable to our former Midland Facility with a carrying value of $2.2 million to assets held for sale (see Note 5).

8. Supplemental Balance Sheet Disclosures

The following table summarizes the components of accrued liabilities as of the dates presented:


	June 30,		December 31,
	2025		2024
Accrued purchases	$	3,529	$	2,085
Compensation	3,395		3,483
Right of use obligations	165		153
Interest	195		269

Sales taxes	261		355
Other	2,752		1,343
	$	10,297	$	7,688

9. Long-Term Debt

Our outstanding long-term debt consists of the following, as of the dates presented:


	June 30,		December 31,
	2025		2024
Credit facility	$	182,000	$	170,000

We have a senior secured revolving credit agreement, as amended (the “Credit Facility”) with Texas Capital Bank, National Association (the “Lender”) as administrative agent, and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners. On April 18, 2025, we entered into the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”) with the Lender and certain other lenders to (i) increase the total commitment to $400.0 million from $300.0 million, (ii) expand the accordion feature to $100.0 million from $50.0 million, (iii) reduce the interest rates by 50 to 75 basis points at comparable leverage levels and (iv) provide for a more flexible leverage covenant beginning on June 30, 2026. In connection with the Fourth Amendment, we incurred fees of $1.2 million.

The Credit Facility provides for a total commitment of $400.0 million. We also have a right to request from the Lender an increase to the potential aggregate commitment of up to $100.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $500.0 million. The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility’s financial covenants.The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.

As of June 30, 2025, we had $182.0 million outstanding under our Credit Facility with a weighted average interest rate of 7.23%. As of June 30, 2025 we had approximately $172.3 million available for borrowing under the Credit Facility, subject to a borrowing base determination. As of June 30, 2025, we were in compliance with all financial covenants in our Credit Facility.

Borrowing Base. At any time before the maturity of the Credit Facility, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above. Generally, the borrowing base equals the sum of (a) 85% of eligible accounts receivable owed to us, plus (b) 50% of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $2.5 million, plus (c) the lesser of (i) 95% of the net book value of the compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80% of the net liquidation value percentage of the net book value of the eligible compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (d) 80% of the net book value, valued at the lower of cost (excluding any costs for capitalized interest or other noncash capitalized costs) or market of the eligible new compressor fleet, minus (e) any required availability reserves determined by the Lender in its sole discretion. The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral.

Interest and Fees. Under the terms of the Credit Facility, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Term Secured Overnight Financing Rate (“SOFR”) Loan, the Adjusted Term SOFR rate plus the Applicable Margin. “Base Rate” means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day; (b) the sum of the federal funds rate for such day plus 0.50%; and (c) the Adjusted Term SOFR for such day plus 1.00%. The Applicable Margin is determined based upon the leverage ratio as set forth in the most recent compliance certificate received by the Lender for each fiscal quarter from time to time pursuant to the Credit Facility. Depending on the leverage ratio, the Applicable Margin can be 1.50% to 2.25% for Base Rate Loans (as defined in the Credit Facility) and 2.50% to 3.25% for Term SOFR Loans and for requested letters of credit. In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Credit Facility is in effect at an annual rate equal to 0.375% of the unused commitment amount. Accrued interest is payable monthly on outstanding principal amounts and unused commitment fee, provided that accrued interest on Term SOFR Loans is payable at the end of each interest period, but in no event less frequently than quarterly.

Covenants. The Credit Facility contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens; enter into transactions with affiliates; make acquisitions in excess of certain amounts; pay dividends; redeem or repurchase capital stock or senior notes; make investments or loans; make negative pledges; consolidate, merge or effect asset sales; or change the nature of our business. In addition, we are subject to certain financial covenants in the Credit Facility that require us to maintain (i) a leverage ratio, as defined, less than or equal to (a) 3.75 to 1.00 for fiscal quarter ending on June 30, 2025, (b) and 3.50 to 1.00 for each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter.

Events of Default and Acceleration. The Credit Facility contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults; defaults in performance of covenants or other agreements contained in the Credit Facility and the other transaction documents; inaccuracies in representations and warranties; certain defaults, termination events or similar events; certain defaults with respect to any other Company indebtedness in excess of $1.0 million; certain bankruptcy or insolvency events; the rendering of certain judgments in excess of $1.0 million; certain ERISA events; certain change in control events and the defectiveness of any liens. Obligations outstanding under the Credit Facility may be accelerated upon the occurrence of an event of default.

10. Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic impact caused by the COVID-19 pandemic. The CARES Act, among other things, permits federal income tax net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes. We generated significant NOLs during 2018 and 2019 and filed carryback claims for these losses to the preceding five years.

During 2020, we received federal income tax refunds corresponding to the 2018 NOL carryback leaving approximately $11.4 million remaining to be refunded in connection with the 2019 NOL carryback. In conjunction with the remaining income tax refund claim, we received a notice from the Internal Revenue Service (“IRS”) on March 8, 2023, stating that our income tax returns for 2015, 2016, 2017 and 2019 were selected for examination. Furthermore and as is customary for income tax refunds of this magnitude, the IRS is required to review the refund claim and provide a report to the Joint Committee on Taxation of the U.S. Congress (“JCT”). Our request for refund was formally submitted to the JCT for their review during the second quarter of 2025 and we are currently awaiting their response. As a result of the submission of the refund claim to the JCT, the IRS has effectively completed their review of the income tax returns for 2015, 2016 and 2017; however, the tax return for 2019 remains technically subject to review until a response is received from the JCT.

11. Commitments and Contingencies

From time to time, we are a party to various claims and legal proceedings arising from our operations in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation. While the outcome of any potential claims and legal proceedings against us cannot be predicted with certainty, we have concluded that it is not considered reasonably possible that a loss resulting from any such claims or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations or cash flows. Furthermore, we believe that we maintain adequate insurance coverage against any potential litigation loss relating to insurable risks.

12. Revenues from Customers

Disaggregation of Revenue

The following table summarizes our revenue disaggregated by product or service type for the periods presented:


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Rental	$	39,580	$	34,926	$	78,490	$	68,660
Sales
Compressors	129		58		950		1,341
Other (Parts/Rebuilds)	621		2,212		1,727		3,432
	750		2,270		2,677		4,773
Aftermarket services	1,052		1,295		1,598		1,965
Total revenue	$	41,382	$	38,491	$	82,765	$	75,398

No amounts were recognized in revenue attributable to deferred revenue during the six months ended June 30, 2025. We recognized $0.4 million in revenue for the six months ended June 30, 2024, that was included in accrued liabilities as deferred revenue at the beginning of 2024.

Transaction Price Allocated to the Remaining Performance Obligations

As of June 30, 2025, and December 31, 2024, we had no deferred revenue related to unsatisfied performance obligations.

Contract Costs

We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less. These costs are included within Selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

13. Stock-Based and Other Long-Term Incentive Compensation

We maintain two stockholder approved plans for the issuance of stock-based compensation awards to our employees and Board of Director members: (i) the 2019 Equity Incentive Plan, as amended (the “Equity Incentive Plan”), and (ii) the 1998 Stock Option Plan, as amended (the “Stock Option Plan”).

The following table summarizes the total stock-based compensation expense recognized during the periods presented:


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Equity-classified	$	579	$	242	$	938	$	516
Liability-classified (1)	137		16		137		16
	$	716	$	258	$	1,075	$	532

(1) Represents compensation expense associated with awards that may be settled in cash at the option of the grantee.

1998 Stock Option Plan

The Stock Option Plan provides for the granting of incentive and non-qualified stock options to our employees for up to 1,000,000 shares of common stock. After consideration of the activity described in the table below, a total of 395,669 shares remained available for grant under the Stock Option Plan as of June 30, 2025. The last date that grants can be made under the Stock Option Plan is February 28, 2026. A summary of all option activity during the six months ended June 30, 2025 is presented below:


	Number of Shares Underlying Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding, December 31, 2024	113,751	$	20.44	5.84	$	747
Granted	40,250	$	22.19		$	—
Exercised	(5,267)	$	10.58		$	76
Canceled/Forfeited	(5,333)	$	23.24		$	16
Expired	(23,167)	$	22.90		$	—
Outstanding, June 30, 2025	120,234	$	20.86	7.73	$	634
Exercisable, June 30, 2025	49,819	$	19.79	5.52	$	339

The following table summarizes information about our stock options outstanding as of June 30, 2025:


Range of Exercise Prices:	Options Outstanding				Options Exercisable
	Shares	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$0.01-$18.00	24,234	6.79	$	10.76	20,067	$	10.95
$18.01-$26.00	79,250	9.30	$	22.41	13,002	$	22.66
$26.01-$30.00	16,750	1.63	$	28.15	16,750	$	28.15
	120,234	7.73	$	20.86	49,819	$	19.79

The following table summarizes changes in our unvested stock options during the six months ended June 30, 2025:


	Shares	Weighted Average Grant Date Fair Value Per Share
Unvested, December 31, 2024	48,998	$	11.35
Granted	40,250	$	12.06
Vested	(14,833)	$	11.33

Canceled/Forfeited	(4,000)	$	12.46
Unvested, June 30, 2025	70,415	$	11.70

As of June 30, 2025, there was a total of approximately $0.6 million of unrecognized compensation cost related to unvested options which is expected to be recognized over the next 2.33 years.

2019 Equity Incentive Plan

On June 5, 2025, our stockholders approved an amendment to the Equity Incentive Plan (the “Amendment”) to increase the number of shares available by 500,000 shares up to a total of 1,650,000 shares of common stock for issuance in the form of awards for: (i) stock options, (ii) stock appreciation rights, (iii) restricted awards in the form of restricted stock and restricted stock units (“RSUs”), (iv) performance share awards, including performance share units (“PSUs”) and (v) other equity-based awards. In addition, the Amendment extended the term of the Equity Incentive Plan by five years to June 20, 2034. After consideration of the activity described in detail below, a total of 643,514 shares remained available for grant under the Equity Incentive Plan as of June 30, 2025.

Time-Vested RSUs

The following table summarizes all restricted stock and RSU activity during the six months ended June 30, 2025 is presented below:


	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding, December 31, 2024	131,183	$	16.39	5.15	$	3,516
Granted	69,672	$	22.67		$	1,579
Vested	(53,094)	$	15.35		$	1,327
Canceled/Forfeited	(910)	$	22.19		$	17
Outstanding, June 30, 2025	146,851	$	19.71	4.27	$	3,790

As of June 30, 2025, there was a total of approximately $2.1 million of unrecognized compensation cost related to unvested restricted stock and RSUs which is expected to be recognized over the next 2.12 years.

Cash Settled RSUs

The 2025 and 2024 grants of RSUs to the independent Board members that can be settled in cash represent liability-classified awards. Compensation expense associated with these awards is based upon the fair value of NGS common stock at each reporting period relative to that portion of the service period that has passed. Accordingly, the compensation expense is variable in nature.


	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding, December 31, 2024	15,069	$	19.51	0.50	$	294
Granted	13,368	$	24.69		$	330
Vested	(8,430)	$	19.57		$	165
Canceled/Forfeited	(2,810)	$	19.57		$	55
Outstanding, June 30, 2025	17,197	$	23.50	0.78	$	445

Performance Share Units

The potential payout for the PSU awards is based upon performance for a three-year period ending December 31, 2026 for the 2024 grants and December 31, 2027 for the 2025 grants measured against relative total shareholder return (“TSR”) compared to a peer group of companies as established by the Compensation Committee. The PSU award payout ranges from zero (if the Company ranks below the 31.25 percentile) and up to 200% (if the Company ranks first) based upon our relative TSR performance ranking (subject to certain caps based on absolute TSR as defined in the PSU agreements).

With respect to vesting, the PSUs have both a service condition and a market condition. Due to the presence of the TSR measurement for the common equity of the peer companies, including NGS common stock, which is deemed a “market condition,” the grant-date fair values of the PSUs have been determined using a binomial pricing model, or a Monte Carlo simulation model.

The following table summarizes the weighted average grant date fair values of PSUs granted and the assumptions used in the Monte Carlo simulation model for the determination of the grant date fair values of our PSUs granted during the six months ended June 30, 2025:


Weighted-average grant date fair value of PSUs granted	$	28.05
Risk free rate	3.93		%
Expected volatility	43.9		%
Expected dividend yield	—		%

The following table summarizes all PSU activity during the six months ended June 30, 2025:


	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value
Outstanding, December 31, 2024	56,764	$	22.47	2.22	$	—
Granted	39,434	$	28.05		$	—
Vested	—				$	—
Canceled/Forfeited	—				$	—
Outstanding, June 30, 2025	96,198	$	24.76	2.38	$	—

As of June 30, 2025, there was a total of approximately $1.8 million of unrecognized compensation cost related to the unvested portion of the PSUs which is expected to be recognized over the next 2.13 years.

14. Earnings per Share

The following table reconciles the numerators and denominators of the basic and diluted earnings per share computation for the periods presented:


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Numerator for basic and diluted earnings per share:
Net income	$	5,188	$	4,250	$	10,042	$	9,348
Denominator for basic earnings per common share:
Weighted average common shares outstanding - Basic	12,483		12,384		12,473		12,392
Denominator for diluted earnings per common share:
Weighted average common shares outstanding	12,483		12,384		12,473		12,392
Dilutive effect of stock-based compensation awards	142		99		156		92
Weighted average common shares outstanding - Diluted	12,625		12,483		12,629		12,484
Earnings per common share:
Basic	$	0.42	$	0.34	$	0.81	$	0.75
Diluted	$	0.41	$	0.34	$	0.80	$	0.75

The following table summarizes the actual number of stock-based compensation awards that were excluded from the determination of diluted earnings per share due to their anti-dilutive effect for the periods presented:


	Three months ended June 30,		Six months ended June 30,
	2025	2024	2025	2024
Stock options	94,000	92,417	94,000	92,417
Restricted stock and RSUs	20,963	5,750	7,595	18,635
PSUs	47,029	—	47,029	—
	161,992	98,167	148,624	111,052

15. Subsequent Events

On July 30, 2025, our Board of Directors declared a cash dividend of $0.10 per share to stockholders of record as of August 8, 2025 expected to be paid on August 22, 2025.

On August 5, 2025, Brian Tucker, NGS management, and the Board, collectively reached the difficult decision that Mr. Tucker will transition out of his role as President and COO. This was driven solely by an unfortunate and unexpected family loss which changed Mr. Tucker's personal circumstances. His transition will take place over the next several months with a target end date of October 31, 2025. Mr. Tucker remains fully committed to NGS during this time and beyond, if necessary.

On August 8, 2025, our Board of Directors approved a share repurchase program (the “Repurchase Plan”). The Repurchase Plan provides for the repurchase of shares of our common stock from time to time in the open market as conditions, cash reserves, cash flows and the evaluation of uses of cash for operations, growth and share repurchase may allow. The Repurchase Plan is limited to $6 million and expires on August 6, 2027.

We have evaluated all events subsequent to the balance sheet date as of June 30, 2025, and through the date this report was issued and determined that there have been no other events that would require adjustments or additional disclosures to our Condensed Consolidated Financial Statements.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information pertaining to us, our industry and the oil and gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management. All statements, other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements. We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” “intend,” “plan,” “budget” and other similar words to identify forward-looking statements. You should read statements that contain these words carefully and should not place undue reliance on these statements because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other “forward-looking” information. We do not undertake any obligation to update or revise publicly any forward-looking statements. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations or assumptions will prove to have been correct. These risks, contingencies and uncertainties, include , but are not limited to, the following:

•conditions in the oil and gas industry, including the supply and demand for oil and gas and volatility in the prices of oil and gas;

•changes in general economic and financial conditions, inflationary pressures, the potential for economic recession in the U.S., tariffs and trade restrictions, including the imposition of new and higher tariffs on imported goods and retaliatory tariffs implemented by other countries on U.S. goods, and the potential effects on our financial condition, results of operations and cash flows;

•our reliance on major customers;

•failure of projected organic growth due to adverse changes in the oil and gas industry, including depressed oil and gas prices, oppressive environmental regulations and competition;

•our inability to achieve increased utilization of assets, including rental fleet utilization and monetizing other non-cash balance sheet assets;

•failure of our customers to continue to rent equipment after expiration of the primary rental term;

•our ability to economically develop and deploy new technologies and services, including technology to comply with health and environmental laws and regulations;

•failure to achieve accretive financial results in connection with any acquisitions we may make;

•fluctuations in interest rates;

•changes in regulation or prohibition of new or current well completion techniques;

•competition among the various providers of compression services and products;

•changes in safety, health and environmental regulations;

•changes in economic or political conditions in the markets in which we operate;

•the inherent risks associated with our operations, such as equipment defects, malfunctions, natural disasters and adverse changes in customer, employee and supplier relationships;

•our inability to comply with covenants in our debt agreements and the decreased financial flexibility associated with our debt;

•inability to finance our future capital requirements and availability of financing;

•capacity availability, costs and performance of our outsourced compressor fabrication providers and overall inflationary pressures;

•impacts of world events, such as acts of terrorism and significant economic disruptions and adverse consequences resulting from possible long-term effects of potential pandemics and other public health crises; and

•general economic conditions.

We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict or that we are unable to control. When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements including Item 1A, Risk Factors, in our 2024 Annual Report, as it contains important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis of the financial condition and results of operations of Natural Gas Services Group, Inc. (the “Company”, “NGS”, “Natural Gas Services Group”, “we,” “us” or “our”) for the periods ended June 30, 2025, and 2024 are based on, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024. The following discussion contains forward-looking statements that include risks and uncertainties. For a description of limitations inherent in forward-looking statements, see “Special Note Regarding Forward-Looking Statements” above.

All dollar amounts presented in the tables that follow are in thousands unless otherwise indicated. References to “quarters” represent the three months ended June 30, 2025, or 2024, as applicable. Certain variances that represent results that are not meaningful are indicated as “NM.”

Overview

We rent, design, sell, install, service and maintain natural gas and electric compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers along with limited in-house assembly. Substantially all of our compressor assembly is done by third-party contractors while a limited level of assembly work remains in-house at our Tulsa, Oklahoma facility. We also provide an exchange and rebuild program for compressors and maintain an inventory of new and used compressors to facilitate this business. Our primary focus is on the rental of natural gas and electric compressors. Our rental contracts generally provide for initial terms of 12 to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units. After the initial term of our rental contracts, most of our customers have continued to rent our compressors on a month-to-month basis. Rental amounts are billed monthly in advance and include maintenance of the rented compressor units.

We conduct our operations in several oil and gas producing basins throughout the United States including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale. We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio. A total of 77 percent of our rental revenue is generated from the Permian Basin and approximately 75 percent of our rental revenue supports oil production primarily in the form of gas lift operations. We operate in one reporting segment.

Operating Highlights

The following table summarizes our key operating statistics as of the dates or for the periods presented, as applicable:


	Three months ended June 30,						Six months ended June 30,
	2025			2024			2025			2024
Rented horsepower (at period end)	498,651			454,568			498,651			454,568
Average rented horsepower	495,665			449,394			494,362			439,740
Fleet horsepower available (at period end):	596,322			552,599			596,322			552,599
Fleet horsepower available - average	599,857			547,428			599,518			538,407
Horsepower utilization (at period end)	83.6		%	82.3		%	83.6		%	82.3		%
Average horsepower utilization	82.6		%	82.1		%	82.5		%	81.7		%
Units utilized (at period end)	1,198			1,242			1,198			1,242
Fleet units (at period end):	1,833			1,899			1,833			1,899
Unit utilization (at period end)	65.4		%	65.4		%	65.4		%	65.4		%
Rental revenues	$	39,580		$	34,926		$	78,490		$	68,660
Total revenues	$	41,382		$	38,491		$	82,765		$	75,398
Rental revenues as a percent of total revenues	95.6		%	90.7		%	94.8		%	91.1		%

Of the total horsepower utilized as of June 30, 2025, 391,785 of horsepower was being rented under contracts expiring between 2025 and 2030 and 106,866 of horsepower was being rented on a month-to-month basis.

Our Performance Trends and Outlook

The oil and gas industry has historically been cyclical and production levels of oil and gas are dependent upon numerous factors. The market for compression equipment and services is highly dependent on the production levels of exploration and production companies and pricing of oil and gas.

Crude Oil. The level of production for crude oil activity and capital expenditures has generally been dependent upon the prevailing view of future crude oil prices, which is influenced by numerous supply and demand factors, including availability and cost of capital, well productivity and development costs, global and domestic economic conditions, environmental regulations, policies of OPEC and Russia, and other factors. While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels.

Natural Gas. We believe the market outlook for natural gas production in the U.S. remains steady while short term price volatility remains a factor due to weather, geopolitical influences and shifts in LNG exports. We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and Marcellus Shale.

Non-GAAP Financial Measures

We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitably and liquidity. The most significant of these measures are “Adjusted Gross Margin” and “Adjusted EBITDA” both of which are measurements that are not explicitly defined in accordance with generally accepted accounting principles in the United States of America (“GAAP”), or non-GAAP financial measures, and may vary among different industries and the participants therein.

Adjusted Gross Margin

We define “Adjusted Gross Margin” as total revenue less costs of revenues (excluding depreciation and amortization expense). Adjusted gross margin is included as a supplemental disclosure because it is a primary measure used by our management as it represents the results of revenue and costs (excluding depreciation and amortization expense), which are key components of our operations. Adjusted Gross Margin differs from gross margin, in that gross margin includes depreciation and amortization 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 and amortization expense does not accurately reflect the costs required to maintain and replenish the operational usage of our assets and therefore may not portray the costs from current operating activity. Rather, depreciation and amortization expense reflects the systematic allocation of historical property and equipment costs over their estimated useful lives.

Adjusted Gross Margin has certain material limitations associated with its use as compared to gross margin. These limitations are primarily due to the exclusion of depreciation and amortization expense, which is material to our results of operations. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and our ability to generate revenue. In order to compensate for these limitations, management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of our performance.

As an indicator of our operating performance, Adjusted Gross Margin should not be considered an alternative to, or more meaningful than, gross margin as determined in accordance with GAAP. Our 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 our gross margin, the most directly comparable GAAP financial measure, and reconciles it to Adjusted Gross Margin with further detail by revenue classification for the periods presented:


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Total revenue	$	41,382	$	38,491	$	82,765	$	75,398
Cost of revenue, exclusive of depreciation and amortization	(17,159)		(17,489)		(34,286)		(33,283)
Depreciation allocable to cost of revenues	(8,873)		(7,572)		(17,412)		(14,508)
Gross margin	15,350		13,430		31,067		27,607
Depreciation allocable to cost of revenues	8,873		7,572		17,412		14,508
Adjusted gross margin	$	24,223	$	21,002	$	48,479	$	42,115

Adjusted gross margin by revenue classification:
Rental	$	24,052	$	20,698	$	48,122	$	41,318
Sales	(161)		21		(250)		344
Aftermarket services	332		283		607		453
Total adjusted gross margin	$	24,223	$	21,002	$	48,479	$	42,115

Adjusted EBITDA

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses. This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

•it is widely used by investors in the energy industry to measure a company’s operating performance without regard to items excluded from the calculation of Adjusted EBITDA, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;

•it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating structure; and

•it is used by our management for various purposes, including as a measure of operating performance, in presentations to our Board of Directors, and as a basis for strategic planning and forecasting.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

•Adjusted EBITDA does not reflect all our cash expenditures, future requirements for capital expenditures, or contractual commitments;

•Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•Adjusted EBITDA does not reflect the cash requirements necessary to service interest or principal payments on our debt and finance leases; and

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any capital expenditures for such replacements.

There are other material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of certain recurring items that materially affect our net income or loss, and the lack of comparability of results of operations of different companies.

The following table reconciles our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented:


	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Net income	$	5,188	$	4,250	$	10,042	$	9,348
Interest expense	3,243		2,932		6,413		5,867
Income tax expense	1,597		1,294		3,079		2,773
Depreciation and amortization	8,969		7,705		17,605		14,792

Inventory allowance	—		—		61		—
Retirement of rental equipment	—		—		728		5
Severance and restructuring charges	89		33		89		33
Stock-based compensation	579		242		938		516
Adjusted EBITDA	$	19,665	$	16,456	$	38,955	$	33,334

Results of Operations

Three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024.

Rentals

We generate revenue primarily from renting, maintaining and servicing compressors to our customers under contractual arrangements. These contracts, which all qualify as operating leases under GAAP, generally include a fee for servicing the compressor unit during the rental term. Our rental contract terms typically range from 12 to 60 months. Our revenue is recognized over time, with monthly payments over the term of the contract. After the terms of the contract have expired, a customer may renew its contract or continue renting on a monthly basis thereafter. The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and service employees that are geographically dispersed throughout our operating regions.

The following table summarizes the revenues, costs, adjusted gross margin and related operating statistics with respect to our rentals of compressors for the periods presented:


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Rental revenue	$	39,580		$	34,926		$	4,654		13.3	%	$	78,490		$	68,660		$	9,830		14.3	%
Cost of rentals (excluding depreciation and amortization)	15,528			14,228			1,300			9.1	%	30,368			27,342			3,026			11.1	%
Rental adjusted gross margin	$	24,052		$	20,698		$	3,354		16.2	%	$	48,122		$	41,318		$	6,804		16.5	%
Rental adjusted gross margin percentage	60.8		%	59.3		%	1.5		%			61.3		%	60.2		%	1.1		%
Percent of total company revenues	95.6		%	90.7		%	4.9		%			94.8		%	91.1		%	3.7		%
Rented horsepower	498,651			454,568			44,083			9.7	%	498,651			454,568			44,083			9.7	%
Horsepower utilization	83.6		%	82.3		%	1.3		%			83.6		%	82.3		%	1.3		%
Units utilized	1,198			1,242			(44)			(3.5)	%	1,198			1,242			(44)			(3.5)	%
Units utilization	65.4		%	65.4		%	—		%			65.4		%	65.4		%	—		%
Customers under contract	63			73			(10)			(13.7)	%	63			73			(10)			(13.7)	%

Rental revenue increased for the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024 due primarily to an increase in rented horsepower despite a decrease in the number of units rented and a decrease in total customers. The increase in revenue reflects a continuing trend of growing demand for our higher horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins. Our utilized horsepower increased marginally during the second quarter of 2025 as compared to the prior year period which reflects the continued addition of high horsepower compressor units to our fleet consistent with our emphasis on larger units over the past few years, as well as the retirement of certain older medium and small horsepower units from the fleet partially offset by the return of lower horsepower units to the fleet by certain customers at the end of their lease terms. Through June 30, 2025, we placed into service a total 181 newly set units, including 166 from our existing fleet and 15 new units. Of those sets, a total of 48 were high horsepower units and 15 of those were new units to the fleet. The decline in customers is primarily attributable to E&P industry consolidation as well as the acquisition of existing producing oil and gas properties among E&P companies; however, it has not resulted in any meaningful decrease in our level of business activity.

The cost of rentals increased on an absolute basis due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs. An expanding portion of our rented compressor units utilize our proprietary System Management and Recovery Technology (“SMART”) and telemetry software which reduces unplanned shutdowns and increases productivity. Despite inflationary pressure associated with our primary cost components, the SMART and telemetry technology allows us to streamline and manage our maintenance activities more efficiently and thereby mitigating the costs to a manageable extent. As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the three and six months ended June 30, 2025, compared to the comparable periods in 2024.

Sales

We generate revenue from the sale of assembled compressors and parts, as well as exchange/rebuilding customer owned compressors and the sale of used rental equipment. Costs of sales include purchases of engines, compressors, coolers and other component materials as well as direct and indirect labor attributable to the assembly of equipment to meet the unique specifications of our customers. In addition, our costs of sales include overhead and related support costs attributable to our storage, assembly, repair and overhaul facilities in Tulsa, Oklahoma as well as Midland, Texas through its closure at the end of March 2025.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressors, parts and equipment and repair/overhaul services for the periods presented:


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Sales revenue	$	750		$	2,270		$	(1,520)		(67.0)	%	$	2,677		$	4,773		$	(2,096)		(43.9)	%
Cost of sales (excluding depreciation and amortization)	911			2,249			(1,338)			(59.5)	%	2,927			4,429			(1,502)			(33.9)	%
Sales adjusted gross margin	$	(161)		$	21		$	(182)		NM		$	(250)		$	344		$	(594)		NM
Sales adjusted gross margin percentage	(21.5)		%	0.9		%	(22.4)		%			(9.3)		%	7.2		%	(16.5)		%
Percent of total company revenues	1.8		%	5.9		%	(4.1)		%			3.2		%	6.3		%	(3.1)		%

Sales revenue declined for the three and six months ended June 30, 2025, compared to the corresponding periods in 2024. Sales are subject to fluctuations in the timing of industry activity related to our customers’ capital projects and, as such, can vary substantially between periods. Due to these circumstances as well as the costs of maintaining support facilities relative to revenues, we continue to shift our business away from sales of new compressor packages to renting our owned units to our customers. While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the gross margins declined to negative values due primarily to indirect labor and fixed overhead costs that are not otherwise subject to capitalization at our assembly, repair and overhaul facilities, as well as severance and other continuing costs primarily at the location in Midland, Texas which we closed at the end of March 2025. Sales represented an insignificant portion of our gross margin in the three and six months ended June 30, 2025, and 2024, respectively.

Aftermarket Service

We provide routine or call-out services on customer-owned equipment as well as commissioning of new units for customers. Revenue is recognized after services in the contract are rendered. The primary costs associated with our aftermarket services are labor, support costs, materials and supplies.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our aftermarket services for the periods presented:


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Aftermarket services revenue	$	1,052		$	1,295		$	(243)		(18.8)	%	$	1,598		$	1,965		$	(367)		(18.7)	%
Cost of aftermarket services (excluding depreciation and amortization)	720			1,012			(292)			(28.9)	%	991			1,512			(521)			(34.5)	%
Aftermarket services adjusted gross margin	$	332		$	283		$	49		17.3	%	$	607		$	453		$	154		34.0	%
Aftermarket services adjusted gross margin percentage	31.6		%	21.9		%	9.7		%			38.0		%	23.1		%	14.9		%
Percent of total company revenues	2.5		%	3.4		%	(0.9)		%			1.9		%	2.6		%	(0.7)		%

Third party aftermarket services revenues and costs declined for the three months ended June 30, 2025, compared to the corresponding periods during 2024; however, the absolute gross margins and percentages both improved over the prior periods in 2024. The decline in revenue and costs is primarily attributable to a marginally lower volume of unit commissioning work performed during the 2025 periods compared to 2024 as well as the effect of lower freight costs. Aftermarket services represented an insignificant portion of our gross margin in the three and six months ended June 30, 2025, and 2024, respectively.

Selling, General and Administrative Expenses

Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, human resources, information technology, health, safety and environmental and investor relations. In addition, SG&A includes non-personnel costs, such as occupancy costs, IT support costs, professional fees and other supporting corporate expenses including public company compliance costs.


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Primary selling, general and administrative expenses	$	4,875		$	4,778		$	97		2.0	%	$	9,894		$	9,206		$	688		7.5	%
Stock-based compensation - equity classified	579			242			337			139.3	%	938			516			422			81.8	%

Total	$	5,454		$	5,020		$	434		8.6	%	$	10,832		$	9,722		$	1,110		11.4	%
SG&A expenses as a percent of total revenues	13.2		%	13.0		%	0.2		%			13.1		%	12.9		%	0.2		%

SG&A expenses increased during the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024. In general, the increase in our total SG&A expenses reflects a higher level of cost to appropriately scale our administrative function. The marginal increase in primary SG&A expenses during the three months ended June 30, 2025 as compared to 2024 reflects (i) higher information technology support costs of $0.2 million, (ii) higher public company costs of $0.1 million and (iii) higher occupancy and office costs of $0.1 million which were substantially offset by (i) lower credit loss expenses of $0.1 million, (ii) lower compensation costs of $0.1 million and (iii) lower professional fees of $0.1 million. The increase in primary SG&A expenses during the six months ended June 30, 2025 compared to 2024 was impacted by (i) higher information technology support costs of $0.4 million in support of our growth initiatives, (ii) higher salaries and benefits of $0.2 million reflecting support staff growth (iii) higher public company costs of $0.1 million and (iv) marginally higher occupancy and office costs of $0.1 million. These increases were partially offset by $0.1 million of lower professional fees and credit loss expense on a combined basis. Our equity classified stock-based compensation increased during both periods in 2025 over 2024 due primarily to a higher mix of performance-based share unit awards, or PSUs, for our executive officers in the 2025 period. PSUs generally have a higher grant-date fair value than traditional restricted stock and restricted stock units.

Depreciation and Amortization

Depreciation and amortization expenses reflect the depreciation of our rental compressor fleet as well as the depreciation and amortization of our operating and corporate facilities, vehicles and other equipment, and the amortization of finance leases and intangible assets.

The following table summarizes the components of our depreciation and amortization expenses for the periods presented:


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Depreciation and amortization allocable to cost of revenues:
Rental	$	8,758		$	7,488		$	1,270		17.0	%	$	17,194		$	14,347		$	2,847		19.8	%
Sales	93			70			23			32.9	%	185			140			45			32.1	%
Aftermarket services	22			14			8			57.1	%	33			21			12			57.1	%
	8,873			7,572			1,301			17.2	%	17,412			14,508			2,904			20.0	%
Corporate depreciation	96			98			(2)			(2.0)	%	193			218			(25)			(11.5)	%
Intangible asset amortization	—			35			(35)			NM		—			66			(66)			NM
Total	$	8,969		$	7,705		$	1,264		16.4	%	$	17,605		$	14,792		$	2,813		19.0	%
Depreciation and amortization as a percent of total revenues	21.7		%	20.0		%	1.7		%			21.3		%	19.6		%	1.7		%

Depreciation and amortization expense increased for the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024, due primarily to depreciation expense associated with the high horsepower units placed in service during the second half of 2024 continuing through June 30, 2025. These higher horsepower unit additions, which began in earnest during 2023, are reflective of our strategic plans to concentrate our business development on these higher margin applications.

Inventory Allowance

We routinely review our stock of inventory for obsolescence and realizability. When the carrying value exceeds the net realizable value, a charge is recorded to operating income.

The following table indicates the charges incurred for inventory allowance for the periods presented:


	Three months ended June 30,							Six months ended June 30,
	2025		2024		Change		%	2025		2024		Change		%
Inventory allowance	$	—	$	—	$	—	NM	$	61	$	—	$	61	NM

During three months ended March 31, 2025, we recorded a nominal increase to the allowance for obsolescence primarily attributable to the transfer of inventory that remains useful from our former Midland, Texas facility, in connection with its closing in March 2025, to our other operating facilities. All of remaining inventory from the Midland, Texas facility that was subject to the allowance for obsolescence was written off during the three months ended March 31, 2025. As of June 30, 2025, we had an inventory obsolescence balance of $2.5 million as compared to $5.9 million as of December 31, 2024. Please see Note 4 (“Inventory ”) to our Condensed Consolidated Financial Statements for additional information regarding the inventory allowance.

Retirement of Rental Equipment

We routinely review the rental fleet to determine which units are no longer of the type, configuration, make or model that our customers are demanding or that are not cost efficient to refurbish, maintain and/or operate. When appropriate, we retire such units from the fleet and write-off any remaining carrying value.

The following table indicates the charges incurred for the retirement of rental equipment for the periods presented:


	Three months ended June 30,							Six months ended June 30,
	2025		2024		Change		%	2025		2024		Change		%
Retirement of rental equipment	$	—	$	—	$	—	NM	$	728	$	5	$	723	NM

We retired certain small and medium horsepower compressor units during the six months ended June 30, 2025 with only those units retired during the three months ended March 31, 2025 and 2024 having any remaining carrying value. Such retirements were minimal during the comparable periods during 2024.

Gain on the Sale of Assets

As circumstances warrant, we will market certain property and equipment, primarily trucks, and other assets when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets. Gains and losses are recognized accordingly upon the completion of such transactions.

The following table presents the gains recognized upon the sale of assets for the periods presented:


	Three months ended June 30,							Six months ended June 30,
	2025		2024		Change		%	2025		2024		Change		%
Gain on the disposition of assets, net	$	124	$	229	$	(105)	NM	$	178	$	229	$	(51)	NM

Gains recognized during the three and six months ended June 30, 2025 are primarily attributable to the sales of trucks after the completion of their useful lives.

Interest Expense

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our senior secured revolving credit agreement, as amended (the “Credit Facility”), net of amounts capitalized attributable to certain capital projects. Also included is interest expense on our financing leases during the 2024 periods as all were settled before 2025.

The following table presents the components of our interest expense for the periods presented:


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Interest on borrowings, finance leases and related fees	$	3,464		$	4,037		$	(573)		(14.2)	%	$	6,996		$	7,980		$	(984)		(12.3)	%
Amortization of debt issue costs	294			165			129			78.2	%	506			315			191			60.6	%
Capitalized interest	(515)			(1,270)			755			(59.4)	%	(1,089)			(2,428)			1,339			(55.1)	%
Total	$	3,243		$	2,932		$	311		10.6	%	$	6,413		$	5,867		$	546		9.3	%
Weighted-average interest rates on borrowings	7.46		%	8.92		%	(1.46)		%			7.68		%	9.00		%	(1.32)		%
Weighted-average outstanding borrowings	$	175,427		$	169,839		$	5,588				$	172,867		$	168,790		$	4,077

Interest expense increased for the three and six months ended June 30, 2025, as compared to the corresponding periods in 2024, due primarily to the effect of $0.8 million and $1.3 million lower capitalized interest, respectively, due primarily to the volume and timing of the completion of certain compressor assembly projects in the 2025 periods. In addition, amortization of debt issue costs increased during the three and six months ended June 30, 2025, as compared to the comparable periods in 2024 due primarily to the amortization of costs associated with certain amendments to the Credit Facility that took place in June of 2024 as well as the the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”) that was completed in April 2025. While the average borrowings outstanding under our Credit Facility have increased during the three and six months ended June 30, 2025, as compared to the comparable periods in 2024, we experienced lower average interest rates consistent with the Federal Reserve interest rate reductions implemented in the second half of 2024 as well as the lower interest rates attributable to the Fourth Amendment.

Other Income (Expense), net

This caption primarily reflects non-operating items of income and loss including non-cash gains and losses attributable to our corporate-owned life insurance (“COLI”) policies related to our deferred compensation plan.

The following table indicates our other income (expense) for the periods presented:


	Three months ended June 30,							Six months ended June 30,
	2025		2024		Change		%	2025		2024		Change		%
Other income (expense), net	$	104	$	(30)	$	134	NM	$	103	$	163	$	(60)	NM

Other income (expense), net improved for the three months ended June 30, 2025 as compared to the corresponding period in 2024 due primarily to certain non-operating credits and unrealized gains attributable to our COLI policies associated with our deferred compensation plan while the six months ended June 30, 2025 declined as compared to the comparable period in 2024, due primarily to higher unrealized gains attributable to our COLI policies in the 2024 period.

Provision for Income Taxes

Provision for income taxes represents our income taxes as determined in accordance with GAAP. It considers taxes attributable to our obligations for federal taxes under the Internal Revenue Code as well as to various states in which we operate, primarily Texas. Please see Note 10 (“Income Taxes ”) to our Condensed Consolidated Financial Statements for additional information.

The following table summarizes our income tax provision for the periods presented:


	Three months ended June 30,											Six months ended June 30,
	2025			2024			Change			%		2025			2024			Change			%
Income tax expense	$	1,597		$	1,294		$	303		23	%	$	3,079		$	2,773		$	306		11	%
Effective income tax rate	23.5		%	23.3		%	0.2		%			23.5		%	22.9		%	0.6		%

For interim periods, our income tax expense is computed based upon our estimated annual effective tax rate and any discrete items that impact the interim periods. Our estimated annual effective tax rate differs from the U.S. federal statutory rate of 21% primarily as a result of certain expenses not being deductible for income tax purposes.

Financial Condition

Liquidity and Capital Resources

Our primary sources of liquidity include cash provided by operating activities and borrowings under our Credit Facility. On April 18, 2025, we entered into the Fourth Amendment which provides us with up to $400.0 million in borrowing commitments with an additional $100.0 million at our request through an accordion feature. The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility’s financial covenants. As of June 30, 2025, the borrowing base under the Credit Facility was $354.3 million with $182.0 million of borrowings outstanding leaving $172.3 million of availability under the Credit Facility.

Our cash flows from operating and investing activities are subject to a degree of volatility due primarily to (i) the consistency of our customers in remitting amounts owed to us for our services in full and on a timely basis and (ii) the timing of payments to our vendors and suppliers for capital projects which are often made well in advance of placing new compressor equipment into service. In order to mitigate such volatility we employ disciplined efforts to monitor customer credit and maintain communications to support collection efforts when necessary. To the extent necessary, we rely on the availability of our Credit Facility to fund capital expenditures beyond that provided by our cash flows from operating activities.

Our forecasted capital expenditures for 2025 will continue to be directly dependent upon our customers’ compression requirements and our capital availability, while maintaining prudent levels of debt.

The level of our capital expenditures will vary in future periods depending on energy market conditions and other related economic factors. Based upon existing economic and market conditions, we believe that cash on hand, cash flows from operating activities and borrowings under the Credit Facility will be sufficient to satisfy our capital, dividend and liquidity requirements for at least the twelve months subsequent to the date that this Quarterly Report on Form 10-Q was filed. We also believe we have flexibility with respect to our financing alternatives and can make adjustments to our capital expenditure plans if circumstances warrant. We do not have any material continuing commitments related to our current operations that cannot be met with our cash on hand, cash from operating activities and borrowings under our Credit Facility.

If we require additional capital to fund any significant unanticipated expenditures, including any material acquisitions of other businesses, joint ventures or other opportunities, this additional capital could exceed our current resources and might not be available to us when we need it, or might not be on acceptable terms. In addition, our financing capacity could be negatively impacted by other economic factors.

For a detailed analysis of our historical capital expenditures, see the “Cash Flows” discussion that follows.

Cash From Operating Activities. As of June 30, 2025, we had $0.3 million on hand and our cash provided by operating activities was $32.3 million for the six months ended June 30, 2025. For additional information and an analysis of our historical cash flows from operating activities, see the “Cash Flows” discussion that follows.

Credit Facility Borrowings. During the six months ended June 30, 2025, we borrowed $12.0 million, net of repayments, under the Credit Facility. The following table summarizes our borrowing activity under the Credit facility for the period presented:


	Borrowings Outstanding
	End of Period		Weighted-average		Maximum		Weighted-average Rate
Three months ended June 30, 2025	$	182,000	$	175,427	$	182,000	7.46	%
Six months ended June 30, 2025	$	182,000	$	172,867	$	182,000	7.68	%

For additional information regarding the terms and covenants under the Credit Facility, see the “Capitalization” discussion that follows.

Proceeds from Sales and Monetization of Assets. We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others. For additional information and an analysis of or historical proceeds from sales of assets, see the “Cash Flows” discussion that follows.

Capital Markets Transactions. From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities. We maintain an effective shelf registration statement with the SEC for up to $200 million for a variety of securities to provide financing optionality.

Cash flows

The following table summarizes our cash flows for the periods presented:


	Six months ended June 30,
	2025		2024
Net cash provided by operating activities	$	32,263	$	31,119
Net cash used in investing activities	(44,962)		(27,881)
Net cash (used in) provided by financing activities	10,882		(2,368)
Net increase in cash and cash equivalents	$	(1,817)	$	870

Cash Flows from Operating Activities. Our cash flows from operating activities increased by $1.1 million during the six months ended June 30, 2025, as compared to the comparable period in 2024. From a broad perspective, cash flows improved due to: (i) growth in accounts payable, (ii) substantial progress in improving our processes for billings and collections from certain customers and lowering our “days sales outstanding” statistics for accounts receivable and (iii) higher realized margins attributable to growth in our high horsepower unit rentals. Our accounts receivable efforts arose from the negative impact on working capital during 2023 and into 2024 as our rental activities began to grow significantly. We anticipate a continued focus on these efforts throughout 2025 as we concentrate on further improvements to our working capital performance statistics.

Cash Flows from Investing Activities. For the six months ended June 30, 2025, and 2024, we invested approximately $45.1 million and $28.3 million, respectively, in rental equipment, property and other equipment. Included in these totals for 2025 and 2024 were $41.2 million and $28.2 million in new equipment to our rental fleet and $3.9 million and less than $0.1 million in other property and equipment, respectively. Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the year.

Cash Flows from Financing Activities. During the six months ended June 30, 2025 we had net borrowings of $12.0 million and for the six months ended June 30, 2024, we had net repayments of $1.0 million under the Credit Facility.

Capitalization

The following table summarizes our total capitalization as of the dates presented:


	June 30,			December 31,
	2025			2024
Credit facility borrowings	$	182,000		$	170,000
Total stockholders’ equity	266,214			255,057
Total capitalization	$	448,214		$	425,057
Debt as a percent of total capitalization	40.6		%	40.0		%

Credit Facility. We have a senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association (the “Lender”) as administrative agent, and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners, with a total commitment of $400.0 million. We also have a right to request from the Lender, an increase to the potential aggregate commitment of up to $100.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $500.0 million. The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.

Our Credit Facility is subject to: (i) a borrowing base calculation, (ii) variable rates of interest on borrowings that are determined, in part, upon our actual leverage ratio, as defined in the Credit Facility, (iii) commitment fees, (iv) certain financial and other covenants and (v) events of default and acceleration, among other terms and conditions that are customary for such credit instruments. Please see Note 9 (“Long-Term Debt ”) to our Condensed Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility.

As of June 30, 2025 we had $182.0 million outstanding under our Credit Facility with a weighted average interest rate of 7.23%. As of June 30, 2025, we had approximately $172.3 million available for borrowing under the Credit Facility, subject to a borrowing base determination. As of June 30, 2025, we were in compliance with all financial covenants in our Credit Facility.

Critical Accounting Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our Condensed Consolidated Financial Statements. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are generally based on historical experience and various other assumptions that we believe to be reasonable in consideration of our circumstances and expectations for the future based on available information. Our actual results could differ significantly from those estimates under different assumptions and conditions.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There have been no changes to the critical accounting estimates disclosed in our Form 10-K for the year ended December 31, 2024.

Recently Issued Accounting Pronouncements

Please see Note 2, (“Summary of Significant Accounting Policies ”) to our Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

Off-Balance Sheet Arrangements

From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of June 30, 2025, the off-balance sheet arrangements and transactions that we have entered into include purchase agreements for certain compressor unit components that are fully anticipated consistent with our capital expenditure plans. We do not believe that these arrangements are reasonably likely to materially affect our liquidity or availability of capital resources.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no changes in the market risks disclosed in our Form 10-K for the year ended December 31, 2024.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Our management, including the Chief Executive Officer and our Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”), as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2025, based on the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.

Based on the results of this evaluation, the Company’s management concluded that internal control over financial reporting was effective as of June 30, 2025.

Changes in Internal Control over Financial Reporting

During the three months ended June 30, 2025, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are a party to various legal proceedings in the ordinary course of our business. While management is unable to predict the ultimate outcome of these actions, it believes that any ultimate liability arising from these actions will not have a material effect on our financial position, results of operations or cash flow. We are not currently a party to any bankruptcy, receivership, reorganization, adjustment or similar proceeding, and we are not aware of any material threatened litigation.

Item 1A. Risk Factors

Please refer to and read Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a discussion of the risks associated with our Company and the industry in which we operate. We may experience additional risks and uncertainties not currently known to us. Further, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect us. Any such risks may materially and adversely affect our business, financial condition, cash flows, and results of operations

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

On May 16, 2025, Stephen C. Taylor, a member of our Board of Directors, adopted a Rule 10b5-1 trading agreement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to an aggregate of 100,000 shares of the Company’s common stock, subject to various volume amounts and price thresholds. The plan becomes effective on August 15, 2025 and terminates on September 30, 2026, unless sooner terminated under its terms. The 10b5-1 Plan was entered into during an open insider trading window and no sales will commence under the plan until completion of the required cooling off period under Rule 10b5-1.

No other director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, during the three months ended June 30, 2025.

Item 6. Exhibits

The following exhibits are filed herewith or incorporated herein by reference, as indicated:


Exhibit No.			Description


4.3			Natural Gas Services Group, Inc. 2019 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 16, 2025).

10.1			Fourth Amendment to Amended and Restated Credit Agreement dated April 18, 2025 among Natural Gas Services Group, Inc. the other Loan Parties thereto, Texas Capital Bank, in its capacity as Administrative Agent and the Lenders Party thereto.

31.1*			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*			Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**			Certification of Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


101.INS			XBRL Instance Document

101.SCH			XBRL Taxonomy Extension Schema Document

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			XBRL Taxonomy Extension Label Linkbase Document

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

			* Filed herewith.
			** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NATURAL GAS SERVICES GROUP, INC.


/s/ Justin C. Jacobs						/s/ Ian M. Eckert
Justin C. Jacobs						Ian M. Eckert
Chief Executive Officer and Director						Chief Financial Officer
(Principal Executive Officer)						(Principal Accounting Officer)

August 11, 2025						August 11, 2025

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Date	Price Target	Rating	Analyst
8/7/2024	$27.00	Strong Buy	Raymond James
12/20/2023	$18.00	Buy	Stifel

SEC Form 10-Q filed by Natural Gas Services Group Inc.

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