Summary of NGS Q4 2025 Earnings Call

1Key Financial Results and Metrics

Fourth Quarter Results:

Rental revenue: $44.3 million, up 16% year-over-year.

Adjusted EBITDA: $21.2 million, a record for the quarter.

Rented horsepower: Approximately 563,000, a 14% increase from the previous year.

Fleet utilization: 84.9%, another record high.

Full Year Results:

Total revenue: $172.3 million, up 10% year-over-year.

Adjusted rental gross margin: $99.6 million, a 14% increase.

Net income: $19.9 million ($1.57 per diluted share), marking record performance.

Capital expenditures: $121.5 million, primarily for growth in large-horsepower units.

2Strategic Updates and Business Highlights

NGS has successfully expanded its market share in the rental compression industry for three consecutive years.

The company initiated a return of capital program, including a dividend of $2.6 million in the second half of 2025, which was increased by 10% in Q4.

Fleet expansion focused on large-horsepower and electric units, with significant contracted deployments planned for 2026.

The company is actively pursuing strategic acquisitions to complement its operations and enhance shareholder value.

3Forward Guidance and Outlook

For 2026, NGS expects adjusted EBITDA of $90.5 million to $95.5 million, driven by continued organic growth and strong demand for compression services.

Growth capital expenditures are projected to be between $55 million and $70 million, reflecting ongoing fleet expansion.

The company anticipates further improvements in adjusted rental gross margin percentage, aiming for modest uplift beyond the 60.6% achieved in 2025.

4Challenges and Points of Concern

There was a decline in adjusted rental gross margin percentage in Q4 due to a physical inventory adjustment, which was below expectations.

Lead times for new large-horsepower compression equipment have increased significantly, impacting the competitive landscape and potentially pricing strategies.

The company is monitoring geopolitical developments that could affect oil markets and U.S. production activity, which introduces uncertainty.

5Notable Q&A Insights

Management indicated that while lead times for high-end large horsepower units have extended beyond 100 weeks, they have not seen significant changes in lead times for lower horsepower units.

There is an ongoing focus on improving warehouse operations and inventory management to enhance efficiency and support margin expansion.

The company is exploring opportunities in the midstream sector but has not yet secured contracts in that area.

Discussions highlighted the importance of maintaining a consistent and increasing dividend, aligning with shareholder expectations for return of capital. Overall, NGS reported strong financial performance in 2025, with a positive outlook for continued growth in 2026, despite facing challenges related to inventory management and supply chain constraints.