Natural Gas Services ((NGS)) has held its Q4 earnings call. Read on for the main highlights of the call.
The latest earnings call from Natural Gas Services highlighted a strong financial growth trajectory and improved asset utilization, with significant increases in rented horsepower and rental revenue. Despite some challenges in fabrication operations and a decline in sales adjusted gross margin, the overall sentiment remains positive, driven by the company’s robust growth and optimistic guidance for the future.
Record-Breaking Growth in Rented Horsepower
Natural Gas Services closed 2024 with nearly 492,000 rented horsepower, marking a 17% growth compared to the previous year and a 55% increase over two years. The company’s horsepower utilization improved to 82.1%, up from 80.8% in 2023 and 74.8% in 2022, showcasing their effective asset management and operational efficiency.
Significant Increase in Rental Revenue
In 2024, the company reported rental revenue of $144.2 million, which is a 36% increase from 2023 and a 94% rise from 2022. The rental adjusted gross margin also saw a significant improvement, reaching 60.5%, which is 650 basis points higher than in 2023 and more than 1,000 basis points higher than in 2022.
Strong Financial Performance
The company demonstrated strong financial performance with an adjusted EBITDA of $69.5 million in 2024, representing a 52% increase from 2023 and a 138% increase from 2022. Additionally, the net income for the quarter was reported at $2.9 million, up 68% year-on-year.
Improved Asset Utilization
Natural Gas Services successfully reduced accounts receivable by $23.6 million, with days sales outstanding dropping significantly from nearly 100 days at the end of 2023 to 35 days by the end of 2024. This improvement highlights the company’s effective financial management and operational efficiency.
Decline in Sales Adjusted Gross Margin
Despite the overall positive performance, the company experienced a decline in sales adjusted gross margin year-on-year by $1.1 million and sequentially by $0.3 million. This decline was attributed to a strategic shift away from the fabrication of new compressor packages and the announced termination of activities at the Midland, Texas facility.
Challenges with Fabrication Operations
The company announced the termination of fabrication and assembly activities at its Midland, Texas facility, which impacted sales gross profit and was accompanied by an intangible asset impairment. This move reflects the company’s strategic shift and adaptation to changing market conditions.
Strong Guidance for 2025
Looking ahead, Natural Gas Services provided optimistic guidance for 2025, with expectations for adjusted EBITDA to range between $74 million and $78 million, representing nearly a 10% increase over 2024. The company also projected growth CapEx between $95 million and $120 million, primarily for large horsepower units under contract. This guidance indicates a substantial increase from previous years and underscores the company’s confidence in continued growth.
In summary, the earnings call from Natural Gas Services painted a picture of strong financial growth and improved operational efficiency, despite some challenges in fabrication operations. The company’s optimistic guidance for 2025 and beyond suggests a promising future, with expectations of continued expansion and increased profitability.