FOR IMMEDIATE RELEASE
NGS Reports Fourth Quarter 2017 Earnings
MIDLAND, Texas March 8, 2018 - Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of gas compression equipment and services to the natural gas and oil industry, announces its financial results for the three months and full year ended December 31, 2017. Financial results contained herein are preliminary and subject to the audited consolidated financial statements included in NGS's Form 10-K to be filed on or about March 9, 2018.
Revenue: Total revenue held constant at $16.7 million for both the three months ended December 31, 2017 and December 31, 2016. Comparing quarter to quarter there was a shift in the revenue mix with rental revenues contributing only 68% of total revenue compared to 75% during the same period in 2016. Total revenue increased between consecutive quarters by approximately $750,000 or 4.7%, to $16.7 million from $15.9 million, primarily due to an increase in flare and part sales. Total revenue decreased to $67.7 million from $71.7 million, or 5.5%, for the year ended December 31, 2017, compared to the year ended December 31, 2016. This was primarily the result of a 48.4% increase in sales revenue offset by an 18.8% decrease in rental revenue. The rental revenue decrease is due to reduced customer demand, resulting from the continued low oil and natural gas prices.
Operating Income: Operating income for the three months ended December 31, 2017 was $217,000, compared to the comparative prior year's level of $967,000. This decrease was primarily due to a shift in the revenue mix between rentals and sales and a reduction in rental gross margins. Sequentially, operating income decreased to $217,000 for the three months ended December 31, 2017 from $593,000 for the three months ended September 30, 2017 primarily due to a decrease in rental gross margins between the periods and fourth quarter inventory adjustments. Operating income for the year ended December 31, 2017 was $1.6 million, down 81% compared to last year's comparative period, primarily due to a decrease in rental revenue and margins.
Adjusted Gross Margins: Total adjusted gross margin, exclusive of depreciation and amortization, for the three months ended December 31, 2017, decreased $1.3 million to $7.9 million from $9.1 million for the same period ended December 31, 2016. Overall adjusted gross margin percentage decreased to 47.2% from 54.6% for this same comparative period. This decrease was the result of lower margins on our rentals. Sequentially, total adjusted gross margin decreased to $7.9 million from $8.3 million due to lower margins on our rentals in the fourth quarter compared to the third quarter of 2017. For the comparative year ended periods, adjusted gross margins decreased from prior year to $33.0 million from $39.8 million and dropped to 48.7% from 55.5% of revenue. Please see discussions of Non-GAAP Financial Measures - Adjusted Gross Margin, below.
Taxes: On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“2017 Tax Act’), which made broad and complex changes to the U.S. tax code. The income tax effects of the 2017 Tax Act include a $18.4 million income tax benefit related to the re-measurement of our deferred tax assets and liabilities at the reduced rate of 21 percent.
Net Income: Net income for the three months ended December 31, 2017 increased to $18.7 million compared to net income of $1.2 million for the same period in 2016. Excluding the $18.4 million tax benefit from the 2017 Tax Act, our adjusted net income for the three months ended December 31, 2017 decreased to $352,000 compared to net income of $1.2 million for the same period in 2016. Sequentially, net income increased to $18.7 million for the fourth quarter of 2017 from $522,000 in the third quarter of 2017; excluding the $18.4 million tax benefit from the 2017 Tax Act we had a decrease of $170,000 between the two periods. In the comparative year ended periods, net income increased by $13.4 million to $19.8 million, without the tax benefit we had a decrease of $5.0 million. Please see discussions of Non-GAAP Financial Measures - Special Items, below.
Earnings per share: Comparing fourth quarter 2017 versus the same quarter 2016, earnings per diluted share was $1.42 up from 9 cents; excluding the tax benefit we were down 6 cents. Sequentially, diluted earnings per share increased $1.38; excluding the tax benefit earnings per share was down 1 cent. Please see discussions of Non-GAAP Financial Measures - Special Items, below.
The following information was filed by Natural Gas Services Group Inc (NGS) on Friday, March 9, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.