|FOR IMMEDIATE RELEASE||NEWS|
|March 14, 2019||NYSE: NGS|
Natural Gas Services Group, Inc.
Reports Fourth Quarter 2018 Earnings
MIDLAND, Texas March 14, 2019 - 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, 2018. 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 March 18, 2019.
Revenue: Total revenue decreased slightly from $16.7 million for the three months ended in December 31, 2017 to $16.2 million for the three months ended in December 31, 2018. Comparing quarter to quarter there was a shift in the revenue mix with rental revenues contributing 79% of total revenue compared to 69% during the same period in 2017. Total revenue decreased between consecutive quarters by 236,000 or 1.4%, to $16.2 million from $16.4 million due to a decrease in compressor sales offset by an increase in rentals. Total revenue decreased to $65.5 million from $67.7 million, or 3.3%, for the year ended December 31, 2018, compared to the year ended December 31, 2017. This was primarily the result of a 19.5% decrease in sales revenue offset by an 3.7% increase in rental revenue. The sales revenue decrease is due to our concentration on fabricating larger horsepower rental fleet units which have taken up a proportionally larger portion of our fabrication footage.
Operating Income: Operating income for the three months ended December 31, 2018 was $106,000, compared to the comparative prior year's level of $217,000. This decrease was primarily due to the decrease in sales revenue and an increase in depreciation. Sequentially, operating income increased to $106,000 for the three months ended December 31, 2018 from an operating loss of $44,000 for the three months ended September 30, 2018 primarily due to an increase in rental gross margins between the periods. Operating income for the year ended December 31, 2018 was $638,000, down 59% compared to last year's comparative period, primarily due to a decrease in sales revenue and total gross margins.
Adjusted Gross Margins: Total adjusted gross margin, exclusive of depreciation and amortization, for the three months ended December 31, 2018, increased $330,000 to $8.2 million from $7.9 million for the same period ended December 31, 2017. Overall adjusted gross margin percentage increased to 50.7% from 47.2% for this same comparative period. This increase was the result in an increase in rental revenue. Sequentially, total adjusted gross margin increased to $8.2 million from $7.8 million due to an increase in our rental revenue in the fourth quarter compared to the third quarter of 2018. For the comparative year ended periods, adjusted gross margins decreased from prior year to $31.8 million from $33.0 million and stayed relatively constant at 48.5% and 48.7% of revenue, sequentially. 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 on the December 31, 2017 financials included 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. There were no tax legislation changes that impacted our 2018 financials.
Net Income: The Company reported a net loss of $282,000 for the three months ended December 31, 2018 compared to net income of $18.7 million for the same period in 2017. However, the fourth quarter net loss included an adjustment for income tax expense and interest (“tax adjustment”) related to executive compensation of $633,000. Excluding the tax adjustment, the adjusted net income for the period was $351,000. Excluding the $18.4 million tax benefit from the 2017 Tax Act in the fourth quarter of last year, our adjusted net income for the three months ended December 31, 2017 remained relatively flat at
The following information was filed by Natural Gas Services Group Inc (NGS) on Monday, March 18, 2019 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.