On April 1, 2024, Natural Gas Services Group Inc (NGS, Financial), a leader in providing gas compression equipment and services to the energy sector, released its 8-K filing, announcing financial results for the full year and fourth quarter of 2023. The company, which specializes in the rental, sale, and maintenance of natural gas compressors and flare systems, has reported a historic year with substantial increases in rental revenue and adjusted EBITDA.
Financial Performance Overview
NGS's full year 2023 rental revenue saw a remarkable 43% increase to $106.2 million, while the fourth quarter rental revenue surged 54% compared to the previous year, reaching $31.6 million. This growth in rental revenue contributed significantly to the company's total revenue, which climbed to $121.2 million for the year, a 43% increase from the $84.8 million reported in 2022. The fourth quarter revenue also showed a strong performance, with a 61% increase to $36.2 million.
The company's net income for the full year was reported at $4.7 million, a significant turnaround from the net loss of $0.6 million in the previous year. This improvement is primarily attributed to the increased operating income, driven by higher rental revenues. Earnings per share for the full year stood at $0.39 per basic share and $0.38 per diluted share.
Adjusted EBITDA for the full year 2023 also saw a substantial increase of 57% to $45.8 million, with the fourth quarter adjusted EBITDA doubling to $16.3 million, a 110% increase year over year. These figures reflect the company's successful management of its rental fleet and the implementation of rental rate increases and surcharges.
Operational Highlights and Challenges
NGS experienced increased rental fleet utilization, both in horsepower and unit basis, indicating efficient asset management and strong market demand. The company ended the year with approximately 420,000 rented horsepower, underscoring its operational success. However, a significant build in accounts receivable reduced cash flow from operations, which the company expects to address in 2024.
Despite the positive results, NGS faced challenges, including the decision to cease new unit fabrication at its Midland, Texas fabrication facility, which resulted in an inventory allowance of $4.0 million. This decision impacted the company's sequential net income, which saw a decrease of $0.5 million to $1.7 million from the previous quarter.
Looking Forward
NGS's outlook for the fiscal year 2024 is optimistic, with an adjusted EBITDA forecast between $58 million and $65 million, indicating a potential increase from the current year. The company plans to continue its capital expenditure program, albeit at a lower scale, with a focus on achieving at least a 20% return on invested capital.
“Our fourth quarter of 2023 was the best quarter of the year in what was a historic year for the Company. I would like to thank our Chairman, Steve Taylor, and the entire NGS team, for their hard work and dedication in driving these results for our shareholders,” said Justin Jacobs, Chief Executive Officer.
NGS's strong performance in 2023, particularly in rental revenue and adjusted EBITDA, demonstrates its resilience and adaptability in a dynamic energy market. The company's focus on maintaining a prudent level of leverage while expanding its fleet size positions it well for future growth and profitability, making it an interesting prospect for value investors and industry stakeholders.
For a more detailed analysis of NGS's financial results and future outlook, investors and interested parties can join the conference call scheduled for April 2, 2024, or access the webcast on the company's website.
For comprehensive insights into NGS's financial health and strategic direction, visit GuruFocus.com for in-depth analysis and up-to-date information on Natural Gas Services Group Inc and other potential investment opportunities.
Explore the complete 8-K earnings release (here) from Natural Gas Services Group Inc for further details.
