On this page of StockholderLetter.com we present the latest annual shareholder letter from NATURAL GAS SERVICES GROUP INC — ticker symbol NGS. Reading current and past NGS letters to shareholders can bring important insights into the investment thesis.
ANNUAL
REPORT
A LETTER TO SHAREHOLDERS
Stephen C. Taylor
Chairman of the Board
   With the successes of 2023 as a
springboard,
we
are
well
positioned to continue our
growth into the future.   
Steve Taylor
Dear Shareholders,
As we reflect on 2023, it is with great pride
that I address you on behalf of Natural Gas
Services Group, Inc (NGS). Our commitment
to quality and service and the execution of
our strategic growth initiatives has yielded a
year of significant achievements and robust
financial performance.
The year 2023 was a historic milestone for
NGS as we posted record results.
We witnessed a remarkable 43% increase in
total revenue compared to 2022, reaching
$121.2 million, with rental revenue
contributing $106.2 million of that (also a
43% increase). Demonstrating our operational
efficiency, our operating income was $10.5
million and adjusted EBITDA soared by 57%,
to $45.8 million. Net income stood at $4.7
million, translating to $0.39 per basic share
and $0.38 per diluted share.
From a cost perspective, the Company made
great strides in reducing our rental cost of
goods resulting in higher trending adjusted
gross margins. We have also outsourced our
Midland-based heavy fabrication capability
which will result in lower costs and reduced
working capital requirements in the future.
These financial results were primarily
attributable to the continued execution of our
large horsepower strategy and the
associated addition and deployment of very
large horsepower compressor units. The
market for our equipment and services
continued in high demand throughout the
year with pre-contracted agreements, long
rental terms and attractive pricing and
returns. To enable this growth in our fleet, the
Company employed a significant amount of
debt capital. Although large relative to our
historical debt levels, we were able to
contractually commit it all before the year
ended. The Company made significant
progress to solidify our position in the 1500
horsepower segment while simultaneously
penetrating the 2500 horsepower segment.
Installation of this newly built equipment is
continuing into 2024.
The rental fleet grew to over 500,000 total
horsepower by year-end with approximately
81% of it utilized. The majority of our new
horsepower was in our large horsepower
sector and included our recent technological
developments focused on runtime efficiency
and reduced methane emissions.
This success is a testament to the hard work
and dedication of our team, all of which was
accomplished with no recordable personal
injuries during the year. My sincere thanks to
everyone.
The result of these achievements and the
market   s recognition of our performance is
reflected in our share price appreciation. For
the full year of 2023, NGS stock increased
40% with an additional gain of 21% in the first
quarter of 2024.
Looking ahead, we are excited about the
opportunities that lie before us. The Company
recently announced guidance that reflects
continued significant growth in adjusted
EBITDA in 2024, with a targeted return on
newly invested capital of at least 20%.
As most of you know, I originally retired in
May 2022, but have been interim CEO and
President since reassuming the role in
November 2022. While honored to lead the
Company once again, the Board of Directors
continued the search for the future leadership
of the Company. That search successfully
culminated with the appointment of Brian
Tucker as President in October 2023 and
Justin Jacobs as Chief Executive Officer in
February 2024. Brian has significant
experience and background in
the oilfield services industry and will make
a strong, positive contribution to the
Company. Justin gained knowledge of NGS
though his prior tenure with a large
institutional shareholder of ours and his
immediately preceding (and continuing)
tenure on our Board. I am currently
assisting Justin with his transition into the
position and the Company and I am
confident with his grasp of the business,
his ability to execute on the existing plans
and his vision for the future. I remain the
Chairman of the Board and a significant
shareholder
and
feel
extremely
comfortable with the capabilities of our
new management team.
We are fortunate to have these two
gentlemen on our team.
We have also strengthened our Board of
Director ranks. As mentioned, Justin Jacobs
joined the Board in April of 2023,
simultaneous with the appointment of Don
Tringali. Don has significant Board
experience and has been valuable in his
perspectives. In October of 2023
Georganne Hodges also joined the Board.
She comes to NGS with broad and varied
energy experience and board background.
NGS has always had strong board
membership, and we have been able to
continue that level of performance while
significantly refreshing our Board and
enhancing our strong shareholder focus.
The Company and the Board are well
positioned to continue our growth and
performance into the future.
Your continued trust and support is
valuable as we navigate this dynamic
energy landscape. We will strive to uphold
our legacy of delivering superior
equipment and service and driving
shareholder value.
Sincerely,
Stephen Taylor
Chairman of the Board
 • shareholder letter icon 5/3/2024 Letter Continued (Full PDF)
 • stockholder letter icon More "Oil & Gas Equipment & Services" Category Stockholder Letters
 • Benford's Law Stocks icon NGS Benford's Law Stock Score = 91


NGS Shareholder/Stockholder Letter Transcript:

ANNUAL
REPORT

A LETTER TO SHAREHOLDERS
Stephen C. Taylor
Chairman of the Board
   With the successes of 2023 as a
springboard,
we
are
well
positioned to continue our
growth into the future.   
Steve Taylor
Dear Shareholders,
As we reflect on 2023, it is with great pride
that I address you on behalf of Natural Gas
Services Group, Inc (NGS). Our commitment
to quality and service and the execution of
our strategic growth initiatives has yielded a
year of significant achievements and robust
financial performance.
The year 2023 was a historic milestone for
NGS as we posted record results.
We witnessed a remarkable 43% increase in
total revenue compared to 2022, reaching
$121.2 million, with rental revenue
contributing $106.2 million of that (also a
43% increase). Demonstrating our operational
efficiency, our operating income was $10.5
million and adjusted EBITDA soared by 57%,
to $45.8 million. Net income stood at $4.7
million, translating to $0.39 per basic share
and $0.38 per diluted share.
From a cost perspective, the Company made
great strides in reducing our rental cost of
goods resulting in higher trending adjusted
gross margins. We have also outsourced our
Midland-based heavy fabrication capability
which will result in lower costs and reduced
working capital requirements in the future.
These financial results were primarily
attributable to the continued execution of our
large horsepower strategy and the
associated addition and deployment of very
large horsepower compressor units. The
market for our equipment and services
continued in high demand throughout the
year with pre-contracted agreements, long
rental terms and attractive pricing and
returns. To enable this growth in our fleet, the
Company employed a significant amount of
debt capital. Although large relative to our
historical debt levels, we were able to
contractually commit it all before the year
ended. The Company made significant
progress to solidify our position in the 1500
horsepower segment while simultaneously
penetrating the 2500 horsepower segment.
Installation of this newly built equipment is
continuing into 2024.
The rental fleet grew to over 500,000 total
horsepower by year-end with approximately
81% of it utilized. The majority of our new
horsepower was in our large horsepower
sector and included our recent technological
developments focused on runtime efficiency
and reduced methane emissions.
This success is a testament to the hard work
and dedication of our team, all of which was
accomplished with no recordable personal
injuries during the year. My sincere thanks to
everyone.
The result of these achievements and the
market   s recognition of our performance is
reflected in our share price appreciation. For
the full year of 2023, NGS stock increased
40% with an additional gain of 21% in the first
quarter of 2024.
Looking ahead, we are excited about the
opportunities that lie before us. The Company
recently announced guidance that reflects
continued significant growth in adjusted
EBITDA in 2024, with a targeted return on
newly invested capital of at least 20%.
As most of you know, I originally retired in
May 2022, but have been interim CEO and
President since reassuming the role in
November 2022. While honored to lead the
Company once again, the Board of Directors
continued the search for the future leadership
of the Company. That search successfully
culminated with the appointment of Brian
Tucker as President in October 2023 and
Justin Jacobs as Chief Executive Officer in
February 2024. Brian has significant
experience and background in
the oilfield services industry and will make
a strong, positive contribution to the
Company. Justin gained knowledge of NGS
though his prior tenure with a large
institutional shareholder of ours and his
immediately preceding (and continuing)
tenure on our Board. I am currently
assisting Justin with his transition into the
position and the Company and I am
confident with his grasp of the business,
his ability to execute on the existing plans
and his vision for the future. I remain the
Chairman of the Board and a significant
shareholder
and
feel
extremely
comfortable with the capabilities of our
new management team.
We are fortunate to have these two
gentlemen on our team.
We have also strengthened our Board of
Director ranks. As mentioned, Justin Jacobs
joined the Board in April of 2023,
simultaneous with the appointment of Don
Tringali. Don has significant Board
experience and has been valuable in his
perspectives. In October of 2023
Georganne Hodges also joined the Board.
She comes to NGS with broad and varied
energy experience and board background.
NGS has always had strong board
membership, and we have been able to
continue that level of performance while
significantly refreshing our Board and
enhancing our strong shareholder focus.
The Company and the Board are well
positioned to continue our growth and
performance into the future.
Your continued trust and support is
valuable as we navigate this dynamic
energy landscape. We will strive to uphold
our legacy of delivering superior
equipment and service and driving
shareholder value.
Sincerely,
Stephen Taylor
Chairman of the Board



shareholder letter icon 5/3/2024 Letter Continued (Full PDF)
 

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