 Midland,TX, Aug. 18, 2020 GLOBE NEWSWIRE -- MIDLAND, Texas August 18, 2020 - Natural Gas Services Group, Inc. NGS or the Company NYSE:NGS, a leading provider of natural gas compression equipment and services to the energy industry, today announced financial results for the three and six months ended June 30, 2020.Second Quarter 2020 Highlights Company demonstrated its resilience during the second quarter despite a very challenging environment. Net income of 165,000 0.01 per diluted share. Adjusted EBITDA of 6.5 million, an increase of 13.0 over the first quarter of 2020 and an increase of 5.3 when compared to the second quarter of 2019. Please see Non-GAAP Financial Measures Adjusted EBITDA, below. Rental revenue of 15.1 million, an increase of 11.5 over the second quarter of 2019. Modest increase in unit and horsepower utilization in June that remained stable in July, reflecting greater stability in oil prices and partial restoration of shut-in production. Company has ample liquidity and is maintaining capital spending discipline 15.5 million of cash, low debt 0.4 million, and a 15 million income tax receivable at the end of the second quarter. Forecasted capital expenditures of 8-10 million for the second half of 2020 backed by recent rental order that will require 6 million in capital. Additional Discussion of the QuarterRevenue: Total revenue for the three months ended June 30, 2020 decreased to 17.4 million from 19.9 million for the three months ended June 30, 2019. This decrease was primarily due to a drop in sales revenue 65.5 decrease resulting from reduced compressor sales offset by increased rental revenue. Rental revenue increased 11.5 to 15.1 million in the second quarter of 2020 from 13.6 million in the second quarter of 2019 due to a greater number of large horsepower units being rented. Total revenue decreased 2.7 to 17.4 million in the second quarter of 2020 compared to 17.9 million in the first quarter of 2020 primarily due to a 6.0 decrease in rental revenue that was partially offset by a 38.5 increase in sales revenue. This sequential decrease in rental revenue was due to shut-ins, rate reductions and unit returns in April and May after oil prices collapsed due to the COVID-19 pandemic and resulting crude oil demand destruction. As oil prices stabilized starting around June 1, we received restart notices on several wells that were recently shut-in, as utilization improved and unit pricing stabilized. Gross Margins: Total gross margins decreased 12.6 to 2.7 million for the three months ended June 30, 2020 compared to 3.1 million for the same period in 2019. Total adjusted gross margin, exclusive of depreciation, for the three months ended June 30, 2020, increased 0.1 million to 8.8 million from 8.7 million for the same period ended June 30, 2019. This improvement was attributable to increased rental revenue and higher rental margins mostly offset by lower sales revenue and lower sales margins. Sequentially, total gross margin increased 30.6 to 2.7 million for the three months ended June 30, 2020 compared to 2.0 million for the three months ended March 31, 2020. Excluding depreciation, total adjusted gross margin increased 8.5 to 8.8 million during the second quarter of 2020 compared to 8.1 million during the first quarter of 2020. This sequential increase was due to increases in sales revenue, sales margins and rental margins that were partially offset by a decrease in rental revenue. Sales margins increased due to higher margin compressor sales as well as improved labor efficiency in our fabrication facilities, while rental margins increased mostly due to a significant decrease in maintenance and repair expense during the second quarter. Please see discussions of Non-GAAP Financial Measures - Adjusted Gross Margin, below. Operating Loss Income: Operating loss for the three months ended June 30, 2020 was 148,000 compared to operating income of 302,000 for the three months ended June 30, 2019. This increase in operating loss was mainly due to lower sales revenue, lower sales margins and higher depreciation expense partially offset by higher rental revenues and improved rental margins. Operating loss in the second quarter of 2020 decreased to 148,000 compared to an operating loss of 273,000 during the first quarter of 2020. This sequential improvement was due to increases in sales revenue, sales margins and rental margins that were partially offset by a decrease in rental revenue and higher selling, general and administrative SGA expenses during the second quarter. SGA increased by 501,000 sequentially due to the impact of an unrealized gain on deferred compensation that impacted first quarter SGA while an unrealized loss on deferred compensation impacted the second quarter. Net Income: Net Income: Net Income for the three months ended June 30, 2020 was 165,000 compared to 327,000 in net income for the three months ended June 30, 2019. This decrease in net income was mainly due to lower sales revenue, lower sales margins and higher depreciation expense partially offset by higher rental revenues, improved rental margins, and higher other income. Second quarter 2020 other income was impacted by an unrealized gain on company-owned life insurance related to deferred compensation of approximately 170,000 as well a 206,000 gain on sale or disposal of assets. Sequentially, net income during the second quarter of 2020 was 165,000 compared to 4.1 million during the first quarter of 2020. The first quarter of 2020 was impacted by a 4.9 million current income tax benefit due to net operating loss carrybacks that are now allowed under the CARES Act. After excluding this income tax benefit, the Company generated an adjusted net loss of 808,000 in the first quarter of 2020 compared to 165,000 of net income during the second quarter. This sequential improvement was due to increases in sales revenue, sales margins, rental margins and other income that were partially offset by a decrease in rental revenue and higher SGA expenses during the second quarter. Second quarter 2020 other income was positively impacted by the factors mentioned above, while other income during the first quarter of 2020 was negatively impacted by an unrealized loss on company-owned life insurance of approximately 262,000. Please see discussions of Non-GAAP Financial Measures - Adjusted Net Loss, below.Earnings per share: For the second quarter of 2020, the Company reported earnings per diluted share of 0.01 compared to earnings per diluted share of 0.02 in the second quarter of 2019. Sequentially, the Company reported earnings per diluted share of 0.01 compared to earnings per diluted share of 0.30 in the first quarter of 2020. After adjusting for the 4.9 million income tax benefit during the first quarter of 2020, the Company generated an adjusted net loss per diluted share of 0.06. Please see discussions of Non-GAAP Financial Measures - Adjusted Net Loss, below.Adjusted EBITDA: Adjusted EBITDA increased 5.3 to 6.5 million for the three months ended June 30, 2020 compared to 6.2 million for the same period in 2019. This increase was attributable to higher rental revenue and rental margins partially offset by lower sales revenue and lower sales margins. Sequentially, adjusted EBITDA increased 13.0 to 6.5 million for the three months ended June 30, 2020 compared to 5.8 million in the previous quarter. This increase was attributable to higher sales revenue, higher sales margins, higher rental margins, and increased other income partially offset by lower rental revenues and higher SGA expenses. Please see discussion of Non-GAAP Financial Measures - Adjusted EBITDA, below.Cash flow: At June 30, 2020, cash and cash equivalents were approximately 15.5 million, while working capital was 54.2 million and total debt was 417,000. For the first six months of 2020, cash flow from operating activities was 14.8 million, while cash flow used in investing activities was 10.8 million. Our cash flow used in investing activities included 11.0 million in capital expenditures, of which 9.5 million was rental capital expenditures. Commenting on Second Quarter 2020 results, Stephen C. Taylor, President and CEO, said:In spite of continued weakness in energy demand and volatile energy commodity prices largely a result of the effects of the COVID-19 pandemic - NGS posted solid financial results in the second quarter. Our ability to react rapidly to reduce our cost structure and respond to our customers needs resulted in less impact than many in our industry on both our income statement and financial condition. We have been able to address our customers requests for pricing and shut-in assistance while maintaining a strong financial position. While our revenues declined in the quarter, we were able to post sequential gains in both gross margin and EBITDA.As importantly, we continued to strengthen our balance sheet and liquidity position, even in this very challenging market environment. NGS delivered free cash flow during the quarter and grew our cash balance to 15.5 million, from 13.1 million at the end of the first quarter. Our liquidity position has continued to strengthen into the third quarter as our cash balance at the end of July was approximately 17 million. While commodity prices have improved from the trough, they remain well below levels that will spur significant oilfield activity. While business has improved, the pace has been slow and inconsistent, a trend we expect to gradually improve through the balance of the year. 