What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-12 compared with 2024-11-14 · 262 added, 326 removed, 199 unchanged (75% of the section changed)

3 unchanged sentences

(in thousands, except par value)

September 30, December 31,

March 31, December 31,

Current Assets:

Cash and cash equivalents $ 2,147 $ 2,142

$ 410 $ 2,746

Trade accounts receivable, net of allowance for credit losses of $ 1,248 and $ 823 , respectively

24,809 39,186

Inventory, net of allowance for obsolescence of $ 2,836 for each of the dates presented, respectively

20,175 21,639

Trade accounts receivable, net of provision for credit losses 15,415 15,626

Inventory, net of allowance for obsolescence 17,343 18,051

Federal income tax receivable 11,263 11,282

1 unchanged sentence

Total current assets 47,160 48,176

58,983 76,271

Long-term inventory, net of allowance for obsolescence of $ 1,168 for each of the dates presented, respectively

Rental equipment, net of accumulated depreciation of $ 211,841 and $ 191,745 , respectively

407,761 373,649

Property and equipment, net of accumulated depreciation of $ 18,609 and $ 17,649 , respectively

21,538 20,550

Intangibles, net of accumulated amortization of $ 2,478 and $ 2,384 , respectively

Long-term inventory, net of allowance for obsolescence — —

Rental equipment, net of accumulated depreciation 424,856 415,021

Property and equipment, net of accumulated depreciation 23,570 22,989

Other assets 6,105 6,342

$ 498,069 $ 478,729

Total assets $ 501,691 $ 492,528

LIABILITIES AND STOCKHOLDERS’ EQUITY

4 unchanged sentences

Long-term debt 168,000 170,000

Deferred income tax liability 45,691 41,636

Deferred income taxes 47,323 45,873

Other long-term liabilities 3,659 4,240

15 unchanged sentences

(in thousands, except earnings per share)

Three months ended Nine months ended

September 30, September 30,

2024 2023 2024 2023

Three months ended

Rental $ 38,910 $ 33,734

2 unchanged sentences

Total revenue 41,383 36,907

40,686 31,369 116,084 84,946

Operating costs and expenses:

Cost of rentals, exclusive of depreciation stated separately below

14,442 13,462 41,784 36,450

Cost of sales, exclusive of depreciation stated separately below

2,028 1,505 6,457 6,618

Cost of aftermarket services, exclusive of depreciation stated separately below

1,324 1,846 2,836 3,424

Selling, general and administrative expenses 5,213 2,845 14,706 12,267

Cost of revenue (excluding depreciation and amortization):

Rental 14,840 13,114

Sales 2,016 2,180

Aftermarket services 271 500

Total cost of revenues (excluding depreciation and amortization) 17,127 15,794

Selling, general and administrative expense 5,378 4,702

Depreciation and amortization 8,636 7,087

Impairments 136 — 136 779

Inventory allowance 61 —

Retirement of rental equipment 728 5

Gain on sale of assets, net ( 54 ) —

Total operating costs and expenses 31,876 27,588

2 unchanged sentences

Interest expense ( 3,170 ) ( 2,935 )

Other income (expense), net

( 15 ) ( 87 ) 148 254

Total other expense

( 3,060 ) ( 1,687 ) ( 8,764 ) ( 1,531 )

Income before provision for income taxes 6,397 3,217 18,518 4,487

Income tax expense

( 1,383 ) ( 1,046 ) ( 4,156 ) ( 1,442 )

Other income (expense) ( 1 ) 193

Total other income (expense), net ( 3,171 ) ( 2,742 )

Income before income taxes 6,336 6,577

Provision for income taxes ( 1,482 ) ( 1,479 )

Net income $ 4,854 $ 5,098

12 unchanged sentences

January 1, 2024 — $ — 13,688 $ 137 $ 116,480 $ 134,281 1,310 $ ( 15,004 ) $ 235,894

Compensation expense on common stock options — — — — 22 — — — 22

Issuance of restricted stock — — 29 — — — — — —

Compensation expense on restricted stock units — — — — 465 — — — 465

Stock-based compensation — — — — 274 — — — 274

Taxes paid related to net shares settlement of equity awards — — 6 — — — — — —

1 unchanged sentence

March 31, 2024 — $ — 13,694 $ 137 $ 116,754 $ 139,379 1,310 $ ( 15,004 ) $ 241,266

Issuance of restricted stock — — 140 1 ( 1 ) — — — —

Compensation expense on common stock options — — — — 30 — — — 30

Compensation expense on restricted stock units — — — — 1,100 — — — 1,100

Taxes paid related to net shares settlement of equity awards — — — — ( 798 ) — — — ( 798 )

Net income — — — — — 504 — — 504

June 30, 2023 — $ — 13,688 $ 136 116,045 $ 130,408 1,310 $ ( 15,004 ) $ 231,585

Compensation expense on common stock options — — — — 22 — — — 22

Compensation expense on restricted common stock — — — — 187 — — — 187

Net income — — — — — 2,171 — — 2,171

September 30, 2023 — $ — 13,688 $ 136 $ 116,254 $ 132,579 1,310 $ ( 15,004 ) $ 233,965

See accompanying notes to these unaudited condensed consolidated financial statements.

NATURAL GAS SERVICES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

(in thousands)

Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity

1 unchanged sentence

January 1, 2025 — $ — 13,762 $ 138 $ 118,415 $ 151,508 1,310 $ ( 15,004 ) $ 255,057

Compensation expense on common stock options — — — — 29 — — — 29

Compensation expense on restricted stock units — — — — 245 — — — 245

Stock-based compensation — — — — 359 — — — 359

Vesting of restricted stock/units — — 22 — — — — — —

Taxes paid related to net shares settlement of equity awards — — — — ( 6 ) — — — ( 6 )

1 unchanged sentence

March 31, 2025 — $ — 13,784 $ 138 $ 118,768 $ 156,362 1,310 $ ( 15,004 ) $ 260,264

Compensation expense on common stock options — — — — 46 — — — 46

Issuance of restricted stock — — 33 — — — — —

Compensation expense on restricted stock units — — — — 196 — — — 196

Taxes paid related to net shares settlement of equity awards — — — — ( 98 ) — — — ( 98 )

Net income — — — — — 4,250 — — 4,250

June 30, 2024 — — 13,727 137 116,898 143,629 1,310 $ ( 15,004 ) 245,660

Exercise of common stock options — — 7 — 70 — — — 70

Issuance of restricted stock — — 7 — — — — — —

Compensation expense on common stock options — — — — 66 — — — 66

Compensation expense on restricted stock and performance share units — — — — 456 — — — 456

Taxes paid related to net shares settlement of equity awards — — — — ( 80 ) — — — ( 80 )

Net income — — — — — 5,014 — — 5,014

September 30, 2024 — $ — 13,741 $ 137 $ 117,410 $ 148,643 1,310 $ ( 15,004 ) $ 251,186

See accompanying notes to these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine months ended

September 30,

Three months ended

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization 8,636 7,087

Inventory allowance 61 —

Retirement of rental equipment 728 5

Gain on sale of assets, net ( 54 ) —

Amortization of debt issuance costs 212 150

Deferred income tax expense 4,055 1,408

Deferred income taxes 1,450 1,456

Stock-based compensation 359 274

Provision for credit losses 208 110

Impairments 136 779

Gain on sale of assets ( 475 ) ( 281 )

Retirement of rental equipment 5 —

Gain on company owned life insurance ( 152 ) 49

Loss (gain) on company owned life insurance 17 ( 184 )

Changes in operating assets and liabilities:

3 unchanged sentences

Accounts payable and accrued liabilities 4,617 ( 8,380 )

Deferred revenue ( 418 ) ( 37 )

Other ( 535 ) 358

3 unchanged sentences

Purchase of company owned life insurance — ( 9 )

Proceeds from sale of property and equipment 504 231

Proceeds from surrender of company owned life insurance 178 —

NET CASH USED IN INVESTING ACTIVITIES ( 19,256 ) ( 10,941 )

1 unchanged sentence

Proceeds from credit facility borrowings 6,000 8,000

Repayment of credit facility borrowings ( 9,000 ) —

Payments of other long-term liabilities, net ( 622 ) ( 50 )

Payments of debt issuance costs ( 962 ) ( 2,131 )

Proceeds from exercise of stock options 70 —

Repayments of credit facility borrowings ( 8,000 ) —

Payments of other long-term liabilities — ( 175 )

Taxes paid related to net share settlement of equity awards ( 6 ) —

NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES ( 2,006 ) 7,825

( 2,692 ) 99,837

NET CHANGE IN CASH AND CASH EQUIVALENTS 5 2,493

3 unchanged sentences

Interest paid $ 3,510 $ 6,220

Income taxes paid $ 16 $ —

NON-CASH TRANSACTIONS:

Transfer of rental equipment to inventory $ — $ 708

Right of use assets acquired through a finance lease $ 2,174 $ 63

Right of use asset acquired through an operating lease $ 520 $ —

Accrued purchases of property and equipment $ 524 $ —

Right of use asset acquired through an finance lease $ — $ 532

See accompanying notes to these unaudited condensed consolidated financial statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts or where otherwise indicated)

Description of Business

Natural Gas Services Group, Inc.

(the “Company,” “NGS,” “Natural Gas Services Group,” “we,” “us” or “our”) (a Colorado corporation), is a leading provider of natural gas compression equipment, technology and services to the energy industry.

We rent, design, sell, install, service and maintain natural gas compressors for oil and natural gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers along with limited in-house assembly.

NGS is headquartered in Midland, Texas, with an assembly facility located in Tulsa, Oklahoma, a rebuild shop in Midland, Texas, and service facilities located in major oil and natural gas producing basins in the U.S.

We operate in one reportable segment.

The Company was formed on December 17, 1998.

(the “Company,” “NGS,” “Natural Gas Services Group,” “we,” “us” or “our”) (a Colorado corporation), is a leading provider of natural gas and electric compression equipment, technology and services to the energy industry.

We rent, design, sell, install, service and maintain compressors and related equipment for our customers’ oil and gas production and processing facilities, generally using equipment from OEM suppliers along with limited in-house assembly.

We are headquartered in Midland, Texas, with an assembly facility located in Tulsa, Oklahoma and service facilities located in major oil and gas producing basins in the United States (“U.S.”).

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its subsidiary, NGSG Properties, LLC, which owns the Company’s headquarters office building and the rabbi trust associated with our deferred compensation plan.

The accompanying unaudited Condensed Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of the Company, its subsidiary, NGSG Properties, LLC, which owns the Company’s headquarters office building, and the rabbi trust associated with our deferred compensation plan.

All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation.

These financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for the fair presentation of our financial position at September 30, 2024 and the results of our operations for the three months and nine months ended September 30, 2024 and 2023.

As permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”), the accompanying Condensed Consolidated Financial Statements do not include all disclosures normally required by generally accepted accounting principles in the United States of America (“GAAP”).

These financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 on file with the SEC.

These financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for the fair presentation of our financial position at March 31, 2025, and the results of our operations for the three months ended March 31, 2025, and 2024.

In our opinion, the Condensed Consolidated Financial Statements represent a fair representation of our financial position, results of operations, changes in stockholders’ equity and cash flows for the periods presented.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2024.

Revenue Recognition Policy

Revenue is measured based on the consideration and terms specified in a customer’s contract, excluding any sale incentives and taxes collected on behalf of third parties (i.e.

sales and property taxes).

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services.

To recognize revenue, we (i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when, or as, we satisfy the performance obligation(s).

Shipping and handling costs incurred are accounted for as fulfillment costs and are included in cost of revenues in our Condensed Consolidated Statements of Operations.

Nature of Goods and Services

The following is a description of principal activities from which we generate our revenue:

Rental Revenue.

We generate revenue from renting compressors to our customers.

These contracts, which all qualify as operating leases under ASC Topic 842, Leases (“ASC 842”), may also include a fee for servicing the compressor during the rental contract.

Our rental contracts typically range from six to 60 months.

Our revenue is recognized over time, with monthly payments over the term of the contract.

After the term of the contract has expired, a customer may renew its contract or continue renting on a monthly basis thereafter.

In accordance with ASC 842, we have applied the practical expedient which allows us to combine lease and non-lease components.

Sales Revenue .

We generate revenue by the sale of custom/fabricated compressors and parts, as well as exchange/rebuilding customer owned compressors and sale of used rental equipment.

Our sales revenue is recognized in accordance with ASC Topic 606, Revenues from Customers.

Custom compressors - We design and coordinate the assembly of compressors based on our customer’s specifications outlined in their contract.

Though the equipment being built is customized by the customer, control under these contracts does not pass to the customer until the compressor is completed and shipped, or in accordance with a bill and hold arrangement, in which the customer accepts title and assumes the risk and rewards of ownership at a specified time.

We request certain of our customers to make progressive payments as the compressor is being built;

these payments are presented as deferred revenue within Accrued liabilities on the Condensed Consolidated Balance Sheet until control has been transferred.

These contracts also may include an assurance warranty clause to guarantee the product is free from defects in material and workmanship for a set duration of time;

this is a standard industry practice and is not considered a performance obligation.

Parts - Revenue is recognized after the customer obtains control of the parts.

Control is passed either by the customer taking physical possession or the parts being shipped.

The amount of revenue recognized is not adjusted for expected returns, as our historical part returns have been de minimis.

Exchange or rebuild customer-owned compressors - Based on the contract, we will either exchange a new/rebuilt compressor for the customer’s malfunctioning compressor or rebuild the customer’s compressor.

Revenue is recognized after control of the replacement or rebuilt compressor has transferred to the customer based on the terms of the contract, i.e., by physical delivery, delivery and installment, or shipment of the compressor.

Used compressors - From time to time, a customer may request to purchase a used compressor out of our rental fleet.

Revenue from the sale of rental equipment is recognized when the control has passed to the customer based on the terms of the contract, i.e.

when the customer has taken physical possession or the equipment has been shipped.

Aftermarket Service Revenue .

We provide routine or call-out services on customer owned equipment as well as commissioning of new units for customers.

Revenue is recognized after services in the contract are rendered.

Payment terms for sales revenue and aftermarket services revenue discussed above are generally 30 to 60 days although terms for specific customers can vary.

Also, the transaction prices are not subject to variable consideration constraints.

Disaggregation of Revenue

The following table summarizes our revenue disaggregated by product or service type for the periods presented:

Three months ended September 30,

Nine months ended September 30,

2024 2023 2024 2023

(in thousands) (in thousands)

Compressors - sales $ 383 $ 207 $ 1,724 $ 1,214

Other (parts/rebuilds) - sales 1,460 1,206 4,892 4,786

Aftermarket services 1,493 2,251 3,458 4,413

Total revenue from contracts with customers 3,336 3,664 10,074 10,413

ASC 842 rental revenue

37,350 27,705 106,010 74,533

Total revenue $ 40,686 $ 31,369 $ 116,084 $ 84,946

Contract Balances

We had the following receivables and deferred revenue from contracts with customers as of the dates presented:

September 30, 2024 December 31, 2023

(in thousands)

Accounts Receivable

Sales and aftermarket services $ 4,394 $ 7,138

Rentals 21,663 32,871

Total Accounts Receivable 26,057 40,009

Allowance for credit losses

( 1,248 ) ( 823 )

Total Accounts Receivable, net $ 24,809 $ 39,186

Deferred revenue $ — $ 418

We recognized sales revenues of $ 0.4 million for the nine months ended September 30, 2024 that was included in accrued liabilities at the beginning of 2024.

Remaining Performance Obligations

As of September 30, 2024, we had no deferred revenue related to unsatisfied performance obligations.

Contract Costs

We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.

These costs are included within Selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, and net operating losses and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Valuation allowances are established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

To the extent we establish a valuation allowance or increase this allowance in a period, we include an expense in the tax provision in our Condensed Consolidated Statements of Operations.

With respect to uncertain tax positions, GAAP prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the Condensed Consolidated Financial Statements.

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.

The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement.

A liability for unrecognized tax benefits is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.

We had no liabilities for uncertain ta x positions as of September 30, 2024 and December 31, 2023.

Our policy regarding income tax interest and penalties is to charge those items as components of interest expense and other expense, respectively.

Capitalized Interest

We capitalize interest from external borrowings on significant expenditures for the assembly of our natural gas compressor equipment until such projects are ready for their intended use.

Capitalized interest is added to the cost of the underlying asset and is amortized over the useful lives of the assets in the same manner as the underlying assets.

For the three months ended September 30, 2024 and 2023, we capitalized interest aggregating approximately $ 1.2 million and $ 1.4 million, respectively.

For the nine months ended September 30, 2024 and 2023, we capitalized interest aggregating approximately $ 3.6 million a nd $ 4.1 million , respe ctively.

Although we review our products to analyze the nature of our revenue, costs and expenses, the net income and non-GAAP financial measures including EBITDA and Adjusted gross margin are not captured or analyzed by these categories.

Our chief executive officer (“CEO”) serves as the CODM and does not make resource allocation decisions or assess the performance of the business based on these categories, but rather on the entire entity in the aggregate.

Accordingly, the measures of profit and loss and total assets are effectively those of the Company as a whole as reflected in these Condensed Consolidated Financial Statements.

Based on these facts and circumstances, we have concluded that we operate in one business segment.

Certain reclassifications have been made to prior periods to conform to the current presentation.

In our Condensed Consolidated Statements of Operations, (gains) and losses on the sale of assets have been reclassified from selling, general and administrative expenses to a stand-alone caption included within total operating income.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2025.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09 “Income Taxes (Topics 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”) to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that ASU 2023-09 will have on our Consolidated Financial Statement disclosures.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”) which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

The adoption of ASU 2023-07 is not expected to have a material impact on our Consolidated Financial Statements or disclosures.

In November 2024, the FASB issued ASU 2024-03 “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expense ” (“ASU 2024-03”) which expands annual and interim disclosures expenses for certain types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general & administrative expenses, and research and development).

In November 2024, the Financial Accounting Standards Board issued ASU 2024-03 “ Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expense ” (“ASU 2024-03”) which expands annual and interim disclosures for certain types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general & administrative expenses, and research and development).

ASU 2024-03 is effective for our annual periods beginning January 1, 2027, and for interim periods beginning January 1, 2028, with early adoption permitted.

The adoption of ASU 2024-03 is not expected to have a material impact on our Consolidated Financial Statements or disclosures.

Trade Accounts Receivable

The following table summarizes our trade accounts receivable from customers as of the dates presented:

March 31, December 31,

Trade accounts receivable

Rentals $ 14,339 $ 14,218

Sales and aftermarket services 1,624 2,657

15,963 16,875

Allowance for credit losses

( 548 ) ( 1,249 )

Total trade accounts receivable, net $ 15,415 $ 15,626

Our trade accounts receivable consist of customer obligations due under normal trade terms for (i) operating leases for the use of our compressor equipment, (ii) the sale of compressors and related equipment and (iii) the performance of aftermarket services.

Major Customers and Concentration of Credit Risk

Rental revenue and sales from Occidental Permian, LTD.

(“Oxy”) in the three months ended March 31, 2025 and 2024 amounted to 46 percent and 51 percent of revenue, respectively.

No other single customer accounted for more than 10 percent of our revenues during these periods.

Likewise, Oxy’s accounts receivable balances amounted to 47 percent and 52 percent of our accounts receivable as of March 31, 2025, and December 31, 2024, respectively.

No other customers amounted to more than 10 percent of our accounts receivable as of these dates.

Allowance for Credit Losses

The following table summarizes the changes in our allowance for credit losses for the periods presented:

Three months ended Year ended

March 31, December 31,

Beginning balance $ 1,249 $ 823

Provision for credit losses 208 433

Write-offs ( 909 ) ( 7 )

Ending balance $ 548 $ 1,249

Management believes that the allowance is adequate;

however, actual write-offs may exceed the recorded allowance.

The substantial write-off of the allowance for credit losses during the three months ended March 31, 2025 reflects certain aged receivables that are no longer deemed collectible.

The following table summarizes the components of our inventory, net of allowance for obsolescence, as of the dates presented:

September 30, 2024 December 31, 2023

(in thousands)

Inventory, net of allowance for obsolescence of $ 2,836

March 31, December 31,

Raw materials, net of allowance of $ 1,415 and $ 4,379 , respectively

$ 16,930 $ 17,706

1 unchanged sentence

Inventory - current 17,343 18,051

Raw materials - long term net of allowance of $ 1,168

Inventory - total $ 21,218 $ 22,340

Our long-term inventory consists of raw materials that remain viable but that we do not expect to sell or use within one year.

Inventory Allowance

We routinely review our inventory allowance balance to account for slow moving or obsolete inventory costs that may not be recoverable in the future.

A summary of activity in our inventory allowance is as follows, for the periods presented:

Nine months ended Year ended

September 30, 2024 December 31, 2023

(in thousands)

Raw materials - long term, net of allowance of $ 1,104 and $ 1,488 , respectively

Total inventory $ 17,343 $ 18,051

Our long-term inventory, which is fully reserved for obsolescence, consists of raw materials that remain viable but with limited market opportunities.

The following table summarizes the changes in our allowance for obsolescence for the periods presented:

March 31, December 31,

Beginning balance $ 5,867 $ 4,004

Accruals — 3,965

Allowance for obsolescence 61 1,863

Write-offs ( 3,409 ) —

Ending balance $ 2,519 $ 5,867

Federal Income Tax Receivable

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act ” ) was enacted in response to the economic impact caused by the COVID-19 pandemic.

The CARES Act allowed net operating losses (“NOLs ”) incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes.

We generated significant NOLs during 2018 and 2019, and have filed amended returns to carryback these losses for five years.

Accordingly, during 2020, we recorded a federal income tax receivable of $ 15.0 million and an increase to our deferred income tax liability of $ 10.1 million on our Condensed Consolidated Balance Sheet.

During the third quarter of 2020, we received refunds totaling $ 3.9 million related to our 2018 NOLs, which reduced our federal income tax receivable to $ 11.4 million and $ 11.5 million on our Condensed Consolidated Balance Sheet as of September 30, 2024 and December 31, 2023, respectively.

The substantial write-off of the allowance for obsolescence during the three months ended March 31, 2025 reflects the disposal of inventory items, including engines, frames and coolers, among other items that were previously held and reserved at our former Midland, Texas fabrication facility.

Rental Equipment

Our rental equipment and associated accumulated depreciation consisted of the following, as of the dates presented:

September 30, 2024 December 31, 2023

(in thousands)

The following table summarizes our rental equipment and accumulated depreciation as of the dates presented:

March 31, December 31,

Compressor units $ 585,043 $ 579,373

Work-in-process 55,008 50,867

Work-in-progress 53,979 51,662

639,022 631,035

Accumulated depreciation ( 214,166 ) ( 216,014 )

Rental equipment, net of accumulated depreciation $ 424,856 $ 415,021

We evaluated our rental equipment for potential impairments as of March 31, 2025, and December 31, 2024 and determined that none were present.

Depreciation expense for rental equipment was $ 7.7 million and $ 6.5 million for the three months ended March 31, 2025, and 2024, respectively.

We capitalized interest totaling approximately $ 0.6 million a nd $ 1.2 million , for the three months ended March 31, 2025, and 2024, respe ctively.

As of March 31, 2025, we had approximately $ 30.0 million of compressor units in work-in-process that were substantially complete, but awaiting final shipment to our customer locations, upon which we did not capitalize interest at the end of the period.

The reduction in capitalized interest for the 2025 period was due to the cessation of capitalization on the large number of units that were substantially complete as noted.

Property and Equipment

The following table summarizes our property and equipment as of the dates presented:

March 31, December 31,

Land $ 1,680 $ 1,680

Building 19,140 19,140

Leasehold improvements 1,346 1,346

Office equipment and furniture 2,057 2,057

Software 898 589

Machinery and equipment 4,754 4,430

Vehicles 13,048 12,739

Work-in-progress 104 168

43,027 42,149

We evaluated our rental equipment for potential impairments as of September 30, 2024, and December 31, 2023 and determined that none were present.

Less accumulated depreciation ( 19,457 ) ( 19,160 )

Total $ 23,570 $ 22,989

Depreciation expense for property and equipment was $ 0.9 million and $ 0.5 million for the three months ended March 31, 2025, and 2024, respectively.

Supplemental Balance Sheet Disclosures

The following table summarizes the components of accrued liabilities as of the dates presented:

March 31, December 31,

Accrued purchases $ 1,967 $ 2,085

Compensation 3,747 3,483

Right of use obligations 165 153

Interest 246 269

Sales taxes 324 355

Other 1,019 1,343

$ 7,468 $ 7,688

Long-Term Debt

Our outstanding long-term debt consists of the following, as of the dates presented:

September 30, 2024 December 31, 2023

(in thousands)

Credit facility borrowings $ 163,000 $ 164,000

Amended and Restated Credit Agreement

On February 28, 2023, we entered into a five-year senior secured revolving credit agreement (“Amended and Restated Credit Agreement”) with the Texas Capital Bank, National Association (the “Lender ” ), as administrative agent, TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with an initial commitment of $ 175.0 million as of the closing date.

The maturity date of the Amended and Restated Credit Agreement is February 28, 2028.

The obligations under the Amended and Restated Credit Agreement are secured by a first priority lien on most of our assets, including inventory and accounts receivable as well as a variable number of our leased compressor equipment.

In connection with the closing of the Amended and Restated Credit Agreement, we incurred fees of $ 2.0 million (representing fees equal to 1.39 % of the $ 145.0 million increase in the commitment from the previous credit agreement) and reimbursed the lenders for their expenses.

On November 14, 2023, we entered into a First Amendment to the Amended and Restated Credit Agreement (the “Amendment”) with the Lender, as administrative agent and certain other lenders to (i) increase the lender commitment from $ 175.0 million to $ 225.0 million, and (ii) to add First-Citizens Bank & Trust Company as a new lender to the facility.

In connection with the Amendment, we incurred fees of $ 0.6 million (representing fees equal to 1.125 % of the $ 50.0 million increase in the commitment) and reimbursed the lenders for their expenses.

On June 6, 2024, we entered into a Second Amendment to the Amended and Restated Credit Agreement (the “Second Amendment”) with the Lender and certain other lenders primarily to (i) increase the aggregate lender commitment from $ 225.0 million to $ 300.0 million, (ii) revise the leverage ratio covenant (as more fully describe below) and (iii) to add Zions Bancorporation, N.A.

(dba Amegy Bank) as a new lender to the facility.

In connection with the Second Amendment, we incurred fees of $ 0.9 million (representing 1.125 % of the $ 75.0 million increase in the commitment) and reimbursed the lenders for their expenses.

On June 25, 2024, we entered into a Third Amendment to the Amended and Restated Credit Agreement (the “Third Amendment”) with the Lender, as administrative agent and the lenders thereto to increase the potential aggregate commitment of the existing credit facility from $ 300.0 million to $ 350.0 million.

Under the Third Amendment, the Company has a right to request from the Lender, on an uncommitted basis, an increase of up to $ 50.0 million on the aggregate commitment;

March 31, December 31,

Credit facility $ 168,000 $ 170,000

We have a senior secured revolving credit agreement, as amended (the “Credit Facility”) with Texas Capital Bank, National Association (the “Lender”) as administrative agent, and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners.

On April 18, 2025, we entered into the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”) with the Lender and certain other lenders to (i) increase the total commitment to $ 400.0 million from $ 300.0 million, (ii) expand the accordion feature to $ 100.0 million from $ 50.0 million, (iii) reduce the interest rates by 50 to 75 basis points at comparable leverage levels and (iv) provide for a more flexible leverage covenant beginning on June 30, 2026.

In connection with the Fourth Amendment, we incurred fees of $ 1.1 million.

The Credit Facility provides for a total commitment of $ 400.0 million.

We also have a right to request from the Lender an increase to the potential aggregate commitment of up to $ 100.0 million;

provided, however, the aggregate commitment amount is not permitted to exceed $ 500.0 million.

In connection with the Third Amendment, we reimbursed the lenders for their expenses.

As of September 30, 2024, we had $ 163.0 million outstanding under our Amended and Restated Credit Agreement with a weighted average interest rate of 8.82 %.

At September 30, 2024, we had approximately $ 131.1 million available for borrowing under the Amended and Restated Credit Agreement, subject to borrowing base determination.

As of September 30, 2024, we were in compliance with all financial covenants in our Amended and Restated Credit Agreement.

The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units.

The maturity date of the Credit Facility is February 28, 2028.

As of March 31, 2025, we had $ 168.0 million outstanding under our Credit Facility with a weighted average interest rate of 7.93 %.

As of March 31, 2025, prior to the effective date of the Fourth Amendment, we had approximately $ 132.0 million available for borrowing under the Credit Facility, subject to a borrowing base determination.

As of March 31, 2025, we were in compliance with all financial covenants in our Credit Facility.

Borrowing Base .

At any time before the maturity of the Amended and Restated Credit Agreement, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above.

At any time before the maturity of the Credit Facility, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above.

Generally, the borrowing base equals the sum of (a) 85 % of eligible accounts receivable owed to us, plus (b) 50 % of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $ 2.5 million, plus (c) the lesser of (i) 95 % of the net book value of the compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80 % of the net liquidation value percentage of the net book value of the eligible compressors that the Lender has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (d) 80 % of the net book value, valued at the lower of cost (excluding any costs for capitalized interest or other noncash capitalized costs) or market of the eligible new compressor fleet, minus (e) any required availability reserves determined by the Lender in its sole discretion.

1 unchanged sentence

Interest and Fees.

Under the terms of the Amended and Restated Credit Agreement, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Term Secured Overnight Financing Rate (“SOFR”) Loan, the Adjusted Term SOFR rate plus the Applicable Margin.

Under the terms of the Credit Facility, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Term Secured Overnight Financing Rate (“SOFR”) Loan, the Adjusted Term SOFR rate plus the Applicable Margin.

“Base Rate” means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day;

1 unchanged sentence

and (c) the Adjusted Term SOFR for such day plus 1.00 %.

The Applicable Margin is determined based upon the leverage ratio as set forth in the most recent compliance certificate received by the Lender for each fiscal quarter from time to time pursuant to the Amended and Restated Credit Agreement.

Depending on the leverage ratio, the Applicable Margin can be 2.00 % to 2.75 % for Base Rate Loans (as defined in the Amended and Restated Credit Agreement) and 3.00 % to 3.75 % for Term SOFR Loans and for requested letters of credit.

In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Amended and Restated Credit Agreement is in effect at an annual rate equal to 0.50 % of the unused commitment amount.

Depending on the leverage ratio, the Applicable Margin can be 1.50 % to 2.25 % for Base Rate Loans (as defined in the Credit Facility) and 2.50 % to 3.25 % for Term SOFR Loans and for requested letters of credit.

In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Credit Facility is in effect at an annual rate equal to 0.375 % of the unused commitment amount.

Accrued interest is payable monthly on outstanding principal amounts and unused commitment fee, provided that accrued interest on Term SOFR Loans is payable at the end of each interest period, but in no event less frequently than quarterly.

The Amended and Restated Credit Agreement contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens;

The Credit Facility contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens;

enter into transactions with affiliates;

6 unchanged sentences

or change the nature of our business.

In addition, we are subject to certain financial covenants in the Amended and Restated Credit Agreement that require us to maintain (i) a leverage ratio, as defined, lesser than or equal to (a) 3.50 to 1.00 as of the last day of each fiscal quarter ending on or prior to December 31, 2024, (b) 3.75 to 1.00 for the fiscal quarters ending on March 31, 2025 and June 30, 2025, (c) 3.50 to 1.00 for the fiscal quarters ending September 30, 2025, December 31, 2025 and March 31, 2026 and (d) 3.25 to 1.00 for the fiscal quarter ending June 30, 2026 and for each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter.

In addition, we are subject to certain financial covenants in the Credit Facility that require us to maintain (i) a leverage ratio, as defined, less than or equal to (a) 3.75 to 1.00 for fiscal quarters ending on March 31, 2025 and June 30, 2025, (b) and 3.50 to 1.00 for each fiscal quarter thereafter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter.

Events of Default and Acceleration .

The Amended and Restated Credit Agreement contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults;

defaults in performance of covenants or other agreements contained in the Amended and Restated Credit Agreement and the other transaction documents;

The Credit Facility contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults;

defaults in performance of covenants or other agreements contained in the Credit Facility and the other transaction documents;

inaccuracies in representations and warranties;

5 unchanged sentences

certain change in control events and the defectiveness of any liens.

Obligations outstanding under the Amended and Restated Credit Agreement may be accelerated upon the occurrence of an event of default.

Obligations outstanding under the Credit Facility may be accelerated upon the occurrence of an event of default.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic impact caused by the COVID-19 pandemic.

The CARES Act, among other things, permits federal income tax net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes.

We generated significant NOLs during 2018 and 2019 and filed carryback claims for these losses to the preceding five years.

In connection with the filing of these claims, we initially recorded a federal income tax receivable of approximately $ 15.0 million and an increase of approximately $ 10.1 million to our deferred tax liability as of March 31, 2020.

During 2020, we received federal income tax refunds corresponding to the 2018 NOL carryback leaving approximately $ 11.3 million remaining to be refunded.

In conjunction with the remaining $ 11.3 million income tax refund claim, we received a notice from the Internal Revenue Service (“IRS”) on March 8, 2023, stating that our income tax returns for 2015, 2016, 2017 and 2019 were selected for examination.

Furthermore and as is customary for income tax refunds of this magnitude, the IRS is required to review the refund claim and provide a report to the Joint Committee on Taxation of the U.S.

Congress (“JCT”).

Our request for refund was formally submitted to the JCT for their review and we are currently awaiting their response.

Commitments and Contingencies

From time to time, we are a party to various claims and legal proceedings arising from our operations in the ordinary course of business.

We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation.

While the outcome of any potential claims and legal proceedings against us cannot be predicted with certainty, we have concluded that it is not considered reasonably possible that a loss resulting from any such claims or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations or cash flows.

Furthermore, we believe that we maintain adequate insurance coverage against any potential litigation loss relating to insurable risks.

Revenues from Customers

Disaggregation of Revenue

The following table summarizes our revenue disaggregated by product or service type for the periods presented:

Three months ended March 31,

Rental $ 38,910 $ 33,734

Compressors 821 1,283

Other (Parts/Rebuilds) 1,106 1,220

Aftermarket services 546 670

Total revenue $ 41,383 $ 36,907

No amounts were recognized in revenue attributable to deferred revenue during the three months ended March 31, 2025.

We recognized $ 0.4 million in revenue for the three months ended March 31, 2024, that was included in accrued liabilities as deferred revenue at the beginning of 2024.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2025, and December 31, 2024, we had no deferred revenue related to unsatisfied performance obligations.

Contract Costs

We recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.

These costs are included within Selling, general and administrative expenses in our Condensed Consolidated Statements of Operations.

Stock-Based and Other Long-Term Incentive Compensation

We maintain two stockholder approved plans for the issuance of stock-based compensation awards to our employees and Board of Director members:

(i) the 2019 Equity Incentive Plan, as amended (the “Equity Incentive Plan”), and (ii) the 1998 Stock Option Plan, as amended (the “Stock Option Plan”).

The following table summarizes the total stock-based compensation expense recognized during the periods presented:

Three months ended March 31,

Equity-classified $ 359 $ 274

Liability-classified (1)

(1) Represents compensation expense associated with awards that may be settled in cash at the option of the grantee including a nominal amount (less than $ 1 thousand) during the 2025 period and none during the 2024 period.

1998 Stock Option Plan

After consideration of the activity described in the table below, a total of 405,919 shares remained available for grant under the 1998 Stock Option Plan (the “Stock Option Plan” ) as of September 30, 2024.

The Stock Option Plan provides for the granting of incentive and non-qualified stock options to our employees for up to 1,000,000 shares of common stock.

After consideration of the activity described in the table below, a total of 370,002 shares remained available for grant under the Stock Option Plan as of March 31, 2025.

The last date that grants can be made under the Stock Option Plan is February 28, 2026.

A summary of all option activity during the nine months ended September 30, 2024 is presented below:

A summary of all option activity during the three months ended March 31, 2025 is presented below:

Number of Shares Underlying

2 unchanged sentences

Contractual Life (years)

(in thousands)

Outstanding, December 31, 2024 113,751 $ 20.44 5.84 $ 747

2 unchanged sentences

Canceled/Forfeited ( 2,833 ) $ 21.57 $ 16

( 29,667 ) $ 30.41 $ —

Outstanding, September 30, 2024 132,250 $ 19.56 6.15 $ 368

Exercisable, September 30, 2024 69,417 $ 19.86 3.56 $ 208

The following table summarizes information about our stock options outstanding as of September 30, 2024:

Expired — $ — $ —

Outstanding, March 31, 2025 151,168 $ 20.89 6.69 $ 344

Exercisable, March 31, 2025 64,921 $ 19.98 3.08 $ 261

The following table summarizes information about our stock options outstanding as of March 31, 2025:

Range of Exercise Prices:

8 unchanged sentences

151,168 6.69 $ 20.89 64,921 $ 19.98

The following table summarizes changes in our unvested stock options during the nine months ended September 30, 2024:

Unvested Stock Options:

The following table summarizes changes in our unvested stock options during the three months ended March 31, 2025:

Shares Weighted Average Grant Date Fair Value Per Share

4 unchanged sentences

Canceled/Forfeited ( 2,500 ) $ 12.46

Unvested, September 30, 2024

Unvested, March 31, 2025

86,247 $ 11.65

As of September 30, 2024, there was $ 0.4 million of unrecognized compensation cost related to unvested options.

For each of the three and nine months ended September 30, 2024 and 2023, there was approximately $ 0.1 million of compensation expense for stock options, respectively.

As of March 31, 2025, there was a total of approximately $ 0.6 million of unrecognized compensation cost related to unvested options which is expected to be recognized over the next 2.54 years.

2019 Equity Incentive Plan

The 2019 Equity Incentive Plan, as amended (the “Equity Incentive Plan” ), as approved by our shareholders, provides for up to 1,150,000 shares of common stock for issuance in the form of awards.

After consideration of the activity described in detail below, a total of 278,113 shares remained available for grant under the Equity Incentive Plan as of September 30, 2024.

The following summarizes grants of certain awards made under our Equity Incentive Plan during 2024:

• On January 29, 2024, the Compensation Committee awarded Justin Jacobs, our Chief Executive Officer (“CEO”) , 31,382 time-vested restricted stock units (“RSUs ”) and two performance share unit (“PSUs ” ) awards, one for 6,494 shares representing a signing bonus and another for 31,382 shares representing an award for 2024 (pro-rated).

The RSU awards vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

• On March 4, 2024, the Compensation Committee awarded Brian Tucker, our Chief Operating Officer (“COO”) , 11,293 time-vested RSUs and 11,293 PSUs.

The RSU awards vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

• On March 14, 2024, the Compensation Committee awarded Mr.

Hazlett, our Chief Technical Officer, 21,984 time-vested RSUs.

These RSUs were to vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

In connection with Mr.

Hazlett ’ s recent retirement on August 1, 2024, we adjusted the vesting terms of the RSUs to correspond with the term of his post-retirement consulting agreement.

• On May 7, 2024 and July 9, 2024 the Compensation Committee awarded certain non-executive employees a combined total of 10,616 time-vested RSUs.

These RSUs vest over three years in equal tranches beginning on the one-year anniversary of the grant date.

• On June 13, 2024, the Compensation Committee awarded each of our four independent Board members a total 5,620 RSUs, or a total of 22,480 RSUs.

One half of these awards, or 11,240 in total, will vest one year from the date of grant and will be settled in shares of common stock.

The other 11,240 awards will vest one year from the date of grant and can be settled, at the discretion of the recipients, in cash or shares of common stock.

• On September 13, 2024, the Compensation Committee awarded Stephen Taylor, our current Chairman of the Board, a total of 4,195 RSUs for his current Board service, of which 2,098 will vest one year from the date of grant and will be settled in shares of common stock and 2,097 awards will vest one year from the date of grant and can be settled, at the discretion of Mr.

Taylor, in cash or shares of common stock.

Performance Share Units

In connection with the PSUs granted to our CEO and COO as set forth above, potential payout for the PSU award is based upon performance for a three-year period ending December 31, 2026 measured against relative total shareholder return (“TSR”) compared to a peer group of 16 companies as established by the Compensation Committee.

The PSU award payout ranges from zero (if the Company ranks below the 31.25 percentile) and up to 200 % (if the Company ranks first) based upon our relative TSR performance ranking (subject to certain caps based on absolute TSR).

With respect to vesting, the PSUs have both a service condition and a market condition.

Due to the presence of the TSR measurement for the common equity of 17 companies, including NGS common stock, which is deemed a “market condition”, the grant-date fair value of the PSUs must be determined using a binomial pricing model.

The grant date fair values of $ 19.59 per unit and $ 22.48 per unit for the PSUs awarded to the CEO and COO, respectively, were derived by using a Monte Carlo simulation model.

The ranges for the assumptions used in the model for the PSUs are presented as follows:

(i) expected volatility - 43.4 % to 43.8 %, (ii) dividend yield - 0 % and (iii) risk-free interest rates - 4.09 % to 4.39 %.

The compensation expense associated with the PSUs, similar to stock options, will be recognized over the vesting term of three years whether or not the settlement results in the payout of shares.

The Equity Incentive Plan provides for up to 1,150,000 shares of common stock for issuance in the form of awards for:

(i) stock options, (ii) stock appreciation rights, (iii) restricted awards in the form of restricted stock and restricted stock units (“RSUs ”) , (iv) performance share awards, including performance share unit (“PSUs ” ) and (v) other equity-based awards.

After consideration of the activity described in detail below, a total of 166,975 shares remained available for grant under the Equity Incentive Plan as of March 31, 2025.

Time-Vested RSUs

The following table summarizes all restricted stock and RSU activity during the three months ended March 31, 2025 is presented below:

Shares Weighted Average

Grant Date Fair Value Weighted

Contractual Life (years) Aggregate

Outstanding, December 31, 2024 131,183 $ 16.39 5.15 $ 3,516

Granted 55,859 $ 22.19 $ 1,240

Exercised ( 22,891 ) $ 15.46 $ 580

Canceled/Forfeited — $ — $ —

Outstanding, March 31, 2025 164,151 $ 18.50 4.81 $ 3,606

As of March 31, 2025, there was a total of approximately $ 2.1 million of unrecognized compensation cost related to unvested restricted stock and RSUs which is expected to be recognized over the next 2.5 years.

Cash Settled RSUs

The 2024 grant of RSUs to the independent Board members and Mr.

Taylor that can be settled in cash represent liability-classified awards.

The 2024 grant of RSUs to the independent Board members that can be settled in cash represent liability-classified awards.

Compensation expense associated with these awards is based upon the fair value of NGS common stock at each reporting period relative to that portion of the service period that has passed.

Accordingly, the compensation expense is variable in nature.

Time-Vested RSUs

A summary of all time-vested RSU activity during the nine months ended September 30, 2024 is presented below:

Shares Weighted Average

1 unchanged sentence

Contractual Life (years) Aggregate

(in thousands)

Outstanding, December 31, 2024 15,069 $ 19.51 0.50 $ 294

88,613 $ 17.67 $ 1,565

( 69,824 ) $ 10.24 $ 1,522

Granted — $ —

Canceled/Forfeited ( 2,810 ) $ 19.57 $ 55

( 23,399 ) $ 11.07 $ 217

Outstanding, September 30, 2024 129,288 $ 15.68 4.96 $ 2,471

Total compensation expense related to these and previously granted awards under the Equity Incentive Plan was $ 0.5 million and $ 0.2 million for the three months ended September 30, 2024, and 2023, respectively, and $ 0.9 million and $ 1.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Outstanding, March 31, 2025 12,259 $ 19.50 0.30 $ 239

Performance Share Units

The potential payout for the PSU awards is based upon performance for a three-year period ending December 31, 2026 for the 2024 grants and December 31, 2027 for the 2025 grants measured against relative total shareholder return (“TSR”) compared to a peer group of companies as established by the Compensation Committee.

With respect to vesting, the PSUs have both a service condition and a market condition.

Due to the presence of the TSR measurement for the common equity of the peer companies, including NGS common stock, which is deemed a “market condition,” the grant-date fair values of the PSUs have been determined using a binomial pricing model, or a Monte Carlo simulation model.

The following table summarizes the weighted average grant date fair values of PSUs granted and the assumptions used in the Monte Carlo simulation model for the determination of the grant date fair values of our PSUs granted during the three months ended March 31, 2025:

Weighted-average grant date fair value of PSUs granted $ 28.05

Risk free rate 3.93 %

Expected volatility 43.9 %

Expected dividend yield — %

The following table summarizes all PSU activity during the three months ended March 31, 2025:

Shares Weighted Average

Grant Date Fair Value Weighted

Contractual Life (years) Aggregate

Outstanding, December 31, 2024 56,764 $ 22.47 2.22 $ —

Granted 39,434 $ 28.05 $ —

Canceled/Forfeited — $ —

Outstanding, March 31, 2025 96,198 $ 24.76 2.38 $ —

As of March 31, 2024, there was a total of approximately $ 2.0 million of unrecognized compensation cost related to the unvested portion of the PSUs which is expected to be recognized over the next 2.38 years.

Earnings per Share

The following table reconciles the numerators and denominators of the basic and diluted earnings per share computation for the periods presented:

Three months ended Nine months ended

September 30, September 30,

2024 2023 2024 2023

(in thousands, except per share data)

Three months ended

Numerator for basic and diluted earnings per share:

$ 4,854 $ 5,098

Denominator for earnings per basic common share:

Weighted average common shares outstanding 12,427 12,378 12,404 12,295

Denominator for earnings per diluted common share:

Denominator for basic earnings per common share:

Weighted average common shares outstanding - Basic 12,462 12,380

Denominator for diluted earnings per common share:

Weighted average common shares outstanding 12,462 12,380

Dilutive effect of stock options, RSUs and PSUs

Diluted weighted average shares 12,526 12,403 12,511 12,372

Dilutive effect of stock-based compensation awards 149 85

Weighted average common shares outstanding - Diluted 12,611 12,465

Earnings per common share:

1 unchanged sentence

Diluted $ 0.38 $ 0.41

Commitments and Contingencies

From time to time, we are a party to various claims and legal proceedings arising from our operations in the ordinary course of business.

We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation.

While the outcome of any claims and legal proceedings against us cannot be predicted with certainty, we have concluded that it is not considered reasonably possible that a loss resulting from such claims or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations or cash flows.

Furthermore, we believe that we maintain adequate insurance coverage against any potential litigation loss relating to insurable risks.

Subsequent Events

We have evaluated all events subsequent to the balance sheet date as of September 30, 2024 and through the date this report was issued and determined that there have been no events that would require adjustments or additional disclosures to our Condensed Consolidated Financial Statements.

We have evaluated all events subsequent to the balance sheet date as of March 31, 2025, and through the date this report was issued and determined that, other than the completion of the Fourth Amendment to the Credit Facility on April 18, 2025 (see Note 8 ), there have been no events that would require adjustments or additional disclosures to our Condensed Consolidated Financial Statements.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) contain certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, and information pertaining to us, our industry and the oil and natural gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management.

All statements, other than statements of historical facts contained in this report as well as our Annual Report, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements.

This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information pertaining to us, our industry and the oil and gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management.

All statements, other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements.

We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “believe,” “continue,” “intend,” “plan,” “budget” and other similar words to identify forward-looking statements.

2 unchanged sentences

Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations or assumptions will prove to have been correct.

Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Those risks include, but are not limited to, (i) achieving increased utilization of assets, including rental fleet utilization and monetizing other non-cash balance sheet assets;

(ii) failure of projected organic growth due to adverse changes in the oil and gas industry, including depressed oil and gas prices, oppressive environmental regulations and competition;

(iii) inability to finance capital expenditures;

(iv) adverse changes in customer, employee or supplier relationships;

(v) adverse regional and national economic and financial market conditions, including in our key operating areas;

(vi) impacts of world events, including pandemics;

the financial condition of the Company’s customers and failure of significant customers to perform their contractual obligations;

(vii) our ability to economically develop and deploy new technologies and services, including technology to comply with health and environmental laws and regulations;

(viii) failure to achieve accretive financial results in connection with any acquisitions we may make (ix) the loss of market share through competition or otherwise, including the introduction of competing technologies by other companies;

and (x) prolonged, substantial reduction in oil and natural gas prices, which could cause a decline in the demand for our products and services.

The forward-looking statements included in this Form 10-Q are only made as of the date of this report, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

A discussion of these and other risk factors is included in our Annual Report filed with the SEC.

Please read Item 1A, Risk Factors, in our Annual Report, as it contains important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements.

These risks, contingencies and uncertainties, include , but are not limited to, the following:

• conditions in the oil and gas industry, including the supply and demand for oil and gas and volatility in the prices of oil and gas;

• changes in general economic and financial conditions, inflationary pressures, the potential for economic recession in the U.S., tariffs and trade restrictions, including the imposition of new and higher tariffs on imported goods and retaliatory tariffs implemented by other countries on U.S.

goods, and the potential effects on our financial condition, results of operations and cash flows;

• our reliance on major customers;

• failure of projected organic growth due to adverse changes in the oil and gas industry, including depressed oil and gas prices, oppressive environmental regulations and competition;

• our inability to achieve increased utilization of assets, including rental fleet utilization and monetizing other non-cash balance sheet assets;

• failure of our customers to continue to rent equipment after expiration of the primary rental term;

• our ability to economically develop and deploy new technologies and services, including technology to comply with health and environmental laws and regulations;

• failure to achieve accretive financial results in connection with any acquisitions we may make;

• fluctuations in interest rates;

• changes in regulation or prohibition of new or current well completion techniques;

• competition among the various providers of compression services and products;

• changes in safety, health and environmental regulations;

• changes in economic or political conditions in the markets in which we operate;

• the inherent risks associated with our operations, such as equipment defects, malfunctions, natural disasters and adverse changes in customer, employee and supplier relationships;

• our inability to comply with covenants in our debt agreements and the decreased financial flexibility associated with our debt;

• inability to finance our future capital requirements and availability of financing;

• capacity availability, costs and performance of our outsourced compressor fabrication providers and overall inflationary pressures;

• impacts of world events, such as acts of terrorism and significant economic disruptions and adverse consequences resulting from possible long-term effects of potential pandemics and other public health crises;

• general economic conditions.

We believe that it is important to communicate our expectations of future performance to our investors.

However, events may occur in the future that we are unable to accurately predict or that we are unable to control.

When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements including Item 1A, Risk Factors, in our 2024 Annual Report, as it contains important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements