NATURAL GAS SERVICES GROUP INC 10-Q

Item 1. Financial Statements NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited) September 30, December 31, 2025 2024 ASSETS Current Assets: Cash and cash equivalents $ — $ 2,142 Trade accounts receivable, net of provision for credit losses 13,610 15,626 Inventory, net of allowance for obsolescence 21,508 18,051 Federal income tax receivable 11,427 11,282 Prepaid expenses and other 2,227 1,075 Assets held for sale 2,227 — Total current assets 50,999 48,176 Long-term inventory, net of allowance for obsolescence — — Rental equipment, net of accumulated depreciation 479,375 415,021 Property and equipment, net of accumulated depreciation 22,514 22,989 Other assets 9,419 6,342 Total assets $ 562,307 $ 492,528 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 12,273 $ 9,670 Accrued liabilities 15,522 7,688 Total current liabilities 27,795 17,358 Long-term debt 208,000 170,000 Deferred income taxes 50,673 45,873 Other long-term liabilities 4,418 4,240 Total liabilities 290,886 237,471 Commitments and contingencies ( Note 11 ) Stockholders’ Equity: Preferred stock, 5,000 shares authorized, no shares issued or outstanding — — Common stock, 30,000 shares authorized, par value $ 0.01 ; 13,864 and 13,762 shares issued, respectively 138 138 Additional paid-in capital 120,222 118,415 Retained earnings 166,065 151,508 Treasury shares, at cost, 1,310 shares for each of the dates presented, respectively ( 15,004 ) ( 15,004 ) Total stockholders’ equity 271,421 255,057 Total liabilities and stockholders’ equity $ 562,307 $ 492,528 See accompanying notes to these unaudited condensed consolidated financial statements. 1 NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited) Three months ended Nine months ended September 30, September 30, 2025 2024 2025 2024 Revenue: Rental $ 41,502 $ 37,350 $ 119,992 $ 106,010 Sales 471 1,843 3,148 6,616 Aftermarket services 1,428 1,493 3,026 3,458 Total revenue 43,401 40,686 126,166 116,084 Cost of revenue (excluding depreciation and amortization): Rental 15,970 14,442 46,338 41,784 Sales 448 2,028 3,375 6,457 Aftermarket services 1,155 1,324 2,146 2,836 Total cost of revenues (excluding depreciation and amortization) 17,573 17,794 51,859 51,077 Selling, general and administrative expense 5,870 5,459 16,702 15,181 Depreciation and amortization 9,249 8,086 26,854 22,878 Impairments — 136 — 136 Inventory allowance — — 61 — Retirement of rental equipment — — 728 5 Gain on disposition of assets, net ( 46 ) ( 246 ) ( 224 ) ( 475 ) Total operating costs and expenses 32,646 31,229 95,980 88,802 Operating income 10,755 9,457 30,186 27,282 Other income (expense): Interest expense ( 3,414 ) ( 3,045 ) ( 9,827 ) ( 8,912 ) Other income (expense) 222 ( 15 ) 325 148 Total other income (expense), net ( 3,192 ) ( 3,060 ) ( 9,502 ) ( 8,764 ) Income before income taxes 7,563 6,397 20,684 18,518 Provision for income taxes ( 1,779 ) ( 1,383 ) ( 4,858 ) ( 4,156 ) Net income $ 5,784 $ 5,014 $ 15,826 $ 14,362 Earnings per share: Basic $ 0.46 $ 0.40 $ 1.26 $ 1.16 Diluted $ 0.46 $ 0.40 $ 1.25 $ 1.15 Weighted average shares outstanding: Basic 12,544 12,427 12,529 12,404 Diluted 12,685 12,526 12,679 12,511 See accompanying notes to these unaudited condensed consolidated financial statements. 2 NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (in thousands) (unaudited) Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount January 1, 2024 — $ — 13,688 $ 137 $ 116,480 $ 134,281 1,310 $ ( 15,004 ) $ 235,894 Stock-based compensation — — — — 274 — — — 274 Taxes paid related to net shares settlement of equity awards — — 6 — — — — — — Net income — — — — — 5,098 — — 5,098 March 31, 2024 — $ — 13,694 $ 137 $ 116,754 $ 139,379 1,310 $ ( 15,004 ) $ 241,266 Stock-based compensation — — — — 242 — — — 242 Taxes paid related to net shares settlement of equity awards — — 33 — ( 98 ) — — — ( 98 ) Net income — — — — — 4,250 — — 4,250 June 30, 2024 — $ — 13,727 $ 137 $ 116,898 $ 143,629 1,310 $ ( 15,004 ) $ 245,660 Stock-based compensation — — — — 522 — — — 522 Vesting of restricted stock/units — — 7 — — — — — — Exercise of common stock options — — 7 — 70 — — — 70 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 Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount January 1, 2025 — $ — 13,762 $ 138 $ 118,415 $ 151,508 1,310 $ ( 15,004 ) $ 255,057 Stock-based compensation — — — — 359 — — — 359 Vesting of restricted stock/units — — 22 — — — — — — Taxes paid related to net shares settlement of equity awards — — — — ( 6 ) — — — ( 6 ) Net income — — — — — 4,854 — — 4,854 March 31, 2025 — $ — 13,784 $ 138 $ 118,768 $ 156,362 1,310 $ ( 15,004 ) $ 260,264 Stock-based compensation — — — — 579 — — — 579 Vesting of restricted stock/units — — 22 — 108 — — — 108 Exercise of common stock options — — 5 — 75 — — — 75 Net income — — — — — 5,188 — — 5,188 June 30, 2025 — $ — 13,811 $ 138 $ 119,530 $ 161,550 1,310 $ ( 15,004 ) $ 266,214 Stock-based compensation — — — — 612 — — — 612 Vesting of restricted stock/units — — 44 — — — — — — Exercise of common stock options — — 9 — 80 — — — 80 Dividends declared ($ 0.10 per share) — — — — — ( 1,269 ) — — ( 1,269 ) Net income — — — — — 5,784 — — 5,784 September 30, 2025 — $ — 13,864 $ 138 $ 120,222 $ 166,065 1,310 $ ( 15,004 ) $ 271,421 See accompanying notes to these unaudited condensed consolidated financial statements. 3 NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine months ended September 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 15,826 $ 14,362 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,854 22,878 Impairments — 136 Inventory allowance 61 — Retirement of rental equipment 728 5 Gain on disposition of assets, net ( 224 ) ( 475 ) Amortization of debt issuance costs 838 530 Deferred income taxes 4,800 4,055 Stock-based compensation 1,550 1,038 Provision for credit losses 241 433 Gain on company owned life insurance ( 57 ) ( 152 ) Changes in operating assets and liabilities: Trade accounts receivables 1,775 13,944 Inventory ( 3,518 ) 1,122 Prepaid expenses and prepaid income taxes ( 1,297 ) ( 1,025 ) Accounts payable and accrued liabilities 3,887 853 Other ( 2,402 ) ( 667 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 49,062 57,037 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of rental equipment, property and other equipment ( 86,926 ) ( 57,350 ) Purchase of company owned life insurance — ( 13 ) Proceeds received from insurance for damages to equipment 96 — Proceeds from disposition of assets, net 9 504 Proceeds from surrender of company owned life insurance — 178 NET CASH USED IN INVESTING ACTIVITIES ( 86,821 ) ( 56,681 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility borrowings 48,122 8,000 Repayments of credit facility borrowings ( 10,122 ) ( 9,000 ) Payments of other long-term liabilities — ( 622 ) Payments of debt issuance costs ( 1,278 ) ( 962 ) Proceeds from exercise of stock options 155 70 Payment of dividends ( 1,254 ) — Taxes paid related to net share settlement of equity awards ( 6 ) ( 178 ) NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 35,617 ( 2,692 ) NET CHANGE IN CASH AND CASH EQUIVALENTS ( 2,142 ) ( 2,336 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,142 2,746 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ — $ 410 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $ 10,722 $ 14,445 Income taxes paid $ 204 $ — NON-CASH TRANSACTIONS: Accrued purchases of property and equipment $ 6,940 $ — Right of use assets acquired through an finance lease $ — $ 2,174 Right of use assets acquired through an operating lease $ 1,053 $ 520 See accompanying notes to these unaudited condensed consolidated financial statements. 4 NATURAL GAS SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts or where otherwise indicated) (unaudited) 1. 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 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 executive offices in Southlake, Texas, an assembly facility located in Tulsa, Oklahoma and service facilities located in major oil and gas producing basins in the United States (“U.S.”). 2. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation 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 as of September 30, 2025, and the results of our operations for the three and nine months ended September 30, 2025, and 2024, respectively. 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 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, 2024, as filed with the SEC. In our opinion, the Condensed Consolidated Financial Statements provide a fair representation of our financial position, results of operations, changes in stockholders’ equity and cash flows for the periods presented. Although we review our service and product offerings 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 chief operating decision maker 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 and nine months ended September 30, 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 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. 5 3. Trade Accounts Receivable The following table summarizes our trade accounts receivable from customers as of the dates presented: September 30, December 31, 2025 2024 Trade accounts receivable Rentals $ 11,813 $ 14,218 Sales and aftermarket services 2,141 2,657 13,954 16,875 Less: Provision for credit losses ( 344 ) ( 1,249 ) Total trade accounts receivable, net $ 13,610 $ 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 from Occidental Permian, LTD. (“Oxy”) and Devon Energy Corporation (“Devon”) in the nine months ended September 30, 2025 and 2024 amounted to 59 percent and 58 percent of revenue on a combined basis, respectively. No other single customer accounted for more than 10 percent of our revenues during these periods. Likewise, Oxy’s and Devon’s accounts receivable balances amounted to 64 percent and 60 percent of our accounts receivable as of September 30, 2025, and December 31, 2024, respectively. No other customers amounted to more than 10 percent of our accounts receivable as of these dates. Provision for Credit Losses The following table summarizes the changes in our provision for credit losses for the periods presented: Nine months ended Year ended September 30, December 31, 2025 2024 Beginning balance $ 1,249 $ 823 Provision for credit losses 241 433 Write-offs ( 1,146 ) ( 7 ) Ending balance $ 344 $ 1,249 Management believes that the provision is adequate; however, actual write-offs may exceed the recorded provision. The substantial write-off of the provision for credit losses during the nine months ended September 30, 2025 reflects certain aged receivables that are no longer deemed collectible. 4. Inventory The following table summarizes the components of our inventory, net of allowance for obsolescence, as of the dates presented: September 30, December 31, 2025 2024 Raw materials, net of allowance of $ 1,499 and $ 4,379 , respectively $ 20,425 $ 17,706 Work-in-process 1,083 345 Inventory - current 21,508 18,051 Raw materials - long term, net of allowance of $ 1,020 and $ 1,488 , respectively — — Total inventory $ 21,508 $ 18,051 6 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: September 30, December 31, 2025 2024 Beginning balance $ 5,867 $ 4,004 Allowance for obsolescence 61 1,863 Write-offs ( 3,409 ) — Ending balance $ 2,519 $ 5,867 The substantial write-off of the allowance for obsolescence during the nine months ended September 30, 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. 5. Assets Held for Sale During the second quarter of 2025, we completed all activities necessary to terminate operations at our fabrication, repair and overhaul facility in Midland, Texas (the (“Midland Facility”) and prepared the site, which includes an industrial building and land, for sale. Accordingly, depreciation of the facility was suspended and the combined net carrying value of the building and land, or $ 2.2 million, was reclassified from property and equipment to an asset held for sale included as a component of current assets on our Condensed Consolidated Balance Sheet as of June 30, 2025. We have engaged a broker and are actively marketing the facility. The closure of the Midland Facility was part of our strategy to streamline and outsource our assembly operations and monetize company-owned real estate as disclosed previously. We anticipate that we will complete a sale transaction for the Midland Facility within the next twelve months. Beginning in the first quarter of 2025, all equipment with continuing productive value was transferred from the Midland Facility to certain of our other regional service centers. By the end of April 2025, the Midland Facility was completely vacant in anticipation of the eventual sale. In addition, we disposed of all inventory items, including engines, frames and coolers, among other items that were fully reserved (see Note 4 ). In connection with the complete closure of the Midland Facility, we terminated eight employees and incurred $ 0.1 million of severance and termination benefits all of which were paid and settled during April 2025. 6. Rental Equipment The following table summarizes our rental equipment and accumulated depreciation as of the dates presented: September 30, December 31, 2025 2024 Compressor units $ 658,412 $ 579,373 Work-in-progress 51,329 51,662 709,741 631,035 Accumulated depreciation ( 230,366 ) ( 216,014 ) Rental equipment, net of accumulated depreciation $ 479,375 $ 415,021 We evaluated our rental equipment for potential impairments as of September 30, 2025, and December 31, 2024 and determined that none were present. Depreciation expense for rental equipment was $ 8.3 million and $ 7.2 million for the three months ended September 30, 2025, and 2024, respectively and $ 24.0 million and $ 20.6 million for the nine months ended September 30, 2025, and 2024, respectively. We capitalized interest totaling approximately $ 0.7 million and $ 1.2 million for the three months ended September 30, 2025, and 2024, respectively, and $ 1.8 million a nd $ 3.6 million , for the nine months ended September 30, 2025, and 2024, respe ctively. 7 7. Property and Equipment The following table summarizes our property and non-rental equipment as of the dates presented: September 30, December 31, 2025 2024 Land $ 1,562 $ 1,680 Building 16,135 19,140 Leasehold improvements 1,026 1,346 Office equipment and furniture 2,057 2,057 Software 619 589 Machinery and equipment 5,065 4,430 Vehicles 12,887 12,739 Work-in-progress 2,592 168 41,943 42,149 Less accumulated depreciation ( 19,429 ) ( 19,160 ) Total $ 22,514 $ 22,989 Depreciation expense for property and equipment was $ 0.9 million and $ 0.9 million for the three months ended September 30, 2025, and 2024, respectively, and $ 2.8 million and $ 2.2 million for the nine months ended September 30, 2025, and 2024, respectively. During the quarter ended September 30, 2025, we reclassified certain items of property and equipment attributable to our former Midland Facility with a carrying value of $ 2.2 million to assets held for sale (see Note 5 ). 8. Supplemental Balance Sheet Disclosures The following table summarizes the components of accrued liabilities as of the dates presented: September 30, December 31, 2025 2024 Accrued purchases $ 8,223 $ 2,085 Compensation 3,700 3,483 Right of use obligations 291 153 Interest 309 269 Sales taxes 327 355 Other 2,672 1,343 $ 15,522 $ 7,688 9. Long-Term Debt Our outstanding long-term debt consists of the following, as of the dates presented: September 30, December 31, 2025 2024 Credit facility $ 208,000 $ 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 September 30, 2025. In connection with the Fourth Amendment, we incurred fees of $ 1.3 million. 8 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. The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility ’ s financial covenants. 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 September 30, 2025, we had $ 208.0 million outstanding under our Credit Facility with a weighted average interest rate of 7.04 %. As of September 30, 2025 we had approximately $ 163.0 million available for borrowing under the Credit Facility, subject to a borrowing base determination. As of September 30, 2025, we were in compliance with all financial covenants in our Credit Facility. Borrowing Base . 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. The Lender may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral. Interest and Fees . 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; (b) the sum of the federal funds rate for such day plus 0.50 %; 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 Credit Facility. 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. Covenants . 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; make acquisitions in excess of certain amounts; pay dividends; redeem or repurchase capital stock or senior notes; make investments or loans; make negative pledges; consolidate, merge or effect asset sales; or change the nature of our business. 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 3.50 to 1.00 for each fiscal quarter 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 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; certain defaults, termination events or similar events; certain defaults with respect to any other Company indebtedness in excess of $ 1.0 million; certain bankruptcy or insolvency events; the rendering of certain judgments in excess of $ 1.0 million; certain ERISA events; certain change in control events and the defectiveness of any liens. Obligations outstanding under the Credit Facility may be accelerated upon the occurrence of an event of default. 9 10. Income Taxes 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. During 2020, we received federal income tax refunds corresponding to the 2018 NOL carryback leaving approximately $ 11.4 million remaining to be refunded in connection with the 2019 NOL carryback. In conjunction with the remaining 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”). As a result of the submission of the refund claim to the JCT, the IRS has effectively completed their review of the income tax returns for 2015, 2016 and 2017. Our request for refund was formally submitted to the JCT for their review during the second quarter of 2025 which was concluded favorably with the JCT concurring with the IRS’s conclusions. As of November 8, 2025, we are awaiting receipt of our refund claim; however, due to the shut down of the federal government which began on October 1, 2025, we are not able to validate the amount or timing of the receipt of the refund claim. 11. 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. 12. 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 September 30, Nine months ended September 30, 2025 2024 2025 2024 Rental $ 41,502 $ 37,350 $ 119,992 $ 106,010 Sales Compressors 35 383 985 1,724 Other (Parts/Rebuilds) 436 1,460 2,163 4,892 471 1,843 3,148 6,616 Aftermarket services 1,428 1,493 3,026 3,458 Total revenue $ 43,401 $ 40,686 $ 126,166 $ 116,084 No amounts were recognized in revenue attributable to deferred revenue during the nine months ended September 30, 2025. We recognized $ 0.4 million in revenue for the nine months ended September 30, 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 September 30, 2025, and December 31, 2024, we had no deferred revenue related to unsatisfied performance obligations. 10 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. 13. 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 September 30, Nine months ended September 30, 2025 2024 2025 2024 Equity-classified $ 612 $ 522 $ 1,550 $ 1,038 Liability-classified (1) 139 46 276 62 $ 751 $ 568 $ 1,826 $ 1,100 (1) Represents compensation expense associated with awards that may be settled in cash at the option of the grantee. 1998 Stock Option Plan 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 392,169 shares remained available for grant under the Stock Option Plan as of September 30, 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, 2025 is presented below: Number of Shares Underlying Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding, December 31, 2024 113,751 $ 20.44 5.84 $ 747 Granted 44,250 $ 22.34 $ — Exercised ( 12,500 ) $ 13.05 $ 159 Canceled/Forfeited ( 5,833 ) $ 23.66 $ 16 Expired ( 23,167 ) $ 22.90 $ — Outstanding, September 30, 2025 116,501 $ 21.31 7.60 $ 781 Exercisable, September 30, 2025 47,751 $ 20.05 5.37 $ 382 The following table summarizes information about our stock options outstanding as of September 30, 2025: Range of Exercise Prices: Options Outstanding Options Exercisable Shares Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.01 -$ 18.00 19,501 6.58 $ 10.82 17,835 $ 10.92 $ 18.01 -$ 26.00 80,750 9.10 $ 22.46 13,666 $ 22.33 $ 26.01 -$ 30.00 16,250 1.38 $ 28.15 16,250 $ 28.15 116,501 7.60 $ 21.31 47,751 $ 20.05 11 The following table summarizes changes in our unvested stock options during the nine months ended September 30, 2025: Shares Weighted Average Grant Date Fair Value Per Share Unvested, December 31, 2024 48,998 $ 11.35 Granted 44,250 $ 12.07 Vested ( 20,498 ) $ 10.60 Canceled/Forfeited ( 4,000 ) $ 12.46 Unvested, September 30, 2025 68,750 $ 11.97 As of September 30, 2025, there was a total of approximately $ 0.5 million of unrecognized compensation cost related to unvested options which is expected to be recognized over the next 2.09 years. 2019 Equity Incentive Plan On June 5, 2025, our stockholders approved an amendment to the Equity Incentive Plan (the “Amendment ” ) to increase the number of shares available by 500,000 shares up to a total of 1,650,000 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 units (“PSUs ” ) and (v) other equity-based awards. In addition, the Amendment extended the term of the Equity Incentive Plan by five years to June 20, 2034. After consideration of the activity described in detail below, a total of 635,421 shares remained available for grant under the Equity Incentive Plan as of September 30, 2025. Time-Vested Restricted Stock and Restricted Stock Units The following table summarizes all restricted stock and RSU activity during the nine months ended September 30, 2025 is presented below: Number of Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding, December 31, 2024 131,183 $ 16.39 5.15 $ 3,516 Granted 75,031 $ 22.78 $ 1,709 Vested ( 72,874 ) $ 15.13 $ 1,796 Canceled/Forfeited ( 910 ) $ 22.19 $ 17 Outstanding, September 30, 2025 132,430 $ 20.66 4.15 $ 3,707 As of September 30, 2025, there was a total of approximately $ 1.9 million of unrecognized compensation cost related to unvested restricted stock and RSUs which is expected to be recognized over the next 1.98 years. Cash Settled Restricted Stock Units The 2025 and 2024 grants 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. Number of Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding, Outstanding, December 31, 2024 15,069 $ 19.51 0.50 $ 294 Granted 13,812 $ 24.60 $ 340 Vested ( 10,527 ) $ 19.57 $ 206 Canceled/Forfeited ( 2,810 ) $ 19.57 $ 55 Outstanding, September 30, 2025 15,544 $ 23.99 0.61 $ 414 12 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. 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 as defined in the PSU agreements). 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 nine months ended September 30, 2025: Weighted-average grant date fair value of PSUs granted $ 28.22 Risk free rate 3.91 % Expected volatility 44.0 % Expected dividend yield — % The following table summarizes all PSU activity during the nine months ended September 30, 2025: Number of Shares Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding, December 31, 2024 56,764 $ 22.47 2.22 $ — Granted 41,724 $ 28.22 $ — Vested — $ — Canceled/Forfeited — $ — Outstanding, September 30, 2025 98,488 $ 24.91 1.89 $ — As of September 30, 2025 , there was a total of approximately $ 1.6 million of unrecognized compensation cost related to the unvested portion of the PSUs which is expected to be recognized over the next 1.89 years. 13 14. 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 September 30, Nine months ended September 30, 2025 2024 2025 2024 Numerator for basic and diluted earnings per share: Net income $ 5,784 $ 5,014 $ 15,826 $ 14,362 Denominator for basic earnings per common share: Weighted average common shares outstanding - Basic 12,544 12,427 12,529 12,404 Denominator for diluted earnings per common share: Weighted average common shares outstanding 12,544 12,427 12,529 12,404 Dilutive effect of stock-based compensation awards 141 99 150 107 Weighted average common shares outstanding - Diluted 12,685 12,526 12,679 12,511 Earnings per common share: Basic $ 0.46 $ 0.40 $ 1.26 $ 1.16 Diluted $ 0.46 $ 0.40 $ 1.25 $ 1.15 The following table summarizes the actual number of stock-based compensation awards that were excluded from the determination of diluted earnings per share due to their anti-dilutive effect for the periods presented: Three months ended September 30, Nine months ended September 30, 2025 2024 2025 2024 Stock options 95,000 92,417 95,000 92,417 Restricted stock and RSUs — 5,750 — 18,635 PSUs 43,154 — 43,154 — 138,154 98,167 138,154 111,052 15. Subsequent Events On November 10, 2025, we announced that our Board of Directors declared a cash dividend of $ 0.11 per share to stockholders of record as of November 20, 2025 expected to be paid on December 3, 2025. We have evaluated all events subsequent to the balance sheet date as of September 30, 2025, and through the date this report was issued and determined that there have been no other events that would require adjustments or additional disclosures to our Condensed Consolidated Financial Statements. 14 SPECIAL NOTE REGARDING 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. You should read statements that contain these words carefully and should not place undue reliance on these statements because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other “forward-looking” information. We do not undertake any obligation to update or revise publicly any forward-looking statements. 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. 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; and • 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. 15