What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-11 compared with 2025-11-10 · 119 added, 138 removed, 220 unchanged (54% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis of the financial condition and results of operations of Natural Gas Services Group, Inc.

(the “Company”, “NGS”, “Natural Gas Services Group”, “we,” “us” or “our”) for the periods ended September 30, 2025, and 2024 are based on, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2024.

The discussion and analysis of our financial condition and results of operations of Natural Gas Services Group, Inc.

(the “Company”, “NGS”, “Natural Gas Services Group”, “we,” “us” or “our”) for the periods ended March 31, 2026, and 2025 are based on, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2025.

The following discussion contains forward-looking statements that include risks and uncertainties.

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All dollar amounts presented in the tables that follow are in thousands unless otherwise indicated.

References to “quarters” represent the three months ended September 30, 2025, or 2024, as applicable.

References to “quarters” represent the three months ended March 31, 2026, or 2025, as applicable.

Certain variances that represent results that are not meaningful are indicated as “NM.”

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

We rent, design, install, service and maintain natural gas and electric compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers.

Substantially all of our compressor assembly is done by third-party contractors while a limited level of assembly work remains in-house at our Tulsa, Oklahoma facility.

We also provide an exchange and rebuild program for compressors and maintain an inventory of new and used compressors and parts to facilitate this business.

Our primary focus is on the rental of natural gas and electric compressors.

Our primary focus is on the rental of natural gas engine and electric motor drive compressors.

Our rental contracts generally provide for initial terms of 12 to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units.

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The following table summarizes our key operating statistics as of the dates or for the periods presented, as applicable:

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Rented horsepower (at period end) 574,969 492,679

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Fleet units (at period end):

1,891 1,909 1,891 1,909

Unit utilization (at period end) 69.0 % 62.7 %

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Rental revenues as a percent of total revenues 97.2 % 94.0 %

Of the total horsepower utilized as of September 30, 2025, 391,045 of horsepower was being rented under contracts expiring between 2025 and 2030 and 134,970 of horsepower was being rented on a month-to-month basis.

Of the total horsepower utilized as of March 31, 2026, 465,638 of horsepower was being rented under contracts expiring between 2026 and 2031 and 109,331 of horsepower was being rented on a month-to-month basis.

Of the 1,243 compressors utilized as of March 31, 2026, 754 units were being rented under multi-year contracts and 489 units were being rented on a month-to-month basis.

Our Performance Trends and Outlook

The oil and gas industry has historically been cyclical and production levels of oil and gas are dependent upon numerous factors.

The market for compression equipment and services is highly dependent on the production levels of exploration and production companies and pricing of oil and gas.

The level of production for crude oil activity and capital expenditures has generally been dependent upon the prevailing view of future crude oil prices, which is influenced by numerous supply and demand factors, including availability and cost of capital, well productivity and development costs, global and domestic economic conditions, environmental regulations, policies of OPEC and Russia, and other factors.

While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels.

The market for compression equipment and services is highly dependent on the production levels and pricing of oil and gas.

Regardless of current oil price volatility driven by geopolitical factors, we expect demand for compression overall, and specifically our fleet to remain strong.

Natural Gas .

We believe the market outlook for natural gas production in the U.S.

remains steady while short term price volatility remains a factor due to weather, geopolitical influences and shifts in LNG exports.

We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and Marcellus Shale.

remains steady while short-term price volatility remains a factor due to geopolitical influences, weather and shifts in LNG exports.

Non-GAAP Financial Measures

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The following table calculates our gross margin, the most directly comparable GAAP financial measure, and reconciles it to Adjusted Gross Margin with further detail by revenue classification for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Total revenue $ 48,467 $ 41,383

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This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP.

Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

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• it helps investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating structure;

• it is used by our management for various purposes, including as a measure of operating performance, in presentations to our Board of Directors, and as a basis for strategic planning and forecasting.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP.

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There are other material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of certain recurring items that materially affect our net income or loss, and the lack of comparability of results of operations of different companies.

Please read the table below to see how Adjusted EBITDA reconciles to our net income, the most directly comparable GAAP financial measure.

The following table reconciles our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Three months ended March 31,

Net income $ 6,763 $ 4,854

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Depreciation and amortization 10,325 8,636

Impairments — 136 — 136

Inventory allowance — 61

Retirement of rental equipment 412 728

Severance and restructuring charges — — 89 33

Stock-based compensation 579 359

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Results of Operations

Three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024.

We generate revenue primarily from renting, maintaining and servicing compressors to our customers under contractual arrangements.

These contracts, which all qualify as operating leases under GAAP, generally include a fee for servicing the compressor unit during the rental term.

Our rental contract terms typically range from 12 to 60 months.

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

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

Three months ended March 31, 2026, compared to the three months ended March 31, 2025.

We generate revenue from renting, maintaining and servicing compressors to our customers under contractual arrangements.

The underlying rental service agreements, which all qualify as operating leases under GAAP, generally include a fee for servicing the compressor unit as well as surcharges for fluids during the rental term.

Our rental agreement terms typically range from 12 to 60 months.

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

After the terms of the agreement have expired, a customer may renew its agreement or continue renting on a monthly basis thereafter.

The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and service employees that are geographically dispersed throughout our operating regions.

The following table summarizes the revenues, costs, adjusted gross margin and related operating statistics with respect to our rentals of compressors for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Three months ended March 31,

2026 2025 Change %

Rental revenue $ 47,115 $ 38,910 $ 8,205 21.1 %

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Percent of total company revenues 97.2 % 94.0 % 3.2 %

Rented horsepower 526,015 475,534 50,481 10.6 % 526,015 475,534 50,481 10.6 %

Horsepower utilization 84.1 % 82.0 % 2.1 % 84.1 % 82.0 % 2.1 %

Units utilized 1,235 1,229 6 0.5 % 1,235 1,229 6 0.5 %

Rented horsepower (at period end) 574,969 492,679 82,290 16.7 %

Horsepower utilization (at period end) 86.9 % 81.7 % 5.2 %

Units utilized (at period end) 1,243 1,202 41 3.4 %

Units utilization 69.0 % 62.7 % 6.3 %

Rental revenue increased for the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024 due primarily to an increase in rented horsepower and units despite a decrease in total customers.

Rental revenue increased for the three months ended March 31, 2026, as compared to the corresponding period in 2025 due primarily to an increase in rented horsepower and units.

The increase in revenue reflects a continuing trend of growing demand for our large horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins.

Our utilized horsepower increased during the third quarter of 2025 as compared to the prior year period which reflects the continued addition of large horsepower units to our fleet consistent with our emphasis on larger units over the past several years, as well as the retirement of certain older medium and small horsepower units from the fleet partially offset by the return of small horsepower units to the idle fleet by certain customers at the end of their lease terms.

Through September 30, 2025, we placed into service a total of 229 newly set units, including 188 from our existing fleet and 41 new units.

Our utilized horsepower increased during the first quarter of 2026 as compared to the prior year period which reflects the continued addition of large horsepower units to our fleet consistent with our emphasis on larger units over the past several years, as well as the retirement of certain older medium and small horsepower units from the fleet.

Through March 31, 2026, we placed into service a total of 98 newly set units, including 64 from our existing fleet and 34 new units.

Of those unit sets, a total of 37 were large horsepower units and 34 of those were new units to the fleet.

The cost of rentals increased on an absolute basis due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs.

The cost of rentals increased on an absolute basis, consistent with revenues, due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs.

An expanding portion of our rented compressor units utilize our proprietary System Management and Recovery Technology (“SMART”) and telemetry software which reduces unplanned shutdowns and increases productivity.

Despite inflationary pressure associated with our primary cost components, the SMART and telemetry technology allows us to streamline and manage our maintenance activities more efficiently and thereby mitigate the costs to a manageable extent.

As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the three and nine months ended September 30, 2025, compared to the comparable periods in 2024.

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

Costs of sales include purchases of engines, compressors, coolers and other component materials as well as direct and indirect labor attributable to the assembly of equipment to meet the unique specifications of our customers.

In addition, our costs of sales include overhead and related support costs attributable to our storage, assembly, repair and overhaul facilities in Tulsa, Oklahoma as well as Midland, Texas through its closure at the end of March 2025.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressors, parts and equipment and repair/overhaul services for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

As a percentage of revenue, cost of rentals, specifically labor, replacement parts, and lubricants declined compared to the first and fourth quarters in 2025.

We expect these costs will normalize over the coming quarters.

As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the three months ended March 31, 2026, compared to the comparable period in 2025.

We generate revenue primarily from the sale of compressor parts and to a lesser extent repair and overhaul services.

Costs of sales primarily include purchases of component materials.

In addition, our costs of sales include overhead and related support costs attributable to our storage, assembly facilities including Midland, Texas through its closure at the end of March 2025.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressor parts and equipment and repair/overhaul services for the periods presented:

Three months ended March 31,

2026 2025 Change %

Sales revenue $ 491 $ 1,927 $ (1,436) (74.5) %

Cost of sales (excluding depreciation and amortization) 624 2,016 (1,392) (69.0) %

Sales adjusted gross margin $ 23 $ (185) $ 208 NM $ (227) $ 159 $ (386) NM

Sales adjusted gross margin $ (133) $ (89) $ (44) 49.4 %

Sales adjusted gross margin percentage (27.1) % (4.6) % (22.5) %

Percent of total company revenues 1.0 % 4.7 % (3.7) %

Sales revenue declined for the three and nine months ended September 30, 2025, compared to the corresponding periods in 2024.

Sales are subject to fluctuations in the timing of industry activity related to our customers’ capital projects and, as such, can vary substantially between periods.

Due to these circumstances as well as the costs of maintaining support facilities relative to revenues, we continue to shift our business away from sales of new compressor packages to renting our owned units to our customers.

While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the gross margins declined to negative values due primarily to indirect labor and fixed overhead costs that are not otherwise subject to capitalization at our assembly, repair and overhaul facilities, as well as severance and other continuing costs primarily at the location in Midland, Texas which we closed at the end of March 2025.

Sales represented an insignificant portion of our gross margin in the three and nine months ended September 30, 2025, and 2024, respectively.

Sales revenue declined for the three months ended March 31, 2026, compared to the corresponding period in 2025 due primarily to the phasing out of direct sales of compressors and repair/overhaul work which was the primary focus of the former Midland Facility.

The costs to support our sales revenues declined on an absolute basis, primarily reflecting a substantially lower volume of business.

Sales represented a negligible negative contribution to gross margin in the three months ended March 31, 2026, and 2025, respectively.

Aftermarket Service

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The following table summarizes the revenues, costs and adjusted gross margin with respect to our aftermarket services for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Three months ended March 31,

2026 2025 Change %

Aftermarket services revenue $ 861 $ 546 $ 315 57.7 %

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Percent of total company revenues 1.8 % 1.3 % 0.5 %

Third party aftermarket services revenues and costs declined for the three and nine months ended September 30, 2025, compared to the corresponding periods during 2024;

however, the absolute gross margins and percentages both improved over the prior periods in 2024.

The decline in revenue and costs is primarily attributable to a marginally lower volume of unit commissioning work performed during the 2025 periods compared to 2024 as well as the effect of lower freight costs.

Aftermarket services represented an insignificant portion of our gross margin in the three and nine months ended September 30, 2025, and 2024, respectively.

Third party aftermarket services revenues, costs and absolute gross margin increased for the three months ended March 31, 2026, compared to the corresponding period during 2025;

however, the gross margin percentage declined over the prior period in 2025.

The increase in revenue and costs is primarily attributable to a marginally higher volume of unit commissioning work performed during the 2026 period compared to 2025.

The margin decline is attributable to higher level of freight services passed on to customers during the 2025 period.

Aftermarket services represented an insignificant portion of our gross margin in the three months ended March 31, 2026, and 2025, respectively.

Selling, General and Administrative Expenses

Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, human resources, information technology, health, safety and environmental and investor relations.

In addition, SG&A includes non-personnel costs, such as occupancy costs, IT support costs, professional fees and other supporting corporate expenses including public company compliance costs.

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, procurement, logistics and supply chain, human resources, information technology (“IT”), health, safety and environmental and investor relations.

In addition, SG&A includes non-personnel costs, such as rent and occupancy, IT support, professional fees and other supporting corporate expenses including public company compliance and related costs.

The following table summarizes the components of our SG&A expenses for the periods presents:

Three months ended March 31,

2026 2025 Change %

Primary selling, general and administrative expenses $ 5,929 $ 5,019 $ 910 18.1 %

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SG&A expenses as a percent of total revenues 13.4 % 13.0 % 0.4 %

SG&A expenses increased during the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024.

SG&A expenses increased during the three months ended March 31, 2026, as compared to the corresponding period in 2025.

In general, the increase in our total SG&A expenses reflects a higher level of cost to appropriately scale our administrative function.

The increase in primary SG&A expenses during the three months ended September 30, 2025 as compared to 2024 reflects (i) higher information technology support costs of $0.3 million, (ii) higher occupancy and office costs of $0.2 million and (iii) higher salaries and benefits costs of $0.1 million which were partially offset by (i) lower credit loss expenses of $0.1 million and (ii) lower commissions of $0.2 million.

The increase in primary SG&A expenses during the nine months ended September 30, 2025 as compared to 2024 was impacted by (i) higher information technology support costs of $0.7 million in support of our growth initiatives, (ii) higher salaries and benefits of $0.7 million reflecting support staff growth (iii) higher public company costs of $0.2 million and (iv) higher occupancy and office costs of $0.2 million.

These increases were partially offset by (i) lower commissions of $0.6 million and (ii) lower credit loss expenses of $0.2 million .

Our equity classified stock-based compensation increased during both periods in 2025 over 2024 due primarily to a higher mix of performance-based share unit awards, or PSUs, for our executive officers in the 2025 period.

The increase in primary SG&A expenses during the three months ended March 31, 2026 as compared to 2025 was impacted by (i) higher professional fees and public company costs of $0.4 million, (ii) higher salaries and benefits, including short-term incentive compensation, of $0.2 million reflecting support staff growth and performance, (iii) higher IT support costs of $0.1 million in support of our growth initiatives and noncapitalizable costs associated with certain IT system conversion projects and (iv) higher occupancy and office costs of $0.1 million.

Our equity classified stock-based compensation increased during the 2026 period over 2025 due primarily to a higher mix of performance-based share unit awards, or PSUs, for our executive officers in the 2026 period.

PSUs generally have a higher grant-date fair value than traditional restricted stock and restricted stock units.

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The following table summarizes the components of our depreciation and amortization expenses for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Three months ended March 31,

2026 2025 Change %

Depreciation and amortization allocable to cost of revenues:

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Corporate depreciation 160 97 63 64.9 %

Intangible asset amortization — 31 (31) NM — 97 (97) NM

Total $ 10,325 $ 8,636 $ 1,689 19.6 %

Depreciation and amortization as a percent of total revenues 21.3 % 20.9 % 0.4 %

Depreciation and amortization expense increased for the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024, due primarily to depreciation expense associated with the high horsepower units placed in service during the second half of 2024 continuing through September 30, 2025.

These higher horsepower unit additions, which began in earnest during 2023, are reflective of our strategic plans to concentrate our business development on these higher margin applications.

We assess our long-lived assets for impairment on an annual basis or when indicators of impairment are present.

An impairment loss is recognized if the future undiscounted cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s carrying value.

The following table indicates the charges incurred for impairments for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Impairments $ — $ 136 $ (136) NM $ — $ 136 $ (136) NM

During the third quarter of 2024, we fully impaired certain information technology assets for which we terminated plans to develop and utilize the associated applications.

Depreciation and amortization expense increased for the three months ended March 31, 2026, as compared to the corresponding period in 2025, due primarily to depreciation expense associated with the large horsepower units placed in service during 2025 continuing through March 31, 2026.

These higher horsepower unit additions are reflective of our strategic plans to concentrate our business development on these higher margin applications.

Furthermore, our equipment additions, during the 2026 period, primarily compressor units and service vehicles, reflect higher overall costs due to broad inflationary pressures as compared to the 2025 period.

Inventory Allowance

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The following table indicates the charges incurred for inventory allowance for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Inventory allowance $ — $ — $ — NM $ 61 $ — $ 61 NM

During three months ended March 31, 2025 , we recorded a nominal increase to the allowance for obsolescence primarily attributable to the transfer of inventory that remains useful from our former Midland, Texas facility, in connection with its closing in March 2025, to our other operating facilities.

Three months ended March 31,

2026 2025 Change %

Inventory allowance $ — $ 61 $ (61) NM

During three months ended March 31, 2025 , we recorded a nominal increase to the allowance for obsolescence primarily attributable to the transfer of inventory that remained useful from our former Midland, Texas facility, in connection with its closing in March 2025, to our other operating facilities.

All of the remaining inventory from the Midland, Texas facility that was subject to the allowance for obsolescence was written off during the three months ended March 31, 2025.

As of September 30, 2025, we had an inventory obsolescence balance of $2.5 million as compared to $5.9 million as of December 31, 2024.

As of March 31, 2026 and December 31, 2025, we had an inventory obsolescence balance of $3.6 million.

Please see Note 4 ( “ Inventory ” ) to our Condensed Consolidated Financial Statements for additional information regarding the inventory allowance.

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The following table indicates the charges incurred for the retirement of rental equipment for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Retirement of rental equipment $ — $ — $ — NM $ 728 $ 5 $ 723 NM

We retired certain small and medium horsepower compressor units during the nine months ended September 30, 2025 with only those units retired during the three months ended March 31, 2025 and 2024 having any remaining carrying value .

Such retirements were minimal during the comparable periods during 2024.

Gain on the Sale of Assets

As circumstances warrant, we will market certain property and equipment, primarily trucks, and other assets when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets.

Three months ended March 31,

2026 2025 Change %

Retirement of rental equipment $ 412 $ 728 $ (316) NM

We retired 134 and 68 units representing 17,700 and 12,073 horsepower, with remaining carrying values of $0.4 million and $0.7 million during the three months ended March 31, 2026 and 2025, respectively .

Gain on Disposition of Assets

As circumstances warrant, we will market certain property and equipment, primarily trucks, when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets.

Gains and losses are recognized accordingly upon the completion of such transactions.

The following table presents the gains recognized upon the sale of assets for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Gain on the disposition of assets, net $ 46 $ 246 $ (200) NM $ 224 $ 475 $ (251) NM

Gains recognized during the three and nine months ended September 30, 2025 and 2024 are primarily attributable to the sales of trucks after the completion of their useful lives.

Three months ended March 31,

2026 2025 Change %

Gain on the disposition of assets, net $ 70 $ 54 $ 16 NM

Gains recognized during the three months ended March 31, 2026 and 2024 are primarily attributable to the sales of trucks after the completion of their useful lives.

Interest Expense

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our senior secured revolving credit agreement, as amended (the “Credit Facility”) , net of amounts capitalized attributable to certain capital projects.

Also included is interest expense on our financing leases during the 2024 periods as all were settled before 2025.

The following table presents the components of our interest expense for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Three months ended March 31,

2026 2025 Change %

Interest on borrowings, finance leases and related fees $ 3,882 $ 3,532 $ 350 9.9 %

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Weighted-average outstanding borrowings $ 225,539 $ 169,003 $ 56,536

Interest expense increased for the three and nine months ended September 30, 2025, as compared to the corresponding periods in 2024 , due primarily to the effect of $0.4 million and $1.7 million lower capitalized interest, respectively, due primarily to the volume and timing of the completion of certain compressor assembly projects in the 2025 periods.

In addition, amortization of debt issue costs increased during the three and nine months ended September 30, 2025, as compared to the comparable periods in 2024 due primarily to the amortization of costs associated with certain amendments to the Credit Facility that took place in June of 2024 as well as the the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”) that was completed in April 2025.

While the average borrowings outstanding under our Credit Facility have increased during the three and nine months ended September 30, 2025, as compared to the comparable periods in 2024, we experienced lower average interest rates consistent with the Federal Reserve interest rate reductions implemented in the second halves of 2024 and 2025 as well as the lower interest rates attributable to the Fourth Amendment.

Interest expense increased for the three months ended March 31, 2026, as compared to the corresponding period in 2025 , due primarily to (i) the effect of $0.4 million of lower capitalized interest, respectively, due primarily to the volume and timing of the completion of certain compressor assembly projects in the 2026 period as well as lower interest rates and (ii) higher interest costs of $0.4 million resulting from $56.5 million of higher average borrowings outstanding partially offset by the effect of lower average interest rates.

In addition, amortization of debt issue costs increased during the three months ended March 31, 2026, as compared to the comparable period in 2025 due primarily to the amortization of costs associated with the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”) that was completed in April

The lower average interest rates are consistent with the Federal Reserve interest rate reductions implemented in the second half of 2025 as well as the lower interest rates attributable to the Fourth Amendment.

Other Income (Expense), net

This caption primarily reflects non-operating items of income and loss including non-cash gains and losses attributable to our corporate-owned life insurance (“COLI”) policies related to our deferred compensation plan as well as other credits, charges and scrap asset sales.

This component of our income primarily reflects non-operating items of income and loss including non-cash gains and losses attributable to our corporate-owned life insurance (“COLI”) policies related to our deferred compensation plan as well as other credits, charges and scrap asset sales.

The following table indicates our other income (expense) for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Other income (expense), net $ 222 $ (15) $ 237 NM $ 325 $ 148 $ 177 NM

Other income (expense), net improved for the three and nine months ended September 30, 2025 as compared to the corresponding periods in 2024 due primarily to certain non-operating credits and scrap asset sales as well as unrealized gains attributable to our COLI policies associated with our deferred compensation plan.

Three months ended March 31,

2026 2025 Change %

Other income (expense), net $ (126) $ (1) $ (125) NM

Other income (expense), net declined for the three months ended March 31, 2026 as compared to the corresponding period in 2025 due primarily to higher unrealized losses attributable to our COLI policies associated with our deferred compensation plan.

Provision for Income Taxes

Provision for income taxes represents our income taxes as determined in accordance with GAAP.

It considers taxes attributable to our obligations for federal taxes under the Internal Revenue Code as well as to various states in which we operate, primarily Texas.

It considers taxes attributable to our obligations for federal income taxes under the Internal Revenue Code as well as to various states in which we operate, primarily Texas.

Please see Note 10 ( “ Income Taxes ” ) to our Condensed Consolidated Financial Statements for additional information.

The following table summarizes our income tax provision for the periods presented:

Three months ended September 30, Nine months ended September 30,

2025 2024 Change % 2025 2024 Change %

Three months ended March 31,

2026 2025 Change %

Income tax expense $ 2,156 $ 1,482 $ 674 45 %

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Our estimated annual effective tax rate differs from the U.S.

federal statutory rate of 21% primarily as a result of certain expenses not being deductible for income tax purposes.

federal statutory rate of 21% primarily as a result of a higher effective tax rate attributable to state and local income taxes including the impact of projected apportionment of taxable income between states with different tax rates.

Financial Condition

Liquidity and Capital Resources

Our primary sources of liquidity include cash provided by operating activities and borrowings under our Credit Facility.

On April 18, 2025, we entered into the Fourth Amendment which provides us with up to $400.0 million in borrowing commitments with an additional $100.0 million at our request through an accordion feature.

Our primary sources of liquidity include cash provided by operating activities and borrowings under our Credit Facility which provides us with up to $400.0 million in borrowing commitments with an additional $100.0 million at our request through an accordion feature.

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.

As of September 30, 2025, the borrowing base under the Credit Facility was $371.0 million with $208.0 million of borrowings outstanding leaving $163.0 million of availability under the Credit Facility.

As of March 31, 2026, the borrowing base under the Credit Facility was $400.0 million with $226.0 million of borrowings outstanding leaving $174.0 million of availability under the Credit Facility.

Our cash flows from operating and investing activities are subject to a degree of volatility due primarily to (i) the consistency of our customers in remitting amounts owed to us for our services in full and on a timely basis and (ii) the timing of payments to our vendors and suppliers for capital projects which are often made well in advance of placing new compressor equipment into service.

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To the extent necessary, we rely on the availability of our Credit Facility to fund capital expenditures beyond that provided by our cash flows from operating activities.

Our forecasted capital expenditures for 2025 will continue to be directly dependent upon our customers’ compression requirements and our capital availability, while maintaining prudent levels of debt.

Our forecasted capital expenditures for the remainder of 2026 will continue to be directly dependent upon our customers’ compression requirements and our capital availability, while maintaining prudent levels of debt.

The level of our capital expenditures will vary in future periods depending on energy market conditions and other related economic factors.

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Cash From Operating Activitie s.

Our cash provided by operating activities was $49.1 million for the nine months ended September 30, 2025.

Our cash provided by operating activities was $23.0 million for the three months ended March 31, 2026.

For additional information and an analysis of our historical cash flows from operating activities, see the “Cash Flows” discussion that follows.

Credit Facility Borrowings .

During the nine months ended September 30, 2025, we borrowed $38.0 million, net of repayments, under the Credit Facility.

During the three months ended March 31, 2026, we repaid $4.0 million, net of borrowings, under the Credit Facility.

The following table summarizes our borrowing activity under the Credit facility for the periods presented:

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End of Period Weighted-average Maximum Weighted-average Rate

Three months ended September 30, 2025 $ 208,000 $ 202,129 $ 208,000 7.08 %

Nine months ended September 30, 2025 $ 208,000 $ 184,826 $ 208,000 7.46 %

Three months ended March 31, 2026 $ 226,000 $ 225,539 $ 230,000 6.62 %

For additional information regarding the terms and covenants under the Credit Facility, see the “Capitalization” discussion that follows.

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The following table summarizes our cash flows for the periods presented:

Nine months ended September 30,

Three months ended March 31,

Net cash provided by operating activities $ 23,035 $ 21,267

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Cash Flows from Operating Activities.

Our cash flows from operating activities decreased by $8.0 million during the nine months ended September 30, 2025, as compared to the comparable period in 2024.

From a broad perspective, cash flows declined in the 2025 period due primarily to the substantial progress made in the 2024 period for improving our processes for billings and collections from certain customers that had the effect of lowering our days sales outstanding (“DSO”) statistics for accounts receivable accounts.

While these efforts have continued with favorable DSO performance into 2025, the timing effect was more beneficial during the 2024 period while the 2025 period reflects a more normalized cash operating cycle.

In addition, we increased our maintenance parts inventory in the 2025 period in support of our growing fleet.

These working capital uses were partially offset by growth in accounts payable and the favorable effects of higher realized margins attributable to growth in our high horsepower unit rentals.

Our cash flows from operating activities increased by $1.8 million during the three months ended March 31, 2026, as compared to the comparable period in 2025.

The net increase is primarily attributable to the receipt in January 2026 of $12.3 million of income tax refunds and related interest as well as the favorable effects of higher realized margins attributable to growth in our high horsepower unit rentals.

These increases were substantially offset by higher working capital uses including (i) the paydown of higher year-end accounts payable, (ii) growth in accounts receivable, (iii) increases in our maintenance parts inventory in support of our growing fleet and (iv) higher interest payments attributable to higher outstanding borrowings during the 2026 period as compared to the 2025 period.

Cash Flows from Investing Activities.

For the nine months ended September 30, 2025, and 2024, we invested approximately $86.9 million and $57.4 million, respectively, in rental equipment, property and other equipment.

Included in these totals for 2025 and 2024 were $82.3 million and $54.7 million in new equipment to our rental fleet and $4.7 million and $2.7 million in other property and equipment, respectively.

Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the year.

For the three months ended March 31, 2026, and 2025, we invested approximately $15.2 million and $19.3 million, respectively, in rental equipment, property and other equipment.

Included in these totals for 2026 and 2025 were $12.2 million and $16.7 million for growth capital expenditures to expand our rental fleet and $3.0 million and $2.6 million for capital maintenance projects, respectively.

Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the period.

Cash Flows from Financing Activities.

During the nine months ended September 30, 2025 we had net borrowings of $38.0 million and for the nine months ended September 30, 2024, we had net repayments of $1.0 million under the Credit Facility.

We paid debt issuance costs that were $0.3 million higher in connection with the Fourth Amendment in the 2025 period as compared to the costs for amendments to the Credit Facility in 2024.

The 2025 period includes a payment of $1.3 million for our first common stock dividend.

During the three months ended March 31, 2026, we had net repayments of $4.0 million and for the three months ended March 31, 2025 we had net repayments of $2.0 million under the Credit Facility.

The 2026 period includes a payment of $1.4 million for a common stock dividend.

The 2026 period also includes the payments of taxes attributable to the net share settlement of equity awards partially offset by the receipt of proceeds from the exercise of stock options.

There were no comparable cash flows for these items during the 2025 period.

Capitalization

The following table summarizes our total capitalization as of the dates presented:

September 30, December 31,

March 31, December 31,

Credit facility borrowings $ 226,000 $ 230,000

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Credit Facility .

We have a senior secured revolving credit agreement, as amended, or 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, with 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;

We have a senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association as administrative agent (the “Administrative Agent”), and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners, and the lenders party thereto (the “Lenders”) with a total commitment of $400.0 million.

We also have a right to request from the Lenders, 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.

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Please see Note 9 ( “ Long-Term Debt ” ) to our Condensed Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility.

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.

As of March 31, 2026 we had $226.0 million outstanding under our Credit Facility with a weighted average interest rate of 6.79%.

As of March 31, 2026, we had approximately $174.0 million available for borrowing under the Credit Facility, subject to a borrowing base determination.

As of March 31, 2026, we were in compliance with all financial covenants in our Credit Facility.

Critical Accounting Estimates

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From time-to-time, we enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations.

As of September 30, 2025, the off-balance sheet arrangements and transactions that we have entered into include purchase agreements for certain compressor unit components that are fully anticipated consistent with our capital expenditure plans.

As of March 31, 2026, the off-balance sheet arrangements and transactions that we have entered into include purchase agreements for certain compressor unit components that are fully anticipated consistent with our capital expenditure plans.

We do not believe that these arrangements are reasonably likely to materially affect our liquidity or availability of capital resources.

Quantitative and Qualitative Disclosures about Market Risk

There have been no changes in the market risks disclosed in our Form 10-K for the year ended December 31, 2024.

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 2. Management’s Discussion and Analysis