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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-11 · 147 added, 96 removed, 243 unchanged (50% of the section changed)

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

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 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 June 30, 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 March 31, 2026, or 2025, as applicable.

References to “quarters” represent the three months ended June 30, 2026, or 2025, as applicable.

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

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.

We rent, design, install, service and maintain natural gas and electric compressors and related equipment and parts for our customers’ 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.

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We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio.

A total of 79 percent of our rental revenue is generated from the Permian Basin and approximately 91 percent of our rental revenue supports oil production primarily in the form of gas lift operations.

Approximately 80 percent of our rental revenue is generated from the Permian Basin and a substantial portion of our rental revenue supports oil production primarily in the form of gas lift and midstream operations.

We operate in one reporting segment.

Recent Developments

On June 12, 2026 (the “Acquisition Date”), we acquired Flatrock Compression Holdings LLC (“Flatrock”), including a current rented fleet of 87,233 horsepower (the “Flatrock Acquisition”), in exchange for (i) 241,803 shares of common stock, par value $0.01 per share of the Company (“Common Stock”), (ii) $108.9 million in cash and (iii) the right to receive certain royalty payments pursuant to a royalty agreement resulting in aggregate total consideration of approximately $119 million .

The cash portion of the purchase price was sourced from borrowings under our senior secured revolving credit agreement (as amended and restated from time to time, the “Credit Facility”), as amended by the Fifth Amendment to the Amended and Restated Credit Agreement (the “Fifth Amendment”).

The results of operations, cash flows and operating statistics attributable to Flatrock from the Acquisition Date through June 30, 2026, are reflected in our condensed consolidated results of operations, cash flows and operating statistics for the periods ended June 30, 2026.

Please see Note 3 ( “ Business Combination ” ) to our Condensed Consolidated Financial Statements for additional information regarding the Flatrock Acquisition.

In connection with the Fifth Amendment, we (i) increased the total commitment of the Credit Facility to $500.0 million from $400.0 million, (ii) provided for Regions Bank, Flatrock’s primary lender, to become a participating lender and (iii) confirmed that the Flatrock Acquisition is a permitted acquisition as that term is defined in the Credit Facility.

On July 20, 2026, we completed our redomestication from Colorado to Texas (the “Redomestication”).

The Redomestication proposal to approve the change in state of incorporation, as described in the Company’s 2026 Proxy Statement, was approved by our shareholders at the 2026 Annual Meeting of Shareholders held on June 10, 2026.

Operating Highlights

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

Three months ended March 31,

Three months ended Six months ended

June 30, June 30,

2026 2025 2026 2025

Rented horsepower (at period end) (1)

669,919 498,651 669,919 498,651

Average rented horsepower 599,702 495,665 586,232 494,362

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Units utilized (at period end) (1)

1,521 1,198 1,521 1,198

Fleet units (at period end) (1)

2,108 1,833 2,108 1,833

Unit utilization (at period end) 72.2 % 65.4 % 72.2 % 65.4 %

Rental revenues (1)

$ 49,433 $ 39,580 $ 96,548 $ 78,490

Total revenues (1)

$ 51,401 $ 41,382 $ 99,868 $ 82,765

Rental revenues as a percent of total revenues 96.2 % 95.6 % 96.7 % 94.8 %

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.

(1) Includes 87,233 of rented and 92,576 of fleet horsepower attributable to 270 utilized and 300 fleet units, respectively, acquired with the Flatrock Acquisition.

Rental and total revenues provided by Flatrock from the Acquisition Date through June 30, 2026 were $1.9 million and $2.2 million, respectively.

Of the total horsepower utilized as of June 30, 2026, 521,931 of horsepower was being rented under contracts expiring between 2026 and 2031 and 147,988 of horsepower was being rented on a month-to-month basis.

Of the 1,521 compressors utilized as of June 30, 2026, 921 units were being rented under multi-year contracts and 600 units were being rented on a month-to-month basis.

Our Performance Trends and Outlook

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The market for compression equipment and services is highly dependent on the production levels 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, the United Arab Emirates and Russia, and other factors.

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

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Non-GAAP Financial Measures

We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitably and liquidity.

We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitability and liquidity.

The most significant of these measures are “Adjusted Gross Margin” and “Adjusted EBITDA” both of which are measurements that are not explicitly defined in accordance with generally accepted accounting principles in the United States of America (“GAAP”), or non-GAAP financial measures, and may vary among different industries and the participants therein.

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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 March 31,

Three months ended Six months ended

June 30, June 30,

2026 2025 2026 2025

Total revenue $ 51,401 $ 41,382 $ 99,868 $ 82,765

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Adjusted EBITDA

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses.

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance, strategic transaction costs including incremental costs directly attributable to business combinations and similar transactions and non-cash equity-classified stock-based compensation expenses.

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.

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

Three months ended March 31,

Three months ended Six months ended

June 30, June 30,

2026 2025 2026 2025

Net income $ 3,830 $ 5,188 $ 10,593 $ 10,042

Interest expense 4,442 3,243 8,470 6,413

Interest income (36) — (36) —

Income tax expense 1,715 1,597 3,871 3,079

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Retirement of rental equipment — — 412 728

Severance and restructuring charges — 89 — 89

Strategic transaction costs 3,271 — 3,271 —

Stock-based compensation 851 579 1,430 938

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Results of Operations

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

Three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025.

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

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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 March 31,

2026 2025 Change %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Rental revenue $ 49,433 $ 39,580 $ 9,853 24.9 % $ 96,548 $ 78,490 $ 18,058 23.0 %

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Units utilization 72.2 % 65.4 % 6.8 % 72.2 % 65.4 % 6.8 %

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.

Rental revenue increased for the three and six months ended June 30, 2026, as compared to the corresponding periods 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 (380 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins.

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.

In addition, the Flatrock Acquisition provided rental revenues of $1.9 million during the period from the Acquisition Date through June 30, 2026.

Our consolidated utilized horsepower increased during the three and six months ended June 30, 2026, as compared to the prior year periods 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.

In addition, we added 87,233 of rented horsepower from 270 rented units in June 2026 attributable to the Flatrock Acquisition.

In the six months ended June 30, 2026, we placed into service a total of 180 newly set units, including 137 from our existing fleet and 43 new units.

Of those unit sets, a total of 61 were large horsepower units and 43 of those were new units to the fleet.

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.

The cost of rentals increased for the three and six months ended June 30, 2026, consistent with revenues, due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs.

Furthermore, we experienced higher unit-redeployment costs consistent with a larger volume of unit sets as compared to the prior year periods.

We also experienced higher lubricant costs during the 2026 periods due primarily to the larger quantity of utilized horsepower.

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 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.

As a percentage of revenue, cost of rentals, specifically labor and replacement parts, for the 2026 periods declined compared to the corresponding periods in 2025.

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 six months ended June 30, 2026, when compared to the corresponding periods in 2025.

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

Costs of sales primarily include purchases of component materials.

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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 %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Sales revenue $ 980 $ 750 $ 230 30.7 % $ 1,471 $ 2,677 $ (1,206) (45.1) %

Cost of sales (excluding depreciation and amortization) 664 911 (247) (27.1) % 1,288 2,927 (1,639) (56.0) %

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

Sales adjusted gross margin $ 316 $ (161) $ 477 NM $ 183 $ (250) $ 433 NM

Sales adjusted gross margin percentage 32.2 % (21.5) % 53.7 % 12.4 % (9.3) % 21.7 %

Percent of total company revenues 1.9 % 1.8 % 0.1 % 1.5 % 3.2 % (1.7) %

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.

Sales revenue increased for the three months ended June 30, 2026 due primarily to off-cycle sales of flare parts compared to the quarterly period during 2025 and declined for the six months ended June 30, 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 during both periods, primarily reflecting a lower volume of business.

While marginally positive for the periods in 2026 due primarily to the off-cycle sale of flare parts, sales represented a negligible contribution to gross margin in the three and six months ended June 30, 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 March 31,

2026 2025 Change %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Aftermarket services revenue $ 988 $ 1,052 $ (64) (6.1) % $ 1,849 $ 1,598 $ 251 15.7 %

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Percent of total company revenues 1.9 % 2.5 % (0.6) % 1.9 % 1.9 % — %

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.

Third party aftermarket services revenues, costs and absolute gross margin decreased for three months ended June 30, 2026 compared to the quarterly period during 2025 due primarily to lower activity while revenues and costs increased marginally for the six months ended June 30, 2026, compared to the corresponding period during 2025;

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

The increase in revenue and costs during the six months ended June 30, 2026 is primarily attributable to a marginally higher volume of unit commissioning work performed during the six-month period in 2026 compared to 2025.

The margin decline is attributable to higher level of new unit set freight services passed on to customers during the 2025 periods.

Aftermarket services represented an insignificant portion of our gross margin in the three and six months ended June 30, 2026, and 2025, respectively.

Selling, General and Administrative Expenses

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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 %

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

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Primary selling, general and administrative expenses $ 5,789 $ 4,875 $ 914 18.7 % $ 11,718 $ 9,894 $ 1,824 18.4 %

Stock-based compensation - equity classified 851 579 272 47.0 % 1,430 938 492 52.5 %

Strategic transaction costs 3,271 — 3,271 NM 3,271 — 3,271 NM

Total $ 9,911 $ 5,454 $ 4,457 81.7 % $ 16,419 $ 10,832 $ 5,587 51.6 %

SG&A expenses as a percent of total revenues 19.3 % 13.2 % 6.1 % 16.4 % 13.1 % 3.3 %

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 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.

Primary SG&A expenses as a percent of total revenues 11.3 % 11.8 % (0.5) % 11.7 % 12.0 % (0.3) %

SG&A expenses increased during the three and six months ended June 30, 2026, as compared to the corresponding periods in 2025.

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

Excluding non-cash share-based compensation and the strategic transaction costs associated with the Flatrock Acquisition, our primary SG&A expenses have declined as a percentage of our revenues in both of the 2026 periods as compared to the corresponding periods in 2025.

The increase in primary SG&A expenses during the three and six months ended June 30, 2026 as compared to the 2025 periods was impacted by (i) higher professional fees and public company costs of $0.4 million and $0.8 million, respectively, including costs associated with our recent Redomestication, (ii) higher salaries and benefits, including short-term incentive compensation, of $0.1 million and $0.4 million, respectively, reflecting support staff growth and performance, (iii) higher occupancy and office costs of $0.1 million and $0.2 million, respectively, (iv) $0.2 million attributable to Flatrock’s legacy administrative operations from the Acquisition Date through June 30, 2026, and (v) higher IT support costs of $0.1 million and $0.2 million, respectively, in support of our growth initiatives and noncapitalizable costs associated with certain IT system implementation projects.

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

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

In addition, we incurred $3.3 million of strategic transaction costs in connection with the Flatrock Acquisition comprised primarily of professional fees for certain advisors and consultants to assist us with various activities to develop, execute and report the transaction.

We anticipate additional transaction costs to be incurred during the third quarter of 2026, primarily attributable to advisory costs associated with the valuation, purchase price allocation and financial reporting attributable to the Flatrock Acquisition.

In addition, we also expect to incur integration costs during the second half of the year to incorporate the legacy Flatrock business into our ERP, human resources and compensation and benefits systems, among others.

Depreciation and Amortization

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

Three months ended March 31,

2026 2025 Change %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Depreciation and amortization allocable to cost of revenues:

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Corporate depreciation 217 96 121 126.0 % 377 193 184 95.3 %

Intangible asset amortization 12 — 12 NM 12 — 12 NM

Total $ 10,979 $ 8,969 $ 2,010 22.4 % $ 21,304 $ 17,605 $ 3,699 21.0 %

Depreciation and amortization as a percent of total revenues 21.4 % 21.7 % (0.3) % 21.3 % 21.3 % — %

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.

Depreciation and amortization expense increased for the three and six months ended June 30, 2026, as compared to the corresponding periods in 2025, due primarily to depreciation expense associated with the large horsepower units placed in service during 2025 continuing through June 30, 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.

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

Amortization of the intangible assets acquired from Flatrock began on the Acquisition Date and the impact during the periods presented was not material.

Inventory Allowance

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

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.

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Inventory allowance $ — $ — $ — NM $ — $ 61 $ (61) NM

During six months ended June 30, 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 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.

There was no impact on our operating income as the Midland allowance was eliminated.

Retirement of Rental Equipment

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

Three months ended March 31,

2026 2025 Change %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Retirement of rental equipment $ — $ — $ — NM $ 412 $ 728 $ (316) (43.4) %

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 .

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 six months ended June 30, 2026 and 2025, respectively .

Gain on Disposition of Assets

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

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.

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Gain on the disposition of assets, net $ 1 $ 124 $ (123) NM $ 71 $ 178 $ (107) NM

Gains recognized during the three and six months ended June 30, 2026 and 2025 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.

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under the Credit Facility , net of amounts capitalized attributable to certain capital projects.

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

Three months ended March 31,

2026 2025 Change %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Interest on borrowings, finance leases and related fees $ 4,349 $ 3,464 $ 885 25.5 % $ 8,231 $ 6,996 $ 1,235 17.7 %

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Weighted-average outstanding borrowings $ 255,552 $ 172,427 $ 83,125 $ 243,282 $ 172,867 $ 70,415

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.

Interest expense increased for the three and six months ended June 30, 2026, as compared to the corresponding periods in 2025 , due primarily to (i) higher interest costs resulting from higher average outstanding borrowings partially offset by the effect of lower average interest rates and (ii) the effect of lower capitalized interest due primarily to the volume and timing of the completion of certain compressor assembly projects in the 2026 periods as well as lower interest rates.

In addition, amortization of debt issue costs increased during the three and six months ended June 30, 2026, as compared to the comparable periods in 2025 due primarily to the amortization of costs associated with the Fifth Amendment that was completed in June 2026 and a previous amendment that was completed in April 2025.

Interest Income

This component of our income reflects interest earned on investments and certain financial assets including, when applicable, interest on significant income tax refunds receivable.

The following table indicates our interest income for the periods presented:

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Interest income $ 36 $ — $ 36 NM $ 36 $ — $ 36 NM

Interest income for the periods ended June 30, 2026, is entirely attributable to interest earned on the income tax refund for the 2019 tax year.

The income tax refund, including interest, was substantially determined and settled in the second quarter of 2026 and the interest was received in July 2026.

Please see Note 11 (“Income Taxes”) to our Condensed Consolidated Financial Statements for additional information.

Other Income (Expense), net

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

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.

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Other income (expense), net $ 29 $ 104 $ (75) NM $ (97) $ 103 $ (200) NM

Other income (expense), net declined for the three and six months ended June 30, 2026 as compared to the corresponding periods in 2025 due primarily to higher unrealized losses attributable to our COLI policies associated with our deferred compensation plan.

Provision for Income Taxes

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

Three months ended March 31,

2026 2025 Change %

Three months ended June 30, Six months ended June 30,

2026 2025 Change % 2026 2025 Change %

Income tax expense $ 1,715 $ 1,597 $ 118 7 % $ 3,871 $ 3,079 $ 792 26 %

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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.

In addition, the periods in 2026 were adversely impacted by a discrete item attributable to the Texas Comptroller’s amendments to Rule 3.588;

a change in law enacted in June 2026 that conformed the Texas cost of goods sold depreciation to current federal law.

This discrete item resulted in a 2.6% increase to our annualized effective rate.

The Redomestication had no impact on the application of the amendments to Rule 3.588 regarding our income subject to taxation in Texas or any other state in which we operate.

Financial Condition

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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 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.

As of June 30, 2026, we had $328.0 million of borrowings outstanding under our Credit Facility with a weighted average interest rate of 6.48% as well as $0.2 million for outstanding letters of credit.

As of June 30, 2026, we had approximately $134.8 million available for borrowing under the Credit Facility, reflecting the applicable borrowing base calculation.

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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Cash From Operating Activitie s.

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

Our cash provided by operating activities was $48.5 million for the six months ended June 30, 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 three months ended March 31, 2026, we repaid $4.0 million, net of borrowings, under the Credit Facility.

During the six months ended June 30, 2026, we borrowed $98.0 million, net of repayments, 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 March 31, 2026 $ 226,000 $ 225,539 $ 230,000 6.62 %

Three months ended June 30, 2026 $ 328,000 $ 255,552 $ 330,500 6.61 %

Six months ended June 30, 2026 $ 328,000 $ 243,282 $ 330,500 6.59 %

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

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We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others.

For additional information and an analysis of or historical proceeds from sales of assets, see the “Cash Flows” discussion that follows.

For additional information and an analysis of our historical proceeds from sales of assets, see the “Cash Flows” discussion that follows.

Capital Markets Transactions .

From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities.

We maintain an effective shelf registration statement with the SEC for up to $200 million for a variety of securities to provide financing optionality.

We maintain an effective shelf registration statement with the Securities and Exchange Commission (the “SEC”) for up to $200 million for a variety of securities to provide financing optionality.

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

Three months ended March 31,

Six months ended June 30,

Net cash provided by operating activities $ 48,467 $ 32,263

Net cash used in investing activities (142,676) (44,962)

Net cash (used in) provided by financing activities (5,514) (2,006)

Net decrease in cash and cash equivalents $ 2,311 $ 5

Net cash provided by financing activities 94,293 10,882

Net increase (decrease) in cash and cash equivalents $ 84 $ (1,817)

Cash Flows from Operating Activities.

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.

Our cash flows from operating activities increased by $16.2 million during the six months ended June 30, 2026, as compared to the comparable period in 2025.

The net increase is primarily attributable to the receipt of $13.8 million in the first half of 2026 related to income tax refunds and associated 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) increases in our maintenance parts inventory in support of our growing fleet, (ii) implementation costs capitalized and paid for software services and (iii) 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 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.

In June 2026, we completed the Flatrock Acquisition for approximately $119 million of which $108.7 million was paid in cash, net of amounts acquired.

For the six months ended June 30, 2026, and 2025, we invested approximately $34.0 million and $45.1 million, respectively, in rental equipment, property and other equipment.

Included in these totals for 2026 and 2025 were $27.6 million and $38.8 million for growth capital expenditures to expand our rental fleet and $6.4 million and $6.3 million for capital maintenance projects, respectively.

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Cash Flows from Financing Activities.

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.

During the six months ended June 30, 2026, we had net borrowings of $98.0 million and for the six months ended June 30, 2025 we had net borrowings of $12.0 million under the Credit Facility.

The net borrowings reflect advances obtained to fully fund the cash portion of the Flatrock Acquisition.

The 2026 period includes payments of $3.3 million for common stock dividends while there were no comparable amounts during the 2025 period as our common stock dividend began in the third quarter of 2025.

The 2026 period also includes the payments of taxes attributable to the net share settlement of equity awards.

These outflows were partially offset by the receipt of over $1.0 million of proceeds from the exercise of stock options.

Capitalization

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

March 31, December 31,

June 30, December 31,

Credit facility borrowings $ 328,000 $ 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 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 maintain a 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 $500.0 million.

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

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Please see Note 10 ( “ Long-Term Debt ” ) to our Condensed Consolidated Financial Statements for a thorough discussion of these matters regarding 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.

As of June 30, 2026 we had $328.0 million outstanding under our Credit Facility with a weighted average interest rate of 6.48%.

As of June 30, 2026, we had approximately $134.8 million available for borrowing under the Credit Facility, subject to a borrowing base determination.

As of June 30, 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 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.

As of June 30, 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.

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