NATURAL GAS SERVICES GROUP INC 10-Q

Item 1. Financial Statements NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited) June 30, December 31, 2026 2025 ASSETS Current Assets: Cash and cash equivalents $ 84 $ — Trade accounts receivable, net of provision for credit losses 22,025 18,497 Inventory, net of allowance for obsolescence 29,110 20,647 Income taxes receivable and prepayments 445 14,056 Prepaid expenses and other 3,000 1,696 Assets held for sale 10,986 2,227 Total current assets 65,650 57,123 Long-term inventory, net of allowance for obsolescence — — Rental equipment, net of accumulated depreciation 613,771 498,525 Property and equipment, net of accumulated depreciation 22,047 20,519 Goodwill 824 — Intangible assets, net of accumulated amortization 1,139 — Other assets 14,912 10,619 Total assets $ 718,343 $ 586,786 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 16,653 $ 14,048 Accrued liabilities 15,980 10,462 Total current liabilities 32,633 24,510 Long-term debt 328,000 230,000 Deferred income taxes 56,777 52,530 Other long-term liabilities 6,447 5,030 Total liabilities 423,857 312,070 Commitments and contingencies ( Note 1 2 ) Stockholders’ Equity: Preferred stock, 5,000 shares authorized, no shares issued or outstanding — — Common stock, 30,000 shares authorized, par value $ 0.01 ; 14,207 and 13,883 shares issued, respectively 142 138 Additional paid-in capital 133,289 120,811 Retained earnings 176,059 168,771 Treasury shares, at cost, 1,310 shares for each of the dates presented, respectively ( 15,004 ) ( 15,004 ) Total stockholders’ equity 294,486 274,716 Total liabilities and stockholders’ equity $ 718,343 $ 586,786 See accompanying notes to these unaudited condensed consolidated financial statements. 1 NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except earnings per share) (unaudited) Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Revenue: Rental $ 49,433 $ 39,580 $ 96,548 $ 78,490 Sales 980 750 1,471 2,677 Aftermarket services 988 1,052 1,849 1,598 Total revenue 51,401 41,382 99,868 82,765 Cost of revenue (excluding depreciation and amortization): Rental 19,217 15,528 36,307 30,368 Sales 664 911 1,288 2,927 Aftermarket services 709 720 1,214 991 Total cost of revenues (excluding depreciation and amortization) 20,590 17,159 38,809 34,286 Selling, general and administrative expense 9,911 5,454 16,419 10,832 Depreciation and amortization 10,979 8,969 21,304 17,605 Inventory allowance — — — 61 Retirement of rental equipment — — 412 728 Gain on disposition of assets, net ( 1 ) ( 124 ) ( 71 ) ( 178 ) Total operating costs and expenses 41,479 31,458 76,873 63,334 Operating income 9,922 9,924 22,995 19,431 Other income (expense): Interest expense ( 4,442 ) ( 3,243 ) ( 8,470 ) ( 6,413 ) Interest income 36 — 36 — Other income (expense) 29 104 ( 97 ) 103 Total other income (expense), net ( 4,377 ) ( 3,139 ) ( 8,531 ) ( 6,310 ) Income before income taxes 5,545 6,785 14,464 13,121 Provision for income taxes ( 1,715 ) ( 1,597 ) ( 3,871 ) ( 3,079 ) Net income $ 3,830 $ 5,188 $ 10,593 $ 10,042 Earnings per share: Basic $ 0.30 $ 0.42 $ 0.84 $ 0.81 Diluted $ 0.30 $ 0.41 $ 0.83 $ 0.80 Weighted average shares outstanding: Basic 12,664 12,483 12,624 12,473 Diluted 12,842 12,625 12,799 12,629 See accompanying notes to these unaudited condensed consolidated financial statements. 2 NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (in thousands) (unaudited) Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount January 1, 2025 — $ — 13,762 $ 138 $ 118,415 $ 151,508 1,310 $ ( 15,004 ) $ 255,057 Stock-based compensation — — — — 359 — — — 359 Vesting of restricted stock/units — — 22 — — — — — — Taxes paid related to net share settlement of equity awards — — — — ( 6 ) — — — ( 6 ) Net income — — — — — 4,854 — — 4,854 March 31, 2025 — $ — 13,784 $ 138 $ 118,768 $ 156,362 1,310 $ ( 15,004 ) $ 260,264 Stock-based compensation — — — — 579 — — — 579 Vesting of restricted stock/units — — 22 — 108 — — — 108 Exercise of common stock options — — 5 — 75 — — — 75 Net income — — — — — 5,188 — — 5,188 June 30, 2025 — $ — 13,811 $ 138 $ 119,530 $ 161,550 1,310 $ ( 15,004 ) $ 266,214 Preferred Stock Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Total Stockholders’ Equity Shares Amount Shares Amount Shares Amount January 1, 2026 — $ — 13,883 $ 138 $ 120,811 $ 168,771 1,310 $ ( 15,004 ) $ 274,716 Stock-based compensation — — — — 579 — — — 579 Vesting of restricted stock/units — — 23 — — — — — — Exercise of common stock options — — 2 1 66 — — — 67 Taxes paid related to net share settlement of equity awards — — ( 1 ) — ( 195 ) — — — ( 195 ) Dividends declared — — — — — ( 1,396 ) — — ( 1,396 ) Net income — — — — — 6,763 — — 6,763 March 31, 2026 — $ — 13,907 $ 139 $ 121,261 $ 174,138 1,310 $ ( 15,004 ) $ 280,534 Stock-based compensation — — — — 851 — — — 851 Vesting of restricted stock/units — — 24 1 412 — — — 413 Exercise of common stock options — — 34 — 961 — — — 961 Taxes paid related to net share settlement of equity awards — — — — ( 193 ) — — — ( 193 ) Issuance of common stock related to the Flatrock acquisition — — 242 2 9,997 — — — 9,999 Dividends declared — — — — — ( 1,909 ) — — ( 1,909 ) Net income — — — — — 3,830 — — 3,830 June 30, 2026 — $ — 14,207 $ 142 $ 133,289 $ 176,059 1,310 $ ( 15,004 ) $ 294,486 See accompanying notes to these unaudited condensed consolidated financial statements. 3 NATURAL GAS SERVICES GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six months ended June 30, 2026 2025 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,593 $ 10,042 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,304 17,605 Inventory allowance — 61 Retirement of rental equipment 412 728 Gain on disposition of assets, net ( 71 ) ( 178 ) Amortization of debt issuance costs 695 506 Deferred income taxes 3,932 3,011 Stock-based compensation 1,430 938 Provision for credit losses 88 208 Loss (gain) on company owned life insurance 103 ( 17 ) Changes in operating assets and liabilities: Trade accounts receivables ( 863 ) 1,676 Inventory ( 1,570 ) ( 344 ) Prepaid expenses, income taxes receivable and prepayments 12,488 ( 1,897 ) Accounts payable and accrued liabilities 2,271 513 Other ( 2,345 ) ( 589 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 48,467 32,263 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of rental equipment, property and other equipment ( 34,033 ) ( 45,065 ) Acquisition, net of cash acquired ( 108,680 ) — Proceeds received from insurance for damages to equipment — 99 Proceeds from disposition of assets, net 37 4 NET CASH USED IN INVESTING ACTIVITIES ( 142,676 ) ( 44,962 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from credit facility borrowings 134,500 23,122 Repayments of credit facility borrowings ( 36,500 ) ( 11,122 ) Payments of debt issuance costs ( 1,068 ) ( 1,187 ) Proceeds from exercise of stock options 1,028 75 Payment of dividends ( 3,279 ) — Taxes paid related to net share settlement of equity awards ( 388 ) ( 6 ) NET CASH PROVIDED BY FINANCING ACTIVITIES 94,293 10,882 NET CHANGE IN CASH AND CASH EQUIVALENTS 84 ( 1,817 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD — 2,142 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 84 $ 325 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid, net of amounts capitalized $ 7,356 $ 7,037 Income taxes paid, net of (refunds) received $ ( 11,641 ) $ 16 NON-CASH TRANSACTIONS: Transfer of property and equipment to assets held for sale $ 8,759 $ 2,227 Accrued purchases of property and equipment $ 2,967 $ 7,254 Right of use assets acquired through an operating lease $ 1,632 $ — Common stock issued in connection with acquisition $ 9,999 $ — Common stock issued to settle liability-classified awards $ 413 $ — See accompanying notes to these unaudited condensed consolidated financial statements. 4 NATURAL GAS SERVICES GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts or where otherwise indicated) (unaudited) 1. Description of Business Natural Gas Services Group, Inc. (the “Company,” “NGS,” “Natural Gas Services Group,” “we,” “us” or “our”) (a Texas corporation), is a leading provider of natural gas and electric compression equipment, technology and services to the energy industry. We rent, design, install, service and maintain compressors and related equipment and parts for our customers’ oil and gas production and processing facilities, generally using equipment from OEM suppliers along with limited in-house assembly. We are headquartered in Southlake, Texas, with administrative offices in Midland, Texas, an assembly facility located in Tulsa, Oklahoma and service facilities located in major oil and gas producing basins in the continental United States (“U.S.”). 2. Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) and include the accounts of the Company and its subsidiaries, all of which are wholly-owned, and the rabbi trust associated with our deferred compensation plan. All significant intercompany accounts and transactions for the periods presented have been eliminated in consolidation. These financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for the fair presentation of our financial position as of June 30, 2026, and the results of our operations for the three and six months ended June 30, 2026, and 2025, respectively. As permitted by the rules and regulations of the SEC, the accompanying Condensed Consolidated Financial Statements do not include all disclosures normally required by GAAP. These financial statements should be read in conjunction with the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC. In our opinion, the Condensed Consolidated Financial Statements provide a fair representation of our financial position, results of operations, changes in stockholders’ equity and cash flows for the periods presented. Although we review our service and product offerings (rentals, sales and aftermarket services) to analyze the nature of our revenue, costs and expenses, the net income and non-GAAP financial measures including Adjusted EBITDA and Adjusted gross margin are not captured or analyzed by these categories. Our chief executive officer (“CEO”) serves as the chief operating decision maker and does not make resource allocation decisions or assess the performance of the business based on these service and product offerings, but rather on the entire entity in the aggregate. Accordingly, the measures of profit and loss and total assets are effectively those of the Company as a whole as reflected in these Condensed Consolidated Financial Statements. Based on these facts and circumstances, we have concluded that we operate in one business segment. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2026. Recently Issued Accounting Pronouncements In November 2024, the Financial Accounting Standards Board issued ASU 2024-03 “ Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense ” (“ASU 2024-03”) which expands annual and interim disclosures for certain types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, selling, general & administrative expenses, and research and development). ASU 2024-03 is effective for our annual periods beginning January 1, 2027, and for interim periods beginning January 1, 2028, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on our Consolidated Financial Statements or disclosures. 5 3. Business Combination Flatrock Acquisition On June 12, 2026 (the “Acquisition Date”), we executed and closed a Securities Purchase Agreement (the “SPA”) with Flatrock Compression Holdings, LLC (“Flatrock”), the holders of all of the membership interests of Flatrock (the “Sellers”) and Mule Deer Sky LLC, acting as the Sellers Representative, to acquire all of the issued and outstanding membership interests of Flatrock from the Sellers, including a current rented fleet of 87,233 horsepower, 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, subject to customary post-closing adjustments, and (iii) the right to receive certain royalty payments pursuant to a royalty agreement (the “Flatrock Acquisition”). The Flatrock Acquisition represents the execution of our business strategy to pursue accretive mergers and acquisitions. Furthermore, the Flatrock Acquisition increases our operational density in the Permian Basin and the Eagle Ford as well as adding meaningful customer diversification and attractive opportunities for growth with several new large customers, and complements our fleet with the addition of significant large horsepower and electric motor units. 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 Flatrock Acquisition has been accounted for by applying the acquisition method of accounting which contemplates the assets acquired and liabilities assumed to be recorded at their fair values on the Acquisition Date. The excess of the total consideration transferred over the fair values of the net assets acquired has been recorded as goodwill. The preliminary purchase price allocation provided below is based upon preliminary estimates and assumptions and is subject to certain adjustments upon management’s review of the final valuations and the working capital adjustment, among others. We are currently in the process of finalizing final valuations attributable to property and equipment, identifiable intangible assets, deferred income taxes, contingent consideration and goodwill. Any adjustments subsequent to the Acquisition Date could impact future depreciation and amortization as well as our income tax provision. Transaction Consideration The following table summarizes the estimated fair value of the consideration transferred: Cash (1) $ 108,928 Common stock issued (2) 9,999 Contingent consideration 53 $ 118,980 (1) Includes $ 45.7 million to repay Flatrock’s outstanding line of credit obligation. (2) Represents the issuance of 241,803 shares of Common Stock to the Sellers (the number of shares was determined from the 30-day volume weighted-average price as provided for in the SPA). 6 Preliminary Purchase Price Allocation The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed as of the Acquisition Date: Cash and cash equivalents $ 248 Trade accounts receivable 2,753 Inventory 6,893 Prepaid expenses and other 181 Rental equipment 100,596 Property and equipment 9,711 Other assets 1,369 Goodwill 824 Intangible assets 1,151 Accounts payable ( 1,898 ) Accrued liabilities ( 1,824 ) Deferred income taxes ( 315 ) Other long-term liabilities ( 709 ) $ 118,980 Goodwill The goodwill arising from the Flatrock Acquisition is primarily attributable to the workforce accompanying the operating assets acquired as well as the expansion of our services in the Permian Basin and Southeast Texas where we currently operate. The goodwill is considered to have an indefinite life and will be reviewed for impairment on an annual basis and when indicators of potential impairment, if any, are present. As the Flatrock Acquisition was structured as an asset purchase for income tax purposes, the goodwill is expected to be fully deductible for U.S. federal income tax purposes. Intangible assets The intangible assets acquired include $ 0.9 million for developed technology and $ 0.3 million for a tradename, both of which are being amortized over a five-year period. The intangible assets were valued using a “relief from royalties” methodology. We recorded a provision for amortization of the intangible assets for less than $ 0.1 million from the Acquisition Date through June 30, 2026. Results of Operations The results of operations attributable to the Flatrock Acquisition have been included in our Condensed Consolidated Financial Statements from the Acquisition Date through June 30, 2026. Total revenue attributable to the net assets acquired from Flatrock from the Acquisition Date through June 30, 2026 was $ 2.2 million and pre-tax earnings attributable to the assets acquired and liabilities assumed since the Acquisition Date was $ 0.8 million. Transaction costs In connection with the Flatrock Acquisition, we engaged certain advisors and consultants to assist us with various activities to develop, execute and report the transaction. A substantial portion of costs were incurred during the three months ended June 30, 2026 and 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. The following table summarizes transaction costs, primarily legal and diligence, directly attributable to the Flatrock Acquisition incurred during the three months ended June 30, 2026 which was recorded in selling, general and administrative expenses: Professional fees (1) $ 3,065 Other costs 206 $ 3,271 (1) Includes legal, business diligence, financial advisory and other consulting fees. 7 Unaudited Pro forma Financial Information The unaudited supplemental pro forma financial information for the three and six months ended June 30, 2026 was derived by adjusting our historical financial statements in order to give effect to the Flatrock assets acquired and liabilities assumed as though the Flatrock Acquisition occurred as of January 1, 2025 and reflects the following: • the application of our accounting policies to reflect the changes in depreciation and amortization attributable to the acquired rental equipment, property and equipment and intangible assets; • the incremental interest expense resulting from borrowings under the Credit Facility to fund the cash component of the consideration transferred; • the income tax effects of the adjustments described above based on our blended statutory tax rate. The unaudited pro forma financial information presented below is presented for informational purposes only and is not necessarily indicative of the results of operations that would have occurred had the Flatrock Acquisition been consummated at the beginning of the period presented nor is it necessarily indicative of our future results of operations. Future results may vary significantly from the results reflected in this unaudited pro forma financial information. Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Revenue $ 59,843 $ 50,486 $ 118,363 $ 101,225 Net income $ 2,852 $ 5,216 $ 10,187 $ 9,799 4. Trade Accounts Receivable The following table summarizes our trade accounts receivable from customers as of the dates presented: June 30, December 31, 2026 2025 Trade accounts receivable Rentals $ 19,867 $ 16,565 Sales and aftermarket services 2,548 2,249 22,415 18,814 Less: Provision for credit losses ( 390 ) ( 317 ) Total trade accounts receivable, net $ 22,025 $ 18,497 Our trade accounts receivable consist of customer obligations due under normal trade terms for (i) operating leases for the use of our compressor equipment, (ii) the sale of compressor parts, other equipment and rebuild services and (iii) the performance of aftermarket services. Major Customers and Concentration of Credit Risk Rental revenue and sales from Occidental Permian, LTD. (“Oxy”) and Devon Energy Corporation (“Devon”) in the six months ended June 30, 2026 and 2025 amounted to 62 percent and 57 percent of revenue on a combined basis, respectively. No other single customer accounted for more than 10 percent of our revenues during these periods. Likewise, Oxy’s and Devon’s accounts receivable balances amounted to 51 percent and 62 percent of our accounts receivable on a combined basis as of June 30, 2026, and December 31, 2025, respectively. No other customers amounted to more than 10 percent of our accounts receivable as of these dates. 8 Provision for Credit Losses The following table summarizes the changes in our provision for credit losses for the periods presented: Six months ended Year ended June 30, December 31, 2026 2025 Beginning balance $ 317 $ 1,249 Provision for credit losses 88 155 Write-offs ( 15 ) ( 1,087 ) Ending balance $ 390 $ 317 Management believes that the provision is adequate; however, actual write-offs may exceed the recorded provision. The substantial write-off of the provision for credit losses during the year ended December 31, 2025 reflects certain aged receivables that were no longer deemed collectible. 5. Inventory The following table summarizes the components of our inventory, net of allowance for obsolescence, as of the dates presented: June 30, December 31, 2026 2025 Parts and supplies, net of allowance of $ 2,552 for each period, respectively $ 28,336 $ 20,104 Work-in-process 774 543 Inventory - current 29,110 20,647 Parts and supplies - long term, net of allowance of $ 1,020 for each period, respectively — — Total inventory $ 29,110 $ 20,647 Our long-term inventory, which is fully reserved for obsolescence, consists of excess materials and supplies that remain viable but with limited market opportunities. The following table summarizes the changes in our allowance for obsolescence for the periods presented: June 30, December 31, 2026 2025 Beginning balance $ 3,572 $ 5,867 Allowance for obsolescence — 1,114 Write-offs — ( 3,409 ) Ending balance $ 3,572 $ 3,572 The substantial write-off of the allowance for obsolescence during the year ended December 31, 2025 reflects the disposal of inventory items, including engines, frames and coolers, among other items that were previously held and reserved at our former fabrication, repair and overhaul facility in Midland, Texas (the “Midland Facility”). 6. Assets Held for Sale and Restructuring Activities As part of our broader efforts to monetize certain noncash assets, we began a process during 2025 to explore and ultimately pursue transactions to sell certain non-core real estate assets. These properties and the related restructuring actions are described below. The carrying value of these properties are reflected as assets held for sale and are included as a component of current assets on our Condensed Consolidated Balance Sheet. Former Headquarters Property In connection with our efforts to plan for an eventual sale of our former corporate headquarters facility including a building and land in Midland, Texas (the “Former Headquarters Property”), we undertook certain actions in the fourth quarter of 2025 to begin building-out a new leased office facility in Midland, Texas. We recorded an impairment during the fourth quarter of 2025 to reduce the carrying value of the Former Headquarters Property to its fair value, less costs to sell, or $ 8.8 million. In February 2026, we entered into an exclusive listing agreement to sell the Former Headquarters Property. 9 Midland Facility During the second quarter of 2025, we completed all activities necessary to terminate operations at the Midland Facility and to begin marketing the facility for sale. The closure of the Midland Facility was part of our strategy to streamline and outsource our assembly operations and monetize company-owned real estate as disclosed previously. We are party to an exclusive listing agreement and are currently marketing the Midland Facility, which has a carrying value of $ 2.2 million. In connection with the complete closure of the Midland Facility, we terminated eight employees and incurred $ 0.1 million of severance and termination benefits all of which were paid and settled during April 2025. In addition, we disposed of all inventory items, including engines, frames and coolers, among other items that were fully reserved (see Note 5 ). 7. Rental Equipment The following table summarizes our rental equipment and accumulated depreciation as of the dates presented: June 30, December 31, 2026 2025 Compressor units $ 824,074 $ 712,693 Work-in-process 34,891 24,894 858,965 737,587 Accumulated depreciation ( 245,194 ) ( 239,062 ) Rental equipment, net of accumulated depreciation $ 613,771 $ 498,525 We evaluated our rental equipment for potential impairments as of June 30, 2026, and December 31, 2025 and determined that none were present. 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. Depreciation expense for rental equipment was $ 9.8 million and $ 8.0 million for the three months ended June 30, 2026 and 2025, respectively, and $ 19.0 million and $ 15.7 million for the six months ended June 30, 2026, and 2025, respectively. We capitalized interest totaling approximately $ 0.3 million and $ 0.5 million for the three months ended June 30, 2026, and 2025, respectively, and $ 0.5 million a nd $ 1.1 million , for the six months ended June 30, 2026, and 2025, respe ctively. 8. Property and Equipment The following table summarizes our property and non-rental equipment as of the dates presented: June 30, December 31, 2026 2025 Land $ 821 $ 1,562 Buildings 5,006 16,703 Leasehold improvements 488 1,026 Office equipment and furniture 745 2,099 Software 55 619 Machinery and equipment 4,365 5,068 Vehicles 25,457 15,315 Work-in-process 2,200 1,137 39,137 43,529 Less accumulated depreciation ( 17,090 ) ( 23,010 ) Total $ 22,047 $ 20,519 Depreciation expense for property and equipment was $ 1.2 million and $ 1.0 million for the three months ended June 30, 2026 and 2025, respectively, and $ 2.3 million and $ 1.9 million for the six months ended June 30, 2026, and 2025, respectively. During the six months ended June 30, 2026, we reclassified certain items of property and equipment attributable to our Former Headquarters Property with a carrying value of $ 8.8 million to assets held for sale (see Note 6 ). 10 9. Supplemental Balance Sheet Disclosures The following table summarizes the components of other assets as of the dates presented: June 30, December 31, 2026 2025 Corporate owned life insurance $ 2,296 $ 2,938 Capitalized hosting arrangement costs 4,366 2,361 Operating lease assets, net 3,667 2,373 Finance lease assets, net 1,269 — Deferred issue costs 3,218 2,845 Other 96 102 $ 14,912 $ 10,619 The following table summarizes the components of accrued liabilities as of the dates presented: June 30, December 31, 2026 2025 Accrued purchases $ 5,075 $ 4,960 Compensation 3,541 3,121 Right of use obligations - operating 722 462 Right of use obligations - finance 560 — Interest 621 273 Sales taxes 519 421 Professional fees 3,621 426 Other 1,321 799 $ 15,980 $ 10,462 10. Long-Term Debt Our outstanding long-term debt consists of the following, as of the dates presented: June 30, December 31, 2026 2025 Credit facility $ 328,000 $ 230,000 We have a Credit Facility with Texas Capital Bank, National Association as administrative agent (the “Administrative Agent”), 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”). On June 12, 2026, we entered into the Fifth Amendment to the Amended and Restated Credit Agreement (the “Fifth Amendment”) with the Lenders to (i) increase the total commitment to $ 500.0 million from $ 400.0 million, (ii) provide for Regions Bank to become a participating lender and (iii) confirm that the Flatrock Acquisition is a permitted acquisition as that term is defined in the Credit Facility. In connection with the Fifth Amendment, we incurred and paid fees of approximately $ 1.0 million. The Credit Facility provides for 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; provided, however, the aggregate commitment amount is not permitted to exceed $ 600.0 million. The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility ’ s financial covenants. The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028. As of 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 determination. As of June 30, 2026, we were in compliance with all financial covenants in our Credit Facility. 11 Borrowing Base . At any time before the maturity of the Credit Facility, we may draw, repay and re-borrow amounts available under the borrowing base up to the maximum aggregate availability discussed above. Generally, the borrowing base equals the sum of (a) 85 % of eligible accounts receivable owed to us, plus (b) 50 % of the eligible inventory, valued at the lower of cost or market value at such time, subject to a cap of this component not to exceed $ 2.5 million, plus (c) the lesser of (i) 95 % of the net book value of the compressors that the Administrative Agent has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time and (ii) 80 % of the net liquidation value percentage of the net book value of the eligible compressors that the Administrative Agent has determined are eligible for the extension of credit, valued at the lower of cost or market value with depreciation not to exceed 25 years, at such time, plus (d) 80 % of the net book value, valued at the lower of cost (excluding any costs for capitalized interest or other noncash capitalized costs) or market of the eligible new compressor fleet, minus (e) any required availability reserves determined by the Administrative Agent in its sole discretion. The Administrative Agent may adjust the borrowing base components if material deviations in the collateral are discovered in future audits of the collateral. Interest and Fees . Under the terms of the Credit Facility, we have the option of selecting the applicable variable rate for each revolving loan, or portion thereof, of either (a) the Base Rate (as defined below) plus the Applicable Margin, or (b) in the case of a Term Secured Overnight Financing Rate (“SOFR”) Loan, the Adjusted Term SOFR rate plus the Applicable Margin. “Base Rate” means, for any day, a rate of interest per annum equal to the highest of (a) the prime rate for such day; (b) the sum of the federal funds rate for such day plus 0.50 %; and (c) the Adjusted Term SOFR for such day plus 1.00 %. The Applicable Margin is determined based upon the leverage ratio as set forth in the most recent compliance certificate received by the Administrative Agent for each fiscal quarter from time to time pursuant to the Credit Facility. Depending on the leverage ratio, the Applicable Margin can be 1.50 % to 2.25 % for Base Rate Loans (as defined in the Credit Facility) and 2.50 % to 3.25 % for Term SOFR Loans and for requested letters of credit. In addition, we are required to pay a monthly commitment fee on the daily average unused amount of the commitment while the Credit Facility is in effect at an annual rate equal to 0.375 % of the unused commitment amount. Accrued interest is payable monthly on outstanding principal amounts and unused commitment fee, provided that accrued interest on Term SOFR Loans is payable at the end of each interest period, but in no event less frequently than quarterly. Covenants . The Credit Facility contains customary representations and warranties, as well as covenants which, among other things, condition or limit our ability to incur additional indebtedness and liens; enter into transactions with affiliates; make acquisitions in excess of certain amounts; pay dividends; redeem or repurchase capital stock or senior notes; make investments or loans; make negative pledges; consolidate, merge or effect asset sales; or change the nature of our business. In addition, we are subject to certain financial covenants in the Credit Facility that require us to maintain (i) a leverage ratio, as defined, less than or equal to 3.50 to 1.00 for each fiscal quarter and (ii) a fixed charge coverage ratio greater than or equal to 1.25 to 1.00 as of the last day of each fiscal quarter. Events of Default and Acceleration . The Credit Facility contains customary events of default for credit facilities of this size and type, and includes, without limitation, payment defaults; defaults in performance of covenants or other agreements contained in the Credit Facility and the other transaction documents; inaccuracies in representations and warranties; certain defaults, termination events or similar events; certain defaults with respect to any other Company indebtedness in excess of $ 1.0 million; certain bankruptcy or insolvency events; the rendering of certain judgments in excess of $ 1.0 million; certain ERISA events; certain change in control events and the defectiveness of any liens. Obligations outstanding under the Credit Facility may be accelerated upon the occurrence of an event of default. 11. Income Taxes Income Taxes Receivable On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic impact caused by the COVID-19 pandemic. The CARES Act, among other things, permits federal income tax net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes. We generated significant NOLs during 2018 and 2019 and filed carryback claims for these losses to the preceding five years. In connection with the filing of these claims, we initially recorded a federal income tax receivable of approximately $ 15.0 million and certain related adjustments to our deferred tax liability. We subsequently received federal income tax refunds corresponding to the 2018 NOL carryback during 2020 leaving approximately $ 11.5 million remaining to be refunded in connection with the 2019 NOL carryback. In conjunction with the remaining income tax refund claim, we received a notice from the Internal Revenue Service (“IRS”) on March 8, 2023, stating that our income tax returns for 2015, 2016, 2017 and 2019 were selected for examination. Furthermore, and as is customary for income tax refunds of this magnitude, the IRS was required to review the refund claim and provide a report to the Joint Committee on Taxation of the U.S. Congress (“JCT”). As a 12 result of the submission of the refund claim to the JCT, the IRS completed their review of the income tax returns for 2015, 2016, 2017 and 2019. Our request for refund was reviewed and concluded favorably with the JCT concurring with the IRS’s conclusions. Subsequent to a delay due to the federal government shutdown in October 2025, we received a total of $ 13.8 million through June 30, 2026. This amount included tax refunds of $ 11.7 million and related interest of $ 2.1 million for the years 2015, 2016, 2017 and 2019. As of June 30, 2026, we had $ 0.3 million remaining as an outstanding receivable attributable solely to interest on the 2019 refund which was subsequently received in July 2026, bringing this matter to a final closure. Current Year Provision Our effective income tax rate is comprised of the federal statutory rate of 21% plus a blended rate for the states in which we generate taxable income. During the quarter ended June 30, 2026, our blended state rate was adversely impacted by 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. 12. Commitments and Contingencies From time to time, we are a party to various claims and legal proceedings arising from our operations in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any threatened material litigation. While the outcome of any potential claims and legal proceedings against us cannot be predicted with certainty, we have concluded that it is not considered reasonably possible that a loss resulting from any such claims or proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse effect on our financial condition, results of operations or cash flows. Furthermore, we believe that we maintain adequate insurance coverage against any potential litigation loss relating to insurable risks. 13. Stockholders’ Equity Common Stock and Additional Paid-In Capital In connection with the Flatrock Acquisition, we issued 241,803 shares of Common Stock to the Sellers as a component of the total transaction consideration paid. Dividends and Comprehensive Income Cash dividends are considered restricted payments as defined in the Credit Facility (see Note 1 0 ) and may be made provided that certain conditions are satisfied as reflected in the Credit Facility, including the absence of any defaults, among others. With respect to the dividends presented in the table below, all of the necessary conditions have been satisfied. The following table summarizes our dividends declared and paid in cash for the periods presented: Quarterly Period Ended Dividends Declared per Share Dividends Paid March 31, 2026 $ 0.11 $ 1,385 June 30, 2026 $ 0.15 $ 1,894 Our comprehensive income is comprised only of our net income as there are no components that would be considered as other comprehensive income. 13 14. Revenues from Customers Disaggregation of Revenue The following table summarizes our revenue disaggregated by product or service type for the periods presented: Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Rental $ 49,433 $ 39,580 $ 96,548 $ 78,490 Sales Parts 605 377 997 1,396 Other (Compressors/Rebuilds) 375 373 474 1,281 980 750 1,471 2,677 Aftermarket services 988 1,052 1,849 1,598 Total revenue $ 51,401 $ 41,382 $ 99,868 $ 82,765 No amounts were recognized in revenue attributable to deferred revenue during the three and six months ended June 30, 2026 and 2025. Transaction Price Allocated to the Remaining Performance Obligations As of June 30, 2026, and December 31, 2025, we had no deferred revenue related to unsatisfied performance obligations. 15. Stock-Based and Other Long-Term Incentive Compensation We maintain the stockholder-approved 2019 Equity Incentive Plan, as amended (the “Equity Incentive Plan”) for the issuance of stock-based compensation awards to our employees, certain consultants and Board of Director members. The Equity Incentive Plan provides for a total of 1,650,000 shares of common stock for issuance in the form of awards for: (i) stock options, (ii) stock appreciation rights, (iii) restricted awards in the form of restricted stock and restricted stock units (“RSUs ”) , (iv) performance share awards, including performance share units (“PSUs ” ) and (v) other equity-based awards. After consideration of the activity described in detail below, a total of 500,369 shares remained available for grant under the Equity Incentive Plan as of June 30, 2026. The Equity Incentive Plan expires on June 20, 2034. Until its expiration on February 28, 2026, we also maintained the 1998 Stock Option Plan, as amended (the “Stock Option Plan”) through which we issued stock options for all years prior to 2026. The following table summarizes the total stock-based compensation expense recognized during the periods presented: Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Equity-classified $ 851 $ 579 $ 1,430 $ 938 Liability-classified (1) 88 137 226 137 $ 939 $ 716 $ 1,656 $ 1,075 (1) Represents compensation expense associated with awards that may be settled in cash at the option of the grantee. 14 Stock Options While the Stock Option Plan has expired, all stock options that were outstanding as of December 31, 2025 will remain subject to their vesting rights through their contractual lives. All options granted after 2025, including those indicated below, were granted under the Equity Incentive Plan. A summary of all option activity during the six months ended June 30, 2026, is presented below: Number of Shares Underlying Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding, December 31, 2025 111,168 $ 21.28 7.27 $ 1,375 Granted 21,500 $ 36.17 $ 49 Exercised ( 36,102 ) $ 21.83 $ 690 Canceled/Forfeited ( 10,083 ) $ 22.59 $ 96 Expired — $ — $ — Outstanding, June 30, 2026 86,483 $ 24.41 7.96 $ 1,639 Exercisable, June 30, 2026 29,321 $ 19.17 6.24 $ 727 The following table summarizes information about our stock options outstanding as of June 30, 2026: Range of Exercise Prices: Options Outstanding Options Exercisable Shares Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Shares Weighted Average Exercise Price $ 0.01 -$ 18.00 12,501 5.94 $ 10.69 10,835 $ 10.83 $ 18.01 -$ 26.00 48,833 8.42 $ 22.39 14,837 $ 22.44 $ 26.01 -$ 36.17 25,149 8.07 $ 34.74 3,649 $ 28.15 86,483 7.96 $ 24.41 29,321 $ 19.17 The following table summarizes changes in our unvested stock options during the six months ended June 30, 2026: Shares Weighted Average Grant Date Fair Value Per Share Unvested, December 31, 2025 65,249 $ 11.97 Granted 21,500 $ 17.44 Vested ( 22,004 ) $ 12.21 Canceled/Forfeited ( 7,583 ) $ 12.23 Unvested, June 30, 2026 57,162 $ 13.91 As of June 30, 2026, there was a total of approximately $ 0.5 million of unrecognized compensation cost related to unvested options which is expected to be recognized over the next 2.01 years. 15 Time-Vested Restricted Stock and Restricted Stock Units The following table summarizes all restricted stock and RSU activity during the six months ended June 30, 2026: Number of Shares Weighted Average Grant Date Fair Value Outstanding, December 31, 2025 105,465 $ 20.82 Granted 81,281 $ 38.08 Vested ( 50,918 ) $ 18.53 Canceled/Forfeited ( 2,803 ) $ 30.27 Outstanding, June 30, 2026 133,025 $ 30.77 As of June 30, 2026, there was a total of approximately $ 3.6 million of unrecognized compensation cost related to unvested restricted stock and RSUs which is expected to be recognized over the next 2.05 years. Cash Settled Restricted Stock Units The 2025 and 2024 grants of RSUs to the independent Board members that can be settled in cash represent liability-classified awards. Compensation expense associated with these awards is based upon the fair value of Common Stock at each reporting period relative to that portion of the service period that has passed. Accordingly, the compensation expense is variable in nature. The following table summarizes all cash settled RSU activity during the six months ended June 30, 2026 is presented below: Number of Shares Weighted Average Grant Date Fair Value Outstanding, December 31, 2025 13,812 $ 24.60 Granted — $ — Vested (1) ( 13,812 ) $ 24.60 Canceled/Forfeited — $ — Outstanding, June 30, 2026 — $ — (1) Of the total awards that vested, 4,456 RSUs were settled in cash and the remaining 9,356 RSUs were settled in shares. Performance Share Units The potential payout for the PSU awards is based upon performance for a three-year period ending December 31, 2026 for the 2024 grants, December 31, 2027 for the 2025 grants and December 31, 2028 for the 2026 grants measured against relative total shareholder return (“TSR”) compared to a peer group of companies as established by the Compensation Committee. The PSU award payout ranges from zero (if the Company ranks below the 31.25th percentile for the 2024 and 2025 grants and below the 30th percentile for the 2026 grant) and up to 200 % (if the Company ranks first) based upon our relative TSR performance ranking (subject to certain caps based on absolute TSR as defined in the PSU agreements). With respect to vesting, the PSUs have both a service condition and a market condition. Due to the presence of the TSR measurement for the common equity of the peer companies, including the Company’s Common Stock, which is deemed a “market condition,” the grant-date fair values of the PSUs have been determined using a binomial pricing model, or a Monte Carlo simulation model. The following table summarizes the weighted average grant date fair values of PSUs granted and the assumptions used in the Monte Carlo simulation model for the determination of the grant date fair values of our PSUs granted during the six months ended June 30, 2026: Weighted-average grant date fair value of PSUs granted $ 45.36 Risk free rate 3.74 % to 4.11 % Expected volatility 43.9 % to 44.8 % 16 The following table summarizes all PSU activity during the six months ended June 30, 2026: Number of Shares Weighted Average Grant Date Fair Value Outstanding, December 31, 2025 78,181 $ 24.90 Granted 46,404 $ 45.36 Vested — Canceled/Forfeited — Outstanding, June 30, 2026 124,585 $ 32.52 As of June 30, 2026 , there was a total of approximately $ 2.7 million of unrecognized compensation cost related to the unvested portion of the PSUs which is expected to be recognized over the next 1.73 years. 16. Earnings per Share The following table reconciles the numerators and denominators of the basic and diluted earnings per share computation for the periods presented: Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Numerator for basic and diluted earnings per share: Net income $ 3,830 $ 5,188 $ 10,593 $ 10,042 Denominator for basic earnings per common share: Weighted average common shares outstanding - Basic 12,664 12,483 12,624 12,473 Denominator for diluted earnings per common share: Weighted average common shares outstanding 12,664 12,483 12,624 12,473 Dilutive effect of stock-based compensation awards 178 142 175 156 Weighted average common shares outstanding - Diluted 12,842 12,625 12,799 12,629 Earnings per common share: Basic $ 0.30 $ 0.42 $ 0.84 $ 0.81 Diluted $ 0.30 $ 0.41 $ 0.83 $ 0.80 The following table summarizes the actual number of stock-based compensation awards that were excluded from the determination of diluted earnings per share due to their anti-dilutive effect for the periods presented: Three months ended Six months ended June 30, June 30, 2026 2025 2026 2025 Stock options 21,500 94,000 21,500 94,000 Restricted stock and RSUs 7,155 20,963 27,536 7,595 PSUs 41,113 47,029 41,113 47,029 69,768 161,992 90,149 148,624 17 17. Subsequent Events On August 10, 2026, we announced that our Board of Directors declared a cash dividend of $ 0.15 per share to stockholders of record as of August 19, 2026, expected to be paid on September 2, 2026. On July 20, 2026, we completed our redomestication from Colorado to Texas (the “Redomestication”). In connection with the Redomestication, we adopted a new certificate of formation and bylaws. The Redomestication proposal to approve the change in state of incorporation, as described in the Company’s 2026 Proxy Statement, was approved by the Company’s shareholders at the Company’s 2026 Annual Meeting of Shareholders held on June 10, 2026. We have evaluated all events subsequent to the balance sheet date as of June 30, 2026, and through the date this report was issued and determined that there have been no other events that would require adjustments or additional disclosures to our Condensed Consolidated Financial Statements. 18 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information pertaining to us, our industry and the oil and gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management. All statements, other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements. We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “guidance,” “forecast,” “believe,” “might,” “continue,” “intend,” “plan,” “project,” “budget” and other similar words to identify forward-looking statements. You should read statements that contain these words carefully and should not place undue reliance on these statements because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other “forward-looking” information. We do not undertake any obligation to update or revise publicly any forward-looking statements. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations or assumptions will prove to have been correct. These risks, contingencies and uncertainties, include, but are not limited to, the following: • conditions in the oil and gas industry, including the supply and demand for oil and gas and volatility in the prices of oil and gas; • changes in general economic and financial conditions, inflationary pressures, the potential for economic recession in the U.S., tariffs and trade restrictions, including the imposition of new and higher tariffs on imported goods and retaliatory tariffs implemented by other countries on U.S. goods, and the potential effects on our financial condition, results of operations and cash flows; • our reliance on major customers; • failure of projected organic growth due to adverse changes in the oil and gas industry, including depressed oil and gas prices, oppressive environmental regulations and competition; • integration of the Flatrock Acquisition with our business; • our inability to achieve increased utilization of assets, including rental fleet utilization and monetizing other non-cash balance sheet assets; • failure of our customers to continue to rent equipment after expiration of the primary rental term; • our ability to economically develop and deploy new technologies and services, including technology to comply with health and environmental laws and regulations; • failure to achieve accretive financial results in connection with any acquisitions we may make; • fluctuations in interest rates; • our ability to make dividends, distributions and share repurchases; • changes in regulation or prohibition of new or current well completion techniques; • competition among the various providers of compression services and products; • changes in safety, health and environmental regulations; • changes in economic or political conditions in the markets in which we operate; • the inherent risks associated with our operations, such as equipment defects, malfunctions, natural disasters and adverse changes in customer, employee and supplier relationships; • our inability to comply with covenants in our debt agreements and the decreased financial flexibility associated with our debt; • inability to finance our future capital requirements and availability of financing; • cybersecurity threats, including increased use of artificial intelligence and other emerging technologies; • capacity availability, costs and performance of our outsourced compressor fabrication providers and overall inflationary pressures; • impacts of world events, such as acts of terrorism, the conflicts in Iran, Ukraine, Venezuela and in the greater Middle East, and significant economic disruptions and adverse consequences resulting from possible long-term effects of potential pandemics and other public health crises; and • general economic conditions. We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict or that we are unable to control. When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements including those risk factors listed under the “Risk Factors” section of this Quarterly Report on Form 10-Q and Item 1A, Risk Factors, in our 2025 Annual Report, as it contains important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements. 19