Natural Gas Services Group (NGS 2.28%), a provider of natural gas compression equipment rentals and services, Natural Gas Services Group released its financial results for Q2 FY2025 on August 11, 2025. The headline results highlighted earnings per share (GAAP) of $0.41 for Q2 2025, beating analyst estimates by $0.07, or 20.4 percent (GAAP EPS, Q2 2025). Revenue (GAAP) was $41.4 million for Q2 2025, just under the consensus GAAP estimate of $41.87 million for Q2 2025. The quarter set records for both adjusted EBITDA and fleet utilization, while management raised full-year 2025 adjusted EBITDA guidance. Operational and financial momentum continued, though GAAP revenue growth for Q2 2025 slightly lagged expectations.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $0.41 | $0.34 | $0.34 | 20.6% |
| Revenue (GAAP) | $41.4 million | $41.87 million | $38.5 million | 7.5% |
| Rental Revenue | $39.6 million | N/A | N/A | |
| Adjusted Gross Margin | $24.2 million | $21.0 million | N/A |
Source: Analyst estimates for the quarter provided by FactSet.
Company Overview and Key Success Factors
Natural Gas Services Group (NGS 2.28%) rents and maintains compression equipment that helps move natural gas from the wellhead through pipelines. Its primary customers are oil and gas producers, who need reliable compression to meet production and environmental standards. The company is particularly known for serving the Permian Basin, a major oil and gas region in the United States.
Recently, the focus has shifted to investing in larger, more advanced compression units with smart technology. These large horsepower units are favored by customers for their increased efficiency and lower emissions. Success now depends on maximizing the use of its rental fleet, growing recurring rental revenues, and managing costs—even as NGS works to diversify beyond its largest customers and regions.
Quarter in Review: Results, Strategy, and Execution
NGS reported its highest-ever adjusted EBITDA of $19.7 million. This represented a 19.5 percent increase from the same period a year ago. Adjusted gross margin improved by $3.2 million year over year, though it slipped slightly compared to Q1 2025 due to costs related to closing the Midland fabrication facility. Total revenue (GAAP) grew $2.9 million year-over-year, supported by substantial gains in rental revenue—the main driver of company profits.
Rental revenue climbed 13.3 percent year over year to $39.6 million. This result reflects more equipment in service and favorable pricing for new units. Nearly all large horsepower compression units rented by the company were fully utilized during the quarter, and fleet utilization for all horsepower sizes hit a record 83.6 percent. NGS reported that about 80 percent of rented horsepower operates under term contracts averaging 2.5 years, which adds predictability to future cash flows.
Strategically, management continued the shift away from smaller and medium horsepower units, instead retiring or selling underused assets. The company’s investments leaned heavily into new, high-demand large horsepower units, many of which use advanced technology for improved uptime and emissions performance. Growth capital expenditures were $22.1 million, with management expecting a heavier investment pace in the second half of 2025. Maintenance capital expenditures held steady at $3.7 million. NGS is accelerating deployment of capital into expanding its high-utilization fleet.
Operational progress extended beyond equipment. Average days sales outstanding fell to about 30 days, supporting strong cash collection and a $25.4 million reduction in accounts receivable from year-end 2023 through Q2 2025. The closure and sale of the Midland fabrication facility further signaled management’s focus on streamlining real estate holdings and maximizing use of cash for fleet expansion.
The balance sheet at period-end showed $172 million of available liquidity, a slight increase in leverage to 2.3 times EBITDA—a level management states is the lowest among public competitors. NGS used its strong balance sheet to initiate its first-ever quarterly dividend in July 2025 while also authorizing a share buyback program. Under the repurchase plan, management highlighted that share purchases will be opportunistic and tied to NGS’s own valuation.
From a risk standpoint, the company remains heavily dependent on Occidental Permian, LTD. for rental revenues, which accounted for 54% of total revenue in 2024. While most growth and current opportunities come from existing customers in the Permian Basin, management noted some new account inquiries and “green shoots” in more gas-focused basins. Still, lack of diversification remains an ongoing challenge.
On innovation, the large horsepower compression units NGS now deploys are described as newer, technologically advanced, and emissions-compliant—meeting customer needs under tightening regulations. Management has prioritized investment in digital “SMART” technology, aiming for better uptime, reduced costs, and environmental compliance. There were no major impacts from tariffs during the quarter, since most suppliers are U.S.-based.
Looking Ahead: Guidance and Key Trends
Management raised its full-year 2025 adjusted EBITDA (non-GAAP) outlook to a new range of $76 million to $80 million, a 2.0 percent increase at the midpoint. Guidance for growth capital expenditures was narrowed to $95 million to $115 million for 2025, with more than half of 2025 growth capital expenditures are expected to be deployed in the second half. Maintenance capital expenditures remain targeted at $11 million to $14 million for FY2025. No formal financial guidance was given for fiscal 2026.
In July, NGS initiated its first quarterly dividend and authorized a share buyback. The goal for the dividend is to remain flat or increase over time, subject to company cash generation. Looking forward, investors will want to track rental revenue growth, fleet utilization rates, ongoing customer diversification efforts, and the success of the newly announced shareholder return programs. Regional concentration and continued dependence on key customers remain central risks. Labor market tightness in the Permian and proper execution of the company’s large horsepower strategy also factor into future performance.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
