Financial Data and Key Metrics Changes - The company's adjusted EBITDA for 2023 was 29.2 million in 2022 [2] - Total revenue for Q1 2024 increased to 26.6 million in Q1 2023 [61] - Adjusted gross margin for Q1 2024 was 57.2%, significantly higher than 41.8% in Q1 2023 [20] - Net income for Q1 2024 was 370,000 in Q1 2023 [21] Business Line Data and Key Metrics Changes - Rental revenue for Q1 2024 was 22.7 million in Q1 2023 [61] - Rental adjusted gross margin dollars increased to 11.1 million in Q1 2023, representing an 86% increase [4] - The rental adjusted gross margin as a percentage of sales for Q1 2024 was 61.1%, compared to 48.8% in Q1 2023 [4] Market Data and Key Metrics Changes - Approximately 75% of the active fleet is located in oil and liquids-oriented basins, where activity is primarily driven by crude oil prices [7] - The company reported stable to increasing production levels in the near to medium term, supported by steady oil prices [7] Company Strategy and Development Direction - The growth strategy includes optimizing the existing utilized fleet, improving asset utilization, expanding the high-horsepower rental fleet, and executing accretive mergers and acquisitions [9] - The company aims to maintain a target return on invested capital of at least 20% for growth capital expenditures [25] - The company is actively discussing new unit contracts but will only spend capital when units are pre-contracted [26] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for the compression market, citing significant demand for rental equipment and attractive pricing [7] - The company anticipates some moderation in rental adjusted gross margin percentage over the course of the year [24] - Management remains cautious about the natural gas market, noting reduced production and low prices, but sees a favorable environment for growth in high horsepower units [65] Other Important Information - The company ended Q1 2024 with 172 million outstanding on its credit facility, maintaining compliance with financial covenants [22] - The average horsepower per unit increased to 286 horsepower as of March 31, 2024, up from 277 horsepower at year-end 2023 [63] Q&A Session Summary Question: What is the sense of how gross margin normalizes? - Management indicated that while they expect some retrenchment, they are gathering more data to understand the sustainability of higher margins with the increasing high-horsepower mix [27] Question: How much opportunity is there for pricing in the pre-existing fleet? - Management noted that the majority of gross profit increase comes from new units, with a substantial contribution from price increases on existing units [30] Question: What is the demand environment for high horsepower units? - Management confirmed strong demand for high horsepower units, with good pricing and contract lengths, similar to previous calls [13]
Natural Gas Services (NGS) - 2024 Q1 - Earnings Call Transcript