Natural Gas Services Group (NYSE:NGS) reported what management described as a “great quarter and record full-year results” for 2025, driven by fleet expansion, strong demand for large horsepower rental compression, improving pricing, and a continued mix shift toward larger and electric motor drive units. Chief Executive Officer Justin Jacobs said the company captured market share in rental compression for the third consecutive year and entered 2026 with record utilization and “significant contracted horsepower deployments.”
Record 2025 operating performance and fleet growth
Jacobs said the company reached record levels of rented horsepower and utilization during 2025. Rented horsepower rose to approximately 563,000 by year-end, up 14% from the prior year, while fleet utilization reached 84.9%.
During 2025, the company added approximately 70,000 horsepower, with more than half deployed in the fourth quarter. Jacobs said large horsepower electric units represented about 30% of those additions. Looking ahead, the company expects electric motor drive units to represent a similar percentage of 2026 additions.
Financial results: revenue growth, record net income, and one-time items
Chief Financial Officer Ian Eckert reported full-year 2025 rental revenue of $164.3 million, up $20.1 million, or 14% year-over-year. Total revenue was $172.3 million, increasing $15.6 million, or about 10%, compared to 2024. Eckert said total revenue growth lagged rental revenue growth because the company exited Midland fabrication operations as part of a strategy to move away from “non-core low-margin fabrication activities.”
Adjusted EBITDA was $21.2 million for the fourth quarter and $81 million for the full year, both company records. Jacobs noted the full-year adjusted EBITDA result was at the high end of guidance, adding that the company raised guidance three times during the year.
Adjusted rental gross margin totaled $99.6 million for 2025, up 14% year-over-year, while adjusted total gross margin was $100.5 million, also up 14% from the prior year. However, the company said fourth-quarter adjusted rental gross margin percentage came in at 58.5%, down roughly 300 basis points sequentially and “well below” expectations. Eckert attributed the decline entirely to a physical inventory adjustment recorded in the quarter and said it did not reflect ongoing business economics.
Net income was $19.9 million, or $1.57 per diluted share, which management described as record performance. Eckert highlighted several discrete items in 2025 results:
- A $2.6 million non-cash impairment charge related to the Midland headquarters property as the company prepared it for sale and transitioned to leased office space.
- $2.4 million in interest income recorded in the fourth quarter following IRS confirmation of refund and interest amounts tied to an income tax receivable.
- An effective tax rate of 24.9% for 2025 versus 20.5% in 2024, primarily due to higher state taxes from changes in state apportionment; management expects an effective tax rate of about 25% in 2026 if the operating footprint remains generally consistent.
Capital allocation: fleet investment, dividends, and asset monetization
The company emphasized a capital allocation approach combining organic fleet expansion with shareholder returns and selective M&A evaluation. In 2025, capital expenditures totaled $121.5 million, including $109.8 million of growth capital for new large horsepower compression units, placing growth capex at the high end of guidance.
Jacobs said the company initiated its first dividend in the second half of 2025 and later increased it by 10% with the fourth-quarter issuance. In total, approximately $2.6 million was returned to shareholders in the second half of the year. In response to analyst questions on future dividends, Jacobs reiterated prior comments that the company understands shareholders’ desire for a “consistent and increasing dividend,” but he did not provide specific dividend guidance.
Management also discussed monetizing non-operating assets. Jacobs said the company received confirmation of a $12.3 million income tax refund and associated interest during the fourth quarter, which was received in the first quarter of 2026. Eckert said the income tax receivable increased to $14.1 million in the fourth quarter, and after the $12.3 million receipt in early 2026, approximately $1.8 million remained outstanding related to the 2019 tax year. The company also said it continues to pursue monetization of real estate, including listing the Midland office property.
2026 outlook: higher EBITDA guidance and continued demand tailwinds
For 2026, the company issued adjusted EBITDA guidance of $90.5 million to $95.5 million, citing record utilization, contracted deployments, and an active quoting pipeline. Jacobs said the company is currently contracted to deploy approximately 50,000 horsepower of new large horsepower units, distributed relatively evenly through the year.
Natural Gas Services Group expects 2026 growth capital expenditures of $55 million to $70 million, which Jacobs said represents an increase of about $5 million at the low end of prior expectations, reflecting continued contract wins. Maintenance capital expenditures are expected to range from $15 million to $18 million; management said 2025 maintenance spending came in at the low end of guidance and some “spill over” is expected in 2026, along with requirements of a growing fleet.
On the market environment, Jacobs said compression demand remains strong, supported by domestic oil production in liquid-rich basins such as the Permian. He pointed to tailwinds including rising LNG export capacity and growing electricity consumption from data centers and AI-related infrastructure. He also said lead times for certain large horsepower components are stretching “well beyond one year,” which management believes supports pricing strength and high utilization. In Q&A, Jacobs said lead times above 100 weeks are most acute at the high end of the large horsepower range, while lead times for somewhat smaller large horsepower equipment have not changed significantly in recent months.
Management also discussed longer-term strategic opportunities. Jacobs said the company is seeing increased quoting activity in midstream applications but has not yet secured material midstream work, describing it as an area of focus that may follow a similar customer-penetration path to its earlier entry into the 1,000-plus horsepower market. The company also said it has evaluated power generation opportunities from an acquisition perspective, though Jacobs noted that, in its review so far, it has not seen power generation businesses with application lengths similar to the company’s compression contracts.
In closing remarks, Jacobs said the company believes it is positioned to continue investing in growth, increasing EBITDA and earnings, returning capital to shareholders, and pursuing strategic opportunities, supported by operational execution and a balance sheet that management described as having leverage at the low end of its public peer group.
About Natural Gas Services Group (NYSE:NGS)
Natural Gas Services Group, Inc (NYSE: NGS) is an energy infrastructure company specializing in natural gas distribution and compression services across the United States. The company operates two primary lines of business: the Distribution segment provides natural gas delivery to residential, commercial and industrial customers, while the Compression Services segment rents, sells and services a diversified fleet of compression equipment for midstream and industrial applications.
In its Distribution segment, Natural Gas Services Group engineers, constructs and maintains local pipeline networks, meters and related apparatus to ensure safe and reliable natural gas supply to municipal utilities and private customers.
