Q2 2026 Natural Gas Services Group Earnings Call

August 11, 2026

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Anna Delgado: Someone else just joined. I am connecting you now. You are muted on this call. This call is being recorded.

Speaker #2: Good morning, ladies and gentlemen, and welcome to the NATURAL GAS SERVICES GROUP INC Q2. At this time, all participants are in listen-only mode. Operator assistance is available at any time during this conference by pressing 0#.

Operator 2: Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group Inc. Q2 Earnings Call. At this time, all participants are in listen only mode. Operator assistance is available at any time during this conference by pressing 0 pound. I would now like to turn the call over to Ms. Anna Delgado. Please begin.

Operator: Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group Inc. Q2 Earnings Call. At this time, all participants are in listen only mode. Operator assistance is available at any time during this conference by pressing 0 pound. I would now like to turn the call over to Ms. Anna Delgado. Please begin.

Speaker #2: I would now like to turn the call over to Ms. Anna Delgado. Please begin.

Speaker #3: Thank you, Luke, and good morning, everyone. Before we begin, I would like to remind you that during the course of this conference call, the Company will be making forward-looking statements within the meaning of the Federal Securities Laws.

Anna Delgado: Thank you, Luke, and good morning, everyone. Before we begin, I would like to remind you that during the course of this conference call, the company will be making forward-looking statements within the meanings of the federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Natural Gas Services Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.

Speaker #3: Investors are cautioned that forward-looking statements are not guarantees of future performance, and that actual results or developments may differ materially from those projected in the forward-looking statements.

Speaker #3: Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Natural Gas Services Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Anna Delgado: Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Natural Gas Services Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.

Speaker #3: Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in yesterday's earnings press release and in our filings with the SEC, including our Form 10-Q for the period ended June 30, 2026, and our Form 8-Ks.

Anna Delgado: These and other risks are described in yesterday's earnings press release and in our filings with the SEC, including our Form 10-Q for the period ended 30 June 2026, and our Form 8-Ks. These documents can be found in the investors relations section of our website located at www.ngsgi.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. In addition, our discussion today will reference certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income, and adjusted gross margin, among others. For reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, please see yesterday's earnings release. I will now turn the call over to Justin Jacobs, Chief Executive Officer. Justin?

Speaker #3: These documents can be found in the investor's relations section of our website located at www.ngsgi.com. Should one or more of these risks materialize or should underline assumptions prove incorrect, actual results may vary materially.

Speaker #3: In addition, our discussion today will reference certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income, and adjusted gross margin, among others. For reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, please see yesterday's earnings release.

Anna Delgado: In addition, our discussion today will reference certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income, and adjusted gross margin, among others. For reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP, please see yesterday's earnings release. I will now turn the call over to Justin Jacobs, Chief Executive Officer. Justin?

Speaker #3: I will now turn the call over to Justin Jacobs, Chief Executive Officer. Justin.

Speaker #4: Thank you, Anna, and good morning, everyone. Joining me today is Ian Eckert, our Chief Financial Officer. As always, I want to begin by thanking the entire NGS team, including our new colleagues from Flat Rock.

Justin Jacobs: Thank you, Anna, and good morning, everyone. Joining me today is Ian Eckert, our Chief Financial Officer. As always, I want to begin by thanking the entire NGS team, including our new colleagues from Flatrock Compression. I especially want to recognize our field service team, whose focus on customer service and strong operational execution drove another record quarter. I also want to thank everyone across both organizations who helped us complete the Flatrock Compression acquisition and who are now working together to integrate our people, systems, and operations. It's an exciting time for NGS. Our team delivered a record Q2 and a milestone H1 2026, combining strong execution and organic growth with a strategic accretive acquisition that materially increased the scale and capabilities of our platform. I usually start these calls by reviewing the details of the quarter. Today, I want to start with strategy.

Speaker #4: I especially want to recognize our field service team whose focus on customer service and strong operational execution drove another record quarter. I also want to thank everyone across both organizations who helped us complete the Flat Rock acquisition and who are now working together to integrate our people, systems, and operations.

Justin Jacobs: I also want to thank everyone across both organizations who helped us complete the Flatrock Compression acquisition and who are now working together to integrate our people, systems, and operations. It's an exciting time for NGS. Our team delivered a record Q2 and a milestone H1 2026, combining strong execution and organic growth with a strategic accretive acquisition that materially increased the scale and capabilities of our platform. I usually start these calls by reviewing the details of the quarter. Today, I want to start with strategy.

Speaker #4: It's an exciting time for NGS. Our team delivered a record-second quarter and a milestone first half of 2026, combining strong execution and organic growth with a strategic accretive acquisition that materially increased the scale and capabilities of our platform.

Speaker #4: I usually start these calls by reviewing the details of the quarter. Today, I want to start with strategy. The second-quarter results are important, but I think they are best understood in the context of the progress NGS has made over the last several years.

Justin Jacobs: The Q2 results are important, but I think they are best understood in the context of the progress NGS has made over the last several years. We have continually discussed four growth and value drivers with investors: fleet optimization, asset utilization, organic growth, and accretive M&A. These drivers have remained entirely consistent. What has changed is the scale of NGS and the progress we have made against each of them. NGS is a materially larger, stronger, and more capable company than it was three years ago. But we do not believe we are close to exhausting the opportunities in front of us. I want to spend a few minutes on what we have accomplished across each of our four growth and value drivers, and importantly, where we see additional opportunities ahead. Our first growth and value driver is optimization of the fleet we already own.

Speaker #4: We have continually discussed four growth and value drivers with investors: fleet optimization, asset utilization, organic growth, and accretive M&A. These drivers have remained entirely consistent. What has changed is the scale of NGS and the progress we have made against each of them.

Speaker #4: NGS is a materially larger stronger and more capable company than it was three years ago. But we do not believe we are close to exhausting the opportunities in front of us.

Justin Jacobs: But we do not believe we are close to exhausting the opportunities in front of us. I want to spend a few minutes on what we have accomplished across each of our four growth and value drivers, and importantly, where we see additional opportunities ahead. Our first growth and value driver is optimization of the fleet we already own. There are several ways we create value here, but two of the most important over the last three years have been pricing and fleet mix.

Speaker #4: So I want to spend a few minutes on what we have accomplished across each of our four growth and value drivers and, importantly, where we see additional opportunities ahead.

Speaker #4: Our first growth and value driver is optimization of the fleet we already own. There are several ways we create value here, but two of the most important over the last three years have been the pricing and fleet mix.

Justin Jacobs: There are several ways we create value here, but two of the most important over the last three years have been pricing and fleet mix. In the Q2 2026, pro forma rental revenue per average horsepower per month, assuming a full quarter of Flatrock Compression revenue, was $28.06. Three years ago, in the Q2 2023, that number was $21.56. That is an improvement of almost $7 per horsepower per month or more than 30%, representing a compound annual growth rate of nearly 10%. At the same time, we have fundamentally changed the composition of the fleet. Our rented large horsepower fleet now totals 501,000 horsepower and is 99% utilized. Large horsepower represents 75% of our total rented horsepower. At the end of the Q2 2023, our rented large horsepower fleet was 228,000 horsepower and represented 61% of the total rented horsepower.

Speaker #4: In the second quarter of 2026, pro forma rental revenue per average horsepower per month, assuming a full quarter of Flat Rock revenue, was $28.06.

Justin Jacobs: In the Q2 2026, pro forma rental revenue per average horsepower per month, assuming a full quarter of Flatrock Compression revenue, was $28.06. Three years ago, in the Q2 2023, that number was $21.56. That is an improvement of almost $7 per horsepower per month or more than 30%, representing a compound annual growth rate of nearly 10%. At the same time, we have fundamentally changed the composition of the fleet.

Speaker #4: Three years ago, in the second quarter of 2023, that number was $21.56. That is an improvement of almost $7 per horsepower per month, or more than 30%, representing a compound annual growth rate of nearly 10%.

Speaker #4: At the same time, we have fundamentally changed the composition of the fleet. Our rented large horsepower fleet now totals 501,000 horsepower and is 99% utilized.

Justin Jacobs: Our rented large horsepower fleet now totals 501,000 horsepower and is 99% utilized. Large horsepower represents 75% of our total rented horsepower. At the end of the Q2 2023, our rented large horsepower fleet was 228,000 horsepower and represented 61% of the total rented horsepower. That means our rented large horsepower fleet has grown at approximately 30% annually over the last three years and is now the vast majority of our rented fleet. That mix shift matters.

Speaker #4: Large horsepower represents 75% of our total rented horsepower. At the end of the second quarter of 2023, our rented large horsepower fleet was 228,000 horsepower and represented 61% of the total rented horsepower.

Speaker #4: That means our rented large-horsepower fleet has grown at approximately 30% annually over the last three years, and is now the vast majority of our rented fleet.

Justin Jacobs: That means our rented large horsepower fleet has grown at approximately 30% annually over the last three years and is now the vast majority of our rented fleet. That mix shift matters. Large horsepower equipment generally provides better economics, longer contract duration, and deeper customer relationships. Increasingly, our large horsepower growth also includes electric motor drive equipment, which has become an important part of our offering, representing nearly 10% of the rented fleet. Looking ahead, we continue to see opportunity on both price and operating performance. Engine and fabrication lead times remain extended while customer demand remains strong. We believe that combination should support a constructive pricing environment for large horsepower compression. At the same time, we continue to invest in how we capture, integrate, and use data across the organization. This includes financial, operational, and increasingly real-time unit-level information. Our smart platform is one example.

Speaker #4: That makeshift matters. Large horsepower equipment generally provides better economics, longer contractoration, and deeper customer relationships. Increasingly, our large horsepower growth also includes electric motor drive equipment, which has become an important part of our offering, representing nearly 10% of the rented fleet.

Justin Jacobs: Large horsepower equipment generally provides better economics, longer contract duration, and deeper customer relationships. Increasingly, our large horsepower growth also includes electric motor drive equipment, which has become an important part of our offering, representing nearly 10% of the rented fleet. Looking ahead, we continue to see opportunity on both price and operating performance. Engine and fabrication lead times remain extended while customer demand remains strong.

Speaker #4: Looking ahead, we continue to see opportunity on both price and operating performance. Engine and fabrication lead times remain extended, while customer demand remains strong.

Speaker #4: We believe that combination should support a constructive pricing environment for large horsepower compression. At the same time, we continue to invest in how we capture, integrate, and use data across the organization.

Justin Jacobs: We believe that combination should support a constructive pricing environment for large horsepower compression. At the same time, we continue to invest in how we capture, integrate, and use data across the organization. This includes financial, operational, and increasingly real-time unit-level information. Our smart platform is one example. We are using predictive analytics to anticipate maintenance needs, improve field service execution, increase uptime, and deploy our people and resources more efficiently.

Speaker #4: This includes financial, operational, and increasingly real-time unit-level information. Our smart platform is one example. We are using predictive analytics to anticipate maintenance needs, improve field service execution, increase uptime, and deploy our people and resources more efficiently.

Justin Jacobs: We are using predictive analytics to anticipate maintenance needs, improve field service execution, increase uptime, and deploy our people and resources more efficiently. Ultimately, the objective is simple. Generate more earnings from every horsepower we already own while providing better service to our customers. Our second driver is asset utilization. This is about looking across the entire balance sheet and asking a straightforward question: Is this asset producing an adequate return for our shareholders? If the answer is no, we need to improve its productivity or convert it into capital that can be deployed somewhere else. Working capital is probably the best example of what we have already accomplished. When I became CEO in February 2024, we finished that quarter with 108 days of accounts receivable. On a pro forma basis, Q2 2026 DSO was approximately 33 days, representing approximately $22 million of accounts receivable.

Speaker #4: Ultimately, the objective is simple: generate more earnings from every horsepower we already own while providing better service to our customers. Our second driver is asset utilization.

Justin Jacobs: Ultimately, the objective is simple. Generate more earnings from every horsepower we already own while providing better service to our customers. Our second driver is asset utilization. This is about looking across the entire balance sheet and asking a straightforward question: Is this asset producing an adequate return for our shareholders? If the answer is no, we need to improve its productivity or convert it into capital that can be deployed somewhere else.

Speaker #4: This is about looking across the entire balance sheet and asking a straightforward question: Is this asset producing an adequate return for our shareholders? If the answer is no, we need to improve its productivity or convert it into capital that can be deployed somewhere else.

Speaker #4: Working capital is probably the best example of what we have already accomplished. When I became CEO in February 2024, we finished that quarter with 108 days of accounts receivable.

Justin Jacobs: Working capital is probably the best example of what we have already accomplished. When I became CEO in February 2024, we finished that quarter with 108 days of accounts receivable. On a pro forma basis, Q2 2026 DSO was approximately 33 days, representing approximately $22 million of accounts receivable. Reducing DSOs from 108 days to approximately 33 days has effectively created more than $40 million of cash. That is meaningful capital that was already inside the business.

Speaker #4: On a pro forma basis, second quarter 2026 DSO was approximately $33 days, representing approximately $22 million of accounts receivable. Reducing DSOs from $108 days to approximately $33 days has effectively created more than $40 million of cash.

Justin Jacobs: Reducing DSOs from 108 days to approximately 33 days has effectively created more than $40 million of cash. That is meaningful capital that was already inside the business. We did not need to issue equity or borrow money to create it. We simply needed to manage the asset more effectively. We applied the same philosophy to our income tax receivable. At year-end 2023, we carried an $11.5 million tax receivable that had first appeared on our balance sheet in Q1 2020. As of 30 June 2026, we had collected $13.8 million of principal and interest, and we subsequently received the remaining $300,000 of interest in July. In total, we converted approximately $14.1 million of longstanding non-cash asset into cash and brought that matter to a close. We have also materially improved the utilization of the compression fleet itself.

Speaker #4: That is meaningful capital that was already inside the business. We did not need to issue equity or borrow money to create it. We simply needed to manage the asset more effectively.

Justin Jacobs: We did not need to issue equity or borrow money to create it. We simply needed to manage the asset more effectively. We applied the same philosophy to our income tax receivable. At year-end 2023, we carried an $11.5 million tax receivable that had first appeared on our balance sheet in Q1 2020. As of 30 June 2026, we had collected $13.8 million of principal and interest, and we subsequently received the remaining $300,000 of interest in July.

Speaker #4: We applied the same philosophy to our income tax receivable. At year-end 2023, we carried an $11.5 million tax receivable that had first appeared on our balance sheet in Q1 2020.

Speaker #4: As of June 30, 2026, we had collected $13.8 million of principal and interest, and we subsequently received the remaining $300,000 of interest in July.

Speaker #4: In total, we converted approximately $14.1 million of longstanding non-cash assets into cash and brought that matter to a close. We have also materially improved the utilization of the compression fleet itself.

Justin Jacobs: In total, we converted approximately $14.1 million of longstanding non-cash asset into cash and brought that matter to a close. We have also materially improved the utilization of the compression fleet itself. Horsepower utilization increased to a record 88.3% in the second quarter from 78.6% three years ago, an improvement of almost 10 percentage points. There is more to do. We are actively marketing our former Midland headquarters and fabrication facility for sale or lease.

Speaker #4: Horsepower utilization increased to a record 88.3% in the second quarter from 78.6% three years ago, an improvement of almost 10 percentage points. But there is more to do.

Justin Jacobs: Horsepower utilization increased to a record 88.3% in the second quarter from 78.6% three years ago, an improvement of almost 10 percentage points. There is more to do. We are actively marketing our former Midland headquarters and fabrication facility for sale or lease. Those two properties have a combined book value of approximately $11 million, and we own four other real estate assets with a combined book value of just over $3 million. We also see a meaningful opportunity in inventory. Better procurement, demand planning, and parts standardization should allow us to reduce inventory while improving parts availability, technician productivity, and ultimately fleet uptime. The objective is the same across all of these areas. Make every dollar already invested in NGS work harder. Our third growth in value driver is organic growth. The change in the size of NGS over the last three years is significant.

Speaker #4: We are actively marketing our former Midland headquarters and fabrication facility for sale or lease. Those two properties have a combined book value of approximately $11 million, and we own four other real estate assets with a combined book value of just over $3 million.

Justin Jacobs: Those two properties have a combined book value of approximately $11 million, and we own four other real estate assets with a combined book value of just over $3 million. We also see a meaningful opportunity in inventory. Better procurement, demand planning, and parts standardization should allow us to reduce inventory while improving parts availability, technician productivity, and ultimately fleet uptime. The objective is the same across all of these areas. Make every dollar already invested in NGS work harder.

Speaker #4: We also see a meaningful opportunity in inventory. Better procurement, demand planning, and parts standardization should allow us to reduce inventory while improving parts availability, technician productivity, and ultimately, fleet uptime.

Speaker #4: The objective is the same across all of these areas: make every dollar already invested in NGS work harder. Our third growth and value driver is organic growth.

Justin Jacobs: Our third growth in value driver is organic growth. The change in the size of NGS over the last three years is significant. We ended the Q2 with approximately 759,000 available horsepower, compared with approximately 474,000 horsepower in the Q2 of 2023. That represents an increase of approximately 285,000 horsepower. Adjusting for the Flatrock Compression acquisition, our organic annual growth rate over that period is more than 10%.

Speaker #4: The change in the size of NGS over the last three years is significant. We ended the second quarter with approximately $759,000 available horsepower, compared with approximately $474,000 horsepower in the second quarter of 2023.

Justin Jacobs: We ended the Q2 with approximately 759,000 available horsepower, compared with approximately 474,000 horsepower in the Q2 of 2023. That represents an increase of approximately 285,000 horsepower. Adjusting for the Flatrock Compression acquisition, our organic annual growth rate over that period is more than 10%. Importantly, that growth has been heavily concentrated in large horsepower equipment, including electric motor drive units, supported by longer duration customer commitments. Another way to look at our organic growth is relative to the public compression industry. At the end of 2022, NGS represented roughly 3% of the horsepower among the four publicly traded pure-play compression companies. Despite that relatively small starting position, we have represented approximately 12% of the organic growth capital deployed by those companies in that period. Our large competitors have grown organically in the low to mid-single digits on an annual basis.

Speaker #4: That represents an increase of approximately 285,000 horsepower. Adjusting for the Flat Rock acquisition, our organic annual growth rate over that period is more than 10%.

Speaker #4: Importantly, that growth has been heavily concentrated in large horsepower equipment, including electric motor-drive units, supported by longer-duration customer commitments. Another way to look at our organic growth is relative to the public impression of the industry.

Justin Jacobs: Importantly, that growth has been heavily concentrated in large horsepower equipment, including electric motor drive units, supported by longer duration customer commitments. Another way to look at our organic growth is relative to the public compression industry. At the end of 2022, NGS represented roughly 3% of the horsepower among the four publicly traded pure-play compression companies.

Speaker #4: At the end of 2022, NGS represented roughly 3% of the horsepower among the four publicly traded pure-play compression companies. Despite that relatively small starting position, we have represented approximately 12% of the organic growth capital deployed by those companies in that period.

Justin Jacobs: Despite that relatively small starting position, we have represented approximately 12% of the organic growth capital deployed by those companies in that period. Our large competitors have grown organically in the low to mid-single digits on an annual basis. We are growing organically at a significantly faster rate. That difference is important. We have consistently deployed growth capital at a rate materially above our relative size, and the result has been continued organic market share gains.

Speaker #4: Our large competitors have grown organically in the low- to mid-single digits on an annual basis. We are growing organically at a significantly faster rate.

Justin Jacobs: We are growing organically at a significantly faster rate. That difference is important. We have consistently deployed growth capital at a rate materially above our relative size, and the result has been continued organic market share gains. Importantly, our objective is not growth for growth's sake. We deploy capital where we believe the expected returns justify the investment, generally supported by long-term customer commitments. The combination of attractive unit economics and growth well above our relative market share is what makes organic growth such an important value driver for NGS. Looking ahead, we believe that can continue. The long-term growth in LNG exports, increasing natural gas production, and rapidly growing electricity demand, including behind the meter power, should require substantially more compression infrastructure. Our objective is not simply to grow with the industry. We intend to continue growing faster than the industry and taking market share.

Speaker #4: That difference is important. We have consistently deployed growth capital at a rate materially above our relative size, and the result has been continued organic market share gains.

Speaker #4: Importantly, our objective is not growth for growth's sake. We deploy capital where we believe the expected returns justify the investment, generally supported by long-term customer commitments.

Justin Jacobs: Importantly, our objective is not growth for growth's sake. We deploy capital where we believe the expected returns justify the investment, generally supported by long-term customer commitments. The combination of attractive unit economics and growth well above our relative market share is what makes organic growth such an important value driver for NGS. Looking ahead, we believe that can continue.

Speaker #4: A combination of attractive unit economics and growth well above our relative market share is what makes organic growth such an important value driver for NGS.

Speaker #4: Looking ahead, we believe that can continue. The long-term growth in LNG exports, increasing natural gas production, and rapidly growing electricity demand, including behind-the-meter power, should require substantially more compression infrastructure.

Justin Jacobs: The long-term growth in LNG exports, increasing natural gas production, and rapidly growing electricity demand, including behind the meter power, should require substantially more compression infrastructure. Our objective is not simply to grow with the industry. We intend to continue growing faster than the industry and taking market share. Our fourth growth and value driver is accretive M&A. With the acquisition of Flatrock Compression in June, we activated the fourth and final value creation lever that we have discussed with investors.

Speaker #4: Our objective is not simply to grow with the industry. We intend to continue growing faster than the industry and taking market share. Our fourth growth and value driver is accretive M&A.

Justin Jacobs: Our fourth growth and value driver is accretive M&A. With the acquisition of Flatrock Compression in June, we activated the fourth and final value creation lever that we have discussed with investors. Importantly, we did so after several years of significant organic improvement in the underlying NGS business. We acquired Flatrock Compression for approximately $120 million, representing approximately 6.2x last quarter annualized adjusted EBITDA before synergies, a material discount to NGS' multiple. Even before considering potential synergies, we acquired a highly complementary business at a multiple below our own. Flatrock Compression added approximately 87,000 rented horsepower and materially accelerated our electric motor drive strategy. Approximately 20% of Flatrock Compression horsepower is electric, compared with 7% for legacy NGS prior to the acquisition.

Speaker #4: With the acquisition of Flat Rock in June, we activated the fourth and final value creation lever that we have discussed with investors. Importantly, we did so after several years of significant organic improvement in the underlying NGS business.

Justin Jacobs: Importantly, we did so after several years of significant organic improvement in the underlying NGS business. We acquired Flatrock Compression for approximately $120 million, representing approximately 6.2x last quarter annualized adjusted EBITDA before synergies, a material discount to NGS' multiple. Even before considering potential synergies, we acquired a highly complementary business at a multiple below our own.

Speaker #4: We acquired Flat Rock for approximately $120 million, representing approximately 6.2 times last quarter annualized adjusted EBITDA before synergies—a material discount to NGS's multiple.

Speaker #4: So even before considering potential synergies, we acquired a highly complementary business at a multiple below our own. Flat Rock added approximately 87,000 rented horsepower and materially accelerated our electric motor drive strategy. Approximately 20% of Flat Rock horsepower is electric, compared with 7% for legacy NGS prior to the acquisition.

Justin Jacobs: Flatrock Compression added approximately 87,000 rented horsepower and materially accelerated our electric motor drive strategy. Approximately 20% of Flatrock Compression horsepower is electric, compared with 7% for legacy NGS prior to the acquisition. Strategically, the transaction also increases our horsepower density in the Midland Basin, establishes critical mass in the Eagle Ford, diversifies our customer mix, and adds two large publicly traded E&P customers in the Midland Basin.

Speaker #4: Strategically, the transaction also increases our horsepower density in the Midland Basin, establishes critical mass in the Eagle Ford, diversifies our customer mix, and adds two large, publicly traded E&P customers in the Midland Basin.

Justin Jacobs: Strategically, the transaction also increases our horsepower density in the Midland Basin, establishes critical mass in the Eagle Ford, diversifies our customer mix, and adds two large publicly traded E&P customers in the Midland Basin. Looking ahead, importantly, we retain substantial financial flexibility. Even after completing the transaction, quarter-end leverage was 2.77x with $172 million of unused commitments in our facility. That gives us meaningful capacity to continue investing organically and to evaluate additional inorganic opportunities where the strategic fit and returns are compelling. Taken together, our progress across these four drivers has materially increased the earnings power, utilization, scale, and quality of NGS while preserving balance sheet flexibility. That stronger platform is particularly valuable because we believe the market opportunity in front of us remains highly attractive. Let me turn to the market outlook.

Speaker #4: Looking ahead, importantly, we retain substantial financial flexibility. Even after completing the transaction, quarter-end leverage was 2.77 times with $172 million of unused commitments in our facility.

Justin Jacobs: Looking ahead, importantly, we retain substantial financial flexibility. Even after completing the transaction, quarter-end leverage was 2.77x with $172 million of unused commitments in our facility. That gives us meaningful capacity to continue investing organically and to evaluate additional inorganic opportunities where the strategic fit and returns are compelling.

Speaker #4: That gives us meaningful capacity to continue investing organically and to evaluate additional inorganic opportunities where the strategic fit and returns are compelling. Taken together, our progress across these four drivers has materially increased the earnings power, utilization, scale, and quality of NGS while preserving balance sheet flexibility.

Justin Jacobs: Taken together, our progress across these four drivers has materially increased the earnings power, utilization, scale, and quality of NGS while preserving balance sheet flexibility. That stronger platform is particularly valuable because we believe the market opportunity in front of us remains highly attractive. Let me turn to the market outlook. Demand for compression remains strong across our operating footprint, particularly in the Permian Basin, which currently represents approximately 80% of our rental revenue.

Speaker #4: And that stronger platform is particularly valuable because we believe the market opportunity in front of us remains highly attractive. Let me turn to the market outlook.

Justin Jacobs: Demand for compression remains strong across our operating footprint, particularly in the Permian Basin, which currently represents approximately 80% of our rental revenue. There continues to be commodity price and geopolitical volatility, but compression demand is ultimately driven by production volumes, throughput, and reliability. The utilization levels across our fleet demonstrate that the customer environment remains constructive. On the oil side, prices in the mid-70s are supporting improving activity. Rig counts have been moving higher, Permian production remains at record levels, and gas-to-oil ratios continue to increase. That last point is particularly important for compression. As gas-to-oil ratios increase, more natural gas is produced for every barrel of oil. That gas must be gathered, processed, and transported. In each stage, there's a need for compression. On natural gas, the longer-term outlook remains exceptionally strong.

Speaker #4: Demand for compression remains strong across our operating footprint, particularly in the Permian basin, which currently represents approximately 80% of our rental revenue. There continues to be commodity price and geopolitical volatility.

Justin Jacobs: There continues to be commodity price and geopolitical volatility, but compression demand is ultimately driven by production volumes, throughput, and reliability. The utilization levels across our fleet demonstrate that the customer environment remains constructive. On the oil side, prices in the mid-70s are supporting improving activity. Rig counts have been moving higher, Permian production remains at record levels, and gas-to-oil ratios continue to increase. That last point is particularly important for compression.

Speaker #4: But compression demand is ultimately driven by production volumes, throughput, and reliability. The utilization levels across our fleet demonstrate that the customer environment remains constructive.

Speaker #4: On the oil side, prices in the mid-70s are supporting improving activity. Rig counts have been moving higher, Permian production remains at record levels, and gas-to-oil ratios continue to increase.

Speaker #4: That last point is particularly important for compression. As gas-to-oil ratios increase, more natural gas is produced for every barrel of oil. That gas must be gathered, processed, and transported, and at each stage, there is a need for compression.

Justin Jacobs: As gas-to-oil ratios increase, more natural gas is produced for every barrel of oil. That gas must be gathered, processed, and transported. In each stage, there's a need for compression. On natural gas, the longer-term outlook remains exceptionally strong. Growing LNG exports, increased power generation demand, data center load growth, and behind-the-meter power generation should require substantially more natural gas infrastructure over the coming years.

Speaker #4: On natural gas, the longer-term outlook remains exceptionally strong. Growing LNG exports, increased power generation demand, data center load growth, and behind-the-meter power generation should require substantially more natural gas infrastructure over the coming years.

Justin Jacobs: Growing LNG exports, increased power generation demand, data center load growth, and behind-the-meter power generation should require substantially more natural gas infrastructure over the coming years. The United States also occupies an advantaged position as the world's largest LNG exporter and a secure source of supply without some of the geographic choke points affecting other major energy exporting regions. Whether we look at associated gas production in the Permian or longer-term growth in natural gas demand, both point toward a greater need for compression. At the same time, the supply of new compression equipment remains constrained. Engine and fabrication lead times have extended significantly. For existing compression providers, that combination of growing demand and constrained equipment supply supports high utilization and disciplined pricing, particularly for large horsepower equipment. We're also operating in an inflationary environment. Labor and parts costs increased during the quarter, and we expect continued pressure.

Speaker #4: The United States also occupies an advantaged position as the world's largest LNG exporter and a secure source of supply without some of the geographic choke points affecting other major energy exporting regions.

Justin Jacobs: The United States also occupies an advantaged position as the world's largest LNG exporter and a secure source of supply without some of the geographic choke points affecting other major energy exporting regions. Whether we look at associated gas production in the Permian or longer-term growth in natural gas demand, both point toward a greater need for compression. At the same time, the supply of new compression equipment remains constrained. Engine and fabrication lead times have extended significantly.

Speaker #4: So whether we look at associated gas production, the Permian, or longer-term growth in natural gas demand, both point toward a greater need for compression.

Speaker #4: At the same time, the supply of new compression equipment remains constrained. Engine and fabrication lead times have extended significantly. For existing compression providers, that combination of growing demand and constrained equipment supply supports high utilization and disciplined pricing, particularly for large horsepower equipment.

Justin Jacobs: For existing compression providers, that combination of growing demand and constrained equipment supply supports high utilization and disciplined pricing, particularly for large horsepower equipment. We're also operating in an inflationary environment. Labor and parts costs increased during the quarter, and we expect continued pressure. Lubricants are a relatively small portion of our cost base, but refinery constraints, combined with the higher crude prices, are likely to drive materially higher lubricant costs.

Speaker #4: We're also operating in an inflationary environment. Labor and parts costs increased during the quarter, and we expect continued pressure. Lubricants are a relatively small portion of our cost base, but refinery constraints combined with a higher crude prices are likely to drive materially higher lubricant costs.

Justin Jacobs: Lubricants are a relatively small portion of our cost base, but refinery constraints, combined with the higher crude prices, are likely to drive materially higher lubricant costs. Our increased scale, procurement capabilities, and smart platform-enabled operating platform should help us mitigate some of those pressures, but we are not immune to inflation and remain disciplined on both price and cost. Overall, our review remains highly positive. Industry fundamentals are strong. Equipment supply is constrained. Pricing remains constructive, and compression is a mission-critical service for our customers. NGS enters that environment with a larger and better fleet, broader customer relationships, increased base and density, technology-enabled service capabilities, and significant financial flexibility. With that context, I'll turn the call over to Ian Eckert to discuss what that stronger NGS platform delivered during the Q2.

Speaker #4: Our increased scale, procurement capabilities, and smart-enabled operating platform should help us mitigate some of those pressures. However, we are not immune to inflation, and we remain disciplined on both price and cost.

Justin Jacobs: Our increased scale, procurement capabilities, and smart platform-enabled operating platform should help us mitigate some of those pressures, but we are not immune to inflation and remain disciplined on both price and cost. Overall, our review remains highly positive. Industry fundamentals are strong. Equipment supply is constrained. Pricing remains constructive, and compression is a mission-critical service for our customers.

Speaker #4: Overall, our review remains highly positive. Industry fundamentals are strong, equipment supply is constrained, pricing remains constructive, and compression is a mission-critical service for our customers.

Speaker #4: NGS enters that environment with a larger and better fleet, broader customer relationships, increased base and density, technology-enabled service capabilities, and significant financial flexibility. With that context, I'll turn the call over to Ian to discuss what that stronger NGS platform delivered during the second quarter.

Justin Jacobs: NGS enters that environment with a larger and better fleet, broader customer relationships, increased base and density, technology-enabled service capabilities, and significant financial flexibility. With that context, I'll turn the call over to Ian Eckert to discuss what that stronger NGS platform delivered during the Q2.

Speaker #1: Thank you, Justin. And good morning to those joining us today. We ended June with approximately 759,000 available horsepower and about 670,000 rented horsepower. Rented horsepower increased 34.3% year over year, reflecting the combination of continued organic deployments and the addition of approximately 87,000 rented horsepower through the acquisition of Flat Rock.

Ian Eckert: Thank you, Justin, and good morning to those joining us today. We ended June with approximately 759,000 available horsepower and approximately 670,000 rented horsepower. Rented horsepower increased 34.3% year-over-year, reflecting the combination of continued organic deployments and the addition of approximately 87,000 rented horsepower through the acquisition of Flatrock Compression. Organically, we added approximately 5,000 horsepower during the Q2 and approximately 22,000 horsepower during the H1, with electric motor drive equipment representing well over half of those additions. Based on our contracted deployment schedule and current customer demand, we now expect to deploy at least 55,000 horsepower organically during 2026, up from our previous expectation of 50,000 horsepower. Horsepower utilization reached a record 88.3%, a significant improvement from the sub 80% utilization levels we reported just three years ago, which primarily reflects our investment in large horsepower and electric motor drive equipment.

Speaker #1: Organically, we added approximately 5,000 horsepower during the second quarter and approximately 22,000 horsepower during the first half, with electric motor drive equipment representing well over half of those additions.

Ian Eckert: Organically, we added approximately 5,000 horsepower during the Q2 and approximately 22,000 horsepower during the H1, with electric motor drive equipment representing well over half of those additions. Based on our contracted deployment schedule and current customer demand, we now expect to deploy at least 55,000 horsepower organically during 2026, up from our previous expectation of 50,000 horsepower.

Speaker #1: Based on our contracted deployment schedule and current customer demand, we now expect to deploy at least 55,000 horsepower organically during 2026, up from our previous expectation of 50,000 horsepower.

Speaker #1: Horsepower utilization reached a record 88.3%, a significant improvement from the sub-80% utilization levels we reported just three years ago. Which primarily reflects our investment in large horsepower and electric motor drive equipment.

Ian Eckert: Horsepower utilization reached a record 88.3%, a significant improvement from the sub 80% utilization levels we reported just three years ago, which primarily reflects our investment in large horsepower and electric motor drive equipment. That combination of greater scale, higher utilization, and improved fleet mix translated into record Q2 financial performance.

Speaker #1: That combination of greater scale, higher utilization, and improved fleet mix translated into record second-quarter financial performance. Turning to the income statement, rental revenue was a record 49.4 million dollars in the second quarter.

Ian Eckert: That combination of greater scale, higher utilization, and improved fleet mix translated into record Q2 financial performance. Turning to the income statement, rental revenue was a record $49.4 million in Q2, up $9.9 million, or approximately 25% from the prior year quarter, and up $2.3 million, or approximately 5% sequentially. Importantly, that growth was driven by both increased horsepower and continued pricing execution. However, Flatrock Compression contributed only approximately half a month of financial performance during Q2, including $1.9 million of rental revenue. As a result, the vast majority of the acquisition's financial contribution will first be reflected in our Q3 results. On a pro forma basis, assuming a full quarter contribution from Flatrock Compression, rental revenue per horsepower per month was approximately $28.06, an increase of more than 5% year-over-year.

Ian Eckert: Turning to the income statement, rental revenue was a record $49.4 million in Q2, up $9.9 million, or approximately 25% from the prior year quarter, and up $2.3 million, or approximately 5% sequentially. Importantly, that growth was driven by both increased horsepower and continued pricing execution. However, Flatrock Compression contributed only approximately half a month of financial performance during Q2, including $1.9 million of rental revenue.

Speaker #1: Up $9.9 million, or approximately 25%, from the prior year quarter, and up $2.3 million, or approximately 5%, sequentially. Importantly, that growth was driven by both increased horsepower and continued pricing execution.

Speaker #1: However, Flat Rock contributed only approximately half a month of financial performance during the second quarter. Including 1.9 million dollars of rental revenue. As a result, the vast majority of the acquisition's financial contribution will first be reflected in our third quarter results.

Ian Eckert: As a result, the vast majority of the acquisition's financial contribution will first be reflected in our Q3 results. On a pro forma basis, assuming a full quarter contribution from Flatrock Compression, rental revenue per horsepower per month was approximately $28.06, an increase of more than 5% year-over-year. That performance reflects the quality of our fleet, the value of our service offering, and our ability to capture price in a constructive market.

Speaker #1: On a pro forma basis, assuming a full quarter contribution from Flat Rock, rental revenue per horsepower per month was approximately $28.06, an increase of more than 5% year over year.

Speaker #1: That performance reflects the quality of our fleet. The value of our service offering, and our ability to capture price in a constructive market. We also converted that revenue growth into higher profitability despite a challenging inflationary environment.

Ian Eckert: That performance reflects the quality of our fleet, the value of our service offering, and our ability to capture price in a constructive market. We also converted that revenue growth into higher profitability despite a challenging inflationary environment. Rental adjusted gross margin increased $6.2 million, or 25.6%, year-over-year to $30.2 million. Rental adjusted gross margin percentage was 61.1%, up approximately 36 basis points from the prior year quarter. I think that margin performance is particularly notable given continued cost pressure across labor, lubricants, parts, and other operating inputs. It reflects the combined benefit of pricing discipline, improved fleet mix, higher utilization, and strong field service level execution. Reported SG&A was $9.9 million during the quarter, which included approximately $3.3 million of transaction costs associated with Flatrock Compression.

Ian Eckert: We also converted that revenue growth into higher profitability despite a challenging inflationary environment. Rental adjusted gross margin increased $6.2 million, or 25.6%, year-over-year to $30.2 million. Rental adjusted gross margin percentage was 61.1%, up approximately 36 basis points from the prior year quarter. I think that margin performance is particularly notable given continued cost pressure across labor, lubricants, parts, and other operating inputs.

Speaker #1: Rental adjusted gross margin, increased 6.2 million dollars, or 25.6%, year over year, to 30.2 million dollars. Rental adjusted gross margin percentage was 61.1%, up approximately 36 basis points, from the prior year quarter.

Speaker #1: I think that margin performance is particularly notable given continued cost pressure across labor, lubricants, parts, and other operating inputs. It reflects the combined benefit of pricing discipline, improved fleet mix, higher utilization, and strong field service level execution.

Ian Eckert: It reflects the combined benefit of pricing discipline, improved fleet mix, higher utilization, and strong field service level execution. Reported SG&A was $9.9 million during the quarter, which included approximately $3.3 million of transaction costs associated with Flatrock Compression. Excluding those transaction costs and non-cash SG&A, underlying SG&A was approximately $5.8 million, or 11.3% of revenue, compared with 11.6% in Q2 2025.

Speaker #1: Reported SG&A was 9.9 million dollars during the quarter. Which included approximately 3.3 million of transaction costs associated with Flat Rock. Excluding those transaction costs, and non-cash SG&A, underlying SG&A was approximately 5.8 million dollars, or 11.3% of revenue, compared with 11.6% in the second quarter of 2025.

Ian Eckert: Excluding those transaction costs and non-cash SG&A, underlying SG&A was approximately $5.8 million, or 11.3% of revenue, compared with 11.6% in Q2 2025. As the business continues to scale, we remain focused on creating additional fixed cost leverage while making the investments necessary to support a larger platform. Adjusted EBITDA reached a record $25.1 million, increasing $5.4 million, or 27.4% year-over-year, and 3.3% sequentially. Importantly, adjusted EBITDA growth year-over-year exceeded revenue growth, demonstrating the operating leverage inherent in the larger platform. Reported net income was $3.8 million, or $0.30 per diluted share, compared with $5.2 million, or $0.41 per diluted share in the prior year quarter. The year-over-year comparison was impacted by the approximately $3.3 million of transaction costs associated with the Flatrock Compression acquisition.

Speaker #1: As the business continues to scale, we remain focused on creating additional fixed cost leverage, while making the investments necessary to support a larger platform.

Ian Eckert: As the business continues to scale, we remain focused on creating additional fixed cost leverage while making the investments necessary to support a larger platform. Adjusted EBITDA reached a record $25.1 million, increasing $5.4 million, or 27.4% year-over-year, and 3.3% sequentially. Importantly, adjusted EBITDA growth year-over-year exceeded revenue growth, demonstrating the operating leverage inherent in the larger platform.

Speaker #1: Adjusted EBITDA reached a record $25.1 million, increasing $5.4 million, or 27.4%, year over year, and 3.3% sequentially. Importantly, adjusted EBITDA growth year over year exceeded revenue growth, demonstrating the operating leverage inherent in the larger platform.

Speaker #1: Reported net income was 3.8 million dollars, or 30 cents per diluted share, compared with 5.2 million dollars, or 41 cents per diluted share in the prior year quarter.

Ian Eckert: Reported net income was $3.8 million, or $0.30 per diluted share, compared with $5.2 million, or $0.41 per diluted share in the prior year quarter. The year-over-year comparison was impacted by the approximately $3.3 million of transaction costs associated with the Flatrock Compression acquisition. Excluding those transaction costs, adjusted net income was $6.1 million, or $0.47 per diluted share, providing a much better view of the underlying earnings performance of the business.

Speaker #1: The year over year comparison was impacted by the approximately 3.3 million dollars of transaction costs associated with the Flat Rock acquisition. Excluding those transaction costs, adjusted net income was 6.1 million dollars, or 47 cents per diluted share, providing a much better view of the underlying earnings performance of the business.

Ian Eckert: Excluding those transaction costs, adjusted net income was $6.1 million, or $0.47 per diluted share, providing a much better view of the underlying earnings performance of the business. There is one additional item on net income that I want to make clear for modeling purposes. Our Q2 effective tax rate was 30.9%, above the approximately 25% to 26% rate we expect for the full year. The higher quarterly rate was primarily driven by a discrete state tax item following a change in Texas franchise tax depreciation rules, which required a one-time remeasurement of certain deferred tax liabilities associated with property and equipment. We do not view the Q2 tax rate as a run rate. For the full year, we still expect approximately 25% to 26% remains the appropriate range.

Speaker #1: There is one additional item on net income that I want to make clear for modeling purposes. Our second quarter effective tax rate was 30.9%, above the approximately 25 to 26 percent rate we expect for the full year.

Ian Eckert: There is one additional item on net income that I want to make clear for modeling purposes. Our Q2 effective tax rate was 30.9%, above the approximately 25% to 26% rate we expect for the full year. The higher quarterly rate was primarily driven by a discrete state tax item following a change in Texas franchise tax depreciation rules, which required a one-time remeasurement of certain deferred tax liabilities associated with property and equipment. We do not view the Q2 tax rate as a run rate.

Speaker #1: The higher quarterly rate was primarily driven by a discrete state tax item following a change in Texas franchise tax depreciation rules, which required a one-time remeasurement of certain deferred tax liabilities associated with property and equipment.

Speaker #1: We do not view the second quarter tax rate as a run rate. For the full year, we still expect approximately 25% to 26% remains the appropriate range.

Ian Eckert: For the full year, we still expect approximately 25% to 26% remains the appropriate range. Turning to cash flow and the balance sheet, cash provided by operating activities was approximately $25.4 million during Q2 and $48.5 million for H1, an increase of roughly 50% compared to H1 2025. We expect the contribution from Flatrock Compression to further strengthen our cash generation profile. Accounts receivable ended the quarter at approximately $22 million.

Speaker #1: Turning to cash flow and the balance sheet, cash provided by operating activities was approximately $25.4 million during the second quarter, and $48.5 million for the first half.

Ian Eckert: Turning to cash flow and the balance sheet, cash provided by operating activities was approximately $25.4 million during Q2 and $48.5 million for H1, an increase of roughly 50% compared to H1 2025. We expect the contribution from Flatrock Compression to further strengthen our cash generation profile. Accounts receivable ended the quarter at approximately $22 million. Reported DSO improved by approximately four days sequentially to approximately 39 days. Because the Flatrock Compression receivables are fully included at quarter end, while only 19 days of Flatrock Compression revenue are included in the quarter, reported DSO is not the best run rate measure. Pro forma for a full quarter of Flatrock Compression revenue, DSO was approximately 33 days, which is more representative of the performance of the combined business.

Speaker #1: An increase of roughly 50% compared to the first half of 2025. And we expect the contribution from Flat Rock to further strengthen our cash generation profile.

Speaker #1: Accounts receivable ended the quarter at approximately 22 million dollars. Reported DSO improved by approximately four days sequentially to approximately 39 days. Because the Flat Rock receivables are fully included at quarter end, while only 19 days of Flat Rock revenue are included in the quarter, reported DSO is not the best run rate measure.

Ian Eckert: Reported DSO improved by approximately four days sequentially to approximately 39 days. Because the Flatrock Compression receivables are fully included at quarter end, while only 19 days of Flatrock Compression revenue are included in the quarter, reported DSO is not the best run rate measure. Pro forma for a full quarter of Flatrock Compression revenue, DSO was approximately 33 days, which is more representative of the performance of the combined business.

Speaker #1: Pro forma for a full quarter of Flat Rock revenue, DSO was approximately 33 days, which is more representative of the performance of the combined business.

Speaker #1: Second quarter capital expenditures totaled approximately 18.8 million dollars, including approximately 15.3 million dollars of growth capital and 3.4 million dollars of maintenance capital. First half growth capital expenditures totaled approximately 27.6 million dollars.

Ian Eckert: Q2 capital expenditures totaled approximately $18.8 million, including approximately $15.3 million of growth capital and $3.4 million of maintenance capital. H1 growth capital expenditures totaled approximately $27.6 million. We expect growth capital spending to increase materially during H2 as we execute against our contracted deployment schedule. Turning to the Flatrock Compression transaction, purchase consideration consisted of approximately $108.9 million of cash and $10 million of NGS common stock. In conjunction with the acquisition, we increased our committed credit facility from $400 million to $500 million while retaining a $100 million accordion. The preliminary purchase price allocation also reinforces the tangible nature of what we acquired. Approximately $100.6 million, or roughly 85% of the purchase price, was allocated to the rental fleet, with less than $1 million reported as goodwill. In other words, the transaction was overwhelmingly an investment in productive cash-generating equipment.

Speaker #1: We expect growth capital spending to increase materially during the second half, as we execute against our contracted deployment schedule. Turning to the Flat Rock transaction, purchase consideration consisted of approximately $108.9 million of cash and $10 million of NGS common stock.

Speaker #1: In conjunction with the acquisition, we increased our committed credit facility from $400 million to $500 million, while retaining a $100 million accordion.

Ian Eckert: In conjunction with the acquisition, we increased our committed credit facility from $400 million to $500 million while retaining a $100 million accordion. The preliminary purchase price allocation also reinforces the tangible nature of what we acquired. Approximately $100.6 million, or roughly 85% of the purchase price, was allocated to the rental fleet, with less than $1 million reported as goodwill. In other words, the transaction was overwhelmingly an investment in productive cash-generating equipment.

Speaker #1: The preliminary purchase price allocation also reinforces the tangible nature of what we acquired. Approximately $100.6 million, or roughly 85% of the purchase price, was allocated to the rental fleet.

Speaker #1: With less than $1 million recorded as goodwill. In other words, the transaction was overwhelmingly an investment in productive, cash-generating equipment. We ended the quarter with approximately $328 million outstanding under the credit facility.

Ian Eckert: We ended the quarter with approximately $328 million outstanding under the credit facility, approximately $135 million of available borrowing capacity under the borrowing base and over $170 million of unused facility. Quarter end bank covenant leverage was approximately 2.77 times with substantial headroom relative to our 3.5 times leverage covenant even after funding the acquisition. Finally, we returned approximately $1.9 million to shareholders through our Q2 dividend of $0.15 per share, and subsequently announced another $0.15 per share dividend for Q3. That quarterly dividend is 50% above the $0.10 per share with which we initiated the program one year ago. In summary, Q2 was another record operating and financial quarter for NGS.

Speaker #1: Approximately 135 million of available borrowing capacity under the borrowing base, and over 170 million dollars of unused facility. Quarter end bank covenant leverage was approximately 2.77 times with substantial headroom relative to our 3.5 times leverage covenant even after funding the acquisition.

Speaker #1: Finally, we returned approximately $1.9 million to shareholders through our second quarter dividend of $0.15 per share, and subsequently announced another $0.15 per share dividend for the third quarter. That quarterly dividend is 50% above the $0.10 per share with which we initiated the program one year ago.

Ian Eckert: Finally, we returned approximately $1.9 million to shareholders through our Q2 dividend of $0.15 per share, and subsequently announced another $0.15 per share dividend for Q3. That quarterly dividend is 50% above the $0.10 per share with which we initiated the program one year ago.

Speaker #1: In summary, the second quarter was another record operating and financial quarter for NGS. The combined platform is larger, more productive, and more diversified. And we have preserved the liquidity and covenant capacity to continue executing our growth and value levers while still returning capital to shareholders.

Ian Eckert: In summary, Q2 was another record operating and financial quarter for NGS. The combined platform is larger, more productive, and more diversified. We have preserved the liquidity and covenant capacity to continue executing our growth and value levers while still returning capital to shareholders. With that, I will turn the call back to Justin to discuss our updated 2026 guidance and closing comments.

Ian Eckert: The combined platform is larger, more productive, and more diversified. We have preserved the liquidity and covenant capacity to continue executing our growth and value levers while still returning capital to shareholders. With that, I will turn the call back to Justin to discuss our updated 2026 guidance and closing comments.

Speaker #1: With that, I'll turn the call back to Justin to discuss our updated 2026 guidance and closing comments.

Speaker #2: Thank you, Ian. Based on our second quarter performance, the Flat Rock acquisition, contracted organic fleet additions, and our current visibility into the remainder of the year, we are increasing full year 2026 adjusted EBITDA guidance to 103 million to 108 million from our previous range of 92.5 to 97.5 million.

Justin Jacobs: Thank you, Ian. Based on our Q2 performance, the Flatrock Compression acquisition, contracted organic fleet additions, and our current visibility into the remainder of the year, we are increasing full year 2026 adjusted EBITDA guidance to $103 million to $108 million from our previous range of $92.5 million to $97.5 million. The increase reflects roughly a half month from Flatrock Compression in Q2, as well as a full H2 contribution. To provide some color, we view this as effectively maintaining existing guidance from NGS and layering in the 6 and a half months of contribution from the acquisition of Flatrock Compression. We look forward to reporting our Q3 results where we will have a full quarter of contribution from the Flatrock Compression acquisition, along with the existing NGS results, and we can adjust our guidance as appropriate.

Speaker #2: The increase reflects roughly a half-month from Flat Rock in the second quarter, as well as a full second half contribution. To provide some color, we view this as effectively maintaining existing guidance from NGS and layering in the six and a half months of contribution from the acquisition of Flat Rock.

Justin Jacobs: To provide some color, we view this as effectively maintaining existing guidance from NGS and layering in the 6 and a half months of contribution from the acquisition of Flatrock Compression. We look forward to reporting our Q3 results where we will have a full quarter of contribution from the Flatrock Compression acquisition, along with the existing NGS results, and we can adjust our guidance as appropriate.

Speaker #2: We look forward to reporting our third quarter results, where we will have a full quarter of contribution from the Flat Rock acquisition, along with the existing NGS results.

Speaker #2: And we can adjust our guidance as appropriate. We are also increasing full-year growth capital expenditures guidance to $60 to $80 million from our previous range of $55 to $70 million.

Justin Jacobs: We are also increasing full year growth capital expenditures guidance to $60 million to $80 million from our previous range of $55 million to $70 million. For clarification, this excludes acquisition consideration. The increase reflects incremental large horsepower and electric motor drive additions, as well as growth commitments that came to NGS with Flatrock Compression. Maintenance capital expenditure guidance is now $15 million to $19 million. The modest increase reflects the larger combined fleet. Importantly, the Flatrock Compression fleet came to us in very good condition and without a meaningful backlog of deferred maintenance. Our quarterly dividend remains $0.15 per share, reflecting our continued confidence in the durability of the cash flow generated by the business. Before I close, I want to briefly note one additional corporate development. Effective 20 July, NGS completed its re-domestication from Colorado to Texas and now is a Texas corporation.

Speaker #2: For clarification, this excludes acquisition consideration. The increase reflects incremental large horsepower and electric motor drive additions as well as growth commitments that came to NGS with Flat Rock.

Speaker #2: Maintenance capital expenditure guidance is now $15 to $19 million. The modest increase reflects the larger combined fleet. Importantly, the Flat Rock fleet came to us in very good condition and without a meaningful backlog of deferred maintenance.

Justin Jacobs: Importantly, the Flatrock Compression fleet came to us in very good condition and without a meaningful backlog of deferred maintenance. Our quarterly dividend remains $0.15 per share, reflecting our continued confidence in the durability of the cash flow generated by the business. Before I close, I want to briefly note one additional corporate development. Effective 20 July, NGS completed its re-domestication from Colorado to Texas and now is a Texas corporation. The primary driver for this change was corporate governance.

Speaker #2: Our quarterly dividend remains 15 cents per share reflecting our continued confidence in the durability of the cash flow generated by the business. Before I close, I want to briefly note one additional corporate development.

Speaker #2: Effective July 20, NGS completed its redomestication from Colorado to Texas and is now a Texas corporation. The primary driver for this change was corporate governance.

Justin Jacobs: The primary driver for this change was corporate governance. Our legacy Colorado governing documents included a classified or staggered board and unusually high voting thresholds that made those provisions difficult to change. Re-domesticating to Texas provided the most efficient path to adopt new governing documents that better reflect how we believe a public company should be governed. Most importantly, our new governing documents eliminate the staggered board. Beginning with our annual meeting next year, every director will stand for election every year. We made this change proactively because we believe it is more shareholder-friendly and in the best interest of NGS and our shareholders. I will close where I started. Over the last three years, we have demonstrated our ability to create value across each of our four growth and value drivers. What excites us today is that we continue to see meaningful opportunity across all four.

Speaker #2: Our legacy Colorado governing documents included a classified or staggered board and unusually high voting thresholds that made those provisions difficult to change. Redomesticating to Texas provided the most efficient path to adopt new governing documents that better reflect how we believe a public company should be governed.

Justin Jacobs: Our legacy Colorado governing documents included a classified or staggered board and unusually high voting thresholds that made those provisions difficult to change. Re-domesticating to Texas provided the most efficient path to adopt new governing documents that better reflect how we believe a public company should be governed. Most importantly, our new governing documents eliminate the staggered board. Beginning with our annual meeting next year, every director will stand for election every year.

Speaker #2: Most importantly, our new governing documents eliminate the staggered board. Beginning with our annual meeting next year, every director will stand for election every year.

Speaker #2: We made this change proactively because we believe it is more shareholder-friendly and in the best interest of NGS and our shareholders. I will close where I started.

Justin Jacobs: We made this change proactively because we believe it is more shareholder-friendly and in the best interest of NGS and our shareholders. I will close where I started. Over the last three years, we have demonstrated our ability to create value across each of our four growth and value drivers. What excites us today is that we continue to see meaningful opportunity across all four. We can generate more earnings from the fleet we already own. We can make underutilized assets and capital more productive.

Speaker #2: Over the last three years, we have demonstrated our ability to create value across each of our four growth and value drivers. What excites us today is that we continue to see meaningful opportunity across all four.

Speaker #2: We can generate more earnings from the fleet we already own. We can make underutilized assets and capital more productive. We believe we can continue to grow organically faster than the industry and take market share.

Justin Jacobs: We can generate more earnings from the fleet we already own. We can make underutilized assets and capital more productive. We believe we can continue to grow organically faster than the industry and take market share, and our balance sheet gives us the capacity to pursue additional accretive acquisitions when we find the right opportunities. At the same time, the market backdrop remains very supportive. Compression demand is strong, equipment availability is constrained, and the long-term outlook for natural gas continues to improve. We believe the combination of a stronger platform and significant remaining opportunity across each of our four growth and value drivers positions NGS to continue increasing earnings, cash flow, and long-term value for our shareholders. Luke, we are now ready to open the call for questions.

Justin Jacobs: We believe we can continue to grow organically faster than the industry and take market share, and our balance sheet gives us the capacity to pursue additional accretive acquisitions when we find the right opportunities. At the same time, the market backdrop remains very supportive. Compression demand is strong, equipment availability is constrained, and the long-term outlook for natural gas continues to improve.

Speaker #2: And our balance sheet gives us the capacity to pursue additional creative acquisitions when we find the right opportunities. At the same time, the market backdrop remains very supportive.

Speaker #2: Compression demand is strong, equipment availability is constrained, and the long-term outlook for natural gas continues to improve. We believe the combination of a stronger platform and significant remaining opportunity across each of our four growth and value drivers positions NGS to continue increasing earnings, cash flow, and long-term value for our shareholders.

Justin Jacobs: We believe the combination of a stronger platform and significant remaining opportunity across each of our four growth and value drivers positions NGS to continue increasing earnings, cash flow, and long-term value for our shareholders. Luke, we are now ready to open the call for questions.

Speaker #2: Luke, we're now ready to open the call for questions.

Speaker #3: Ladies and gentlemen, at this time we will conduct the question and answer session. If you would like to state a question, please go ahead and press 7 pound on your phone now.

Operator 2: Ladies and gentlemen, at this time, we will conduct the question and answer session. If you would like to state a question, please go ahead and press 7 pound on your phone now. Again, that's 7 pound, and you'll be placed in the queue in the order received. You can press 7 pound again at any time to remove yourself from the queue. Our first question comes from Jim Rollyson with Raymond James. Go ahead, please.

Operator: Ladies and gentlemen, at this time, we will conduct the question and answer session. If you would like to state a question, please go ahead and press 7 pound on your phone now. Again, that's 7 pound, and you'll be placed in the queue in the order received. You can press 7 pound again at any time to remove yourself from the queue. Our first question comes from Jim Rollyson with Raymond James. Go ahead, please.

Speaker #3: Again, that's seven pound. And you'll be placed in the queue in the order received. You can press seven pound again at any time to remove yourself from the queue.

Speaker #3: Our first question comes from Jim Rolison with Raymond James. Go ahead, please.

Speaker #4: Hey, good morning, guys. Great results and you covered a whole lot of ground this morning. I guess Justin, you talked about outpacing growth relative to the market which you guys have been on this trend for a period of time now.

James Rollyson: Hey, good morning, guys. Great results and you covered a whole lot of ground this morning. I guess, Justin, you talked about outpacing growth relative to the market, which you guys have been on this trend for a period of time now. If you listen to some of the peers that have talked about the long-term outlook, which continues to be very bullish. You've seen some interesting longer-term commitments by others, and my recollection is your growth has been driven in large part by some specific customer opportunities. I'd love to just get an update on how you think about the opportunity set in front of you and over time, what you think a sustainable growth CapEx outlook might look like.

Jim Rollyson: Hey, good morning, guys. Great results and you covered a whole lot of ground this morning. I guess, Justin, you talked about outpacing growth relative to the market, which you guys have been on this trend for a period of time now. If you listen to some of the peers that have talked about the long-term outlook, which continues to be very bullish. You've seen some interesting longer-term commitments by others, and my recollection is your growth has been driven in large part by some specific customer opportunities.

Speaker #4: If you kind of listen to some of the peers that have kind of talked about the long-term outlook which continues to be very, very bullish, you've seen some interesting longer-term commitments by others.

Speaker #4: And my recollection is, your growth has been driven in large part by some specific customer opportunities. I'd love to just get an update on how you think about the opportunity set in front of you, and over time, what you think a sustainable growth CapEx outlook might look like.

Jim Rollyson: I'd love to just get an update on how you think about the opportunity set in front of you and over time, what you think a sustainable growth CapEx outlook might look like.

Speaker #2: Morning, Jim. Thank you for joining and for the question. You know, as I look forward, we've obviously talked extensively here about the market and the growth that we see going forward, and obviously the growth that we've achieved over the last several years.

Justin Jacobs: Morning, Jim. Thank you. Thanks for joining in the question. As I look at the forward, obviously talked extensively here about the market and the growth that we see going forward, and obviously the growth that we've achieved over the last several years. I think that over time, and the Flatrock Compression acquisition is certainly helpful in this particular point, that growth is going to come from a broader set of customers over time. Our several large disclosed customers we'll continue to grow with. But we have more opportunities with existing customers to increase the amount of equipment we have with them, and substantially so, and there are new opportunity sets in terms of customers that we think we're going to be able to capture some equipment with going forward.

Speaker #2: I think that over time and the Flat Rock acquisition has certainly helpful in this particular point. That growth is going to come from a broader set of customers over time.

Speaker #2: Our several large disclosed customers will continue to grow with, but we have more opportunities with existing customers to increase the amount of equipment we have with them and substantially so.

Justin Jacobs: But we have more opportunities with existing customers to increase the amount of equipment we have with them, and substantially so, and there are new opportunity sets in terms of customers that we think we're going to be able to capture some equipment with going forward. I think it is continued growth with existing customers, bringing both large and small, and new customer wins out there that I think we'll be able to hit or be able to capture growth with them. We're not going to set longer term targets at this point.

Speaker #2: And there are new opportunity sets in terms of customers that we think we're going to be able to capture some equipment with going forward.

Speaker #2: So I think it is continued growth with existing customers bringing both large and small and new customer wins out there that I think we'll be able to hit.

Justin Jacobs: I think it is continued growth with existing customers, bringing both large and small, and new customer wins out there that I think we'll be able to hit or be able to capture growth with them. We're not going to set longer term targets at this point. Really going to point to our track record of materially outpacing the industry, and with what I see and what I've seen people disclose, quite comfortable in saying we'll continue to do that in the future.

Speaker #2: Or be able to capture growth with them. We're not going to set, you know, longer-term targets at this point. Really going to point to our track record of materially outpacing the industry and with what I see and what I've seen people disclose, quite comfortable in saying we'll continue to do that in the future.

Justin Jacobs: Really going to point to our track record of materially outpacing the industry, and with what I see and what I've seen people disclose, quite comfortable in saying we'll continue to do that in the future.

Speaker #4: Got it. Appreciate that. And just as a follow-up, I think it's pretty related. You talked about fleet optimization and kind of unlocking value there.

James Rollyson: Got it. Appreciate that. Just as a follow-up, I think it is pretty related. You talked about fleet optimization and kind of unlocking value there. Maybe just your thoughts on what inning you are around optimizing your current fleet, especially with the added customer list of Flatrock Compression, maybe how you think about that over time.

Jim Rollyson: Got it. Appreciate that. Just as a follow-up, I think it is pretty related. You talked about fleet optimization and kind of unlocking value there. Maybe just your thoughts on what inning you are around optimizing your current fleet, especially with the added customer list of Flatrock Compression, maybe how you think about that over time.

Speaker #4: Maybe just your thoughts on what any you are around optimizing your current fleet and especially with the added customer list of Flat Rock, maybe how you think about that over time.

Speaker #2: I think when it comes to I'd break that into a couple of components. And I think we're in different innings. On those components. On the pricing side, the numbers as stated earlier, obviously there's been pretty significant price increases.

Justin Jacobs: Well, I think when it comes to I break that into a couple of components, and I think we are in different innings on those components. On the pricing side, the numbers I stated earlier, obviously, there has been pretty significant price increases. I think that will continue. It may not continue at the same rates, because there has been substantial price increases over the last several years, but I think that will continue. The second part I would look at is the operational optimization opportunity we have. I think that is centered around data capture, analysis, and execution or kind of implementation from the learning of that data and that analysis. That is not just financial. I think that is across a range of different opportunity types or sets of data, whether financial, operating, unit performance.

Speaker #2: And so I think that will continue may not continue at the same rates because there has been substantial price increases over the last several years.

Speaker #2: But I think that will continue. And the second part I would look at is, you know, the operational optimization opportunity we have. And I think that is centered around data capture, analysis, and execution—or kind of implementation—from the learning of that data and then analysis.

Justin Jacobs: I think that is centered around data capture, analysis, and execution or kind of implementation from the learning of that data and that analysis. That is not just financial. I think that is across a range of different opportunity types or sets of data, whether financial, operating, unit performance. In that particular area, I think we are much earlier in the game or in the earlier innings. It is not an opportunity we are going to quantify at this point.

Speaker #2: And that is not just financial. I think that is across a range of different opportunity types or sets of data, whether financial, operating, unit performance, and in that particular area, I think we are much earlier in the game or in the earlier innings.

Justin Jacobs: In that particular area, I think we are much earlier in the game or in the earlier innings. It is not an opportunity we are going to quantify at this point. But I do think that in terms of execution and delivering for our customers and ultimately for our financial performance, I think it is a material opportunity.

Speaker #2: It's not an opportunity we're going to quantify at this point, but I do think that in terms of execution and delivering for our customers, and ultimately for our financial performance, I think there it is a material opportunity.

Justin Jacobs: But I do think that in terms of execution and delivering for our customers and ultimately for our financial performance, I think it is a material opportunity.

Speaker #4: Sounds exciting. I'll turn it back. Thank you, sir.

James Rollyson: Sounds exciting. I will turn it back. Thank you, sir.

Jim Rollyson: Sounds exciting. I will turn it back. Thank you, sir.

Speaker #2: Thank you, Jim.

Justin Jacobs: Thank you, Jim.

Speaker #1: Thank you very much.

Operator 2: Thank you very much. Our next question comes from Nathaniel Pendleton with Texas Capital.

Operator: Thank you very much. Our next question comes from Nate Pendleton with Texas Capital.

Speaker #3: Our next question comes from Nate Pendleton with Texas Capital.

Speaker #4: Good morning, and congrats on the great update. I wanted to start with the integration of Flat Rock. In the release, you mentioned meaningful opportunities for growth, operating efficiency, and fixed cost leverage.

Nathaniel Pendleton: Good morning, and congrats on the great update. I wanted to start on the integration of Flatrock Compression. In the release, you mentioned meaningful opportunities on growth, operating efficiency, and fixed cost leverage. Can you unpack those a bit for us and give us a sense as to how you think about the size of those opportunities?

Nate Pendleton: Good morning, and congrats on the great update. I wanted to start on the integration of Flatrock Compression. In the release, you mentioned meaningful opportunities on growth, operating efficiency, and fixed cost leverage. Can you unpack those a bit for us and give us a sense as to how you think about the size of those opportunities?

Speaker #4: Can you unpack those a bit for us and give us a sense as to how you think about the size of those opportunities?

Speaker #2: Yes. Good morning, Nate. You know, in terms of the Flat Rock integration, I think the integration is going very well thus far. As it relates to the integration opportunities mentioned on the call, you know, there are clearly some opportunities in terms of route density and procurement scale.

Justin Jacobs: Yes. Good morning, Nate. In terms of the Flatrock Compression integration, I think the integration is going very well thus far. As it relates to the integration opportunities mentioned on the call, there is clearly some opportunities in terms of route density, procurement scale, commonality in terms of equipment or parts and technician productivity, as well as fixed cost leverage opportunities. We are not going to give a formal synergy target right now. The current guidance that we have provided does not assume material labor application synergies. So those represent potential upside rather than something required to make the deal work. We viewed this deal as an opportunity to acquire very attractive assets and a strong field service organization. It certainly wasn't reliant on any synergies that we expect to deliver over the course of the next year.

Ian Eckert: Yes. Good morning, Nate. In terms of the Flatrock Compression integration, I think the integration is going very well thus far. As it relates to the integration opportunities mentioned on the call, there is clearly some opportunities in terms of route density, procurement scale, commonality in terms of equipment or parts and technician productivity, as well as fixed cost leverage opportunities. We are not going to give a formal synergy target right now.

Speaker #2: You know, commonality in terms of equipment or parts, and technician productivity, as well as fixed cost leverage opportunities. We're not going to give a formal synergy target right now.

Speaker #2: You know, the current guidance that we've provided does not assume material labor application synergies. So those represent potential upside rather than something required to make the deal work.

Ian Eckert: The current guidance that we have provided does not assume material labor application synergies. So those represent potential upside rather than something required to make the deal work. We viewed this deal as an opportunity to acquire very attractive assets and a strong field service organization. It certainly wasn't reliant on any synergies that we expect to deliver over the course of the next year.

Speaker #2: You know, we viewed this deal as an opportunity to acquire very attractive assets and a strong field service organization. And it certainly wasn't reliant on any synergies that we expect to deliver over the course of the next year.

Speaker #4: Got it. Thanks, Ian. And as my follow-up, with lead times continuing to extend for new large equipment and the benefits of scale in this industry, can you talk a bit about how you're looking at the M&A landscape post-Flat Rock?

Nathaniel Pendleton: Got it. Thanks, Ian. As my follow-up, with lead times continuing to extend for new large equipment and the benefits of scale in this industry, can you talk a bit about how you are looking at the M&A landscape post Flatrock Compression? Have conversations changed as lead times have extended recently?

Nate Pendleton: Got it. Thanks, Ian. As my follow-up, with lead times continuing to extend for new large equipment and the benefits of scale in this industry, can you talk a bit about how you are looking at the M&A landscape post Flatrock Compression? Have conversations changed as lead times have extended recently?

Speaker #4: Have conversations changed as lead times have extended recently?

Speaker #2: I don't know that I would say I've seen any real difference in the M&A opportunities as a result of lead times extending. You know, in terms of how we're looking at the M&A landscape, it's really through the exact same kind of framework that we were using previously and have used consistently. Applied in the Flat Rock acquisition, it will apply going forward.

Justin Jacobs: I do not know that I would say I have seen any real difference in the M&A opportunities as a result of lead times extending. In terms of how we are looking at the M&A landscape, it is really through the exact same kind of framework that we were using previously, and have used consistently, applied in the Flatrock Compression acquisition, will apply going forward. What are the quality of the assets? What are the customers? What are the basins? Ultimately, what is the value? We will look at and have looked at, and will continue to look at whole company acquisitions, partial acquisitions of competitors or customers' equipment. Really, that framework has been consistent and will remain consistent. I have not seen, at least at this point, any real material change or any changes I can think of as it relates directly to the lead timing expansions or extensions.

Speaker #2: You know, what are the quality of the assets? What are the customers? What are the basins? And ultimately what's the value? We will look at and have looked at and continue to look at whole company acquisitions, partial acquisitions, of competitors or customers' equipment.

Justin Jacobs: We will look at and have looked at, and will continue to look at whole company acquisitions, partial acquisitions of competitors or customers' equipment. Really, that framework has been consistent and will remain consistent. I have not seen, at least at this point, any real material change or any changes I can think of as it relates directly to the lead timing expansions or extensions.

Speaker #2: And so really that framework has been consistent and will remain consistent. And I haven't seen at least at this point any real material change or any change that I can think of as it relates directly to the lead time expansion or extensions.

Speaker #4: All right. Thanks for taking my questions.

Nathaniel Pendleton: All right. Thanks for taking my questions.

Nate Pendleton: All right. Thanks for taking my questions.

Speaker #2: Appreciate it, Nate. Thank you.

Justin Jacobs: Appreciate it, Nate. Thank you.

Speaker #3: Thank you very much. And next is Rob Brown with Blake Street Capital. Go ahead, please.

Operator 2: Thank you very much. Next is Rob Brown with Lake Street Capital. Go ahead, please.

Operator: Thank you very much. Next is Rob Brown with Lake Street Capital. Go ahead, please.

Speaker #5: Good morning. Just following up a little bit on the constrained kind of lead times and supply environment, where are you seeing kind of the constraints and how are lead times, I guess, extending in those areas?

Rob Brown: Good morning. Just following up a little bit on the constrained kind of lead times and supply environment, where are you seeing kind of the constraints and how are lead times, I guess, extending in those areas?

Speaker #2: Yeah, I think the morning, Rob. Thanks for joining us. The I think it consistent story in terms of the drivers of the lead times, long lead times.

Justin Jacobs: Yeah. Morning, Rob. Thanks for joining us. I think it's a consistent story in terms of the drivers of the long lead times. The engines are typically, this depends on the size of the particular engine, but engines are typically the longest, and it's the largest engines that have the longest lead times. Certainly, the fabrication is still a constrained area, although less than the largest engines are. The compressors are behind that. For the equipment that we are ordering, we're seeing long lead times, but pretty consistent from 3 months ago, generally. That's something that we've been planning for. We feel like our ability to source engines from multiple OEMs provides an advantage for us in terms of procuring equipment to meet our customers' needs in shorter time periods.

Speaker #2: The engines are typically—this depends on the size of the particular engine. But engines are typically the longest, and it's the largest engines that have the longest lead times.

Speaker #2: And certainly the fabrication is still a constrained area, although less than the largest the largest engines are and then the compressors are behind that.

Speaker #2: So you know, we're seeing for the equipment that we are ordering we're seeing long lead times, but you know, pretty consistent from three months ago.

Speaker #2: Generally. And so that's something that we've been planning for. We feel like our ability to source engines from multiple OEMs provides an advantage for us in terms of procuring equipment to meet our customers' needs in shorter time periods.

Justin Jacobs: That's something that we've been planning for. We feel like our ability to source engines from multiple OEMs provides an advantage for us in terms of procuring equipment to meet our customers' needs in shorter time periods.

Speaker #5: Great. Thank you. And then kind of in your comments on gross margin or question on gross margin, you know, you've had some inflationary pressures, but you also have some scale benefits helping you.

Rob Brown: Great. Thank you. Coming to comments on gross margin or question on gross margin. You've had some inflationary pressures, but you also have some scale benefits helping you. Just what's sort of your sense on the gross margin impact overall, given the current cross currents?

Speaker #5: Just what's sort of your sense on the gross margin impact overall given the current gross currents?

Speaker #2: Yeah, Rob. When I take a look at the margins for the second half of the year, you know, we certainly don't expect the first quarter margin of 63.7% to be permanent, as you saw in the second quarter.

Ian Eckert: Yeah, Rob. When I take a look at the margins for the H2 of the year, we certainly don't expect a Q1 margin of 63.7% to be permanent as you saw in the Q2. But we do expect that the underlying fleet economics will remain strong. We do see some H2 pressure as it relates to lubricants and other inputs, but lubricants are a relatively small part of the overall cost base, and offsetting that are our pricing on new sets and renewals of existing contracts, and a larger mix of high return, large horsepower, and electric units, as well as some procurement scale and some synergies from the Flatrock Compression acquisition.

Speaker #2: But we do expect that the underlying fleet economics will remain strong. You know, we do see some second half pressure as it relates to lubricants and other inputs.

Ian Eckert: We do see some H2 pressure as it relates to lubricants and other inputs, but lubricants are a relatively small part of the overall cost base, and offsetting that are our pricing on new sets and renewals of existing contracts, and a larger mix of high return, large horsepower, and electric units, as well as some procurement scale and some synergies from the Flatrock Compression acquisition.

Speaker #2: But lubricants are a relatively small part of the overall cost base, and offsetting that are pricing on new sets and renewals of existing contracts.

Speaker #2: And a larger mix of high return, large horsepower and electric units, as well as some procurement scale and some synergies from the Flat Rock acquisition.

Speaker #2: As those things start to catch up with inflation, I think it sets up a reasonably stable second half of the year from a margin perspective in comparison.

Ian Eckert: As those things start to catch up with inflation, I think it sets up a reasonably stable H2 of the year from a margin perspective in comparison with what we recognized in the Q2.

Speaker #2: With what we recognized in the second quarter.

Speaker #5: Okay. Thank you. I'll turn it over.

Rob Brown: Okay. Thank you. I'll turn it over.

Speaker #2: Thanks, Rob.

Justin Jacobs: Thanks, Rob.

Speaker #3: Thank you very much. All right. Next question comes from Josh Jane with Daniel Energy Partners. Go ahead, please.

Operator 2: Thank you very much. Our next question comes from Josh Jayne with Daniel Energy Partners. Go ahead, please.

Operator: Thank you very much. Our next question comes from Josh Jayne with Daniel Energy Partners. Go ahead, please.

Speaker #6: Thanks. Good morning. I just wanted to follow up on your answer to the last question. So in talking about offsetting inflationary pressures, you talked about the ability to, I guess, reprice some of your equipment.

Josh Jayne: Thanks. Good morning. I just wanted to follow up on your answer to the last question. In talking about offsetting inflationary pressures, you talked about the ability to, I guess, reprice some of your equipment. Could you talk about how much of your fleet will reprice in the remainder of 2026 and into 2027? Or maybe how much of your fleet is priced below where leading edge pricing is today?

Speaker #6: Could you talk about how much of your fleet will reprice in the remainder of '26 and into '27, or maybe how much of your fleet is priced below where leading-edge pricing is today?

Speaker #2: I think good morning, Josh. Thanks for joining us. You know, I think the way I would answer that question is to point to what we have disclosed publicly.

Justin Jacobs: Good morning, Josh. Thanks for joining us. I think the way I would answer that question is to point to what we have disclosed publicly. In our investor presentation, we cite the amount of our, I believe it is done on rental revenue, that is under a term other than month to month, that number is 78%. We have 22% that is on month to month, and there is opportunity there. The weighted average tenor of that under term is 2.2 years. That can give you a little bit of sense, and it is obviously not exactly pro rata over that time period, but it gives you a reasonable sense of the fleet that will be coming up off of term and creates repricing opportunities.

Speaker #2: And in our investor presentation, we cite the amount of our I believe it's done on rental revenue that is under a term other than month to month.

Speaker #2: That number is 78%. And so we have 22% that's on month to month. And so there's opportunity there and the weighted average tenor of that under term is 2.2 years.

Speaker #2: And so that can give you a little bit of sense and it's, you know, obviously not exactly pro rata over that time period, but it gives you a reasonable sense of the fleet that will be coming up off of term and creates repricing opportunities.

Justin Jacobs: That can give you a little bit of sense, and it is obviously not exactly pro rata over that time period, but it gives you a reasonable sense of the fleet that will be coming up off of term and creates repricing opportunities.

Speaker #2: We have with the price increases you've seen over the last several years, we've been you know, I think appropriate in going to our customers and saying, listen, you know, the price is really across the board.

Justin Jacobs: With the price increases you have seen over the last several years, we have been, I think, appropriate in going to our customers and saying, "Listen, the prices really across the board, our costs across the board, those are up, and we have to be able to capture an appropriate price for the great service that we are providing." We have been, I think, relatively at good results related to that, both from a ultimately service level for our customers, but also delivering value for our shareholders and getting the appropriate return. It is something that we are constantly looking at. In terms of what price increases we can reasonably capture while still delivering a strong customer relationship or having a strong customer relationship. Obviously, that is always a balance, but something we are constantly looking at and looking across the different cost buckets and what we expect in terms of inflation.

Speaker #2: Our costs across the board. Those are up and we have to be able to, you know, capture an appropriate price for the great service that we're providing.

Speaker #2: And you know, we've been I think relatively at good results related to that both from a ultimately service level for our customers but also delivering value for our shareholders and getting the appropriate return.

Speaker #2: And so it's something that we're constantly looking at in terms of, you know, what price increases we can reasonably capture while still delivering a strong customer relationship or having a strong customer relationship.

Justin Jacobs: It is something that we are constantly looking at. In terms of what price increases we can reasonably capture while still delivering a strong customer relationship or having a strong customer relationship. Obviously, that is always a balance, but something we are constantly looking at and looking across the different cost buckets and what we expect in terms of inflation.

Speaker #2: Obviously, that's always a balance, but it's something we're constantly looking at and looking across the different cost buckets and what we expect in terms of inflation.

Speaker #2: And those are items that our customers are seeing as well. You know, whether it's labor, or parts, or lubricants—everyone is seeing that, so it's not a surprise to anybody.

Justin Jacobs: Those are items that our customers are seeing as well. Whether it is labor or parts or lubricants, everyone is seeing that, so it is not a surprise to anybody.

Speaker #6: And maybe a follow-up to that. Are you seeing any change, I guess, over the last 90 or 180 days in contracts, in terms of customers being willing to extend contracts out further?

Josh Jayne: Maybe a follow-up to that, are you seeing any change, I guess, over the last 90 and 180 days in contracting terms, customers willing to extend contracts out further? Maybe you could just discuss that a little bit, just given the tightness in the market and also the limited equipment availability that is sort of being capped by the engines, just how people are thinking about contracting terms today.

Speaker #6: Maybe you could just discuss that a little bit, given the tightness in the market and also the limited equipment availability that's sort of being capped by the engines.

Speaker #6: Just how people are thinking about contracting terms today.

Speaker #2: Yeah, I think it is it's always customer specific and can be even unit specific. I think that is an opportunity that is out there and the trade off that invariably occurs with term is less price.

Justin Jacobs: Yeah, I think it is. It is always customer specific and can be even unit specific. I think that is an opportunity that is out there, and the trade-off that invariably occurs with term is less price increase. So that is a consideration when thinking about extending term of how long do you actually want term extended on equipment.

Speaker #2: Increase. And so that is a consideration when thinking about extending term of how long do you actually want term extended on equipment.

Speaker #6: And actually, one more if I could squeeze it in. Sale leasebacks today, just given the just given where we are in the cycle with engine availability, you know, from a large supplier, just is something like that when you think about growing your business becoming more attractive option to grow moving forward?

Josh Jayne: Actually one more if I could squeeze it in.

Justin Jacobs: Sure.

Josh Jayne: Sale-leasebacks today, just given where we are in the cycle with engine availability from a large supplier, is something like that when you think about growing your business becoming more attractive option to grow moving forward? Then I will turn it back. Thanks.

Speaker #6: And then I'll turn it back. Thanks.

Speaker #2: When you say just to clarify, when you say sale leaseback, are you talking about customer selling and leasing back from us? I think it's a I do think it is an opportunity.

Justin Jacobs: Just to clarify, when you say sale-leaseback, are you talking about customers selling and leasing

Justin Jacobs: Just to clarify, when you say sale-leaseback, are you talking about customers selling and leasing back from us?

Josh Jayne: Yes

Justin Jacobs: back from us?

Josh Jayne: Yes

Josh Jayne: Yes.

Justin Jacobs: I do think it is an opportunity. I think it should be an opportunity really in any market environment, just when for thinking about from a capital allocation and ultimately, the valuation or multiple that different companies get. It is something that we have had conversations with customers in the past. We will continue to have those. It is difficult to predict if that will occur or to what extent the size of the opportunity specifically for us. But it is a conversation that we have had with customers that we would absolutely entertain doing that, including a potential size. But just very difficult to predict.

Speaker #2: I think it should be an opportunity really in any market environment just for thinking about from a capital allocation and ultimately the valuation or multiple that different companies get.

Speaker #2: This is something that we've had conversations about with customers in the past. We will continue to have those. It's difficult to predict if that will occur, or to what extent the size of the opportunity would be—specifically for us.

Speaker #2: But it is a conversation that we've had with customers and we would absolutely entertain doing that, including a potential size. But just very difficult to predict.

Justin Jacobs: But it is a conversation that we have had with customers that we would absolutely entertain doing that, including a potential size. But just very difficult to predict.

Speaker #6: Thanks. I'll turn it back.

Josh Jayne: Thanks. I will turn it back.

Speaker #2: Appreciate it, Josh. Thank you.

Justin Jacobs: Appreciate it, Josh. Thank you.

Speaker #3: Thank you very much. And again, if you have a question, please go ahead and press seven pounds. So we can open up your line.

Operator 2: Thank you very much. Again, if you have a question, please go ahead and press seven, pound so we can open up your line. We do not have any other questions.

Operator: Thank you very much. Again, if you have a question, please go ahead and press seven, pound so we can open up your line. We do not have any other questions.

Speaker #3: We don't have any other questions.

Speaker #2: Thank you, Luke. Thank you, everyone, for your time and your questions today. We are proud of what the NGS team has accomplished. But as I said earlier, we believe there is still substantial opportunity ahead of us across each of our four growth and value drivers.

Justin Jacobs: Thank you, Luke. Thank you everyone for your time and your questions today. We are proud of what the NGS team has accomplished, but as I said earlier, we believe there is still substantial opportunity ahead of us across each of our four growth and value drivers. We look forward to continuing to execute and updating you on our progress next quarter. Thank you.

Speaker #2: We look forward to continuing to execute and updating you on our progress next quarter. Thank you.

Operator 2: Thank you, everyone. This concludes today's conference call. Thank you for attending.

Operator: Thank you, everyone. This concludes today's conference call. Thank you for attending.

Q2 2026 Natural Gas Services Group Earnings Call

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