NGS Reports Year-over-Year Net Income Growth of 29% First Quarter 2015 Earnings of 29 cents per Diluted Share

 MIDLAND, Texas May 7, 2015 - Natural Gas Services Group, Inc. (NYSE:NGS), a leading provider of gas compression equipment and services to the natural gas industry, announces its financial results for the three months ended March 31, 2015.

Revenue: Total revenue was $24.7 million, an increase from $22.3 million, or 11%, for the three months ended March 31, 2015 compared to the same period ended March 31, 2014. This change was attributable to an increase of 10% in rental revenue to $20.6 million from $18.8 million and an almost $600,000 increase in sales revenue to $3.9 million for the period ended March 31, 2015 compared to the same three month period in 2014. Total revenue decreased between consecutive quarters by $2.4 million to $24.7 million from $27.1 million, mainly due to an expected decline in compressor sales.

Gross Margins: Total gross margin for the three months ended March 31, 2015 increased 18% to $14.2 million from $12.0 million for the same period ended March 31, 2014. Overall gross margin percentage was 57% for the three months ended March 31, 2015 and 54% for the same period ended March 31, 2014. The difference in gross margin percentages between quarters was driven by higher gross margins from our rental operations. Sequentially, gross margin decreased $700,000 to $14.2 million from $14.9 million as a result of the slowdown in compressor sales.

Operating Income: Operating income for the three months ended March 31, 2015 was $5.8 million, up 33% from the comparative prior year's level of $4.4 million. The increase was due to higher total sales revenues, increased rental revenue and stronger rental gross margins in the current quarter. Sequentially, operating income decreased to $5.8 million for the three months ended March 31, 2015 from $6.7 million in the period ended December 31, 2014, primarily due to lower compressor sales between the periods. 

Net Income:  Net income for the three months ended March 31, 2015 increased 29% to $3.7 million, when compared to net income of $2.9 million for the same period in 2014, and increased to 15% of revenue from 13%.  This increase was attributable to higher revenues in all segments. Sequentially, net income decreased approximately $300,000 to $3.7 million from $4.0 million, but remained flat at 15% of revenue. This is decrease is because of lower compressor sales between the periods.

Earnings Per Share:  Comparing the first quarter of 2015 versus 2014, earnings per diluted share was 29 cents, up from 23 cents.  Diluted earnings per share decreased to 29 cents from 32 cents, between sequential quarters.

EBITDA:  EBITDA increased 23% to $11.6 million or 47% of revenue for the three months ended March 31, 2015 versus $9.4 million or 42% of revenue for the same three months ended March 31, 2014. EBITDA decreased approximately $800,000 in the sequential quarters, but relative to revenue increased to 47% from 46%. Please see discussion of Non-GAAP Financial Measures, below.

Cash Flow: At March 31, 2015, cash and cash equivalents were $8.6 million; working capital was $43.5 million with a total debt level of $417,000, all of which was classified as long term. Positive net cash flow from operating activities was $11.6 million during the first three months of 2015.

Commenting on first quarter 2015 results, Stephen C. Taylor, President and CEO, said:

"We are pleased with our performance during this first quarter, especially the growth we achieved compared to the first quarter of 2014. As anticipated, our quarterly compressor sales slowed due to the contraction of our customer's capital spending. Rental gross margins continued strong this quarter and our EBITDA and Net Income metrics, with respect to revenue, grew. Looking forward, 2015 will be a more challenging year and while we expect pricing and utilization pressure, we are focused on our costs and maintaining our service response to our customers. Cash flow from operations was exceptionally strong this quarter and we anticipate appreciable growth in free cash flow and our balance sheet cash throughout the year."

Selected data: The table below shows revenues, percentage of total revenues, gross margin, exclusive of depreciation, amortization, and gross margin percentage of each of our business lines for the three months ended March 31, 2015 and 2014.  Gross margin is the difference between revenue and cost of sales, exclusive of depreciation and amortization.

(1) For a reconciliation of gross margin to its most directly comparable financial measure calculated and presented in accordance with GAAP, please read "Non-GAAP Financial Measures" below.

Non GAAP Financial Measures: "EBITDA" reflects net income or loss before interest, taxes, depreciation and amortization.  EBITDA is a measure used by analysts and investors as an indicator of operating cash flow since it excludes the impact of movements in working capital items, non-cash charges and financing costs.  Therefore, EBITDA gives the investor information as to the cash generated from the operations of a business.  However, EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States of America ("GAAP"), and should not be considered a substitute for other financial measures of performance.  EBITDA as calculated by NGS may not be comparable to EBITDA as calculated and reported by other companies. The most comparable GAAP measure to EBITDA is net income. The reconciliation of net income      to EBITDA and gross margin is as follows:

"Gross margin" is defined as total revenue less cost of sales (excluding depreciation and amortization expense).  Gross margin is included as a supplemental disclosure because it is a primary measure used by management as it represents the results of revenue and cost of sales (excluding depreciation and amortization expense), which are key operating components.  Depreciation expense is a necessary element of costs and the ability to generate revenue and selling, general and administrative expense is a necessary cost to support operations and required corporate activities.  Management uses this non-GAAP measure as a supplemental measure to other GAAP results to provide a more complete understanding of the company's performance.  As an indicator of operating performance, gross margin should not be considered an alternative to, or more meaningful than, net income as determined in accordance with GAAP.  Gross margin may not be comparable to a similarly titled measure of another company because other entities may not calculate gross margin in the same manner.

Cautionary Note Regarding Forward-Looking Statements:

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements involve known and unknown risks and uncertainties, which may cause NGS's actual results in future periods to differ materially from forecasted results.  Those risks include, among other things, the loss of market share through competition or otherwise; the introduction of competing technologies by other companies; a prolonged, substantial reduction in oil and gas prices which could cause a decline in the demand for NGS's products and services; and new governmental safety, health and environmental regulations which could require NGS to make significant capital expenditures. The forward-looking statements included in this press release are only made as of the date of this press release, and NGS undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. A discussion of these factors is included in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Conference Call Details:

Teleconference: Thursday, May 7, 2015 at 10:00 a.m. Central (11:00 a.m. Eastern).  Live via phone by dialing 800-624-7038, pass code "Natural Gas Services".   All attendees and participants to the conference call should arrange to call in at least 5 minutes prior to the start time.

Live Webcast: The webcast will be available in listen only mode via our website www.ngsgi.com, investor relations section.

Webcast Reply: For those unable to attend or participate, a replay of the conference call will be available within 24 hours on the NGS website at www.ngsgi.com.

Stephen C. Taylor, President and CEO of Natural Gas Services Group, Inc. will be leading the call and discussing the financial results for the three months ended March 31, 2015.

About Natural Gas Services Group, Inc. (NGS):
NGS is a leading provider of small to medium horsepower, wellhead compression equipment to the natural gas industry with a primary focus on the non-conventional gas and oil industry, i.e., coalbed methane, gas and oil shales and tight gas. The Company manufactures, fabricates, rents, sells and maintains natural gas compressors and flare systems for gas and oil production and plant facilities. NGS is headquartered in Midland, Texas with fabrication facilities located in Tulsa, Oklahoma and Midland, Texas and service facilities located in major gas and oil producing basins in the U.S. Additional information can be found at www.ngsgi.com.