Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group, Inc. fourth quarter 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#. I would now like to turn the call over to Anna Delgado. Please begin.

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 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, Inc. 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. These and other risks are described in yesterday's earnings press release and our filings with the SEC, including our Forms 10-K for the period ended 12/31/2025 and our Forms 8-K. These documents can be found in the investors 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, and adjusted gross margin, among others. For a 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 C. Jacobs, Chief Executive Officer. Justin?

Thank you, Anna. Good morning, everyone. Joining me today is Ian M. Eckert, our Chief Financial Officer. To start, I want to once again thank the entire Natural Gas Services Group, Inc. team for their continued dedication and hard work. Our results this year reflect the efforts of the entire organization. I especially want to recognize our field team. Their commitment to delivering exceptional uptime and reliability for our customers continues to be a defining strength of this company. As a result of our team's strong execution, Natural Gas Services Group, Inc. delivered another great quarter and record full-year results in 2025. This performance also marks the third consecutive year in which we have taken market share in the rental compression industry. Our continued growth reinforces Natural Gas Services Group, Inc.'s position as one of the fastest-growing rental compression companies and as we enter 2026, we feel confident in our ability to drive further improvements and to continue to increase shareholder value. Moving to our operating and financial performance in the fourth quarter and full year, we reached record levels of rented horsepower and utilization in 2025. Rented horsepower increased to approximately 563,000 by year-end 2025, a 14% increase over the prior year. Fleet utilization reached 84.9%, another high watermark for the company. The fourth quarter rental revenue totaled $44.3 million, up roughly 16% year over year, reflecting continued fleet expansion and strong demand for large-horsepower compression units. Adjusted EBITDA was $21.2 million for the quarter and $81 million for the full year, both records for Natural Gas Services Group, Inc., and the full-year number was at the high end of our guidance range, and I would note that we increased guidance three times during the course of the year. We also started our return of capital program in 2025.…

Thank you, Justin, and good morning to everyone joining us today. As Justin emphasized, the Natural Gas Services Group, Inc. team delivered a very strong year for our shareholders, reflective of significant fleet expansion and strong operational performance. To recap the full year 2025, rental revenue totaled $164.3 million, representing an increase of $20.1 million, or 14% year over year. Total revenue reached $172.3 million, increasing $15.6 million, or approximately 10%, compared to 2024. Total revenue growth was lower than rental revenue growth due to our exit from the Midland fabrication operations and our broader strategy to migrate away from non-core, low-margin fabrication activities. Adjusted rental gross margin totaled $99.6 million, an increase of $12.3 million, or 14%, year over year, reflecting continued growth of our rental fleet and improved pricing. Fourth quarter adjusted rental gross margin improved 1.6% sequentially to $25.9 million. During the fourth quarter, our adjusted rental gross margin percentage was 58.5%, which declined roughly 300 basis points compared to the third quarter and was well below our expectations. All of this decline relates to a physical inventory adjustment recorded during the fourth quarter. Importantly, it does not reflect the ongoing economics of our business. In fact, as we move into 2026, we expect continued adjusted rental gross margin percentage expansion beyond the 2025 figure of 60.6%. This is driven by new large-horsepower unit deployments, operating leverage from our growing horsepower base, and ongoing cost discipline. For the year, adjusted total gross margin was $100.5 million, representing a 14% increase year over year. Net income totaled $19.9 million, or $1.57 per diluted share, representing record performance for the company. I would like to point out a few discrete items included within our 2025 results. First, we recorded a $2.6 million non-cash impairment charge related to our Midland…

Thank you, Ian. We enter 2026 with record fleet utilization, significant contracted horsepower deployments, and a very active quoting pipeline. Based on this visibility, we are providing adjusted EBITDA guidance for 2026 of $90.5 million to $95.5 million. We expect continued organic growth in 2026 driven by large-horsepower deployments, expanding customer relationships, and sustained industry demand for compression services. In 2026, we expect growth capital expenditures in the range of $55 million to $70 million, which represents an increase of approximately $5 million at the low end of our prior expectations. This comes on top of hitting the high end of our range for growth CapEx in 2025. The 2026 increase, combined with the 2025 actual performance, shows that we continue to win new contracts to drive organic growth. Based on the forward growth capital guidance now provided by our public peers, 2026 will mark the fourth consecutive year that Natural Gas Services Group, Inc. has captured market share organically. The streak is a testament to the strong competitive position we have in the market. Maintenance capital expenditures are expected to be in the range of $15 million to $18 million in 2026. Our 2025 maintenance capital came in at the low end of the guidance range, so we expect a little spillover in 2026, coupled with the capital requirements of a growing fleet. In closing, Natural Gas Services Group, Inc. delivered record results in 2025. We achieved record rented horsepower, record fleet utilization, and record adjusted EBITDA. Looking forward, we believe the company is well positioned for continued growth and market share expansion. Structural tailwinds for the compression industry remain strong, including LNG export growth, increasing natural gas power demand, and rising electricity consumption driven by data centers and AI infrastructure. Combined with our strong balance sheet and operational execution, these factors position Natural Gas Services Group, Inc. to continue investing in growth, increasing EBITDA and earnings, returning capital to shareholders, and pursuing strategic opportunities. Luke, we are now ready to open the call for questions.

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

Hey. Good morning, guys, and nice job and great finish to a pretty strong year here. Justin, in the press release, and I think Ian mentioned this, you mentioned large horsepower and electric motor drive assets are expected to expand rental gross margins. Maybe a little context, relative to the 60.6% number you printed in 2025, what is the kind of guidance range embedded as far as margins go?

We have not given, historically—nor are we going to at this point—specific guidance on adjusted rental gross margin percentage or gross margins overall. As we look at that 60.6% for 2025, we do expect uplift from that. Generally, in past quarters, we have described margins in the low sixties, and that is our expectation going forward. So I would expect to see some modest uplift from that, and beyond the current mix shift, looking further out, we would like to see that number keep ticking up.

Thanks for the color. Appreciate that. And then as a follow-up, a bunch of your peers have talked about extended lead times, especially for Cat, talking 110 to 120 weeks, which is more like two years instead of one. I know you guys have—historically, at least recently on the large-horsepower side—been a big fan and customer of Waukesha. But maybe you could talk about what you are seeing in lead times with them and, generally, what is the current bottleneck across engines, compressors, fabrication, etcetera. Just kind of how that sets up for you specifically.

Yes. What we are seeing in the lead times is particularly at the high end of the large horsepower from our perspective of what we offer in the fleet. That is where you are seeing those 100-plus weeks. As we look in horsepower below that, but still well in large horsepower, we have not seen significant changes over the past three to six months and certainly nothing like what we have seen specifically from Caterpillar at that high end of the range of our fleet. As we look at the other major components and the fabrication space, generally, I would say there is not a lot of change since three to six months ago. It is probably creeping out a little bit. But the 100-plus week, that is tied to engines at the high end of the range.

Got it. Appreciate that. I will turn it back. Thank you.

Thank you, Jim. Our next question comes from Nate Pendleton with Texas Capital.

Good morning. Congrats on the strong quarter. Can you share your thoughts on how the competitive environment evolves with the new large-horsepower units being so delayed, as you just talked about? And maybe how that can manifest for you guys as far as pricing and the potential M&A market due to that tightness?

Thanks for joining, Nate. It is a rapidly evolving landscape, particularly at the high end of the horsepower. If you look back to not just our call, but our competitors'—our public competitors'—calls in the third quarter, the lead times for that high end were up around half the number that it is at today. There are a number of different ways that we are able to address that. One is, as a percentage of our fleet overall, that longest lead-time item, we certainly have a good quantity of those units, but it is far from a majority of our large horsepower. And so in some of those still significant size equipment, but less than the high end, the lead times are significantly less than 100 weeks, and that provides us an ability to continue our growth and meet customer needs. In terms of the impact in M&A and other, I think it is too early to really look at that. This is a relatively recent and pretty material change in the competitive landscape.

Understood. And then, perhaps for Ian, I know you have been really involved in some of the blocking and tackling that goes on behind the scenes to deliver the improving results we have seen quarter after quarter. Can you talk about maybe some of the areas of opportunity that your team has been working on from your perspective and maybe how that might manifest in the financials going forward?

Yes. Sure, Nate. Thanks for joining the call today. So I am going to start with that physical inventory adjustment in the fourth quarter. As part of that process, we identified a number of capability and process gaps within our warehouse operations. Importantly, we have already taken decisive actions to address those areas, and that includes targeted personnel changes and implementations of best practices across our inventory management processes. And while that is a one-time impact in the fourth quarter, I think those actions that were taken ultimately help us as we move into 2026. As those warehouse operations continue to mature, we expect to realize improved efficiencies and some degree of cost savings, which should ultimately help to support margin expansion going forward.

Got it. Thanks for taking my questions.

Thanks, Nate.

Thank you very much. Our next question comes from Selman Akyol with Stifel.

Thank you. Good morning. A couple quick ones for me. As you think about the environment and the competition, and you noted the longer lead times for the extremely high horsepower, is that giving you an opening at all to move beyond gas lift more into midstream? Are you seeing any opportunities for that?

Good morning, Selman. Thanks for joining. I have spoken on a number of the recent calls that when you look at our larger horsepower that is in centralized gas lift, and you look at our large horsepower overall, we do not have any material applications in the midstream at this point. That has been a targeted area for us to focus on to add to our existing business. I can say that it is still early for us, but that we are seeing at least quoting activity in that area, and that it is up to us from an execution perspective to be able to go out and win that business. So it has been a focus area not just because of recent lead times, but because we think—and have thought for a number of quarters—that is an opportunity for us because of the similarity of the equipment.

Is that just a matter of pricing, or is it you need to get your first customer and then sort of prove you can do it in the reliability, and then you think more comes pretty rapidly. Does that make sense?

It does make sense. I think if you look at the evolution of our business, not over the last couple of quarters, but going back several years, we are reasonably new entrants into the 1,000-plus horsepower package market. Our first 35/16s are north of 30—north of 1,000 units—are kind of 2018, 2019 time frame. We first got into that business with Occidental Petroleum. Obviously, they are now our largest customer. We now have a material number of customers—Devon Energy—where we are servicing with north of 1,000-horsepower units. I think it is a similar evolution there. Midstream is a logical next place for us to have looked and to penetrate. We have not done that yet, but I think getting that first customer is going to demonstrate that our equipment from a technology perspective and the service we provide—we should have competitive advantage there as well. That is how we approach it.

Got it. Okay. Thank you for that. And then next, thinking about EBITDA growth—very robust in 2026—clearly you have got some monetization going on, and your CapEx is coming down, so your free cash flow is accelerating. I know you highlighted your inaugural dividend and then you increased it once already, and you have got this strong free cash flow coming. How should we be thinking about return of capital and dividend in particular as we go through 2026 and beyond?

There I would repeat comments that we have made on prior calls. I think on the call after we initiated the dividend, we made clear we have a good understanding of shareholders' desire for a consistent and increasing dividend, and we were not going to provide specific guidance other than to make it clear we understood that. That is how I would think about how we—and the Board—will approach return of capital overall, but the dividend specifically in 2026.

Okay. Thank you very much.

Thanks, Selman.

Our next question comes from Tim O'Tell with Petra Company Management.

Good morning. I had a couple comments because in the wake of Steve's retirement, I wanted to just make on the way in, and wanted to just acknowledge him for a couple things. One being building a balance sheet through some very tough years, and then also seeing the growth opportunity, sort of 2019–2020, which also became interesting, obviously, signing up with Oxy and actually pivoting towards growth in large horsepower, which has obviously been a very good move. And then also, kind of later on—but not that much later than 2020—obviously working with Justin to replace himself, and that has proven so far to be a very good choice. And so I wanted to kind of congratulate him on the way out. And then one other comment that I wanted to make before I get into a couple of questions is I would still love to see some more detail around discretionary cash flow and discretionary cash flow per share and growth in that metric. A few of your competitors focus on that. I think it is appropriate. It is more indicative of economic earnings for the company, and would love to encourage more focus on that and a little bit more information around that.

Tim, appreciate you joining, and appreciate your comments. Just to echo on the first point for Steve, and particularly the last part you put there, I think of Steve as really a quasi founder of this business. Having worked with him through the transition, he did an outstanding job. It was absolutely amazing for me, and I think for the company, and a lot of credit is due to him there. So just wanted to echo your comments on that.

Yes. Well, thanks for that, Justin. I think Steve—hopefully he is listening from home or can go listen to it at some point—and anyway, we appreciate you. It was a very good run for a very good result. To a question that was just asked and just kind of feeling you out in terms of how you are looking at things going forward in terms of the growth space, midstream—obviously, you would be well suited to fill some of that bill. There are some competitors out there you would be aware of, and a few also that are not necessarily directly in the compression space but in related spaces that have been looking at actually power generation. So you have the reciprocating engine on the front end driven by natural gas to actually create pad power or maybe beyond pad power. I am wondering how you look at those two trade-offs, if you are even considering the electric generation space given kind of the wall of demand that is coming at us. Also, related to that, I do wonder—it is maybe more of a question for your customers, but you are in that discussion—how the space looks at the fact that electric power will be tight, will be in demand, maybe short supply at times, and pricing on the power to drive the compression may also become an interesting topic. Could you talk to that for a minute?

Sure. Happy to. On the power gen space, that is an area that we have looked at from an acquisition perspective and looked at a couple of specific opportunities. Some of the similarities are relatively straightforward in terms of the service model, the equipment, the rental nature of equipment, at least in certain applications. We understand that is a similar market. I think what we have seen from one of our public competitors shows that. As we look at it, some of our questions really relate to: are we going to see the same long-term applications as compression? We have not seen business—at least that we have looked at yet—in the power gen space that has a similar application length that we do, particularly with our large horsepower. We are going to continue to look at it very closely, and I am sure look at additional opportunities. As with all M&A, you never know exactly what will happen—it is kind of the sun, the moon, the stars—so it is certainly on our radar, but those are kind of how we look at it.

Okay. Great. I kind of expected something along those lines, wanted to feel you out a little bit on that because we have not discussed that. Another question I have, and this might be a little bit more for Ian than you, Justin. You mentioned Oxy and Steve kind of engaged with them and started to support a lot of capital for that particular customer in the 2019–2021 space in terms of some of the going online. One of the things I am noticing on the maintenance CapEx level is that that is creeping up. I am wondering if maybe you could talk to this a little bit. I am wondering if some of that maintenance CapEx is kind of associated with the initial bolus of that significant allocation of capital to the Oxy footprint, and whether we should expect that to level out for a few years until the next big bolus reaches, let us say, five years, or if that is on a trajectory that is likely to build as we go forward more or less ratably or steadily, trailing the growth that you have put up the last couple of years?

Hi, Tim. Thanks for joining. You hit on a key point here. We have seen significant fleet horsepower growth over the last half a decade, and your assumption is correct. The initial tranche of those large-horsepower units are coming up on some key maintenance events that require maintenance capital, hence the increase that we see year on year from 2025 to 2026. I believe you can expect that to continue gradually, ticking upward given the significant horsepower we put in place over the last five years.

Tim, I know you know this well, but as we talk to our broader public shareholder base, just to make sure they understand the maintenance cycle here: specifically for the engine, you are looking at major maintenance roughly every three and a half years. At three and a half years you have a good-sized event, and at seven years you have a larger event in terms of cost, with other components on roughly similar cycles. Our expectation with the growing fleet size is that maintenance capital will gradually drift up in proportion with our fleet growth.

Right. And that makes perfect sense. But obviously it is taking a bit of a step up and it probably helps to actually set the table for that as we go forward. Also, that kind of circles back to my comment on discretionary cash flow and discretionary cash flow per share growth as we go forward. And then I am also—this is another question kind of for Ian—is the physical inventory adjustment that you took in the fourth quarter, is there more of that to come as we go into the front end of 2026 to kind of set the table for growth in adjusted gross margin again? Or is that really basically behind us, and going forward it is just actually tuning up operations more than anything else.

Yes. That is very much behind us at this point in time. That was a one-time impact in the fourth quarter. Moving forward, I do not expect continued physical inventory adjustments of that scale.

Great. Okay. Thanks. I think that is all I have right now. Thank you, gentlemen, and another good quarter setting up for another interesting and fruitful year. Thanks.

Thanks, Tim. Appreciate you joining.

Thank you very much. And again, if you have any questions, please go ahead and press 7#. Our next question comes from Rob Brown with Lake Street Capital Markets. Go ahead, please.

Hi. Good morning. I wanted to follow up on your comments about increased quoting activity. Just a sense of what areas are the most active and maybe the ability to expand, I think, your 50,000 horsepower this year. How early do you have to get the quotes in to expand that 50,000, and what could it be?

When I look at the quoting activity overall, at least from a geographic perspective, it is certainly dominated by the Permian Basin, as our existing business is, and so really no difference there from where we operate today. In terms of applications, as was said earlier in the call in one of the questions, we are seeing opportunities in the midstream, but we have not won one of those yet. On the 50,000—just to confirm—that is contracted growth that we expect to set in 2026. We are seeing a mix of larger existing customers in terms of quoting, some customers that are very large companies but relatively small customers for us where the quoting activity is far in excess of the amount of business that we have with them today, and then some new customers in there, a number of whom we have already won some units with. So I would generally describe it as broad-based.

Great. Okay. Thank you. And then, just on the comments around the natural gas demand, some of the demand drivers there. Do you foresee a better utilization in smaller-horsepower fleet from that, or how does that impact your business?

I would say that we have not modeled that into our forward guidance. I think it is a reasonable expectation that we will see it. We just have not included that in. As our business is increasingly becoming dominated by large-horsepower units, the impact to the business will be—it could be a reasonable amount—but I would not describe it as particularly significant relative to the overall size of the business.

Okay. Great. Thank you. I will turn it over.

Appreciate it, Rob. Thank you.

Thank you very much. And again, if you have any questions, please press 7#. I do not see any other questions, sir.

Thank you, Luke. And thank you all for your questions and for your continued interest in Natural Gas Services Group, Inc. We sincerely appreciate your support, and we look forward to updating you on our progress next quarter.

Thank you.

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