NATURAL GAS SERVICES GROUP INC

Previous wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information pertaining to us, our industry and the oil and gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management. All statements, other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements. We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “guidance,” “believe,” “continue,” “intend,” “plan,” “budget” and other similar words to identify forward-looking statements. You should read statements that contain these words carefully and should not place undue reliance on these statements because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other “forward-looking” information. We do not undertake any obligation to update or revise publicly any forward-looking statements. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations or assumptions will prove to have been correct. These risks, contingencies and uncertainties, include, but are not limited to, the following:

Current wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and information pertaining to us, our industry and the oil and gas industry that is based on the beliefs of our management, as well as assumptions made by and information currently available to our management. All statements, other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future financial position, growth strategy, budgets, projected costs, plans and objectives of management for future operations, are forward-looking statements. We use the words “may,” “will,” “expect,” “anticipate,” “estimate,” “guidance,” “forecast,” “believe,” “might,” “continue,” “intend,” “plan,” “project,” “budget” and other similar words to identify forward-looking statements. You should read statements that contain these words carefully and should not place undue reliance on these statements because they discuss future expectations, contain projections of results of operations or of our financial condition and/or state other “forward-looking” information. We do not undertake any obligation to update or revise publicly any forward-looking statements. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these expectations or assumptions will prove to have been correct. These risks, contingencies and uncertainties, include, but are not limited to, the following:

Previous wording

We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict or that we are unable to control. When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements including Item 1A, Risk Factors, in our 2025 Annual Report, as it contains important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements.

Current wording

We believe that it is important to communicate our expectations of future performance to our investors. However, events may occur in the future that we are unable to accurately predict or that we are unable to control. When considering our forward-looking statements, you should keep in mind the risk factors and other cautionary statements including those risk factors listed under the “Risk Factors” section of this Quarterly Report on Form 10-Q and Item 1A, Risk Factors, in our 2025 Annual Report, as it contains important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements.

Previous wording

The discussion and analysis of our financial condition and results of operations of Natural Gas Services Group, Inc. (the “Company”, “NGS”, “Natural Gas Services Group”, “we,” “us” or “our”) for the periods ended March 31, 2026, and 2025 are based on, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2025. The following discussion contains forward-looking statements that include risks and uncertainties. For a description of limitations inherent in forward-looking statements, see “Special Note Regarding Forward-Looking Statements” above.

Current wording

The discussion and analysis of the financial condition and results of operations of Natural Gas Services Group, Inc. (the “Company,” “NGS,” “Natural Gas Services Group,” “we,” “us” or “our”) for the periods ended June 30, 2026, and 2025 are based on, and should be read in conjunction with, our Condensed Consolidated Financial Statements and the related notes included elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2025. The following discussion contains forward-looking statements that include risks and uncertainties. For a description of limitations inherent in forward-looking statements, see “Special Note Regarding Forward-Looking Statements” above.

Previous wording

We rent, design, install, service and maintain natural gas and electric compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers. Substantially all of our compressor assembly is done by third-party contractors while a limited level of assembly work remains in-house at our Tulsa, Oklahoma facility. Our primary focus is on the rental of natural gas engine and electric motor drive compressors. Our rental contracts generally provide for initial terms of 12 to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units. After the initial term of our rental contracts, most of our customers have continued to rent our compressors on a month-to-month basis. Rental amounts are billed monthly in advance and include maintenance of the rented compressor units.

Current wording

We rent, design, install, service and maintain natural gas and electric compressors and related equipment and parts for our customers’ oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers. Substantially all of our compressor assembly is done by third-party contractors while a limited level of assembly work remains in-house at our Tulsa, Oklahoma facility. Our primary focus is on the rental of natural gas engine and electric motor drive compressors. Our rental contracts generally provide for initial terms of 12 to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units. After the initial term of our rental contracts, most of our customers have continued to rent our compressors on a month-to-month basis. Rental amounts are billed monthly in advance and include maintenance of the rented compressor units.

Previous wording

We conduct our operations in several oil and gas producing basins throughout the United States including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale. We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio. A total of 79 percent of our rental revenue is generated from the Permian Basin and approximately 91 percent of our rental revenue supports oil production primarily in the form of gas lift operations. We operate in one reporting segment.

Current wording

We conduct our operations in several oil and gas producing basins throughout the United States including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale. We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio. Approximately 80 percent of our rental revenue is generated from the Permian Basin and a substantial portion of our rental revenue supports oil production primarily in the form of gas lift and midstream operations. We operate in one reporting segment.

Previous wording

Of the total horsepower utilized as of March 31, 2026, 465,638 of horsepower was being rented under contracts expiring between 2026 and 2031 and 109,331 of horsepower was being rented on a month-to-month basis. Of the 1,243 compressors utilized as of March 31, 2026, 754 units were being rented under multi-year contracts and 489 units were being rented on a month-to-month basis.

Current wording

Of the total horsepower utilized as of June 30, 2026, 521,931 of horsepower was being rented under contracts expiring between 2026 and 2031 and 147,988 of horsepower was being rented on a month-to-month basis. Of the 1,521 compressors utilized as of June 30, 2026, 921 units were being rented under multi-year contracts and 600 units were being rented on a month-to-month basis.

Previous wording

Crude Oil. The level of production for crude oil activity and capital expenditures has generally been dependent upon the prevailing view of future crude oil prices, which is influenced by numerous supply and demand factors, including availability and cost of capital, well productivity and development costs, global and domestic economic conditions, environmental regulations, policies of OPEC, the United Arab Emirates and Russia, and other factors. Regardless of current oil price volatility driven by geopolitical factors, we expect demand for compression overall, and specifically our fleet to remain strong.

Current wording

Crude Oil. The level of production for crude oil activity and capital expenditures has generally been dependent upon the prevailing view of future crude oil prices, which is influenced by numerous supply and demand factors, including availability and cost of capital, well productivity and development costs, global and domestic economic conditions, environmental regulations, policies of OPEC, the United Arab Emirates and Russia, recent hostilities involving the United States, Israel, the Gulf States, and Iran, and other factors. Regardless of current oil price volatility driven by geopolitical factors, we expect demand for compression overall, and specifically our fleet to remain strong.

Previous wording

We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitably and liquidity. The most significant of these measures are “Adjusted Gross Margin” and “Adjusted EBITDA” both of which are measurements that are not explicitly defined in accordance with generally accepted accounting principles in the United States of America (“GAAP”), or non-GAAP financial measures, and may vary among different industries and the participants therein.

Current wording

We utilize certain financial and operating metrics to analyze our performance and assess our operating results and overall profitability and liquidity. The most significant of these measures are “Adjusted Gross Margin” and “Adjusted EBITDA” both of which are measurements that are not explicitly defined in accordance with generally accepted accounting principles in the United States of America (“GAAP”), or non-GAAP financial measures, and may vary among different industries and the participants therein.

Previous wording

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses. This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

Current wording

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance, strategic transaction costs including incremental costs directly attributable to business combinations and similar transactions and non-cash equity-classified stock-based compensation expenses. This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

Previous wording

Three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Current wording

Three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025.

Previous wording

Rental revenue increased for the three months ended March 31, 2026, as compared to the corresponding period in 2025 due primarily to an increase in rented horsepower and units. The increase in revenue reflects a continuing trend of growing demand for our large horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins. Our utilized horsepower increased during the first quarter of 2026 as compared to the prior year period which reflects the continued addition of large horsepower units to our fleet consistent with our emphasis on larger units over the past several years, as well as the retirement of certain older medium and small horsepower units from the fleet. Through March 31, 2026, we placed into service a total of 98 newly set units, including 64 from our existing fleet and 34 new units. Of those unit sets, a total of 37 were large horsepower units and 34 of those were new units to the fleet.

Current wording

Rental revenue increased for the three and six months ended June 30, 2026, as compared to the corresponding periods in 2025 due primarily to an increase in rented horsepower and units. The increase in revenue reflects a continuing trend of growing demand for our large horsepower units (380 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins. In addition, the Flatrock Acquisition provided rental revenues of $1.9 million during the period from the Acquisition Date through June 30, 2026. Our consolidated utilized horsepower increased during the three and six months ended June 30, 2026, as compared to the prior year periods which reflects the continued addition of large horsepower units to our fleet consistent with our emphasis on larger units over the past several years, as well as the retirement of certain older medium and small horsepower units from the fleet. In addition, we added 87,233 of rented horsepower from 270 rented units in June 2026 attributable to the Flatrock Acquisition. In the six months ended June 30, 2026, we placed into service a total of 180 newly set units, including 137 from our existing fleet and 43 new units. Of those unit sets, a total of 61 were large horsepower units and 43 of those were new units to the fleet.

Previous wording

The cost of rentals increased on an absolute basis, consistent with revenues, due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs. An expanding portion of our rented compressor units utilize our proprietary System Management and Recovery Technology (“SMART”) and telemetry software which reduces unplanned shutdowns and increases productivity. Despite inflationary pressure associated with our primary cost components, the SMART and telemetry technology allows us to streamline and manage our maintenance activities more efficiently and thereby mitigate the costs to a manageable extent. As a percentage of revenue, cost of rentals, specifically labor, replacement parts, and lubricants declined compared to the first and fourth quarters in 2025. We expect these costs will normalize over the coming quarters. As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the three months ended March 31, 2026, compared to the comparable period in 2025.

Current wording

The cost of rentals increased for the three and six months ended June 30, 2026, consistent with revenues, due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs. Furthermore, we experienced higher unit-redeployment costs consistent with a larger volume of unit sets as compared to the prior year periods. We also experienced higher lubricant costs during the 2026 periods due primarily to the larger quantity of utilized horsepower. An expanding portion of our rented compressor units utilize our proprietary System Management and Recovery Technology (“SMART”) and telemetry software which reduces unplanned shutdowns and increases productivity. Despite inflationary pressure associated with our primary cost components, the SMART and telemetry technology allows us to streamline and manage our maintenance activities more efficiently and thereby mitigate the costs to a manageable extent. As a percentage of revenue, cost of rentals, specifically labor and replacement parts, for the 2026 periods declined compared to the corresponding periods in 2025. As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the three and six months ended June 30, 2026, when compared to the corresponding periods in 2025.

Previous wording

We generate revenue primarily from the sale of compressor parts and to a lesser extent repair and overhaul services. Costs of sales primarily include purchases of component materials. In addition, our costs of sales include overhead and related support costs attributable to our storage, assembly facilities including Midland, Texas through its closure at the end of March 2025.

Current wording

We generate revenue primarily from the sale of compressor and other parts and to a lesser extent repair and overhaul services. Costs of sales primarily include purchases of component materials. In addition, our costs of sales include overhead and related support costs attributable to our storage, assembly facilities including Midland, Texas through its closure at the end of March 2025.

Previous wording

Sales revenue declined for the three months ended March 31, 2026, compared to the corresponding period in 2025 due primarily to the phasing out of direct sales of compressors and repair/overhaul work which was the primary focus of the former Midland Facility. The costs to support our sales revenues declined on an absolute basis, primarily reflecting a substantially lower volume of business. Sales represented a negligible negative contribution to gross margin in the three months ended March 31, 2026, and 2025, respectively.

Current wording

Sales revenue increased for the three months ended June 30, 2026 due primarily to off-cycle sales of flare parts compared to the quarterly period during 2025 and declined for the six months ended June 30, 2026, compared to the corresponding period in 2025 due primarily to the phasing out of direct sales of compressors and repair/overhaul work which was the primary focus of the former Midland Facility. The costs to support our sales revenues declined on an absolute basis during both periods, primarily reflecting a lower volume of business. While marginally positive for the periods in 2026 due primarily to the off-cycle sale of flare parts, sales represented a negligible contribution to gross margin in the three and six months ended June 30, 2026, and 2025, respectively.

Previous wording

Third party aftermarket services revenues, costs and absolute gross margin increased for the three months ended March 31, 2026, compared to the corresponding period during 2025; however, the gross margin percentage declined over the prior period in 2025. The increase in revenue and costs is primarily attributable to a marginally higher volume of unit commissioning work performed during the 2026 period compared to 2025. The margin decline is attributable to higher level of freight services passed on to customers during the 2025 period. Aftermarket services represented an insignificant portion of our gross margin in the three months ended March 31, 2026, and 2025, respectively.

Current wording

Third party aftermarket services revenues, costs and absolute gross margin decreased for three months ended June 30, 2026 compared to the quarterly period during 2025 due primarily to lower activity while revenues and costs increased marginally for the six months ended June 30, 2026, compared to the corresponding period during 2025; however, the gross margin percentage declined over the prior six month period in 2025. The increase in revenue and costs during the six months ended June 30, 2026 is primarily attributable to a marginally higher volume of unit commissioning work performed during the six-month period in 2026 compared to 2025. The margin decline is attributable to higher level of new unit set freight services passed on to customers during the 2025 periods. Aftermarket services represented an insignificant portion of our gross margin in the three and six months ended June 30, 2026, and 2025, respectively.

Previous wording

The following table summarizes the components of our SG&A expenses for the periods presents:

Current wording

The following table summarizes the components of our SG&A expenses for the periods presented:

Previous wording

SG&A expenses increased during thethree months ended March 31, 2026, as compared to thecorresponding period in 2025. In general, the increase in our total SG&A expenses reflects a higher level of cost to appropriately scale our administrative function. The increase in primary SG&A expenses during the three months ended March 31, 2026 as compared to 2025 was impacted by (i) higher professional fees and public company costs of $0.4 million, (ii) higher salaries and benefits, including short-term incentive compensation, of $0.2 million reflecting support staff growth and performance, (iii) higher IT support costs of $0.1 million in support of our growth initiatives and noncapitalizable costs associated with certain IT system conversion projects and (iv) higher occupancy and office costs of $0.1 million. Our equity classified stock-based compensation increased during the 2026 period over 2025 due primarily to a higher mix of performance-based share unit awards, or PSUs, for our executive officers in the 2026 period. PSUs generally have a higher grant-date fair value than traditional restricted stock and restricted stock units.

Current wording

SG&A expenses increased during the three andsix months ended June 30, 2026, as compared to thecorresponding periods in 2025. In general, the increase in our total SG&A expenses reflects a higher level of cost to appropriately scale our administrative function commensurate with our overall organizational growth. Excluding non-cash share-based compensation and the strategic transaction costs associated with the Flatrock Acquisition, our primary SG&A expenses have declined as a percentage of our revenues in both of the 2026 periods as compared to the corresponding periods in 2025. The increase in primary SG&A expenses during the three and six months ended June 30, 2026 as compared to the 2025 periodswas impacted by (i) higher professional fees and public company costs of $0.4 million and $0.8 million, respectively, including costs associated with our recent Redomestication, (ii) higher salaries and benefits, including short-term incentive compensation, of $0.1 million and $0.4 million, respectively, reflecting support staff growth and performance, (iii) higher occupancy and office costs of $0.1 million and $0.2 million, respectively, (iv) $0.2 million attributable to Flatrock’s legacy administrative operations from the Acquisition Date through June 30, 2026, and (v) higher IT support costs of $0.1 million and $0.2 million, respectively, in support of our growth initiatives and noncapitalizable costs associated with certain IT system implementation projects.

Previous wording

Depreciation and amortization expense increased for thethree months ended March 31, 2026, as compared to thecorresponding period in 2025, due primarily to depreciation expense associated with the large horsepower units placed in service during 2025 continuing through March 31, 2026. These higher horsepower unit additions are reflective of our strategic plans to concentrate our business development on these higher margin applications. Furthermore, our equipment additions, during the 2026 period, primarily compressor units and service vehicles, reflect higher overall costs due to broad inflationary pressures as compared to the 2025 period.

Current wording

Depreciation and amortization expense increased for the three andsix months ended June 30, 2026, as compared to thecorresponding periods in 2025, due primarily to depreciation expense associated with the large horsepower units placed in service during 2025 continuing through June 30, 2026. These higher horsepower unit additions are reflective of our strategic plans to concentrate our business development on these higher margin applications. Furthermore, our equipment additions, during the 2026 periods, primarily compressor units and service vehicles, reflect higher overall costs due to broad inflationary pressures as compared to the 2025 periods. Amortization of the intangible assets acquired from Flatrock began on the Acquisition Date and the impact during the periods presented was not material.

Previous wording

During three months ended March 31, 2025, we recorded a nominal increase to the allowance for obsolescence primarily attributable to the transfer of inventory that remained useful from our former Midland, Texas facility, in connection with its closing in March 2025, to our other operating facilities. All of the remaining inventory from the Midland, Texas facility that was subject to the allowance for obsolescence was written off during the three months ended March 31, 2025. As of March 31, 2026 and December 31, 2025, we had an inventory obsolescence balance of $3.6 million. Please see Note 4 (“Inventory”) to our Condensed Consolidated Financial Statements for additional information regarding the inventory allowance.

Current wording

During six months ended June 30, 2025, we recorded a nominal increase to the allowance for obsolescence primarily attributable to the transfer of inventory that remained useful from our former Midland, Texas facility, in connection with its closing in March 2025, to our other operating facilities. All of the remaining inventory from the Midland, Texas facility that was subject to the allowance for obsolescence was written off during the three months ended March 31, 2025. There was no impact on our operating income as the Midland allowance was eliminated.

Previous wording

We retired 134 and 68 units representing 17,700 and 12,073 horsepower, with remaining carrying values of $0.4 million and $0.7 million during thethree months ended March 31, 2026 and 2025, respectively.

Current wording

We retired 134 and 68 units representing 17,700 and 12,073 horsepower, with remaining carrying values of $0.4 million and $0.7 million during thesix months ended June 30, 2026 and 2025, respectively.

Previous wording

Gains recognized during the three months ended March 31, 2026 and 2024 are primarily attributable to the sales of trucks after the completion of their useful lives.

Current wording

Gains recognized during the three and six months ended June 30, 2026 and 2025 are primarily attributable to the sales of trucks after the completion of their useful lives.

Previous wording

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our senior secured revolving credit agreement, as amended (the “Credit Facility”), net of amounts capitalized attributable to certain capital projects.

Current wording

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under the Credit Facility, net of amounts capitalized attributable to certain capital projects.

Previous wording

Interest expense increased for thethree months ended March 31, 2026, as compared to thecorresponding period in 2025, due primarily to (i) the effect of $0.4 million of lower capitalized interest, respectively, due primarily to the volume and timing of the completion of certain compressor assembly projects in the 2026 period as well as lower interest rates and (ii) higher interest costs of $0.4 million resulting from $56.5 million of higher average borrowings outstanding partially offset by the effect of lower average interest rates. In addition, amortization of debt issue costs increased during the three months ended March 31, 2026, as compared to the comparable period in 2025 due primarily to the amortization of costs associated withthe Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”)that was completed in April

Current wording

Interest expense increased for the three andsix months ended June 30, 2026, as compared to thecorresponding periods in 2025, due primarily to (i) higher interest costs resulting from higher average outstanding borrowings partially offset by the effect of lower average interest rates and (ii) the effect of lower capitalized interest due primarily to the volume and timing of the completion of certain compressor assembly projects in the 2026 periods as well as lower interest rates. In addition, amortization of debt issue costs increased during the three and six months ended June 30, 2026, as compared to the comparable periods in 2025 due primarily to the amortization of costs associated withthe Fifth Amendment that was completed in June 2026 and a previous amendment that was completed in April 2025. The lower average interest rates are consistent with the Federal Reserve interest rate reductions implemented in the second half of 2025 as well as the lower interest rates attributable to the previous amendment.

Previous wording

Other income (expense), net declined for thethree months ended March 31, 2026 as compared to the corresponding period in 2025 due primarily to higher unrealized losses attributable to our COLI policies associated with our deferred compensation plan.

Current wording

Other income (expense), net declined for the three andsix months ended June 30, 2026 as compared to the corresponding periods in 2025 due primarily to higher unrealized losses attributable to our COLI policies associated with our deferred compensation plan.

Previous wording

For interim periods, our income tax expense is computed based upon our estimated annual effective tax rate and any discrete items that impact the interim periods. Our estimated annual effective tax rate differs from the U.S. federal statutory rate of 21% primarily as a result of a higher effective tax rate attributable to state and local income taxes including the impact of projected apportionment of taxable income between states with different tax rates.

Current wording

For interim periods, our income tax expense is computed based upon our estimated annual effective tax rate and any discrete items that impact the interim periods. Our estimated annual effective tax rate differs from the U.S. federal statutory rate of 21% primarily as a result of a higher effective tax rate attributable to state and local income taxes including the impact of projected apportionment of taxable income between states with different tax rates. In addition, the periods in 2026 were adversely impacted by a discrete item attributable to the Texas Comptroller’s amendments to Rule 3.588; a change in law enacted in June 2026 that conformed the Texas cost of goods sold depreciation to current federal law. This discrete item resulted in a 2.6% increase to our annualized effective rate. The Redomestication had no impact on the application of the amendments to Rule 3.588 regarding our income subject to taxation in Texas or any other state in which we operate.

Previous wording

Our primary sources of liquidity include cash provided by operating activities and borrowings under our Credit Facility which provides us with up to $400.0 million in borrowing commitments with an additional $100.0 million at our request through an accordion feature. The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility’s financial covenants. As of March 31, 2026, the borrowing base under the Credit Facility was $400.0 million with $226.0 million of borrowings outstanding leaving $174.0 million of availability under the Credit Facility.

Current wording

Our primary sources of liquidity include cash provided by operating activities and borrowings under our Credit Facility which provides us with up to $500.0 million in borrowing commitments with an additional $100.0 million at our request through an accordion feature. The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility’s financial covenants. As of June 30, 2026, we had $328.0 million of borrowings outstanding under our Credit Facility with a weighted average interest rate of 6.48% as well as $0.2 million for outstanding letters of credit. As of June 30, 2026, we had approximately $134.8 million available for borrowing under the Credit Facility, reflecting the applicable borrowing base calculation.

Previous wording

Cash From Operating Activities. Our cash provided by operating activities was $23.0 million for the three months ended March 31, 2026. For additional information and an analysis of our historical cash flows from operating activities, see the “Cash Flows” discussion that follows.

Current wording

Cash From Operating Activities. Our cash provided by operating activities was $48.5 million for the six months ended June 30, 2026. For additional information and an analysis of our historical cash flows from operating activities, see the “Cash Flows” discussion that follows.

Previous wording

Credit Facility Borrowings. During the three months ended March 31, 2026, we repaid $4.0 million, net of borrowings, under the Credit Facility. The following table summarizes our borrowing activity under the Credit facility for the periods presented:

Current wording

Credit Facility Borrowings. During the six months ended June 30, 2026, we borrowed $98.0 million, net of repayments, under the Credit Facility. The following table summarizes our borrowing activity under the Credit Facility for the periods presented:

Previous wording

Proceeds from Sales and Monetization of Assets. We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others. For additional information and an analysis of or historical proceeds from sales of assets, see the “Cash Flows” discussion that follows.

Current wording

Proceeds from Sales and Monetization of Assets. We continually evaluate the potential sale of assets, including underutilized or retired compressor units, obsolete and slow-moving inventory and non-strategic real estate assets, among others. For additional information and an analysis of our historical proceeds from sales of assets, see the “Cash Flows” discussion that follows.

Previous wording

Capital Markets Transactions. From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities. We maintain an effective shelf registration statement with the SEC for up to $200 million for a variety of securities to provide financing optionality.

Current wording

Capital Markets Transactions. From time-to-time and under market conditions that we believe are favorable to us, we may consider capital markets transactions, including the offering of debt and equity securities. We maintain an effective shelf registration statement with the Securities and Exchange Commission (the “SEC”) for up to $200 million for a variety of securities to provide financing optionality.

Previous wording

Cash Flows from Operating Activities. Our cash flows from operating activities increased by $1.8 million during the three months ended March 31, 2026, as compared to the comparable period in 2025. The net increase is primarily attributable to the receipt in January 2026 of $12.3 million of income tax refunds and related interest as well as the favorable effects of higher realized margins attributable to growth in our high horsepower unit rentals. These increases were substantially offset by higher working capital uses including (i) the paydown of higher year-end accounts payable, (ii) growth in accounts receivable, (iii) increases in our maintenance parts inventory in support of our growing fleet and (iv) higher interest payments attributable to higher outstanding borrowings during the 2026 period as compared to the 2025 period.

Current wording

Cash Flows from Operating Activities. Our cash flows from operating activities increased by $16.2 million during the six months ended June 30, 2026, as compared to the comparable period in 2025. The net increase is primarily attributable to the receipt of $13.8 million in the first half of 2026 related to income tax refunds and associated interest as well as the favorable effects of higher realized margins attributable to growth in our high horsepower unit rentals. These increases were substantially offset by higher working capital uses including (i) increases in our maintenance parts inventory in support of our growing fleet, (ii) implementation costs capitalized and paid for software services and (iii) higher interest payments attributable to higher outstanding borrowings during the 2026 period as compared to the 2025 period.

Previous wording

Cash Flows from Investing Activities. For the three months ended March 31, 2026, and 2025, we invested approximately $15.2 million and $19.3 million, respectively, in rental equipment, property and other equipment. Included in these totals for 2026 and 2025 were $12.2 million and $16.7 million for growth capital expenditures to expand our rental fleet and $3.0 million and $2.6 million for capital maintenance projects, respectively. Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the period.

Current wording

Cash Flows from Investing Activities. In June 2026, we completed the Flatrock Acquisition for approximately $119 million of which $108.7 million was paid in cash, net of amounts acquired. For the six months ended June 30, 2026, and 2025, we invested approximately $34.0 million and $45.1 million, respectively, in rental equipment, property and other equipment. Included in these totals for 2026 and 2025 were $27.6 million and $38.8 million for growth capital expenditures to expand our rental fleet and $6.4 million and $6.3 million for capital maintenance projects, respectively. Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the period.

Previous wording

Cash Flows from Financing Activities. During the three months ended March 31, 2026, we had net repayments of $4.0 million and for the three months ended March 31, 2025 we had net repayments of $2.0 million under the Credit Facility. The 2026 period includes a payment of $1.4 million for a common stock dividend. The 2026 period also includes the payments of taxes attributable to the net share settlement of equity awards partially offset by the receipt of proceeds from the exercise of stock options. There were no comparable cash flows for these items during the 2025 period.

Current wording

Cash Flows from Financing Activities. During the six months ended June 30, 2026, we had net borrowings of $98.0 million and for the six months ended June 30, 2025 we had net borrowings of $12.0 million under the Credit Facility. The net borrowings reflect advances obtained to fully fund the cash portion of the Flatrock Acquisition. The 2026 period includes payments of $3.3 million for common stock dividends while there were no comparable amounts during the 2025 period as our common stock dividend began in the third quarter of 2025. The 2026 period also includes the payments of taxes attributable to the net share settlement of equity awards. These outflows were partially offset by the receipt of over $1.0 million of proceeds from the exercise of stock options.

Previous wording

Credit Facility. We have a senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association as administrative agent (the “Administrative Agent”), and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners, and the lenders party thereto (the “Lenders”) with a total commitment of $400.0 million. We also have a right to request from the Lenders, an increase to the potential aggregate commitment of up to $100.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $500.0 million. The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.

Current wording

Credit Facility. We maintain a Credit Facility with Texas Capital Bank, National Association as administrative agent (the “Administrative Agent”), and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners, and the lenders party thereto (the “Lenders”) with a total commitment of $500.0 million. We also have a right to request from the Lenders, an increase to the potential aggregate commitment of up to $100.0 million; provided, however, the aggregate commitment amount is not permitted to exceed $600.0 million. The obligations under the Credit Facility are secured by a first priority lien on most of our assets, including inventory and certain accounts receivable as well as a variable number of our leased compressor units. The maturity date of the Credit Facility is February 28, 2028.

Previous wording

As of March 31, 2026 we had $226.0 million outstanding under our Credit Facility with a weighted average interest rate of 6.79%. As of March 31, 2026, we had approximately $174.0 million available for borrowing under the Credit Facility, subject to a borrowing base determination. As of March 31, 2026, we were in compliance with all financial covenants in our Credit Facility.

Current wording

As of June 30, 2026 we had $328.0 million outstanding under our Credit Facility with a weighted average interest rate of 6.48%. As of June 30, 2026, we had approximately $134.8 million available for borrowing under the Credit Facility, subject to a borrowing base determination. As of June 30, 2026, we were in compliance with all financial covenants in our Credit Facility.