Stabilis Solutions - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 printed mixed fundamentals: revenue of $17.3M (-12.3% YoY) and adjusted EBITDA of $2.1M (11.9% margin), impacted by planned marine customer downtime and the roll-off of a large short-duration industrial project; GAAP net loss was ($1.6)M driven by $2.1M non-recurring executive transition costs.
• Liquidity remained solid with $9.0M cash and $3.5M availability ($12.5M total), and management emphasized “essentially no net debt” at quarter-end alongside continuing operating cash generation ($1.0M).
• End-market mix continues to pivot toward growth verticals: marine and aerospace contributed ~51% of Q1 revenue versus 39% in Q1 2024; aerospace revenues grew 147% YoY while power generation was stable.
• Strategic growth focus reiterated: progressing commercial contracts and FEED work to expand liquefaction capacity on the Gulf Coast (George West and waterfront), with potential FID requiring $20–$25M and ~9–12 months to complete at George West (longer on-water).

What Went Well and What Went Wrong

What Went Well

• Strong momentum in growth markets: marine and aerospace revenue mix up to ~51% in Q1 2025 (+12ppt YoY); aerospace revenues +147% YoY, with management highlighting increased activity with a major aerospace customer.
• Continued operating cash generation and liquidity: $1.0M cash from operations in Q1 and $12.5M total liquidity, positioning for growth investments; “essentially no net debt” at quarter-end.
• Execution-ready platform for Gulf Coast expansion: FEED studies and equipment/infrastructure progress support potential capacity additions; management: “We’re actively positioning the business to scale… targeted opex investments… while continuing to generate consistent positive operating cash flow”.

What Went Wrong

• Topline and profitability headwinds: revenue fell 12.3% YoY; adjusted EBITDA declined to $2.1M (11.9% vs 15.7% LY) due to lower equipment/labor revenues after a completed contract and planned cruise maintenance week reducing a bunkering event.
• Non-recurring SG&A: ~$2.1M executive transition costs drove GAAP net loss ($1.6M, -$0.09/sh) versus $0.08/sh in Q1 2024.
• No formal quantitative guidance: management discussed growth pathways and capex/timelines but did not issue revenue/EPS/margin guidance ranges, limiting near-term model precision for the Street.

Transcript

Operator (participant)

Welcome to the Stabilis Solutions First Quarter 2025 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star and one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star and two. So that others can hear your questions clearly, we ask that you please pick up your handset to provide best sound quality. Lastly, if you should require any operator assistance, please press star and zero. It is now my pleasure to turn today's call over to Andy Puhala, Chief Financial Officer. Sir, you may begin.

Andy Puhala (SVP and CFO)

Good morning and welcome to Stabilis Solutions First Quarter 2025 Results Conference Call. I'm Andy Puhala, Senior Vice President and CFO of Stabilis, and joining me today is our Executive Chairman and Interim President and CEO, Casey Crenshaw. We issued a press release after the market closed yesterday detailing our first quarter operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at stabilis-solutions.com. Before we begin, I'd like to remind everyone that today's conference call will contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company's expectations and beliefs as of today, May 8, 2025. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

The company undertakes no obligation to provide updates or revisions to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results. Investors are cautioned not to place undue reliance on any forward-looking statements. Further, please note that we may refer to certain non-GAAP financial information on today's call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today's call is being recorded and will be available for replay. With that, I'll hand the call over to Casey Crenshaw for his remarks.

Casey Crenshaw (Executive Chairman and Interim CEO)

Thank you, Andy, and good morning to everyone joining us on the call. Our first quarter results reflect the continued execution of our strategy to pursue long-term growth across our core end markets, including marine bunkering, aerospace, and power generation. These markets are supported by significant multi-year demand ranging from rising remote power needs and marine fuel transitions to the growth of commercial space industry. Revenue and adjusted EBITDA declined this quarter primarily due to planned downtime with a key marine bunkering customer and the successful completion of a major short-duration industrial project in the third quarter of last year. While these factors affected our near-term results, they do not reflect the underlying momentum in our business. Revenue in our marine and aerospace markets grew by more than 13% year over year, driven primarily by increased activity with a major aerospace customer.

We continue to advance commercial discussions across all of our end markets, both with new customers and long-standing partners. Our strategy remains focused on expanding our position as the leading small-scale LNG supplier within these high-growth sectors, where access to traditional LNG supply infrastructure is limited. Looking ahead, we're actively positioning the business to scale alongside our customers by making targeted operating expense investments in our commercial, technical, and operations teams to support future growth. These growth-focused costs are fully reflected in our results, yet we continue to generate consistent positive operating cash flow. As we secure additional contracts, we plan to expand our footprint to meet growing demand. We continue to evaluate the potential expansion of our liquefaction capacity in South Texas and along the Gulf Coast. While no final investment decision has been made, this remains a key first part of our long-term growth strategy.

In the near term, we expect steady utilization and demand under existing contracts with upside potential as we convert new opportunities into signed agreements. Changes in U.S. trade policy and tariff regimes are not expected to directly impact our business. Approximately 95% of our revenue comes from U.S.-based customers utilizing domestically sourced natural gas. From a capital allocation standpoint, we remain focused on maintaining a strong balance sheet and liquidity position. This approach ensures we are well-prepared to fund future growth and capitalize on long-term demand we see ahead. With that, I'll turn the call back over to Andy to review our financial performance in more detail.

Andy Puhala (SVP and CFO)

Thank you, Casey. I'll start with a discussion of our first quarter performance, followed by an update on our balance sheet and liquidity exiting the quarter. Our revenues during the first quarter decreased 12% compared to the first quarter of 2024, but were modestly higher when compared to the fourth quarter of 2024. The decline in revenues on a year-over-year was primarily the result of the roll-off of a large contract with an industrial customer, the temporary impact from a week of planned downtime with a major marine customer, partly offset by a 147% increase in revenues from aerospace customers as we continue to grow our presence in that market. Power generation revenues remained consistent with Q1 of 2024. During the first quarter, approximately 51% of our revenues were derived from marine and aerospace customers compared to 39% in the first quarter of last year.

First quarter GAAP net loss was $1.6 million, or $0.09 per diluted share, compared to net income of $1.5 million, or $0.08 per diluted share in the first quarter of 2024. Our GAAP net loss during the quarter reflects a non-recurring impact of approximately $2.1 million relating to executive transition costs during the quarter. Adjusted EBITDA was $2.1 million during the first quarter compared to $3.1 million in the first quarter of last year. Adjusted EBITDA margin was 11.9%, down from 15.7% in the first quarter of last year. The decrease in our adjusted EBITDA was primarily the result of lower revenues, while our adjusted EBITDA percentage declined due to lower equipment and labor revenues associated with the completion of a customer contract. Cash generated from operations during the first quarter was $1 million, representing a conversion rate of 50% of our adjusted EBITDA.

This cash generation continued to support a strong liquidity position of $12.5 million at the end of the first quarter. Capital expenditures declined in the first quarter on a sequential basis due to the timing of capital needs involved in our ongoing efforts to invest in our infrastructure along the Gulf Coast. During the quarter, our CapEx was $500,000, with about 70% of those expenditures going towards growth initiatives. Our growth investments during the quarter primarily focused on front-end engineering and design studies for our potential Gulf Coast expansion. As Casey noted, the success of our ongoing commercial initiatives will be a critical stepping stone for continued growth investment, which will require incremental capital as we make final investment decisions on these key investments.

As of March 31, 2025, Stabilis had total cash and equivalents of $9 million, together with $3.5 million of availability under our credit facilities. With $9.1 million of total debt outstanding, we ended the quarter with essentially no net debt and strong balance sheet flexibility. That concludes our prepared remarks. Operator, please open the line for the Q&A session.

Operator (participant)

Absolutely. The floor is now open for questions. At this time, if you have a question or comment, please press the star and one keys on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star and two. Again, we ask that you pick up your handset when providing your question to provide for optimal sound quality. Our first question comes from Martin Malloy with Johnson Rice. Please go ahead. Your line is open.

Martin Malloy (Equity Research and Partner)

Good morning. Thank you for taking my questions.

Casey Crenshaw (Executive Chairman and Interim CEO)

Morning, Marty.

Martin Malloy (Equity Research and Partner)

First question I just wanted to ask about is on the contracting side. On the last call, you mentioned that you had moved that additional liquefaction train down to the George West area, I believe. Just if you could give any more color in terms of where you are in terms of timing of being able to get a commercial contract that would support the deployment of that additional train.

Casey Crenshaw (Executive Chairman and Interim CEO)

You bet, Marty. This is Casey. Thanks for joining this morning. Thank you for your question. We are super actively working on a couple different commercial contracts. When they are finalized and papered, we think that's plenty of increased committed contracted demand to go for FID on the project. We are hoping to be able to come back with clarity on that. Second, third quarter of this year is our expected timeframe to have that kind of at that point. We were hoping to be able to be there this quarter right now, but it's just with timing and pushing and some of the other things going on, it's just pushed just a little bit. No change in our expectation.

Martin Malloy (Equity Research and Partner)

Okay. Great. Just in terms of power generation, that's been an area that's garnered some more time on your earnings calls in recent quarters. Can you maybe talk about the types of customer inquiries you're seeing? Is this for data center, reshoring of manufacturing, standby emergency-type power, or base load power?

Casey Crenshaw (Executive Chairman and Interim CEO)

Yeah. Marty, this is Casey. I'll take this one and start and then let Andy follow up. It is really all of the above. We define this category as distributed power, so kind of behind-the-meter power. We are working on half a dozen AI opportunities. There are digital mining opportunities. There are just behind-the-meter microgrid opportunities in oil and gas sector and other sectors. It is a couple different things. It is the increased need of power, and then it is the lack of access to the last-mile pipe into the facilities or area, or it is the just inability to get power and enough power brought in quickly. Some of these projects range from six months up to five years, depending on short-term versus bridge versus how long the bridge is. Some of them could get converted to backup after that point.

We're working on lots of different opportunities around the space. We don't want to call it just AI or just this. It's just kind of fully remote power opportunities.

Martin Malloy (Equity Research and Partner)

Great. Thank you very much.

Operator (participant)

If you do have a question, you may press the star and one on your telephone keypad at this time. We'll take our next question from Tate Sullivan with Maxim Group. Please go ahead. Your line is open.

Tate Sullivan (Managing Director and Senior Research Analyst)

Thank you. Good morning. Can you talk about your ship bunkering operation in terms of mentioning the downtime? Is it when cruise ships themselves are down for operation, or the bunkering, the fueling infrastructure, if you can provide more detail on that?

Casey Crenshaw (Executive Chairman and Interim CEO)

Yeah, Tate. Hey, good morning. Welcome to the call. Thank you for your question. The way I would try to explain this to y'all for y'all to think about, kind of how to plan for this and your own internal kind of thoughts, is it's really one week out of 52 where crew operators are doing maintenance on all of their operations on the vessel, maybe lifeboats, just a whole set of operations. This was just a planned non-sailing week, which created a reduction in a bunkering event during the quarter. That's the way we think about it. Out of 52 weeks a year, we would expect to at least have one week of planned maintenance outage. Does that answer your question, Tate?

Tate Sullivan (Managing Director and Senior Research Analyst)

Yes. Thank you. Outside of, I mean, there is a lot of different considerations for indications of demand, I imagine, for small-scale LNG services. Is there anything that you would point to? I mean, is it permit applications, any pipeline hookups, or anything that you look at in terms of indications of more demand for your services in the U.S.?

Casey Crenshaw (Executive Chairman and Interim CEO)

We're really looking at, instead of looking at the whole U.S., there's a lot of indicators of increased overall U.S. activity. We're a little bit more focused on kind of those three areas that we talk about: the aerospace, the marine bunkering, and the distributed power markets is where we're working. We're primarily focused on the indicators around the areas and the scope of areas that we're working on adding additional infrastructure and investment. What we can say is that what I can speak to is the areas that we're working on in those three sectors are all seeing increased bidding, inbound customer need, and opportunities. All three sectors in the areas that we are looking to deploy capital right now are seeing increased commercial activity.

Tate Sullivan (Managing Director and Senior Research Analyst)

Thank you for that. Then specifically for the space industry, and I know you might be limited, but you can say, I mean, SpaceX has announced more launches of its larger rockets or applications to do so in Texas. I mean, is that a good example of an indication of rising demand for yourself, or is that more pertinent for other larger scale scenarios?

Casey Crenshaw (Executive Chairman and Interim CEO)

Yeah. I think just the normalization and the fact that commercial aerospace activity is increasing on a macro basis, lots of different people in the space working on doing more launches, and the fact that LNG as the primary propellant for those rockets is the choice that they're going with is probably the primary drivers that we're excited about. We also have a facility that has multiple facilities. We have two facilities. Both of them are participating in the industry right now in different ways. We work with both launches and the testing around the engines and the units there. We're pretty, again, it's a growing industry, and we expect to see a lot of growth.

Now, the total size of it versus distributed power and marine bunkering may never reach the size of those total opportunities, but as a really strong end market that we're good at and participating in, we're super excited about it.

Andy Puhala (SVP and CFO)

Hey, Tate, this is Andy. Let me just add a little bit to that. I mean, in terms of the indicators, you're exactly right. We look at launch schedules and testing schedules and what we're hearing from both hearing from our customers and seeing in the media like everyone else. On the marine side, we're looking at the deliveries of dual fuel or LNG-powered vessels coming into the market. We're looking at what our customers are telling us in terms of their plans, for example, for Galveston and LNG vessels and things like that. It is those types of things that we look at to get our indications of coming demand and growing demand. Great. Thank you for all the background, and have a great rest of the day.

Tate Sullivan (Managing Director and Senior Research Analyst)

Thank you.

Andy Puhala (SVP and CFO)

Thanks, Tate.

Operator (participant)

This does conclude the Q&A portion of today's call. I would now like to turn the floor back to Andy Puhala for any closing remarks.

Andy Puhala (SVP and CFO)

Thank you, David. For all who joined us today, thanks for your time and continued interest in the company. If you want to talk more or have questions, please contact me at our investor relations number. Thanks for joining. We look forward to speaking with you guys next quarter. This concludes our call. You can now disconnect. Thank you, guys.

Operator (participant)

Thank you. This does conclude today's Stabilis Solutions First Quarter 2025 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.