Stabilis Solutions - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue was $17.3M, GAAP net loss was $0.6M ($0.03 diluted EPS), and Adjusted EBITDA was $1.5M; cash from operations was $4.5M and quarter-end liquidity reached a record $16.1M (cash $12.2M and ~$3.9M availability).
• Mix shift toward growth end-markets continued: aerospace, marine, and power generation represented ~77% of revenue vs 62% in Q2 2024, with aerospace revenue up 83% YoY and power generation up 10% YoY.
• Sequentially, revenue was flat vs Q1 2025 ($17.3M) but Adjusted EBITDA margin compressed to 8.6% vs 11.9% in Q1; YoY, revenue declined 7% and EPS fell to a loss vs $0.00 last year, driven by roll-off of a large short-duration industrial project.
• Catalysts: management is working to finalize multi-year offtake contracts (marine/aerospace/power), enabling a potential FID and project financing for a Gulf Coast liquefier; George West capacity could be expanded quickly; distributed power demand tied to data centers/AI is an emerging opportunity.

What Went Well and What Went Wrong

What Went Well

• Record liquidity and strong operating cash generation: “record liquidity position of $16,100,000… $12,200,000 of cash and approximately $4,000,000 of availability” and $4,500,000 CFO in Q2.
• Strategic mix shift toward growth verticals: growth end-markets rose to ~77% of revenue; aerospace +83% YoY; power generation +10% YoY.
• Continued execution in marine bunkering (Carnival), with long-term offtake agreements under negotiation to anchor new Gulf Coast liquefaction capacity.

What Went Wrong

• YoY decline in revenue (−7%) and profitability: net loss of $0.6M vs $27k profit last year; Adjusted EBITDA down to $1.5M from $2.1M, driven by roll-off of a large industrial contract.
• Margin compression: Adjusted EBITDA margin fell to 8.6% vs 11.3% last year and 11.9% in Q1 2025; EBITDA also impacted by a ~$200k nonrecurring JV charge.
• SG&A normalization post-Q1 severance; while SG&A fell by $0.2M YoY in Q2, earlier Q1 non-recurring SG&A ($2.1M) reflected executive transition costs and affected 1H trajectory.

Transcript

Speaker 4

Welcome to the Stabilis Solutions second 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 one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. To ensure others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Andy Puhala, Chief Financial Officer. Mr. Puhala, please go ahead.

Speaker 2

Good morning and welcome to Stabilis Solutions' second 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 second 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, August 7, 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 for 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.

Speaker 3

Thank you, Andy, and good morning to everyone joining us on the call. During the second quarter, our teams were sharply focused on operational execution and deepening our customer relationships within our marine, aerospace, and power generation end markets, which, as we've discussed before, are the most promising long-term growth opportunities for the company. Commercial discussions with both new and longstanding customers are progressing well in all three end markets. We are working to secure long-term customer commitments needed to grow the business and allow us to make investment decisions on capacity expansion. During the quarter, we saw revenue and EBITDA decrease year over year, primarily due to the successful completion of a large, short-duration industrial project last year.

However, revenue in the three key growth end markets continued to expand with marine, aerospace, and power generation sector revenues up a combined 15% year over year, driven by an 83% increase in aerospace revenues. In the first half of the year, aerospace revenues have more than doubled from the same period in 2023, and we expect growth in this sector to continue. In the marine sector, we continue to perform well on our Gulf Coast bunkering contract with Carnival Cruise Line. Growth in this sector is dependent on securing additional long-term customer contracts, including contracts that will support our final investment decision for additional liquefaction capacity on the Gulf Coast. We are pleased with our progress on several potential LNG offtake agreements in the marine sector.

In our power generation end market, we're seeing increased interest in LNG as a bridge and backup fueling solution to meet the rising electric demand from the data centers and other energy-intensive infrastructure. While this opportunity remains in its early stages, the projected long-term growth in electricity demand is creating a broad range of use cases for our LNG solutions. We are actively engaged with multiple customers as they explore reliable, scalable options for distributed power. In conclusion, our strategic vision is clear, and Stabilis Solutions has significant long-term growth opportunities ahead. We're building Stabilis Solutions into the leading provider of last-mile LNG solutions with a focus on becoming the partner of choice for certain key end markets. Our team continues to execute against this vision, demonstrating operational excellence and generating strong commercial momentum along the way.

We look forward to updating you in the coming months as we finalize new contract awards. With that, I'll turn the call back over to Andy to review our financial performance in detail.

Speaker 2

Thank you, Casey. I'll start with a discussion of our second quarter performance, followed by an update on our balance sheet and liquidity. Our revenues during the second quarter decreased 7% compared to the second quarter of 2024. As Casey mentioned, the decline in revenues year over year was primarily the result of the rolloff of a large contract with an industrial customer that occurred last year. This decline was partly offset by an 83% increase in aerospace revenues and a 10% increase in our power generation market. During the second quarter, approximately 77% of our revenues were derived from aerospace, marine, and power generation customers, compared to 62% in the second quarter of last year, as we continue to focus on these growth sectors. Adjusted EBITDA was $1.5 million during the second quarter, compared to $2.1 million in the second quarter of last year.

Adjusted EBITDA margin was 8.6%, down from 11.3% in the second quarter of last year. In addition to the rolloff of the short-term customer contract previously mentioned, EBITDA was negatively impacted by non-recurring charges of approximately $0.2 million related to our foreign joint venture. Cash generated from operations during the second quarter was $4.5 million. The strong cash generation resulted in a record liquidity position of $16.1 million at quarter end, consisting of $12.2 million of cash and approximately $4 million of availability under our credit facilities. With $8.4 million in debt and lease obligations outstanding, we ended the quarter in a net cash position with no net debt and strong balance sheet flexibility that positions us to strategically deploy capital to support the growth of our business. Our capital expenditures were $0.6 million during the quarter.

As discussed on previous calls, as we finalize new customer commitments and a related capacity expansion, we expect an acceleration in capital commitments. That concludes our prepared remarks. Operator, please open the line for the Q&A session.

Speaker 4

Thank you. At this time, if you would like to ask a question, press star one now on your telephone keypad. The floor will be open for questions. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Martin Malloy of Johnson Rice. Please go ahead.

Speaker 1

good morning.

Speaker 2

morning, Marty. Good morning.

Speaker 1

First question, just wanted to ask about the contractual agreements, the offtake agreements, that it sounds like you've got a number that are in the works, and it could be within the next couple of months that they're announced. I just wanted to get a sense if that was the correct interpretation of your statements. Also, the magnitude and the industries involved here, and are these going to be of the size and tenor that would allow for project financing potential?

Speaker 2

Yeah, Marty, why don't I start? This is Casey, and then I'll let Andy come back in and add some additional color. The way we see this is really all three of those growth segments that we talk about, both the marine, aerospace, and power generation, distributed power generation business, all of them have contracts that we're working on with multiple customers. We're always in the business of signing new customer agreements. When we think about duration, some are six months, and then some of them keep getting extended and can go for multiple years. They're all different in duration, but we're working on them in all three segments, numerous contracts in all three segments.

If we want to then kind of shift into how those are going to allow us to deploy capital, if we want to talk about aerospace, we're working on a number of additional contracts there that would allow us to support additional capital expenditures to fulfill those or to support those contracts. Power generation, the same, or distributed power. Probably the most pointed question would be more around the marine sector, where we're working on a Gulf Coast liquefier to support the marine market. That is where we've got a number of very large offtake agreements that we're working on finalizing the contracts on. Those would be enough to support final investment decision and project financing around a project for that. Andy may have some additional color on that, but I wanted to just cover it.

All three segments have different contracting and work around those that are much longer term in duration than just kind of spot work. Yeah, that's right. Just to add to that, I mean, these are multi-year offtake agreements with firm commitments.

Speaker 1

Okay, thank you for that. For my follow-up question, I just wanted to ask about the timing of once these contracts are announced. I know you've got some equipment at George West for potentially doubling up capacity there or someplace else. You've got long lead-time equipment already purchased. Could you make, it sounds like this, you've got potential agreements that would cover LNG needs in excess of that. Can you talk about the timing of getting additional liquefaction capacity online? In the meantime, would you source the LNG potentially from other sources?

Speaker 2

Yeah. Let me start it. First of all, I'll take you back to the three big end markets that we're working in: marine, aerospace, and power generation. If you think about power generation and distributed power, specifically around data centers and AI, all of that is happening around the whole United States. One of the things you should remember about Stabilis Solutions is we don't only make our own LNG. We have supply arrangements with 30 plus other liquefiers around the United States. The power, distributed power generation market, it's going to determine if we are going to add liquefaction capacity or if we're going to deploy what we have as a fleet of the last-mile liquefaction, last-mile LNG equipment, which is the on-site story and the vaporization equipment, which is very valuable, which we already have in our fleet. We already have that part of it.

If it's close to one of our liquefiers, we'll get our own LNG. If it's not, we'll use one of our third-party offtake agreements. When you're thinking about aerospace, it's a lot the same, but the quality component of the liquid really requires it to be from specific places. A lot of that ends up coming out of our own liquefiers. When you're talking about marine, that would take larger facilities to do on-the-water, barge work, and that'll take new capacity. If you talk about deploying new capacity, the quickest new capacity would probably be in George West. We already have the facility there. We've already got the long-lead equipment. We can do that quickly. We're also secondly working on our Gulf Coast liquefier.

Right now, we're spending money on engineering and pre-construction work to prepare to deploy that, but that's a little bit longer than what you could get done at our site in George West.

Speaker 1

Great, thank you. I'll turn it back.

Speaker 4

Thank you. Once again, to ask your questions, that is star one on your telephone keypad. Our next question is from Tate Sullivan of Maxim Group. Please go ahead.

Speaker 0

Hi, thank you. Good morning. Casey, thanks for the comment on the Gulf Coast liquefier. Does completing that, is that the key variable to finalize some of the contracts you mentioned in the marine sector, or are there other variables to finalize those contracts between the four infrastructures?

Speaker 2

Yeah, first of all, Tate, thanks for being on the call today, and we welcome your question. Maybe I need to clarify a little bit. I may not have communicated it very well. The contracts are kind of the front-end part, and then those would anchor the project financing to then put it in. We're already actively working on and doing marine bunkering projects every day of the week in the Gulf Coast, as we stated with one of our good cruise customers. We're doing that through a truck-to-ship process, truck-to-barge ship process. These contracts that we're working on will underpin putting a new facility, what we call on the water, so that we can produce the LNG needed for those contracts on the water. When I say on the water, next to the water, where we don't have to truck the LNG in.

Really, what we're waiting on is these contracts that are long enough in tenure and duration to underpin the project financing so we can make the final investment decision to move forward.

Speaker 0

Okay. Thank you. For those marine contracts, can you share, is it still mostly with cruise ship customers or are there other types of shipping customer discussions?

Speaker 2

We are having numerous discussions with multiple end markets around the marine space. If it's okay, Tate, we prefer to not share the details of all the different customer work we're doing around there, but we're definitely deep into the cruise space as we're currently delivering into that market today.

Speaker 0

Thank you, Casey. Have a good day.

Speaker 2

Thank you.

Speaker 4

To ask a question, that is star one on your telephone keypad. We'll take our next question from Spencer Lehman. Your line is open.

Speaker 1

Oh, hi gentlemen. Hi Andy. Yeah.

Speaker 2

Hi, Spencer.

Speaker 1

There's a lot of, the macro picture for LNG is just very attractive, and there's a lot going on with that. A couple of weeks ago, they announced that Europe was going to spend $750 billion in purchases. Certainly, the overall picture is just great for energy and especially LNG. Of course, a lot of hype on data centers. It just seems like there's a tremendous amount of need for energy in the country. I mean, also with the administration certainly supporting that whole area. I think we're sort of in a sweet spot here, but the stock, small companies off the radar. I'm just curious what you're doing now or could do to really get the story out.

Speaker 2

Spencer, this is Casey. Let me start. I'll have Andy come back on it and do some additional color and clarification. I appreciate your questions. As a meaningful shareholder of the company, I feel the same thoughts around that that you just shared there. When I think about me being a shareholder of Stabilis Solutions and being here, we started Stabilis Solutions in 2012, so we've got over a decade of just high, active real work in LNG. We've delivered just a ton of real products, a ton of real customers. We've got an amazing team of operational people, an amazing team of business development, engineering, and just overall staff, and we're doing it every day of the week. We have these big growth end markets that can just take the company and have a step change in both size of revenue and earnings.

When I think about my investment in Stabilis Solutions, I think about a cash-flow-generating, positively operating LNG platform. It's actively working on growing itself in three dynamic end markets. To me, it's a great place to be. When I think about long-term, I think Buffett or someone said, the stock market is a short-term, people talk about it's a long-term, it's a weighing machine. As we continue to hit some of these long-term contracts and grow the company, other investors will come in and want to be part of this amazing position that Stabilis Solutions has been, a current operating, cash-flow-generating, great small business with options to grow the business extremely large in these three end markets. I think it's a great place to be. I'm delighted to be a shareholder personally, proud of it.

I think over time, other people will find that out and will join up as we hit our strategic vision for the company. I'll turn it over to Andy on tactically what your question might be. Yeah. Thanks, Spencer. Just to add to that, I mean, look, we're eager to get out and talk to the market and tell people what we've got going on at Stabilis Solutions. We think that the key thing there is to get some of these contracts so that we have an opportunity to go out and have something exciting to talk about in the marketplace. As Casey mentioned, we think we'll close on several transformative type projects. We've got the opportunity to go out and give people some specifics to really think about and understand what that means for Stabilis Solutions.

You know, until we have some of those specifics, it's kind of hard sometimes to get people as excited as we are about the opportunity. Believe me, we're excited. We don't get too focused on the quarter-to-quarter minutia because we think that this is really a long-term growth story, and we're very bullish about it.

Speaker 1

Thank you so much. Thank you, Casey. That was very encouraging and enlightening. My only problem is I'm going to be 90 here in a few months. I'm running out of time, so don't wait too long.

Speaker 2

We're not waiting. We're actively waiting.

Speaker 1

I know you're not.

Speaker 2

That seems in the business, in the growth section to have that step change and transformational deal. You know, when I think about where Stabilis Solutions is going to be in the next 3, 5, and 10 years, it's really exciting to be in the LNG manufacturing and distribution and part of that value chain of the gas. Stabilis Solutions is a great platform of that. I think, Spencer, that 90 years is young these days now. I think we look forward to many more years with you as a shareholder and growing the company.

Speaker 1

I'm definitely a long-term, but long-term now is like, you know, four or five years. Yeah, it's just a great atmosphere to be in right now with LNG, and I'm excited about that. I think things are ready to really happen for you guys. Thank you.

Speaker 2

Thanks, Spencer. Thank you.

Speaker 4

Thank you. Thank you. This does conclude the question and answer portion of today's call. I would now like to turn the floor over to Andy Puhala for closing remarks.

Speaker 2

Thanks, Leo. Thank you for all that joined us today. We appreciate your time and continued interest and support with the company. If you have any additional questions or simply want to learn more about what we're building at Stabilis Solutions, please contact me at our investor relations number. This concludes our call, and thank you all very much.

Speaker 4

Thank you. This concludes today's Stabilis Solutions second quarter 2025 earnings conference call. Please disconnect your line at this time and have a wonderful day.