Stabilis Solutions - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 delivered record profitability metrics: net income of $2.1M ($0.11 EPS), Adjusted EBITDA of $4.0M, and Adjusted EBITDA margin of 23.2% driven by mix shift to aerospace and marine and operating efficiencies.
• Revenue mix pivot toward growth markets accelerated: aerospace +35% YoY, power generation +23% YoY, and marine bunkering +500%+ YoY; aerospace+marine reached ~49% of Q4 revenue vs ~14% LY, offsetting softer oil & gas and lower natural gas prices.
• Liquidity solid: $9.0M cash and $4.3M availability exiting Q4; TTM Adjusted EBITDA implies net debt/EBITDA ~0.03x, supporting growth investments and potential project financing for incremental liquefaction capacity.
• Guidance: no quantitative revenue/EPS outlook; management outlined maintenance capex of ~$1.5–$2.0M annually, potential $20–$25M FID to complete an additional LNG train (9–12 months to complete at George West), and incremental gross margin potential of $10–$15M upon deployment.
• Consensus estimates from S&P Global were unavailable at time of analysis, so beats/misses vs Street cannot be assessed; however, operational records and margin expansion are likely positive stock catalysts given the mix shift narrative and capex optionality [Values retrieved from S&P Global unavailable].

What Went Well and What Went Wrong

What Went Well

• Record Q4 Adjusted EBITDA ($4.0M) and margin (23.2%) on improved utilization and mix toward contracted, higher-quality revenues; Q4 net income rose to $2.1M ($0.11) vs $1.4M ($0.08) in Q4 2023.
• Strategic mix shift: aerospace and marine reached ~49% of Q4 revenue, up from ~14% LY, with aerospace +35% YoY and marine bunkering +500%+ YoY; management emphasized “multi-year value creation journey” and strong competitive position in these markets.
• Operating cash flow more than doubled YoY in 2024 to $13.7M, funding capex and storage expansion; exiting Q4, cash and availability totaled $13.3M, positioning SLNG to finance growth.

Management quotes:

• “Adjusted EBITDA of $4 million was a record for the fourth quarter… margin also reached a record 23.2%”.
• “Revenue mix in high-growth marine and aerospace increased from 14%… to nearly 50% in Q4 2024”.
• “Operating cash flow more than doubled… driven by improved utilization… and revenue growth within aerospace and marine”.

What Went Wrong

• Reported revenue declined ~4% YoY in Q4 due to lower oil & gas customer revenues and lower natural gas prices despite volume growth; commodity price pass-through muted revenue growth.
• Sequential revenue fell Q3→Q4 ($17.6M to $17.3M) amid timing effects (oil & gas contracts, slower aerospace uptake, marine scaling cadence); management flagged timing across end-markets.
• Q4 G&A declined on accrual adjustments and CEO transition-related items; management highlighted one-time costs expected in Q1 tied to separation, adding near-term noise to expense lines.

Transcript

Operator (participant)

Welcome to the Stabilis Solutions fourth quarter and full year 2024 earnings conference call. At this time, all participants have been placed on 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 headset 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.

Andy Puhala (SVP and CFO)

Good morning, and welcome to Stabilis Solutions fourth quarter and full year 2024 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 fourth quarter and full year 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, February 26, 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, Interim President, and CEO)

Thank you, Andy, and good morning to everyone joining us on the call. 2024 was a strong year operationally for Stabilis, one in which our team continued to build a leading last-mile LNG solutions platform equipped for long-term value creation. I'm pleased with much of the progress we made these last few years, from our expanded commercial teams to our increased operational efficiency and improved capital structure. Over the past year, we prioritized asset optimization and operational efficiency, laying the foundation for future growth by strengthening our position to secure new contracts and customers. When we founded Stabilis in 2013, we recognized that while many industries were more than willing to adopt LNG as a lower-cost, clean-burning fuel, they simply had no way of securing a reliable supply of it in local markets. Customers wanted a reliable product and needed a reliable solution.

More than a decade later, we built one of the leading last-mile LNG solution platforms in the United States, one with the ability to provide LNG to both domestic and international customers. While our growth trajectory will not be and has not been linear, we have the capabilities, technical know-how, and relationships to scale the business in the years ahead, building on the momentum we've generated to date. In recent years, Stabilis has executed on a strategy that prioritized operational efficiency and disciplined capital allocation, consistent with our long-term focus on value creation. Entering 2025, we remain committed to this strategy, but we will prioritize growth within a handful of high-potential markets, including marine, aerospace, and distributed power solutions. To that end, during 2024, we invested the majority of our CapEx in growth-related investments, with a particular focus on expanding our infrastructure and presence along the U.S.

Gulf Coast as we scale to serve both new and existing customers. We're reinvesting ahead of further growth and demand for small-scale LNG, just as we've done over the past decade. We want to thank Westy for his contributions over the last three and a half years and wish him success as he embarks on the next chapter of his career. Be assured the company has strong and deep knowledge of the business and the opportunities to grow it, an excellent management team, and an amazing group of talented and dedicated team members that look forward to executing on our strategy. I'm excited to resume the role of CEO and look forward to leading Stabilis. With that, I will turn the call over to Andy to review our financial performance.

Andy Puhala (SVP and CFO)

Thank you, Casey. Let's move to a discussion of our fourth quarter performance, together with an update on our balance sheet and liquidity exiting the quarter. Revenue during the fourth quarter decreased 4% compared to the fourth quarter of 2023. The decline in revenues was primarily due to lower oil and gas customer revenues, as well as lower overall natural gas prices, partly offset by a 35% increase in aerospace revenues, a 23% increase in power generation revenues, and over 500% growth in our marine bunkering revenues. During the fourth quarter, approximately 49% of our revenues were derived from aerospace and marine customers, compared to 14% in the fourth quarter last year. Fourth quarter net income was $2.1 million, or $0.11 per diluted share, compared to $1.4 million, or $0.08 per diluted share, in the fourth quarter of 2023.

Adjusted EBITDA of $4 million was a record for the fourth quarter, increasing by $1.1 million compared to the prior year period. Adjusted EBITDA margin also reached a record 23.2% during the quarter, up from 16% in the fourth quarter of last year. Full year, we generated revenues of $73.3 million, an increase of 0.2% compared to 2023. Importantly, our gallons delivered to customers increased by over 8 million gallons from 2023. The additional volumes were offset by lower natural gas commodity prices, which we passed through to customers as revenue. Full year adjusted EBITDA was $11.8 million, up from $6.8 million in 2023. We generated $13.7 million of cash from operations during 2024, representing a conversion of over 100% of our EBITDA. This cash generation allowed us to build a strong cash and liquidity position through the year.

As Casey mentioned, more than $7 million of our $9.2 million in full-year capital expenditures were directed towards growth investments. In the fourth quarter specifically, we deployed over $5.5 million in capital as part of our efforts to invest in our infrastructure along the U.S. Gulf Coast, as we relocated an LNG train purchased in 2023 in preparation for future deployment and expanded our storage capacity at our George West facility. Our capital spending for 2024 represented approximately 12% of our total revenue. Going forward, we expect our maintenance CapEx will remain stable at approximately $1.5 million-$2 million annually. Significantly larger capital expenditures will be required as we make FID decisions on certain growth investments to position us for incremental growth in the marine and aerospace markets.

As of December 31, 2024, Stabilis had total cash and equivalents of $9 million, together with $4.3 million of availability under our credit facilities. Total debt outstanding as of December 31, 2024, was $9.3 million, resulting in a net debt to trailing 12-month adjusted EBITDA of just 0.03x. These trends highlight our successful execution as we focus our business on securing growth through incremental contracts and customers. That concludes our prepared remarks. Operator, please open the line for the Q&A session.

Operator (participant)

The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star two. 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 with Johnson Rice. Your line is open.

Martin Malloy (Director of Equity Research)

Thank you for taking my questions. Good morning. I wanted to.

Andy Puhala (SVP and CFO)

Good morning, Martin.

Martin Malloy (Director of Equity Research)

Good morning. I want to first ask about with the relocation of the equipment, for the, another liquefaction train, to the Gulf Coast region. Can you maybe talk about the timetable or milestones, in conjunction with, with FID on that project, for expanding liquefaction capacity to support marine bunkering?

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Hey, Marty. Good morning, and thanks for joining the call today. You know, we've got that unit relocated, and as Andy stated, we purchased that in 2023, and we relocated it last year down to our George West facility and installed some of the storage units to expand our capacity of storage and kind of make it easier for us to service some of the marine markets with that excess storage. We are working on multiple paths to deploy that, as both in the marine space and increased demand in aerospace and distributed power. We are working on both, you know, financing, how to properly finance that with what contracts and what customer contracts will come first between the difference between the three different growth platforms we've got.

In the same time, we're working on expanding, you know, with that plant or with an additional plant capacity in Galveston and the Houston Ship Channel area for different clients and customers for marine bunkering. We're kind of working multiple paths for multiple end markets that we've discussed on the call, primary growth drivers.

Martin Malloy (Director of Equity Research)

Okay. The next question, I just wanted to ask about the G&A line. It was a little bit lower this quarter, and maybe if you could talk about the, the fourth quarter G&A line and then what we should expect going forward.

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Yeah. Marty, I'm gonna touch on it real quick, and then I'm gonna let Andy kind of follow up. Bottom line is it had an adjustment and accrual for some of the bonus accruals that were in there, as well as an adjustment related to Westy's change and mutual separation. That happened in the fourth quarter. It was just a cleanup for the year-end on some accruals. That change. We will also have, just to preview it, some one-time cost coming through in the first quarter associated with the mutual separation between the company and Westy. Those are kind of the two one-time events, and I'll let Andy see if he wants to give an ongoing number there.

Andy Puhala (SVP and CFO)

Yeah. Look, I think Westy, I think Casey covered it, covered it well. You know, the G&A was down both sequentially and year-over-year for the quarter. There were some, you know, bonus incentive accruals that were lower than last year and lower than Q3. There were also some lower professional services in the quarter, which is just, you know, timing of those. Other than that, you know, nothing out of the ordinary. I would say that if you look at it on a full-year basis, I mean, that G&A run rate is. Forward, Marty.

Operator (participant)

We will take our next question from Tate Sullivan with Maxim Group. Your line is open.

Tate Sullivan (Senior Research Analyst)

Hi. Thank you. Good morning. In the change in millions of gallons for 2024 was 8.2 million. I think that implies a year-over-year slight decrease in Q4. Is that timing related to the Carnival contract or other considerations that you might be able to comment on?

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Hey, Tate. Thank you for joining the call. Appreciate you being on and your question. I think that has to do with, as we've stated, some of the operational efficiency and the shifting of some of the contracts and where we're working and just kind of the timing of growth in the aerospace industry and some oil and gas end market, mining operations that came off. It had a combination of all three of those: a decrease in an oil and gas contract, a slower uptake on some of the aerospace, and then just the timing of the scaling of the marine is the primary reason for the difference in gallons.

Tate Sullivan (Senior Research Analyst)

Okay. Thank you. Andy, definitely we should.

Andy Puhala (SVP and CFO)

Tate, let me just.

Tate Sullivan (Senior Research Analyst)

Let me.

Andy Puhala (SVP and CFO)

Yep.

Thanks. Yeah. Sorry. This is Andy. Let me add something. I think you were referring to the year-over-year increase in gallons. Is that right? Maybe just to make sure we understood the question.

Tate Sullivan (Senior Research Analyst)

Yeah. Yeah.

Andy Puhala (SVP and CFO)

Yeah. Yeah. So, the gallons, as I mentioned in my comments, were up, yeah, about 8 million gallons. And that, a large part of that was a marine bunkering contract that started late in the quarter in 2023 and was, you know, in full, full operation in 2024. That was a big part of it, if that helps.

Tate Sullivan (Senior Research Analyst)

Yes. Yeah. Thank you. Thanks. And then, Andy, in your prepared comments, did you mention a separate per cent growth figure for marine bunkering, or were you referring to just the total year-over-year growth in 4Q? I wanted to make sure I did not miss that.

Andy Puhala (SVP and CFO)

Yeah. In our comments, we talked about the growth in Q4 of both marine and aerospace year-over-year.

Tate Sullivan (Senior Research Analyst)

Okay. You talked about a significant increase in CapEx for the potential growth investments related to FID. Is most of that—can you get into some details there? Is most of that related to moving the train, associated equipment around where you ultimately place the train? Can you talk about some of the potential spending, if you can, at this point before FID?

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Yeah. In the fourth quarter, Tate, primarily that was related to the moving of the liquefaction train down to George West and the installing of the extra storage in George West. That was the primary two drivers of that, in the fourth quarter.

Operator (participant)

Once again, for any follow-ups or additional questions, you may press star one on your telephone keypad. We'll take our next question from Barry Haimes with Sage Asset Management. Your line is open.

Barry Haimes (Managing Partner)

Thanks so much, guys. Good quarter. Another follow-up question too on the new train. Could you talk about what has to happen to get to FID and what the timing might be, how long to finish out the construction, and then what the remaining cost would be, as well as the total cost? Anything you can share on profit or revenue in terms of, you know, either EBITDA that that could generate or ROIC in the project, and any sort of financial metrics. One other question. Thanks.

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Thanks, Barry, for the question. You know, we estimate that it would take about between $20 million and $25 million to finish construction on that train if we end up putting it in George West. It is a total different number if we end up putting it on the coast, and a marine bunkering application on the water. If it is, you know, operating as an additional train, it could easily create between $10 million and $15 million of additional gross margin in that application in George West. As for when we will be ready to, you know, give more guidance on when it is gonna FID and when we are ready to install it, I think that is gonna depend on a couple different commercial contracts that we are working on and customer activity.

We'd rather not, you know, lock ourselves into an actual date on that because we'd like to see kind of which customers and who wants to take most of the offtake around that and what the terms of that are. We're working with numerous parties around that. We're also working on the financing around, you know, how to most optimize putting it in. As for when we could complete it, I believe it's about a nine-month process if we put it in George West. Nine to twelve months. It's a much longer process if we're putting it on the water, just due to the balance of plant that we have to bring in that's not already there. I hope that answered your question.

Barry Haimes (Managing Partner)

Yeah. No, that's terrific. Appreciate all the extra color. The one other question just has to do with the bunkering business, and, you know, you talked about the big contract with Carnival, but could you talk a little bit more about, you know, how many customers you have now, and how you see that playing out over the next year or two? I mean, I'm hearing that there's tons of, of LNG ships being built. You probably have a better feel for delivery schedules and such. Any, any sort of extra color on kind of where that stands now and how you're thinking about the next year or two? Thanks.

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Sure, Barry. I'll try to give a little bit of color, and then I'll let Andy come in if there's any more details he wants to talk about. You know, the marine bunkering business, as our management team has communicated to you guys publicly, is really an exciting space for the company. Again, I don't like to just focus on one area 'cause we've got the marine bunkering, we've got, you know, the aerospace, which is super exciting, and we've got the, you know, distributed power behind the meter for all types of applications for that distributed power market. All three are really neat growth drivers, as well as the traditional businesses we're doing and, you know, whether it be off-pipe applications for, you know, asphalt or mining or other applications are all exciting.

In the marine bunkering space, you know, it's really around the different types of ships that are converting. Right now we're working in the cruise space on that contract we've discussed publicly. There's also other markets around container ships, car hauling ships, and then you've got just the tanker market hauling, you know, more commodity. All of them are adopting and converting at different rates of speed and take different investments and infrastructure depending on the type of customer and the type of client and the region. You know, we've seen the cruise space, you know, be early movers in Florida, and we think that that's gonna happen in the Gulf Coast with our help. We're working toward that area.

We're also seeing container ships start to adopt and fuel in the U.S. on the East Coast, and we think that will over time happen in the Gulf Coast as well. We're working to be the primary supplier of all of that as quick as we can and take our kind of advantage on first mover in the region and take advantage of that situation. You know, it's easy to see. I think the bottom line is people and customers want to take advantage of the cheaper natural gas in America and our ability to liquefy it here and not have the risk of price shock as the world market moves around. They're looking for consistency of supply as part of their supply chain, and that's what we're working around.

Operator (participant)

We'll move next to shareholder Spencer Lehman. Your line is open.

Spencer Lehman (Shareholder)

Hi, good morning, Andy. Welcome back, Mr. Ballard. I'm a long-term shareholder. I think probably go back at least 15 years. You know, a couple years ago, I think from 2023 to 2024, the stock was pretty much flat-lined at $4 and pretty quiet. You almost were like a private company. Fortunately, this year, I think partly due to maybe the new administration being more favorable to natural gas, but specifically, the advent of AI and data centers, were very exciting and, I think, responsible for the increased activity and moving the stock. What sort of puzzles me is why you don't mention data centers in your press releases and even on your website. Correct me if I'm wrong, Andy, but I don't see the word data center mentioned.

You talk always about aerospace and marine and other markets. I'm just wondering why so shy about talking about data centers because that's what's really exciting in the stock market now. Nobody's talking ab I mean, yeah, I mean, we know that marine and all that are good for the company, but as far as what's really, you know, exciting is a, is a, is AI and, and, and data centers. Am I, am I correct in that, that I don't, I just can't find that word data center mentioned either in your press releases or in your website? Thank you.

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Spencer, this is Casey Crenshaw, and I do appreciate your question. I also appreciate you being a long-term holder of the stock and,

Spencer Lehman (Shareholder)

Thank you.

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Stakeholder in the company. I think if you think about how we talk about the business and creating long-term value, we think about data centers as being an end market for distributed power. Distributed power for us is our term that we talk about, which distributed power is kind of behind the meter where we're trying to create a virtual pipeline of natural gas in the form of LNG to those applications. Whether it be backup, bridge, or permanent, it's creating the energy source for power generation for whether it be microgrids, different type of use of digital work or AI or just behind the meter to support the weakening, weakened overall power around the United States. All of them are the same to us.

We're providing a, you know, fuel to provide that distributed power solution. You know, we appreciate the feedback. You know, a year ago, no one even talked about AI. Now every single public company's talking about it in every single press release, regardless of their actual, you know, connection to it. We have a strong connection to distributed power in both backup and bridge for that end market. We look forward to, as we stated, as one of our three growth markets that we're working on. I'll let Andy see if he has anything to add, Spencer. I appreciate you being a long-term holder through 15 years.

Andy Puhala (SVP and CFO)

Yeah. Yeah. The only thing I'd add, Spencer, I mean, as Casey mentioned, you know, we've been doing remote power generation for a long time, and we're, you know, we're good at it. It's a key part of our business. You know, in 2024, big drivers of our business are obviously marine and aerospace. You know, we don't today have any data center work currently, but believe me, once, you know, we do think that we've got some that's gonna come, and when we have it, we'll be more than happy to talk about it. And you'll know.

Casey Crenshaw (Executive Chairman, Interim President, and CEO)

Yeah. Spencer, I'd also add we have a strong commercial team working on this area. It's important to us. We're working on distributed power projects every day, but we want to make sure that if that distributed power is actually for AI, we want to be careful not to, you know, be talking about stuff just for the sake of short-term announcements. We're a long-term holder. We're committed to long-term value, myself. We want investors to know that that's the company's point of view around that. We will be in that market. When we have something to talk about that's of material nature, we'll spend time talking about it.

Operator (participant)

Once again, for any additional comments, questions, or follow-ups, that is star and one. We'll pause a moment. This does conclude the Q&A portion of today's call. I would now like to turn the floor over to Mr. Puhala for his closing remarks.

Andy Puhala (SVP and CFO)

Thank you, Chloe. For everyone who joined us today, thank you for your time and continued interest in the company. If you have any questions or want to learn more about what we are doing over here at Stabilis, please, you know, contact me or our Investor Relations team. That concludes our call for today, so you can now disconnect. Thank you.

Operator (participant)

Thank you. This concludes today's Stabilis Solutions fourth quarter and full year 2024 earnings conference call. Please disconnect your line at this time and have a wonderful day.