Stabilis Solutions, Inc.

Welcome to the Stabilis Solutions third quarter 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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. so that others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, should you require operator assistance, please press star zero. I would now like to turn the call over to Andy Pujala, Chief Financial Officer. Mr. Pujala, please go ahead.

Good morning, and welcome to Stabilis Solutions' third quarter 2024 results conference call. I'm Andy Pujala, Senior Vice President and CFO of Stabilis, and joining me today is our President and CEO, Westy Ballard. We issued a press release after the market closed yesterday detailing our third 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, November 7th, 2024. 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 Westy Ballard for his remarks.

Thank you, Andy, and good morning to everyone joining us on the call. We've got a lot of great stuff to talk about today, really building off the momentum when I joined as CEO a little over three years ago. and uh in doing so uh really outlined two primary strategic objectives the first objective was to stabilize and optimize our existing business to ensure we had a liquidity profile equipped to support both our core business as well as the business we would seek to build in the years ahead over the last 24 months we have demonstrated our commitment to a disciplined returns focused approach towards capital allocation while positioning the business to scale within both established and emerging growth industries in search of cleaner fuel alternatives. During the third quarter, we delivered more than 15% revenue growth, while continuing to shift our revenue mix from spot sales toward longer-term contractual agreements. To that end, 68% of our third quarter revenue was under rateable contractual agreements, up from 43% in the previous year. This pronounced shift in the quality and consistency of our revenue mix and the enhanced gas processing capabilities we deployed last year to address feed gas consistency issues resulted in exceptional utilization of our two owned LNG production facilities and has contributed to a significant improvement in our margin realization consistent with our strategic focus on driving improved operating leverage. And given our improved margins and operating leverage, we ended the third quarter with $15.6 million of available cash and liquidity and a net cash position on our balance sheet versus $8.6 million of total liquidity in the year-ago period. Our improved financial foundation and strong liquidity profile have enabled continued investment of operating cash flows to grow the business. Along our strategic focus of strengthening the durability of our business and liquidity profile, we established a second objective, which was to identify, prioritize, and pursue key growth initiatives that can drive long-term shareholder value. Fueling large marine vessels, providing power for data centers and for emergency response situations, and fueling high-performance rocket boosters in the aerospace arena are incredibly exciting end markets for expansion as they gravitate toward cleaner fuel sources that are reliable and cost-effective. In evaluating growth opportunities, a key criterion was our ability to leverage our capabilities to expand into new markets that are at the forefront of considerable growth. not only is our scalable cost-effective execution-ready operating model a considerable competitive advantage for us but also being an incumbent supplier in many markets positions us for further market share growth as neither large-scale energy production nor alternative fuel sources are feasible or economically viable for most of these customer applications While we are encouraged by the growth in these markets, they are in early stages of what we anticipate will become a significant increase in demand. The anatomy of these types of projects consists of a wide array of variables across commercial, operational, and financing fronts, so they take time, and we recognize that. That notwithstanding, over the past 24 months, we've made tremendous progress along this front, as evidenced by our LNG bunkering operations in Port Canaveral, Florida, and the Port of Long Beach, California, and the award of a multi-year LNG bunkering contract to fuel Carnival Corporation's newest LNG-fueled cruise ship, the Carnival Jubilee, in Galveston, Texas, in the fourth quarter of 2023. And during the third quarter, we realized a threefold year-over-year increase in revenues within our marine and aerospace growth markets, which now comprise approximately 40% of total revenues compared to 11% in the third quarter of last year. Within our marine business, Stabilis is the only provider of marine bunkering solutions with experience executing LNG bunkering operations using multiple modes of delivery on all three coasts. Since identifying expansion in the marine market as a key growth strategy, we have spent an enormous amount of time and energy further developing our commercial relationships with the world's largest and most dynamic owners and operators of vessels. Throughout these discussions, several consistent themes have arisen as to why we are a highly thought of leader to develop the modern marine bunkering infrastructure in the United States. These themes include our extensive experience supported by our deep bench of regulatory, engineering, project management, and operational teams ready to execute. We are a low-risk and execution-ready choice given our existing redundant and reliable supply chain and ability to deliver LNG volumes at scale. And as a NASDAQ-listed company, our customers value the transparency and stability we provide as a financial counterparty. This is evidenced by the award of our LNG bunkering contract with Carnival Corporation. Our team has done an excellent job in the execution of the Carnival contract, and we are excited about leveraging our first mover advantage to further scale our LNG marine bunkering supply chain to the waterfront on the Texas Gulf Coast. We are moving quickly along this front and feel that we are competitively advantaged when compared to concept company competitors, as we have invested in design, engineering, and feasibility assessment, identified a proposed site, purchased the major components of a 100,000 gallon per day liquefaction plant, and we present a de-risked value proposition to prospective customers, not only due to our experience, but by virtue of our ability to leverage our existing operational South Texas and Louisiana liquefaction plants as backstop or supplemental supply points to ensure redundancy and continuity of supply. Beyond the Texas Gulf Coast, we are actively evaluating opportunities to build upon our experience on the East and West Coast, as well as expanding outside of the U.S. to the Caribbean, Central America, and South America. Our goal is to have a robust and highly optimized portfolio of production and delivery capabilities to service a broad array of exciting growth opportunities for marine bunkering and power generation applications across these markets. In turning to our commercial industrial markets, we see strong structural tailwinds driving incremental power demand. Applications include data centers, the onshoring of manufacturing, and vehicle electrification, all of which are expected to increase U.S. power consumption by at least 55 gigawatts between now and 2030. Of the 55 gigawatts, data centers are anticipated to consume around 40% or 22 gigawatts. So to put that into context, that's equivalent to roughly 23 billion incremental LNG gallons of demand per year, or said differently, nearly 650 additional Stabilis South Texas liquefaction plants. This incremental power demand poses a litany of challenges for utilities to service this incremental demand. As addition of new power generation capacity is highly regulated, it will require significant investment that may not be appropriated and will take considerable time to build. Reliability, scalability, cleaner and more sustainable power supply are critical needs for data centers, and the constraints are causing data center infrastructure providers and off-takers to proactively take control of their own power destinies. This dynamic is creating considerable opportunities for new power generation solutions in the market to support this incremental load growth and put Stabilis in a wonderful position to address these needs. So it is our intention to empower data centers to do just that, control their own power destinies. We want to bring energy to where they need it. To do so, we intend to deploy a suit of capabilities across several fronts. We provide front-end power strategy development and project management services consisting of our highly trained engineering, technical, operational, and project management personnel to assist customers with planning, permitting, licensing, site design, natural gas pipeline sourcing, and access. We'll also provide 24-7-365 production, storage, and delivery of LNG to support the 5-9s, which is 99.999% of reliability for behind-the-meter power to natural gas generators or turbines, primarily in new-build data centers where there is a time lag between data center power demand and when base load grid power is available at the data center site. And we will also provide backup and peaking power generation at data center locations as well. To support this, we provide ancillary and critical back-end services consisting of continuous methane emissions monitoring, renewable natural gas, or RNG, and other alternative energy solutions sourcing supported by our highly trained operational and field service technicians to assist customers with mobilizing, commissioning, monitoring, and reliably operating on location. We're extremely excited about the potential in this market, which is a natural extension of our considerable power generation resume, where we have delivered over 12 million kilowatt hours of dependable natural gas fired power for critical must-run applications since our company's inception. In closing, I want to leave you with this message. With Stabilis, we've provided shareholders with a business that can capitalize on significant upside evident across our growing underserved clean fuel markets while de-risking the model through an increased mix of high quality contractual revenue and a disciplined approach to capital allocation. Simply put, we've effectively combined the remarkable growth potential of a successful startup without the risk profile of a startup. It's an incredibly exciting time for our business and we're just getting started. With that, I'll turn it over to Andy.