Stabilis Solutions, Inc.

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 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star and 2. 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 0. It is now my pleasure to turn today's call over to Andy Pujalla, Chief Financial Officer. Sir, you may begin.

Good morning and welcome to Stabilis Solutions First Quarter 2025 results conference call. I'm Andy Pujalla, 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 -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. 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, 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. In the last quarter, 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 percent 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. 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 percent 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 percent increase in revenues from aerospace customers as we continue to grow our presence in that market. Power generation revenues remain consistent with Q1 of 2024. During the first quarter, approximately 51 percent of our revenues were derived from marine and aerospace customers compared to 39 percent in the first quarter of last year. First quarter gap net loss was $1.6 million, or nine cents per diluted share, compared to net income of $1.5 million, or eight cents per diluted share in the first quarter of 2024. Our gap net loss during the quarter reflects a non-recurring impact of approximately $2.1 million relating to executive transition costs during the quarter. Adjusted EVA dial was $2.1 million during the first quarter compared to $3.1 million in the first quarter of last year. Adjusted EVA dial margin was 11.9 percent, down from 15.7 percent in the first quarter of last year. The decrease in our adjusted EVA dial was primarily the result of lower revenues, while our adjusted EVA dial 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 percent of our adjusted EVA dial. 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 half a million dollars, with about 70 percent 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.

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 Rise. Please go ahead. Your line is open.

Good morning. Thank you for taking my questions. Good morning, Marty. First question I just wanted to ask about is on the contracting side. And on the last call, you mentioned that you had moved that additional liquefaction train down to the George West area, I believe. If you could give any more color in terms of where you are in terms of timing of being able to get commercial contracts that would support the deployment of that additional train.

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

Okay. Great. And 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 and manufacturing, standby, emergency type power or baseload power?

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

Great. Thank you very much.

And once again, 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.

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

Yeah, Tate. Hey, good morning. Welcome to the call. Thank you for your question. So we, you know, the way I would try to explain this to y'all for y'all to think about kind of how to plan for this in your own internal kind of thoughts is it's really one week out of 52 where, you know, crews operate, you're doing maintenance on all of their operations on the vessel, maybe light boat, just a whole set of operations. And so this was just a planned, you know, non sailing week, which, you know, created a reduction and a bunkering event during the quarter. So that's the way we think about it. So out of 52 weeks a year, we would expect to at least have one week with planned maintenance outage. Does that answer your question, Tate? Yes. Yes,

thank you. And then outside of, I mean, there's a lot of different considerations for indications of demand, I imagine, for small scale LNG services. Is there anything that you'd 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.?

Well, we're really looking at, you know, instead of looking at a whole U.S., there's a lot of indicators of increased, you know, 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, you know, distributed power markets. That's where we're working. And we're primarily focused on the indicators around the areas and the scope, the areas that we're working on, adding additional infrastructure and investment. And so 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. So all three sectors in the areas that we are looking to deploy capital right now are seeing increased commercial activity.

Thank you for that. And then specifically for the space industry, and I know you might be limited, but you can say SpaceX has announced more plans, 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 scales?

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 the LNG as the primary propellant for those rockets is the choice that they're going with. And so we're excited about that. So we also have a facility that has a multiple facility, two facilities, both of them are participating in the industry right now in different ways. So we work with both launches and the testing around the engines and the units there. So we're pretty, you know, 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 brain bunkering may never reach the size of those total opportunity. But as a, you know, really strong in market that we're good at and participating in, we're super excited about it. Hey, 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, you know, launch schedules and testing schedules and what we're hearing from both hearing from our customers and, you know, seeing in the media like everyone else. On the marine side, you know, 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. So it's those types of things that, you know, we look at to get our indications of coming demand and growing demand. Thank you

for all the background and have a great rest of the day. Thank you. Thanks, Tate.

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

Well, 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, you know, please contact me at our investor relations number. And thanks for joining. We look forward to speaking with you guys next quarter. This concludes our call. You can now disconnect. Thank you, guys.

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.