Stabilis Solutions, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are with FY2021. This is an annual report, not a standalone fourth-quarter report, and the filing does not provide a clear standalone Q4 financial summary.
Business context
Stabilis provides small-scale LNG production, delivery, equipment rental, engineering and field support, primarily in North America. It operates liquefiers in George West, Texas, and Port Allen, Louisiana, and owns a 40% equity-method interest in China-based BOMAY. Brazil operations were sold in October 2022 and are presented as discontinued operations.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $98.8 million | $69.2 million |
| Operating income (loss), including equity income | $0.03 million | $(7.3) million |
| Net loss from continuing operations | $(1.2) million | $(7.6) million |
| Net loss, including discontinued operations | $(3.2) million | $(7.8) million |
| Operating cash flow | $14.7 million | $4.3 million |
| Cash and cash equivalents at year-end | $11.5 million | $0.9 million |
- Revenue increased 42.9%, reflecting higher LNG volumes and prices, customer price adjustments, and growth in rental, service and other activity. LNG product revenue was $83.1 million; rental revenue was $13.1 million.
- Costs of revenue rose 40.7% to $77.7 million, slightly slower than revenue growth. Costs of revenue were 79% of revenue versus 80% in FY2021, implying gross margin of approximately 21% versus 20%.
- FY2022 included $0.9 million of unrealized derivative losses. Net equity income from foreign joint ventures was $1.6 million, down from $1.8 million.
- Investing cash outflow was $1.9 million; financing cash outflow was $2.3 million, mainly reflecting debt repayment. Year-end accounts receivable increased to $16.3 million from $9.4 million.
- Year-end total debt and finance lease obligations were reported as $12.3 million, with $3.3 million due in 2023. Debt net of issuance costs was $11.9 million on the balance sheet. The $10 million AmeriState facility had $1 million available to draw; the company reported compliance with its debt covenants.
- Current assets were $32.2 million and current liabilities $27.5 million. Accrued liabilities included $8.5 million in customer deposits and prepayments, including a $4.6 million deposit to be credited at contract completion.
Material changes and unusual items
- Brazil operations were sold for approximately $0.9 million, comprising $0.2 million cash and a note receivable payable over four years. FY2022 discontinued-operations loss was $2.0 million, including a $1.4 million impairment and $0.6 million of cumulative foreign-exchange losses reclassified on sale.
- DOE authorized exports of domestically produced LNG to free-trade and non-free-trade countries for up to 51.75 billion cubic feet per year, for 28 years. No exports under this authorization occurred in 2022.
- The company recorded a $0.9 million unrealized natural-gas derivative loss; year-end call options had a fair value of $0.6 million and covered 1.3 million MMBtu, extending into Q2 2024. Management said these instruments were used to manage price exposure, not for speculation.
- Inflation in fuel, repairs, maintenance, electricity, skilled labor and insurance pressured margins. Management said it raised customer pricing but could not pass through all cost increases.
Outlook, risks and contingencies
Management expects inflationary pressures to continue into 2023. It believes operating cash flows and available capacity under the loan facility should fund the business for the next 12 months, while noting that future financing may not be available on acceptable terms. No specific revenue or earnings guidance was provided.
- Risks include dependence on a limited customer base: two customers each contributed more than 10% of FY2022 revenue, and the largest contributed 17.5%. One customer represented 35.9% of year-end receivables.
- Other key exposures include LNG supply and commodity-price volatility, cost inflation, competition from other fuels and providers, project execution, regulatory and environmental requirements, severe weather, and counterparty credit risk. The company does not carry business-interruption insurance for hurricanes and other natural disasters.
- The company reported no material off-balance-sheet arrangements. Management did not expect ordinary-course litigation, tax and other disputes to materially affect results, while acknowledging outcomes are uncertain.
- The independent auditor issued an unqualified opinion on the financial statements and reported no critical audit matters. Management assessed disclosure controls and internal control over financial reporting as effective; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Whether higher LNG volumes and pricing can be sustained while controlling inflation-related costs and protecting margins.
- Collection of the enlarged receivables balance and the timing and conditions for use of customer deposits.
- Performance and cash-flow impact of the two major customers, particularly the customer representing 35.9% of year-end receivables.
- Debt repayment and refinancing needs, including the $2.4 million related-party note due through December 2023 and the AmeriState facility’s interest-rate reset after April 2026.
- Whether the export authorization leads to commercial activity, and the terms and collectability of the Brazil sale note.
- Related-party transactions and governance: Casey Crenshaw beneficially owned 71.9% of the common stock; BOMAY’s joint-venture term ends in 2028 and extension is not assured.