Stabilis Solutions, Inc. — Q1 2024 Form 10-Q
Business and period: Stabilis provides LNG production, delivery, equipment rental, and engineering and field services across several end markets. It also owns 40% of BOMAY, a Chinese electrical-systems joint venture. This unaudited report covers the three months ended March 31, 2024; comparisons are with Q1 2023. Dollar amounts below are in millions unless stated otherwise.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $19.77 | $26.84; down 26.3% |
| Operating income before equity income | $1.38 | $1.01 |
| Net income | $1.47; $0.08 per diluted share | $1.08; $0.06 per diluted share |
| Operating cash flow | $3.93 | $0.09 |
| Capital expenditures | $0.87 | $3.73 |
| Cash and cash equivalents | $8.29 at March 31 | $5.37 at December 31, 2023 |
| Total assets / stockholders’ equity | $80.65 / $63.19 | $81.30 / $61.81 at December 31, 2023 |
Revenue and margins: LNG product revenue was $15.41 million, rental $2.17 million, service $1.92 million, and other $0.26 million. Cost of revenues was $13.51 million; gross profit before derivative changes was approximately $6.26 million, or 31.6% of revenue, versus $6.57 million, or 24.5%, in Q1 2023. Operating income including joint-venture equity income was $1.58 million (8.0% of revenue), versus $1.36 million (5.1%).
Cash, debt, and liquidity: Cash increased $2.91 million during the quarter. Net cash used in investing and financing was $0.67 million and $0.36 million, respectively. Balance-sheet debt, net of issuance costs, was $9.10 million, including $1.66 million current; lease obligations were $0.11 million current, with none shown long term. Management described approximately $9.2 million of debt and lease obligations, with $1.8 million due within twelve months. No revolving-credit borrowings were outstanding; reported total availability under the revolving facility and AmeriState term facility was $4.3 million. The company was in compliance with debt covenants. Its current assets of $15.49 million exceeded current liabilities of $10.01 million.
Material changes and operating drivers
- Revenue fell $7.07 million, mainly due to lower natural gas prices ($4.9 million impact) and lower minimum-purchase take-or-pay revenue ($3.4 million). Increased LNG gallons delivered added $1.4 million, and customer-mix pricing added $0.4 million. Management reported higher delivered gallons, but the filing does not provide a clear absolute volume figure.
- Cost of revenues declined $6.76 million, primarily from lower gas prices and take-or-pay costs. As a share of revenue, cost of revenues decreased to 68% from 76%.
- Net income increased 35.5%, supported by improved operating income and lower net interest and other expense; lower revenue was partly offset by improved cost ratios. Joint-venture equity income declined to $0.20 million from $0.35 million.
- Operating cash flow improved substantially, reflecting higher net income and working-capital changes. Investing outlays were lower than in Q1 2023, when the company made larger purchases of liquefaction assets.
- A $0.13 million gain was recorded on asset disposals. A $0.25 million unrealized natural-gas-derivative gain was recorded, compared with a $0.17 million loss in Q1 2023; derivative fair value was zero at quarter-end.
Outlook, risks, and other matters
- Management believes operating cash flow and available debt capacity will fund the business for the next twelve months, while noting that future cash generation and access to additional financing are uncertain. No quantified earnings or revenue guidance was provided.
- Management reported a multi-year contract to supply high-purity LNG rocket propellant. A two-year marine-bunkering contract signed in Q4 2023 is estimated to require 22 million gallons annually; that customer represented approximately 30% of Q1 2024 revenue, creating significant customer-concentration exposure.
- The company has DOE authorization to export up to approximately 1.0 MTPA equivalent to FTA and non-FTA countries, subject to milestones and time limits. It had not exported under this authorization or made material related expenditures or sales commitments by March 31, 2024. It delivered LNG to Mexico during the quarter under existing authorization.
- Open capital-expenditure purchase orders were approximately $2.3 million at quarter-end. The company may pursue financing or expansion, but says funding may not be available on acceptable terms.
- Environmental compliance costs are not expected to be material. Management does not expect ordinary-course legal matters to have a material adverse effect, while acknowledging unfavorable resolutions could be material. No material changes to the risk factors in the 2023 Form 10-K were reported; disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether higher LNG delivery volumes and new aerospace and marine contracts translate into sustained revenue and margin growth, and how dependent revenue remains on the marine customer.
- The duration, volume, pricing, and performance obligations of the rocket-propellant and marine-bunkering contracts.
- Debt and lease repayment schedules, covenant headroom, and whether reported facility availability remains accessible under borrowing-base and other terms.
- Cash requirements for the $2.3 million of open capital orders and any planned capacity expansion; management’s twelve-month liquidity assessment depends on future cash generation and financing access.
- Export-authorization milestones and deadlines, and the timing and economics of any potential exports.