Stabilis Solutions, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Unaudited results; dollar amounts below are in millions unless otherwise stated. Stabilis supplies LNG and hydrogen solutions in North America and power-delivery equipment and services in Brazil and China.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $16.1 | $5.0 | $33.7 | $18.8 |
| Operating loss | $(1.6) | $(3.0) | $(1.3) | $(3.8) |
| Net loss | $(1.0) | $(3.5) | $(0.8) | $(4.5) |
| Basic and diluted loss per share | $(0.06) | $(0.21) | $(0.05) | $(0.27) |
- Q2 revenue rose 221% year over year, led by LNG product revenue of $11.8 million, up 310%. Rental, service and other revenue increased 126%; power-delivery revenue increased 70%.
- For the first half, revenue increased 79%. LNG product revenue rose 96%, rental, service and other revenue 54%, and power-delivery revenue 40%.
- Operating losses narrowed, but the company remained loss-making. Q2 operating expenses were $18.1 million versus $9.0 million a year earlier. Q2 LNG product costs were 79% of LNG product revenue, compared with 88%; for the first half, the ratio worsened to 77% from 72%.
- Q2 net loss included $1.0 million of other income, principally the $1.1 million PPP loan forgiveness gain. First-half other income of $1.1 million also included release of escrow funds related to the Myers settlement.
Cash flow, balance sheet and capital
- Six-month operating cash flow was $2.6 million, down from $4.3 million, reflecting lower BOMAY distributions and higher working-capital needs. Investing cash outflow was $5.7 million, mainly for the Port Allen facility and LNG equipment; financing provided $4.5 million.
- Cash was $3.3 million at June 30, 2021, versus $1.8 million at year-end 2020. Current assets were $14.1 million and current liabilities $13.8 million.
- Management reported $11.9 million of debt and finance-lease obligations, including $3.6 million due within 12 months. The company drew $7.0 million under a USDA-backed AmeriState facility, which permits up to $10.0 million in borrowings. It matures in 2031 and bears 5.75% interest through April 2026, then prime plus 2.5%. The company was covenant-compliant and expected about $0.8 million of interest payments for full-year 2021.
- On June 1, Stabilis acquired the Port Allen, Louisiana LNG plant, with 30,000 gallons-per-day capacity, for $5.0 million cash and 500,000 shares valued at $3.8 million. Management said it increases total production capacity by 30%. The share count was 17.50 million at June 30, versus 16.90 million at December 31, 2020.
Outlook, risks and contingencies
- No quantified revenue or earnings guidance was provided. Management cited recovering activity, new opportunities—particularly in Mexico and power generation—and record year-to-date revenue. It believes operating cash flow will fund the business for the next 12 months and concluded there was no substantial doubt about going concern.
- Management cautioned that recurring operating losses, uncertain future cash generation and the need for financing remain relevant. Additional financing may be pursued, but availability and acceptable terms are not assured.
- Risks include COVID-19 and economic conditions, LNG and competing-fuel demand and pricing, customer concentration, counterparties’ credit and performance, operational and regulatory matters, and permits for planned Mexico expansion. Three customers represented 50% of Q2 revenue; two customers represented 52% of receivables at quarter-end.
- The company reported no material change to previously disclosed risk factors. It said ordinary-course legal matters are not expected to have a material adverse effect. The Myers working-capital dispute was settled, claims mutually released, and the lawsuit dismissed with prejudice. Environmental compliance spending was not expected to materially affect financial results.
Most important facts for investors to verify
- Whether revenue growth converts into sustained positive operating results and cash flow, particularly given first-half working-capital use and lower operating cash flow.
- Port Allen’s production ramp, customer contribution, costs and expected returns after its June acquisition.
- Debt and liquidity: the remaining availability and conditions under the $10.0 million facility, repayment schedule, interest burden and covenant headroom.
- Customer concentration, receivable collection, and the durability of Mexico and power-generation opportunities.
- The composition and repeatability of other income, especially PPP forgiveness and Myers-related escrow proceeds, which improved reported net results.