Business context and reporting period
Stabilis Solutions, Inc. filed this Form 10-K for the fiscal year ended December 31, 2020. The company supplies LNG and hydrogen production, distribution, transportation, equipment rental and field services, primarily in North America, and provides power-delivery equipment and services in Brazil and through a 40% interest in a China joint venture. The filing reports full-year results; it does not provide separate fourth-quarter financial results.
Comparability with 2019 is limited: the Power Delivery business entered consolidated results after the July 2019 Share Exchange, and Diversenergy was acquired in August 2019.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $41.55 million | $47.07 million |
| Operating loss | $5.81 million | $4.30 million |
| Net loss attributable to Stabilis | $6.76 million | $5.72 million |
| Net loss per share, basic and diluted | $0.40 | $0.39 |
| Cash from operating activities | $1.34 million | $4.11 million |
| Cash and cash equivalents at year-end | $1.81 million | $3.98 million |
Revenue declined 11.7%; operating loss widened by $1.51 million. The operating loss was approximately 14.0% of revenue in 2020 versus 9.1% in 2019; net loss was approximately 16.3% versus 12.1% of revenue, respectively (calculated from reported figures).
- LNG product revenue fell 20.2% to $27.34 million, primarily reflecting weaker mining and oilfield customer activity during the pandemic. Total LNG-segment revenue declined 16.9% to $36.29 million.
- Power Delivery revenue increased 53.8% to $5.26 million because 2019 included only a partial year after the Share Exchange. Management said 2020 revenue would have been 28.7% lower than 2019 on a full-year comparison.
- LNG deliveries declined to 35.25 million gallons from 42.53 million; George West plant utilization fell to 54.5% from 69.6%. The plant was reported 99.2% dispatchable in 2020.
- Net equity income from foreign joint ventures was $2.46 million. Management said, on a full-year 2019 comparison, this income would have decreased 31.1%.
Liquidity, debt and capital needs
At year-end, current assets were $10.81 million and current liabilities were $14.23 million, implying negative working capital of approximately $3.42 million. Cash was $1.81 million. The company reported $7.87 million of debt principal, with $4.46 million due in 2021 and $3.36 million in 2022; it also reported $0.65 million of finance-lease obligations. Management’s overview described debt and finance-lease obligations together as approximately $8.5 million.
Operating cash flow fell to $1.34 million, including a $2.1 million cash distribution from BOMAY. Investing activities used $0.26 million and financing activities used $3.20 million. The company received a $1.1 million Paycheck Protection Program loan; forgiveness was not assured, though management intended to apply. A $5 million related-party secured note bears 12% interest after December 10, 2020. The company reported compliance with debt covenants at year-end.
Outlook, risks and unusual items
- Management stated it expected sufficient operating cash flow to fund the business for the next 12 months, citing resumed customer activity and new opportunities, particularly in Mexico. The filing also notes recurring operating losses, negative working capital and uncertainty about future cash generation; there is no assurance the outlook will be achieved.
- Planned 2021 capital expenditures were approximately $3 million to $4 million, primarily for Mexico expansion and rolling stock. No specific revenue or earnings guidance was provided.
- COVID-19 and the energy-market downturn reduced activity. Cost actions included headcount and temporary salary reductions, reduced travel and eliminating certain consultants. LNG demand, customer performance, access to financing, customer concentration, commodity costs, permits and construction execution remain significant risks.
- Two customers each generated more than 10% of 2020 revenue; together they accounted for 21%. The company had no LNG or hydrogen take-or-pay supply contracts matched to customer demand at year-end.
- In early 2021, the company and Myers resolved a disputed potential $4.3 million working-capital claim; claims were released and the lawsuit dismissed with prejudice.
- The independent auditor issued an unqualified opinion and reported no critical audit matters. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Whether operating cash flow and liquidity can support near-term maturities, working-capital needs and planned 2021 capital spending.
- Whether the PPP loan is forgiven and how the 12% related-party note and 2021 debt maturities are managed.
- Whether customer activity, LNG volumes and plant utilization recover, and whether customer concentration declines.
- Whether Mexico expansion opportunities secure required permits, financing and contracted demand.
- The terms and governance of related-party financing and purchases, given the executive chairman’s control of approximately 76.7% of shares and links to related counterparties.