Stabilis Solutions, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the supplied filing text does not provide standalone fourth-quarter results. Stabilis provides small-scale LNG production, delivery, equipment rental, and engineering services, primarily in North America, and holds a 40% equity-method investment in China-based BOMAY.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $73.1 million | $98.8 million |
| Operating loss before equity income | $(0.8) million | $(1.6) million |
| Net equity income from foreign joint venture | $1.7 million | $1.6 million |
| Net income (loss) | $0.1 million | $(3.2) million |
| Net income (loss) per share | $0.01 | $(0.17) |
| Net cash provided by operating activities | $6.7 million | $14.7 million |
| Cash and cash equivalents at year-end | $5.4 million | $11.5 million |
- Revenue declined 26.0%. LNG product revenue fell 29.6% to $58.5 million; rental revenue was $6.2 million, service revenue $6.9 million, and other revenue $1.5 million.
- Management attributed lower revenue chiefly to 12.7 million fewer gallons delivered and lower natural gas prices. Minimum take-or-pay revenue partially offset the decline.
- Cost of revenues was $54.9 million, or 75% of revenue versus 79% in 2022. Revenue less cost of revenues was $18.2 million, approximately 24.9% of revenue, compared with $21.1 million, approximately 21.4%, in 2022. These figures exclude other operating expenses.
- Cash from operations decreased $8.0 million, primarily due to working-capital movements, including payments of accounts payable, and lower BOMAY dividends. Investing used $8.9 million, including purchases of liquefaction assets; financing used $3.9 million, primarily for debt repayments. Cash declined $6.1 million during the year.
- At year-end, current assets were $15.0 million and current liabilities were $11.7 million. Debt carrying value was $9.4 million, including an $0.8 million insurance-premium note; the AmeriState term loan had $9.0 million principal outstanding. Lease liabilities were $0.2 million. The filing reports $5.6 million total availability under the AmeriState and Cadence facilities; no Cadence revolver borrowings were outstanding. The company was in compliance with its debt covenants.
Material changes and notable items
- George West, Texas facility production and profitability were adversely affected by feed-gas composition changes in the second and third quarters. Pretreatment upgrades were completed, and management reported that the facility returned to full production rates.
- Stabilis acquired key components of a 100,000-gallon-per-day liquefaction train for $6.0 million and was evaluating installation alternatives. Construction in progress was $9.9 million at year-end.
- A two-year marine bunkering contract was signed in the fourth quarter, with estimated deliveries of 22 million LNG gallons per year.
- The company recorded a $1.2 million gain on disposal of fixed assets, largely related to insurance proceeds following a June 2023 fire and a settlement for a damaged trailer. The filing says the fire damage did not adversely affect operations.
- Related-party MG Finance debt was paid in full by year-end. The company also entered into a three-year, $10 million Cadence revolving facility in 2023, subject to an accounts-receivable borrowing base.
- The 2022 comparison includes a $2.0 million loss from discontinued Brazil operations; Brazil was sold in October 2022. There was no discontinued-operations activity in 2023.
Outlook, risks, and contingencies
- Management believes operating cash flow and borrowing availability will fund the business for the next 12 months, but notes there is no assurance that additional financing will be available on acceptable terms. No expansion commitments had been made; further capacity expansion could require external capital.
- Management reported continued inflation in fuel, repairs, maintenance, electricity, skilled labor, and insurance, although pressure began to slow near year-end. The company passes through much of its natural-gas and transportation costs but cannot pass through all cost increases.
- Key risks include volatile LNG and natural-gas prices and demand, supply interruptions, customer and counterparty credit/performance, competition, project execution and permitting, regulation and environmental requirements, extreme weather, and limited insurance for business interruption. The filing states that the company does not carry business-interruption insurance for hurricanes and other natural disasters.
- Customer concentration remains material: Aggreko accounted for more than 10% of 2023 revenue; the filing’s customer table reports one customer at 18.5% of revenue. BOMAY contributed $1.7 million of net equity income; Stabilis’ investment was $12.0 million. BOMAY’s joint-venture term ends in 2028 and extension is subject to agreement and regulatory approval.
- The company had $2.3 million of open capital-expenditure purchase orders at year-end. Management did not expect ordinary-course litigation and contingency matters to have a material effect, while noting outcomes cannot be assured.
- The auditor issued an unqualified opinion on the financial statements 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.
Investor verification priorities
- Confirm delivery volumes, margins, and expected economics of the 22-million-gallon annual marine contract, including timing and customer commitments.
- Track utilization, costs, and operating performance at George West after pretreatment upgrades, and the cost, funding, and installation plan for the acquired liquefaction train.
- Reconcile ongoing cash generation and working-capital needs with the reported cash balance, facility availability, debt maturities, and covenant requirements.
- Assess customer concentration and credit exposure, particularly the significant customer, and monitor BOMAY distributions and the joint venture’s 2028 renewal prospects.
- Review the effect of natural-gas pricing, inflation, insurance limits, and potential capital needs on operating margins and liquidity.