Stabilis Solutions, Inc. (NASDAQ:SLNG) Q4 2023 Earnings Call Transcript
Stabilis Solutions, Inc. (NASDAQ:SLNG) Q4 2023 Earnings Call Transcript March 7, 2024
Stabilis Solutions, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Stabilis Solutions Fourth Quarter and Full Year 2023 Results Conference Call. [Operator Instructions]. I would now like to turn the call over to Andy Puhala, Chief Financial Officer. Mr. Puhala, please go ahead.
Andy Puhala: Good morning, and welcome to Stabilis Solutions’ fourth quarter and full year 2023 results conference call. I'm Andy Puhala, Senior Vice President and CFO of Stabilis, and joining me today is our President and CEO, Westy Ballard. We issued a press release after the market closed yesterday detailing our fourth quarter and full year 2023 operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at stabillis-solutions.com. Before we begin, I'd like to remind everyone that today's conference call will contain certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company's expectations and beliefs as of today, March 7, 2024.
Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. The company undertakes no obligation to provide updates or revisions to the forward-looking statements made in today's call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results. Investors are cautioned not to place undue reliance on any forward-looking statements. Further, please note that we may refer to certain non-GAAP financial information on today's call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today's call is being recorded and will be available for replay.
With that, I'll hand the call over to Westy Ballard for his remarks.
Westy Ballard: Thank you, Andy, and good morning to everyone joining us on the call. Let me start by thanking our employees for their many contributions during what amounted to a historic year for Stabilis. Our success was a collective effort that culminated in our first full year of profitability since becoming a public company. While our full year profitability was an important milestone for our entire team, we remain in the early stages of a multi-year value creation story. You see, not only are we building a profitable clean fueling solutions platform of scale, we're at the forefront of emerging blue sky sectors characterized by significant opportunities for sustained asymmetric growth. And as we look across the competitive landscape here domestically, we believe we are the only company in the small-scale LNG universe that has built the infrastructure, operational and technical capabilities, and customer relationships, capable of advancing an increasingly sophisticated growth platform that further enhances our unique value proposition and competitive moat.
Looking back over the progress we made in 2023, there were several highlights worthy of note, including the following. Commercially, we continue to shift our business model from commodity spot sales toward longer-duration, take-or-pay contractual revenue. We believe this approach ensures further optimization of our asset base and increases the visibility of cash flow generation, positioning us to opportunistically invest in the people, systems and infrastructure required to support future growth. In our marine business, we made measurable strides, where we completed a 6-month LNG bunkering contract in Port Canaveral, Florida, and conducted multiple LNG bunkering operations for a large container carrier in the Port of Long Beach, California.
In December, we commenced our previously announced multiyear marine bunkering contract with Carnival Corporation in Galveston, Texas. Carnival is a pioneering global cruise line committed to the decarbonization of their fleet through the adoption of LNG and alternative fuels, and the first cruise line to introduce LNG-powered cruise ships in North America. Our relationship with Carnival is an important use case that further solidifies our position as a premier provider of comprehensive and scalable marine LNG fueling solutions in the market. Revenue from our marine customers in 2023 represented roughly 14% of total revenue, and our outlook for 2024 has marine revenue increasing to roughly 1/3 of total 2024 revenue. Beyond Carnival, over the last 2 years, we have engaged in full project development, management, engineering, support personnel, supply and operational services for the successful delivery of more than 2,000 loads of LNG to fuel container ships, cruise ships and offshore supply vessels.
And our team's efforts during that period have been impressive, with marine revenue growing at a compounded annual growth rate of 122%. Looking ahead, our marine strategy will focus on expanding our capabilities directly to the waterfront of high-traffic ports across the U.S. In doing so, we will continue to optimize our portfolio of owned and third-party supply sources, infrastructure and logistical assets to provide comprehensive and scaled solutions to current and future customers. Along those lines we operate, we continue to enhance our logistical capabilities to become the only small-scale LNG bunker provider capable of delivering multiple modes of delivery to our bunkering customers, whether that be bunker barge to vessel, truck to bunker barge or truck to vessel across all 3 U.S. coastal markets.
This operational and geographical flexibility affords our current and prospective customers, the ability to validate a variety of trade lanes throughout the U.S., knowing they will have a reliable fuel supply with Stabilis. Throughout the year, we're also the beneficiaries -- the strong activity across our other diverse end markets, primarily led by aerospace, electric utilities, mining, and oil and gas sectors. Within the aerospace sector, our high purity methane continues to become the preferred fuel for space rockets, resulting in sales volumes of LNG to aerospace customers of approximately 3.4 million gallons in 2023, or 7% of total volumes for the year. Entering 2024, we are seeing a significant increase in quoting activity that points to a positive demand inflection within both our marine and aerospace markets.
Given these favorable underlying demand conditions, we expect that by mid-2024, our 2 owned liquefaction plants will effectively be sold out for the remainder of the year and well into 2025. Which begs the question, now what? In answering that question, it's important to remind everyone that our proven ability to rapidly source LNG at scale from our extensive supply network to meet ongoing incremental growth in customer demand, while we produce a variety of opportunities to expand our assets and operations. On that note, allow me to share a few comments on our capital allocation over the last year, and we are focused entering 2024. In 2023, we deployed more than $7.8 million toward growth-related investments in our marine capabilities by acquiring the critical components for a new LNG production train and associated storage and equipment for waterfront expansion.
Even after the significant level of investment in our marine business, we ended the year with more than $11 million of cash and availability under our credit facilities to fund our ongoing operations, and a net leverage ratio of 0.6x 2023 adjusted EBITDA. Looking ahead, we intend to further optimize our existing asset base and supply chain, while prioritizing scalable investments and incremental new capacity and infrastructure capable of supporting demand inflection within our marine, aerospace and other diverse end markets, both in the U.S. and abroad. To accomplish this, we are routinely evaluating a variety of prospective sources of capital with heavy emphasis on focus -- and focus on those partners that know our industry, our company and recognize a significant upside potential in our operating model.
Importantly, our decision to proceed with new infrastructure investments will correspond directly with our demonstrated ability to secure long-term ratable offtake to derisk our investment for multi-year period. With that, I'll turn it over to Andy.
Andy Puhala: Thank you, Westy. Let's move to a discussion of our fourth quarter and full year performance, together with an update on our balance sheet and liquidity exiting 2023. Our fourth quarter 2023 results reflect 18% sequential revenue growth, and the first quarter of profitability since Q1 of 2023. During the fourth quarter, our George West plant returned to full production rates. And that, combined with several new projects resulted in a strong sequential performance. During the second and third quarters of 2023, operations at our George West facility were impacted by a series of investments we made to enhance our ability to utilize a wider range of [De Gas] stock. With this project work reaching completion in the third quarter, our George West facility operated at 95% of capacity during the fourth quarter and continues to operate at a similar level into the first quarter of 2024.
We generated $1.3 million of cash from operations in the fourth quarter and $6.7 million for the full year. This strong cash generation helped us to fund $10.3 million of total capital investment through the year, while maintaining our strong liquidity position. At December 31, 2023, Stabilis had total cash in equivalence of $5.4 million, together with $5.6 million of availability under our credit facilities. Total debt outstanding as of December 31, was $9.4 million, resulting in a ratio of net debt to trailing 12-month adjusted EBITDA of 0.6x. Given the recent activity in some of our higher growth target end markets, we are actively considering potential avenues for capacity growth. Our current liquidity position and balance sheet provides us with the optionality to pursue select organic investment as we meet an inflection point in demand for our solutions.
As we look out over the coming years, the exponential growth opportunity for our business may want further capital investment beyond what our current balance sheet can support. For such investment, we are actively evaluating multiple pathways for financing, but our top priority in doing so continues to be protecting and maximizing shareholder value. That concludes our prepared remarks. Operator, please open the line for questions.
See also 15 Sunniest Cities in Europe and 15 Militaries with the Most Armored Fighting Vehicles in the World.
To continue reading the Q&A session, please click here.
