Stabilis Solutions Inc (SLNG) 2020 Q1 法說會逐字稿

Good day, everyone. Ladies and gentlemen, before we begin today's call, I'd like to remind everyone that today's conference will contain 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 beliefs and expectations as of today, May 7, 2020. Forward-looking statements are subject to the risks and uncertainties that may cause actual results to differ materially from those projected.

The company undertakes no obligation to release updates or revisions to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in the company's filings with the SEC and the press release announcing the company's results. Investors are cautioned not to place undue reliance on any forward-looking statement.

I'd now like to welcome you all to the Stabilis Energy Q1 earnings conference call. Today's conference is being recorded.

And at this time, I am pleased to turn the meeting over to Jim Reddinger, President and CEO of Stabilis Energy. Good morning, Jim.

Thanks much. This is Jim Reddinger, President and CEO of Stabilis. And with me is Andy Puhala, our Senior Vice President and Chief Financial Officer. I would like to welcome you to the conference call this morning.

We come today with some very good news about the company's performance in the first quarter and the cautious outlook for the current quarter. We're pleased to report a strong first quarter in our core LNG business with a record of nearly 12 million LNG gallons delivered in the quarter. We also ended the quarter with historically strong utilization rates on our cryogenic equipment as our customers used it to transport, store and vaporize LNG on numerous project sites across North America.

We believe that this strong first quarter performance demonstrates that LNG adoption is increasing as a fuel source across multiple end markets. We saw strong LNG consumption across multiple end markets, including industrial, mining, pipelines, utilities and energy. We also saw strong sales across the border into Mexico. The value proposition of lower cost and lower harmful environmental emissions continues to drive our customers to use LNG in their operations.

And I'd like to take a -- this is a moment to recognize our team at Stabilis for both finding these opportunities in the first quarter and for providing our customers with world-class execution on each and every site. We think that we have the best small-scale LNG team in the business, and we're very appreciative of the great work everyone put in last quarter. So that's the good news about the first quarter performance.

The cautious outlook stems from a slowdown in general business activity that started impacting our international Power Delivery business early in the first quarter and our LNG business in April. Our Power Delivery segment, which includes our Chinese joint venture and our Brazilian subsidiary, was the first to be negatively impacted by the global pandemic. As you all know, China was hit with virus-related shutdowns earlier than most countries, and this impacted our joint venture's ability to operate its manufacturing facility in the first quarter. Our Brazil business originally lagged in virus-related impact but is now experiencing more disruption.

Our LNG business started to see reduced customer activity in April, particularly in the energy sector, and businesses remained weak since then. We estimate that our April activity levels were significantly below those of the first quarter, and we're not clear if or when activity will pick back up in the second quarter. We've responded to this by focusing on sales and by cutting costs.

On sales, we are redoubling our efforts on existing customers as well as reaching out to new customers and markets to further diversify our end markets. And on cost cuts, we are reducing costs across the business, including travel, other general and administrative costs and, unfortunately, head count compensation. We will talk more about our new sales efforts and cost-cutting measures later in the call.

I'd now turn the call over to Andy for a discussion of our financial results, and I'll wrap up the call with some additional information on the business. Andy?

Thanks, Jim. For the first quarter, Stabilis reported revenues of $13.8 million, a sequential increase of 11% versus $12.5 million reported in Q4 of 2019. LNG segment revenues were $12.5 million compared to $10.4 million in the fourth quarter. The sequential increase is primarily due to a 27% increase in LNG gallons delivered and additional equipment rental revenue resulting from our normal seasonal winter peaking activities for utilities. Our George West facility utilization increased to 74% in the quarter, up from 64% in Q4 of last year. Revenue gains due to increases in LNG volumes sold were partially offset by lower natural gas prices.

Our strong LNG segment results were partially offset by the Power Delivery business. Net equity income from our Chinese joint venture was a loss of $0.2 million compared to income of $1.1 million in the previous quarter. As we disclosed in the press release, our Chinese joint venture's manufacturing facility was closed for approximately 4 weeks during the quarter and was further impacted by supply chain disruptions. Full production is now resumed. However, the impact of the related economic downturn we'll have on orders at the joint venture for the rest of 2020 is not yet known.

Revenues from Brazil were $1.3 million, down from $2.1 million in the previous quarter as a result of the pandemic and an unfavorable exchange rate. Our Brazilian operations were impacted late in the quarter and shut for the last few weeks of March. Our Brazilian business is currently operating at reduced activity levels, and we expect lower activity levels to continue at least through midyear. We will provide updates as our visibility improves.

As a result, adjusted EBITDA for the quarter was $1.5 million, down from the $2.2 million in the prior quarter. Net loss for the quarter increased to $1.1 million compared to a net loss of $0.6 million in the preceding quarter.

Moving to Q1 year-over-year results. The company grew revenues 7% in the first quarter compared to Q1 of 2019. LNG segment revenues decreased by $0.5 million year-over-year due to lower natural gas prices and reduced activity levels with several oil and gas customers. As mentioned previously, the utilization of our George West plant was 74% in Q1, up from 58% in the year-ago quarter.

Adjusted EBITDA of $1.5 million was down from the $2.3 million reported in the prior year quarter due to the Power Delivery segment results I previously mentioned. As a reminder, our Power Delivery segment was acquired as part of the reverse merger with American Electric Technologies in July of 2019 so its results are not included in the prior year Q1 numbers. Net loss increased to $1.1 million from $0.7 million in the year-ago quarter.

We finished the quarter with $3.2 million in cash, and we believe we have adequate cash and access to sources of liquidity to manage the downturn. That being said, we remain highly focused on preserving cash and maintaining a strong balance sheet.

I'll now turn the call back to Jim for some additional remarks.

Thanks, Andy. As I discussed earlier, our North American LNG business was not significantly impacted during the first quarter but we are now seeing a slowdown particularly with our upstream oil and gas customers. As such, we've refocused our sales team on opportunities to further diversify our business.

Recent sales activity in Mexico has been encouraging, and we are gaining traction in the Mexican market. A new customer we discussed on our last earnings call took delivery of approximately 90,000 gallons during the month of April, and they continue to ramp up operations this month. We continue to have a number of promising opportunities in Mexico particularly in the mining sector, and we're optimistic that we will turn some verbal commitments into additional contract awards in the near future.

In the U.S. market, we recently signed a new 12-month contract to provide over 100,000 gallons per month to an industrial customer for power generation. We've also seen success in the pipeline maintenance and outage projects with recent contract wins along the Gulf Coast.

On cost-cutting, we have eliminated all nonessential costs, including travel, entertainment and other nonessential overhead expenses. We've obtained cost concessions for many of our key LNG transportation and other major vendors, and in the U.S., we have also reduced our head count by approximately 15% and employee compensation by approximately 20%. In addition, we have deferred payment on cash bonuses and other payments until we get better visibility on the broader economic outlook.

I want to reemphasize in my final comments that our long-term strategy is unchanged. We seek to become the preeminent small-scale LNG provider in North America by providing superior value and service to our customers. We believe that small-scale LNG will continue to become an increasingly important and growing piece of North America's energy solution. In the short term, we're focused on increasing and diversifying sales, controlling costs and maintaining liquidity and a healthy balance sheet.

With that, I'll open the call to questions. Take it away, Jim.

(Operator Instructions) Gentlemen, first, we'll hear from Bill Dezellem at Tieton Capital.

I'm actually going to beg for 3 questions rather than 1 and a follow-up, if I may. But first of all, how does the virus impact your Mexico permitting, either activity or plans?

Bill, the -- on the sales side and the project development side in Mexico, we've pushed ahead full speed and as I mentioned on the call, had some good success with new customers, which we hope to continue here in the next few weeks. On the permitting side, many of the government offices have been closed for the last few weeks and should remain closed or expected to remain closed over the next few weeks. I know they put out some new guidance last night or this morning that we need to study. So there could be a slowdown in permitting based on when the -- those offices open. But we've -- as you know, we've got permits in already for 1 project, and we anticipate hearing back from that when the offices open.

And so essentially, whatever your original time line was, is it a fair interpretation that you would anticipate that to be pushed out given that the permitting offices and the government offices are closed?

We just don't know yet, Bill. We'll let you know as soon as we have more information because we just don't know where we were in the queue and what the delay is going to -- what kind of delays are going to come out of this. So apologies, but we'll have to hold off on that until we know -- have more information.

Okay. That's just fine. And then a question #2, oilfield. What percent of your business did the oilfield -- your LNG business, did oilfield represent in the first quarter of this year, the first quarter of last year and the fourth quarter of 2019?

That's a very specific question, Bill. Let us pull that data together. And if we can't get it to you by the end of this call, we'll pull it together and get it to you later. I don't have all 3 periods in front of me right now.

Okay. No problem. And then lastly, you had an increase in volumes at George West while the third-party volumes declined. And so the question is, was that an intentional switch to put more volume through the George West plant? Or is that simply a geographic function of where the demand was in the 2 quarters?

It wasn't intentional. There were 2 main factors in that shift or 3 main factors. One is the business at George West in the first quarter was historically strong, so business at George West was higher. Second was, although we were deployed on more projects in the Northeast this year for winter peaking, the weather was warm, and so there wasn't as much gas flow. So we had good success on rental revenue, staff deployment. And we did have gas flow in the Northeast, but compared to the year earlier, it wasn't as strong given the warmer weather. And then the third difference is we had a couple, I'd say, test pilot projects last year in the first quarter on e-fracs in the energy sector that consumed a lot of fuel that when you look at the year-over-year comparison, we didn't have the same kind of tests this year. And so third-party field volumes were lower for that reason as well.

(Operator Instructions) And we have no signals from the phone audience. Mr. Reddinger and Mr. Puhala, I'll turn it back to you for any additional or closing remarks.

Thanks for being on the call today, everyone. And if there's any other data to follow up on, we'll be sure to get back to you. Thank you.

Ladies and gentlemen, this does conclude today's update, and we thank you all for joining. You may now disconnect your lines, and we hope that you enjoy the rest of your day.