Stabilis Solutions, Inc.: Form 10-Q for the period ended Sep 30, 2025

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-Q (“this Report”) and the consolidated financial statements included in the 2024 Annual Report on Form 10-K filed on February 25, 2025 with the U.S. Securities and Exchange Commission (the “SEC”). Historical results and percentage relationships set forth in the Condensed Consolidated Statements of Operations and Cash Flows, including trends that might appear, are not necessarily indicative of future operations or cash flows.

Overview

Stabilis Solutions, Inc. and its subsidiaries provide turnkey clean energy production, storage, transportation and fueling solutions, using liquefied natural gas (“LNG”), to multiple end markets. We provide LNG solutions to customers in diverse end markets, including aerospace, agriculture, energy, industrial, marine bunkering, mining, pipeline, remote power and utility markets. LNG can be used to deliver natural gas to locations where pipeline service is unavailable, has been interrupted, or needs to be supplemented. LNG can also be used to replace a variety of fuels, including distillate fuel oil, such as diesel and marine gas oil, and propane, among others, to provide environmental and economic benefits. Increasingly, LNG is being utilized as a transportation fuel in the marine industry and as a propellant in the private rocket launch sector. We believe that these fuel markets are large and provide significant opportunities for LNG usage.

The Company generates revenue by selling and delivering LNG to our customers, renting cryogenic equipment and providing engineering and field support services. We sell our products and services separately or as a bundle depending on the customer’s needs. Pricing depends on market pricing for natural gas and competing fuel sources (such as diesel, fuel oil, and propane among others), as well as the customer’s purchased volume, contract duration and credit profile.

*LNG Production and Sales—*Stabilis builds and operates cryogenic natural gas processing facilities, called “liquefiers,” which convert natural gas into LNG through a purification and multiple stage cooling process. We currently own and operate a liquefier that can produce up to 100,000 LNG gallons per day in George West, Texas and a liquefier that can produce up to 30,000 LNG gallons per day in Port Allen, Louisiana. We also purchase LNG from third-party production sources which allows us to support customers in markets where we do not own liquefiers. We make the determination of LNG supply sources based on the cost of LNG, the transportation cost to deliver to regional customer locations, and the reliability of the supply source. Revenues earned from the production and sales of LNG are included within LNG Product revenue.

*Transportation and Logistics Services—*Stabilis offers our customers a “virtual natural gas pipeline” by providing turnkey LNG transportation and logistics services in North America. We deliver LNG to our customers’ work sites from both our own production facilities and our network of third-party production sources located throughout North America. We own a fleet of cryogenic trailers to transport and deliver LNG. We also outsource similar equipment and transportation services from qualified third-party providers as required to support our customer base. Revenues earned from the transportation and logistical services of LNG to our customers are included within LNG Product revenue.

*Cryogenic Equipment Rental—*Stabilis operates a fleet of mobile LNG storage and vaporization assets, including: transportation trailers, electric and gas-fired vaporizers, ambient vaporizers, storage tanks, and mobile vehicle fuelers. We also own several stationary storage and regasification assets. We believe this is one of the largest fleets of small-scale LNG equipment in North America. Our fleet consists primarily of trailer-mounted mobile assets, making delivery to and between customer locations more efficient. We deploy these assets on job sites to provide our customers with the equipment required to transport, store, and consume LNG in their operations. Revenues earned from cryogenic equipment rental are included within Rental revenue.

*Engineering and Field Support Services—*Stabilis has experience in the safe, cost effective, and reliable use of LNG in multiple customer applications. We have also developed many processes and procedures that we believe improve our customers’ use of LNG in their operations. Our engineers help our customers design and integrate LNG into their operations and our field service technicians help our customers mobilize, commission and reliably operate on the job site. Revenues earned from engineering and field support services are included within Service revenue.

Current Events and Expansion Efforts

In the third quarter 2025, the Company announced that it had executed a 10-year bunkering agreement with a leading, investment-grade global marine operator to supply LNG and to anchor development of a new 350,000 gallon-per-day, waterfront LNG liquefaction facility in Galveston, Texas. There are conditions precedent to the bunkering agreement which include the Company successfully finalizing project financing by the first quarter 2026 and completing construction on the Galveston LNG facility by the second quarter 2028. The Company is currently pursuing financing as required under the bunkering agreement; however, there is no guarantee that the Company will be able to successfully obtain the financing necessary and/or complete construction under the required timeframe or at all. See also "Future Cash Requirements" section below. If successful, the new Galveston LNG liquefaction facility is expected to be strategically located to continue to support and expand the Company's service to its cruise customers and expand marine bunkering services to additional marine markets.

U.S. Department of Energy ("DOE") Approval to Export LNG

In the third quarter of 2022, Stabilis received authorization from the DOE to export domestically produced LNG to all free trade ("FTA") and non-free trade ("non-FTA") countries, for up to 51.75 billion cubic feet per year (or approximately 1.0 MTPA) of natural gas equivalent. The authorization is for shipments of LNG and is for a term of 28 years with a remaining term of approximately 25 years under this authorization. In the third quarter of 2024, the Company met the initial time requirement to initiate exports to non-FTA countries. As of September 30, 2025, we have delivered LNG to Europe under this authorization. For exports to FTA countries, the Company has five years from the date it received the authorization with which to initiate exportation of LNG.

The DOE authorization received during the third quarter of 2022 supplements the Company's other existing import and export license from the DOE. Under this license, the Company is authorized to import and export LNG from and to Canada and Mexico, via truck. Additionally, effective September 2024, the Company can import LNG, by vessel, from various international sources to any LNG import terminal in the United States.

Results of Operations

Stabilis supplies LNG to multiple end markets in North America and provides turnkey fuel solutions to help users of propane, diesel and other crude-based fuel products convert to LNG.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

The comparative tables below reflect our consolidated operating results for the three months ended September 30, 2025 (the “Current Quarter”) as compared to the three months ended September 30, 2024 (the “Prior Year Quarter”) (unaudited, amounts in thousands, except for percentages).

Revenue

During the Current Quarter, revenues increased $2.7 million, or 15%, compared to the Prior Year Quarter. The change in revenue primarily related to:

• Increased gallons of LNG delivered in the Current Quarter compared to the Prior Year Quarter resulting in an increase in revenues of $2.9 million;
• Increased average natural gas prices in the Current Quarter compared to the Prior Year Quarter resulting in an increase in revenues of $1.3 million; and
• Increased take-or pay revenues in the Current Quarter compared to the Prior Year Quarter resulting in an increase in revenues of $0.1 million;
• These increases were partially offset by decreased revenues of $1.1 million related to lower average pricing due to customer mix in the Current Quarter compared to the Prior Year Quarter; and
• Decreased rental, service and other revenues in the Current Quarter compared to the Prior Year Quarter, resulting in decreased revenues of $0.5 million.

Operating Expenses

Cost of revenues. Cost of revenues increased $2.1 million, or 17%, compared to the Prior Year Quarter. As a percentage of revenue, these costs were 72% in both the Current Quarter and the Prior Year Quarter. The change in cost of revenues was primarily attributable to:

• Increased gallons of LNG delivered in the Current Quarter compared to the Prior Year Quarter resulting in an increase in cost of revenues of $1.9 million; and
• Higher average natural gas pricing in the Current Quarter compared to the Prior Year Quarter resulting in increased cost of revenues of $1.0 million.​
• These increases were partially offset by decreased rental, service and other costs in the Current Quarter compared to the Prior Year Quarter resulting in a decrease in cost of revenues of $0.5 million; and
• Decrease in net transportation and liquefaction cost in the Current Quarter compared to the Prior Year Quarter resulting in decreased cost of revenues of $0.3 million.

Change in unrealized loss on natural gas derivatives. The Company had an unrealized loss of $19 thousand on change in unrealized loss on natural gas derivatives in the Current Quarter and a loss of $13 thousand in the Prior Year Quarter.

Selling, general and administrative expenses. Selling, general and administrative expenses decreased $0.3 million in the Current Quarter compared to the Prior Year Quarter. The decrease was primarily related to lower compensation expense in the Current Quarter.

Depreciation. Depreciation expense increased $0.1 million during the Current Quarter as compared to the Prior Year Quarter primarily due to new mobile assets and other capital expenditures. The increase was partially offset by other assets reaching the end of their depreciable lives.

Loss (gain) on disposal of assets. The Company recorded a loss of $0.2 million on disposal of assets related to a damaged trailer compared to a gain on disposal of assets of $0.1 million in the Prior Year Quarter related to the sale of certain assets in which proceeds of $0.1 million were received.

Net equity income from foreign joint venture operations. Equity income from the Company's foreign joint venture decreased by $0.2 million in the Current Quarter compared to the Prior Year Quarter due to decreased net profits by the joint venture.

Interest income. Interest income, net was $0.1 million in the Current Quarter compared to $0.1 million in the Prior Year Quarter. In both periods, interest income, net related to interest earned on the Company's cash balances during the quarter.

Other income (expense). Other expense was $35 thousand during the Current Quarter compared to other income of $10 thousand in the Prior Year Quarter related to, in both periods, transactional foreign exchange gains (losses).

Income tax expense. The Company incurred state and foreign income tax expense of $1 thousand during the Current Quarter compared to income tax benefit of $0.1 million during the Prior Year Quarter. Income tax expense for the Current Quarter primarily related to state income taxes. The income tax benefit in the Prior Year Quarter primarily related to revisions in estimated state taxes. No U.S. federal income taxes were recorded for the Current Quarter or Prior Year Quarter as any net U.S. deferred tax assets generated from operating losses or used from operating income were offset by a change in the Company's valuation allowance on net deferred tax assets.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

The comparative tables below reflect our consolidated operating results for the nine months ended September 30, 2025 (the “Current Year”) as compared to the nine months ended September 30, 2024 (the “Prior Year”) (unaudited, amounts in thousands, except for percentages).

Revenue

During the Current Year, revenues decreased $1.0 million, or 2%, compared to the Prior Year. The change in revenue primarily related to:

• Decreased rental, service and other revenues in the Current Year compared to the Prior Year, resulting in decreased revenues of $2.8 million;
• Lower average pricing due to customer mix in the Current Year compared to the Prior Year, resulting in decreased revenues of $1.2 million;
• Decreased gallons of LNG delivered in the Current Year compared to the Prior Year, resulting in a decrease in revenues of $0.6 million; and
• Lower take-or-pay revenues in the Current Year compared to the Prior Year, resulting in decreased revenues of $0.2 million.
• These decreases were partially offset by increased revenues of $3.8 million related to higher natural gas prices in the Current Year compared to the Prior Year.

Operating Expenses

Cost of revenues. Cost of revenues increased $0.5 million, or 1%, compared to the Prior Year. As a percentage of revenue, these costs were 73% and 71% in the Current Year and the Prior Year, respectively. The change in cost of revenues was primarily attributable to:

• Higher natural gas pricing in the Current Year compared to the Prior Year Quarter resulting in increased cost of revenues of $3.4 million.
• The increase was partially offset by decreased rental, service and other costs in the Current Year compared to the Prior Year, resulting in a decrease in cost of revenues of $1.5 million;
• Lower net transportation and liquefaction cost in the Current Year compared to the Prior Year, resulting in decreased cost of revenues of $0.9 million;
• Fewer gallons of LNG delivered in the Current Year compared to the Prior Year, resulting in a decrease in cost of revenues of $0.4 million; and
• Lower take-or-pay in the Current Year compared to the Prior Year Quarter, resulting in decreased cost of revenues of $0.1 million.

Change in unrealized gain on natural gas derivatives. The Company had a gain of $5 thousand on change in unrealized gain on natural gas derivatives in the Current Year compared to a change in unrealized gain of $0.3 million in the Prior Year. The decrease in the gain in the Current Year is due to the maturity of natural gas derivatives.

Selling, general and administrative expenses. Selling, general and administrative expenses increased $1.0 million in the Current Year compared to the Prior Year. Mr. Ballard's severance related expenses accounted for $2.1 million of the increase in the Current Year. The Company also had higher office lease costs related to the new corporate office lease in the Current Year. The increases in the Current Year were partially offset by lower other compensation expense.

Depreciation. Depreciation expense increased $0.2 million during the Current Year as compared to the Prior Year primarily due to new mobile assets and other capital expenditures in the Current Year compared to the Prior Year. The increase was partially offset by other assets reaching the end of their depreciable lives.

Loss (gain) on disposal of assets. The Company recorded a loss on disposal of assets of $0.1 million in the Current Year primarily related to a damaged trailer, partially offset by the sale of an asset in which proceeds of $0.2 million were received. In the Prior Year, a gain of $0.3 million on the disposal of assets was recorded related to the sale of certain assets in which proceeds of $0.4 million were received.

Net equity income from foreign joint venture operations. Equity income from the Company's foreign joint venture decreased by $0.3 million in the Current Year compared to the Prior Year due to lower net profits by the joint venture in the Current Year.

Interest income. Interest income, net was $0.1 million in the Current Year compared to interest income, net of $0.1 million in the Prior Year. The increase in interest income, net related to interest earned on the Company's cash balances during the Current Year.

Other income (expense). Other expense was $71 thousand during the Current Year compared to other income of $15 thousand in the Prior Year related to, in both periods, transactional foreign exchange gains (losses).

Income tax expense. The Company incurred income tax expense of $0.1 million during the Current Year compared to income tax expense of $0.4 million during the Prior Year. Income tax expense for the Current Year primarily related to foreign income taxes paid on the Company's dividends received from its joint venture investment in BOMAY. Income tax expense for the Prior Year primarily related to foreign income taxes paid on the Company's dividends received from the Company's joint venture investment in BOMAY and state income taxes related to the Prior Year operating income, partially offset by revisions in estimated state taxes in the Prior Year. No U.S. federal income taxes were recorded for the Current Year or Prior Year as any net U.S. deferred tax assets generated from operating losses or used from operating income were offset by a change in the Company's valuation allowance on net deferred tax assets.

Liquidity and Capital Resources

The Company's principal sources of liquidity in the Current Year have consisted of cash provided by our operations, cash on hand, and distributions from our BOMAY joint venture. The Company used cash flows generated from operations to invest in fixed assets to support growth, as well as to pay interest and principal amounts outstanding under our debt agreements.

On March 27, 2025 the Company, entered into a Modification Agreement to the existing Loan Agreement with Cadence Bank. Under the Agreement the $10.0 million Revolving Credit Facility maturity date was extended to June 9, 2028. Additionally, the Agreement amended the Fixed Charge Coverage Ratio terms primarily related to the inclusion of excess cash. The three-year Revolving Credit Facility, as amended, contains a maximum aggregate amount of $10.0 million, subject to a borrowing base of 80% of eligible accounts receivable. The Company may request an increase in the maximum aggregate amount under the Revolving Credit Facility by up to $5.0 million, subject to the approval of Cadence Bank. All borrowings under the Revolving Credit Facility are secured by the Borrowers’ accounts receivable and deposit accounts. Borrowings under the Revolving Credit Facility incur interest at the Prime Rate published by the Wall Street Journal. Any unused portion is subject to a quarterly unused commitment fee of 0.5% per annum. As of September 30, 2025, no amounts have been drawn under the Revolving Credit Facility. The Revolving Credit Facility contains various restrictions and covenants. As of September 30, 2025, the Company was in compliance with all its covenants related to the Revolving Credit Facility.

As of September 30, 2025, we had $10.3 million in cash and cash equivalents on hand, $9.5 million in outstanding debt (net of debt issuance costs) and lease obligations (of which $2.7 million is due in the next twelve months). The Company has total availability under the Revolving Credit Facility and the AmeriState Secured Term Loan Facility of $5.2 million at September 30, 2025. During the nine months ended September 30, 2025, the Company made no draw downs on either the Revolving Credit Facility or the AmeriState Secured Term Loan Facility.

Management believes the business will generate sufficient cash flows from its operations along with availability under the Company's debt agreements to fund the business for the next twelve months. The Company is subject to substantial business risks and uncertainties inherent in the LNG industry and there is no assurance that the Company will be able to generate sufficient cash flows in the future to sustain itself or to support future growth. As we continue to grow, management continues to evaluate additional financing alternatives, however, there is no guarantee that additional financing will be available or available at terms that would be beneficial to shareholders.

Cash Flows

Cash flows provided by (used in) our operating, investing and financing activities are summarized below (unaudited, in thousands):

Operating Activities

Net cash provided by operating activities totaled $7.9 million for the nine months ended September 30, 2025 compared to $11.5 million for the same period in 2024. The decrease in net cash provided by operating activities of $3.6 million as compared to the Prior Year was primarily attributable to lower net income in the Current Year.

Investing Activities

Net cash used in investing activities totaled $4.8 million for the nine months ended September 30, 2025 compared to $3.2 million for the nine months ended September 30, 2024. The increase in net cash used in investing activities in the Current Year of $1.6 million was primarily due to cash paid for capital expenditures to support growth.

Financing Activities

Net cash used in financing activities totaled $1.8 million for the nine months ended September 30, 2025, compared to $1.3 million for the nine months ended September 30, 2024. The increase in cash used in financing activities in the Current Year compared to the Prior Year is due to additional debt payments on the AmeriState Loan and payments related to finance leases for new mobile assets.

Future Cash Requirements

We require cash to fund our operating expenses and working capital requirements, including costs associated with fuel sales, capital expenditures, debt repayments, equipment maintenance of LNG production facilities, mergers and acquisitions (if any), pursuing market expansion, supporting sales and marketing activities and other general corporate purposes. While we believe we have sufficient liquidity and capital resources to fund our operations and repay our debt, we may elect to pursue additional financing activities such as refinancing existing debt, obtaining new debt, or debt or equity offerings to provide flexibility with our cash management. Certain of these alternatives may require the consent of current lenders or stockholders, and there is no assurance that we will be able to execute any of these alternatives on acceptable terms or at all. Additionally, the Company may pursue additional expansion activities to increase its liquefaction capabilities. Such an effort, if pursued, would require additional liquidity from other sources either from the sale of debt or equity securities, additional capital investment from new owners or joint venture partners, or any combination of the above. The Company has made no such expansion commitments to date. In the event the Company pursues such expansion in the near term, there is no assurance that the Company will be able to secure additional liquidity on favorable terms or at all.

Capital expenditures for the nine months ended September 30, 2025 were $5.0 million and primarily related to the preliminary work and ordering long lead time items related to the Company's Galveston expansion, refurbishments and upgrades to existing assets and rolling stock. Future capital expenditures will be dependent upon business needs and value-adding investment opportunities as well as the availability of additional capital at favorable terms which is difficult to predict. At September 30, 2025, the Company had open purchase orders and commitments related to capital expenditures of approximately $4.0 million. See additional discussion regarding the Company's potential expansion efforts below.

Expansion Efforts

In the third quarter 2025, the Company announced that it had executed a 10-year bunkering agreement with a leading, investment-grade global marine operator to supply LNG and to anchor development of a new 350,000 gallon-per-day, waterfront LNG liquefaction facility in Galveston, Texas. Conditions precedent to the bunkering agreement include the Company successfully finalizing project financing by the first quarter 2026 and completing construction on the Galveston LNG facility by the second quarter 2028. The amount needed to finance such a facility exceeds the Company's current working capital and debt availability. The Company is in the process of determining the financing structure for the Gulf Coast expansion, with final investment decision ("FID") to be made in early 2026. The Company has identified a site for the new facility and has completed initial front-end-engineering and design activities. Future short-term capital requirements remain uncertain at this time as there is no guarantee that the Company will be able to successfully obtain the financing necessary and/or complete construction within the required timeframe or at all.

Off-Balance Sheet Arrangements

As of September 30, 2025, we had no transactions that met the definition of off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial position, operating results, liquidity, cash requirements or capital resources.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities known to exist at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates. There have been no significant changes in the Company's “Critical Accounting Policies and Estimates” during the three and nine months ended September 30, 2025 from those disclosed within the Company's Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on February 25, 2025.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at September 30, 2025.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Our operations and financial results are subject to various risks and uncertainties, including those described in the Part I. “Item 1A. Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 25, 2025 (“Form 10-K”), which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. During the nine months ended September 30, 2025, there have been no material changes in our risk factors disclosed in our 2024 Form 10-K; except for the addition of the following risk factor.

Changes in U.S. trade policy including tariffs may have a material adverse effect on our business and results of operations

Escalating tariffs and the potential for additional trade restrictions by the United States have increased uncertainty regarding future economic conditions and financial markets and have, in some cases, resulted in the imposition of retaliatory tariffs by foreign governments. The ultimate impact of U.S. tariffs and retaliatory trade measures on economic conditions remains uncertain. While the majority of our sales are domestic, and LNG trade between the U.S. and Mexico is not currently subject to tariffs; such tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global economies which could reduce demand for LNG and our services or increase our operating costs. Although the extent of any such impact is uncertain, it could have a material adverse effect on our business, financial condition and results of operations.