Stabilis Solutions, Inc. Q3 FY2026 earnings call

• Data Center Momentum: The company has secured momentum ahead of what is expected to be a record year in 2027. A major multi-year agreement to supply LNG for behind-the-meter bridge power at a U.S. data center is on track to begin in Q1 2027, ramping through Q2 and Q3. More than $15 million in specific project equipment is on order, fully funded by customer advance payments.
• Aerospace Growth: Aerospace remains a critical growth driver, with revenue increasing 49% year-over-year due to increased launch and testing activity. The company is finalizing long-term off-take agreements with multiple space customers, leveraging its difficult-to-replicate operating track record for high-purity LNG delivery.
• Galveston Project Status: While the Galveston liquefaction project represents attractive long-term value, management is not ready to commit to a Final Investment Decision (FID) timeline. This decision remains subject to arranging final financing and securing sufficient commercial off-take.
• Market Segmentation Strategy: Management categorizes data center demand into four phases: construction, commissioning, bridge power, and long-term backup. Commercial teams are actively bidding across these phases, with robust demand observed particularly in commissioning and bridge power due to grid connection delays.
• Financial Discipline: The company returned to profitability on a net income basis. Fixed costs are largely in place, expecting meaningful operating leverage as the 2027 contract scales. All commodity price risk is passed through to customers, preserving margins.

The company reported total revenue of $14.8 million, a decrease of 27% year-over-year from the third quarter of 2025, primarily due to the completion of large marine and power generation contracts in late 2025. However, revenue increased 25% sequentially from $11.9 million in the second quarter, driven by a short-term data center contract that began LNG deliveries in August. Adjusted EBITDA was $1.9 million, down from $2.9 million in the prior year period but up significantly from $0.1 million in the previous quarter. Net income was $0.2 million (one cent per diluted share), compared to a net loss of $4.6 million in Q2 2026 and net income of $1.1 million in Q3 2025. In terms of revenue contribution, data center-related revenue accounted for 17% of total revenue in Q3 2026, up from less than 1% in Q2 2026. Aerospace revenue grew 49% year-over-year, representing a key growth engine alongside legacy industrial business.

• No Formal Guidance Provided: Management explicitly stated they are not providing specific financial guidance for 2027.
• Revenue Expectations: Management expects meaningful revenue growth in 2027, driven by the ramp-up of the major data center contract starting in Q1.
• EBITDA Margin Expansion: Management anticipates significant growth in adjusted EBITDA dollars and margin expansion into the high teens in 2027, driven by operating leverage as fixed costs do not grow proportionally with revenue.
• Contract Timeline: The major data center contract is expected to reach full run-rate by Q4 2027, after ramping through the first three quarters of the year.

• Financing and FID Uncertainty: The Galveston project’s Final Investment Decision is contingent on securing a final financing structure and sufficient commercial off-take, creating uncertainty regarding its near-term realization.
• Operational Execution Risks: The aerospace market faces anomalies, timing changes, and regulatory hurdles that can impact visibility and cadence of deliveries.
• Grid Connection Delays: Delays in permanent grid connections for data centers can disrupt project timelines, though this also creates opportunities for bridge power contracts.
• Vertical Integration Threats: Some clients in the aerospace sector are exploring vertical integration, which could potentially alter off-take dynamics, although management believes overall growth trends remain positive despite this noise.

Q: Martin Malloy asked about the volume involved in long-term off-take discussions with aerospace customers versus current business, and whether this would lead to investment in additional liquefaction capacity.

A: Casey Crenshaw explained that while there is noise around client vertical integration, the aerospace market is maturing with more real clients buying product. They are seeing multiple customers enter into multi-year off-take arrangements. Regarding capacity, they are in discussions to add infrastructure and potentially expand the Galveston facility or bring inbound LNG inland, hoping to meet term contract demands, though no forward guidance was provided on specific capacity additions.

Q: Barry Hames inquired about the term of the new data center contract and the status of the marine bunkering market, specifically asking how much off-take is committed for the Galveston facility.

A: Andy Puhala disclosed the data center contract is roughly $200 million over two years, ramping in Q1 2027, with potential extension depending on grid connection timing. Regarding marine, Casey Crenshaw noted that macro conditions are strong due to global disruptions and the need for LNG alternatives to diesel. For Galveston, they have approximately 25% of the committed off-take for the 350,000 gallons-per-day facility, which is insufficient for FID; they need more commitments to secure financing.

Q: Matt Dane asked for details on the data center contract start date, ramp schedule, and the size/pipeline of other data center opportunities.

A: Andy Puhala confirmed the contract starts mid-Q1 2027 with mobilization and testing, ramping deliveries through Q2 and Q3, reaching full run-rate by Q4. Casey Crenshaw described the pipeline as substantially growing, with the most activity in 'construction' and 'commissioning' phases, and rising interest in 'bridge power' due to grid delays. He emphasized that the 'backup' phase is the newest area seeing increased activity, and while the pipeline is deep, they focus on winning enough opportunities rather than landing all of them.