Koil Energy’s Earnings Call: Growth Amid Challenges

Koil Energy Solutions Inc ((KLNG)) has held its Q3 earnings call. Read on for the main highlights of the call.

Koil Energy’s recent earnings call revealed a mixed sentiment, with strong revenue growth and expansion into new markets being tempered by financial challenges. The company reported a record high backlog, indicating a positive future outlook, yet faced issues such as negative EBITDA, a significant receivable write-off, and decreased profit margins. Overall, the positive aspects of the company’s performance were balanced by notable concerns.

Revenue Growth

Koil Energy reported a 22% increase in revenue this quarter, reaching $6.4 million, which is also 22% higher than the same period last year. The growth was driven by a 33% rise in service revenue and a 15% increase in fixed price contracts or product sales compared to the previous year.

Expansion into Brazil

The company marked a significant milestone in its growth strategy by securing its first two contracts in Brazil. This expansion into a new market is a crucial step forward for Koil Energy, potentially opening up further opportunities in the region.

Record High Backlog

Koil Energy achieved a record high backlog due to recent contract awards, suggesting a positive outlook for the upcoming quarters. This backlog is expected to support the company’s future performance and growth.

Positive Market Feedback

The company received favorable feedback from clients in the U.S., Brazil, and Norway, indicating a potential increase in future subsea tieback activities. This positive market reception could lead to further business opportunities and growth.

Negative EBITDA and Net Loss

Despite the revenue growth, Koil Energy reported a negative EBITDA of 3% of revenue, resulting in a loss of $249,000. The company also recorded a net loss of $413,000, or $0.03 per fully diluted share, a significant decline from the net income of $523,000 in the same quarter last year.

OMSI Limited Receivable Write-off

A significant financial challenge arose from the write-off of a receivable from OMSI Limited in the U.K., which had been unpaid for over seven months. This write-off had a notable impact on the company’s financial results.

Decreased Gross Profit Margin

Koil Energy’s gross profit margin declined to 32% from 40% in the same quarter last year. Although profitability on a dollar basis remained unchanged, the margin decrease was attributed to a higher mix of pass-through procurement costs.

Increased SG&A Expenses

The company’s selling, general, and administrative expenses rose by $928,000 from the previous year. This increase was driven by the OMSI write-off, higher legal costs, and the addition of key personnel.

Forward-Looking Guidance

Looking ahead, Koil Energy anticipates positive performance buoyed by recent significant contract wins and increased bidding activities. Despite the financial challenges, the company remains optimistic about its future, supported by a strong backlog and ongoing market expansion efforts.

In conclusion, Koil Energy’s earnings call highlighted a balance between promising growth and notable financial challenges. While the company demonstrated strong revenue growth and expansion into new markets, it also faced issues such as negative EBITDA and decreased profit margins. The overall sentiment from the call suggests cautious optimism, with a focus on leveraging recent successes to drive future performance.