Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Koil Energy Solutions Inc (KLNG, Financial) reported a 27% year-over-year revenue growth for the third quarter.
- Gross margin improved to 40%, up from 33% in the same quarter last year.
- Adjusted EBITDA turned positive with a margin of 13%, compared to a loss in the previous year.
- The company generated approximately $1 million in free cash flow during the first nine months of 2024.
- Koil Energy Solutions Inc (KLNG) secured significant contracts, including a major subsea equipment installation in the Gulf of Mexico and maintenance services for an offshore production platform.
Negative Points
- Overall revenue decreased by 10% sequentially quarter-over-quarter due to delayed deliveries from machining suppliers.
- The company faced challenges in managing its supply chain, impacting the timely completion of fixed-price projects.
- There was an increase in selling, general, and administrative expenses due to growth strategy-related costs.
- Some revenue expected in Q3 was deferred to Q4 due to project delays, affecting quarterly financial performance.
- The company is still working on improving its financial systems and metrics, indicating room for operational enhancements.
Q & A Highlights
Q: Could you provide an update on the Flying Leads contract in the Gulf of Mexico? Is the revenue from this contract fully recognized in 2024, or will some extend into 2025?
A: Some of the work for the Flying Leads contract will extend into 2025, particularly the installation part. While the project is progressing well, a portion of the revenue will be recognized in Q4 2024 and some in 2025. - Trevor Ashurst, Vice President - Finance
Q: There was a decrease in fixed-price contract revenues from Q1 to Q3. Was Q1 an outlier, or is Q3 an anomaly?
A: Q1 and Q2 had similar revenue levels, but Q3 saw a decrease due to supply chain management issues, causing some expected revenue to shift to Q4. We are working hard to maintain high revenue and profit levels, and while fluctuations can occur, our focus is on growth and execution. - Trevor Ashurst, Vice President - Finance
Q: The SG&A expenses increased quarter-over-quarter. Was this due to expanding the sales team or service revenues?
A: The increase in SG&A was primarily due to our growth strategy, including professional services and contractors for our efforts in Brazil, as well as cybersecurity risk assessments. Some costs are one-time, while others are ongoing. - Trevor Ashurst, Vice President - Finance
Q: Are you currently communicating backlog levels, similar to what was done when the company was Deep Down Incorporated?
A: We are considering reporting backlog levels in the future as we improve our financial systems and metrics. Currently, the backlog is not a meaningful number due to its varied nature, but it may become relevant as we refine our processes. - Trevor Ashurst, Vice President - Finance
Q: You mentioned pursuing about 80 projects. Is this just in Brazil, or is it worldwide?
A: The 80 projects are worldwide. Our strategy includes increasing wallet share with current customers, improving technology, and pursuing new markets and clients, particularly in South America. - Trevor Ashurst, Vice President - Finance
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
