Stabilis Solutions (SLNG) Q3 2026 Earnings Call: Data Center Contract Drives 2027 Outlook

Stabilis Solutions (NASDAQ: SLNG) reported a sharp sequential recovery in third-quarter 2026 results as a short-term data center project began LNG deliveries. Management expects a larger, two-year data center contract to drive substantial growth in 2027, while aerospace demand continues to expand.

Key Takeaways

• Q3 2026 revenue was $14.8 million, down 27% year over year but up 25% from $11.9 million in Q2.
• Adjusted EBITDA increased sequentially from $0.1 million to $1.9 million. Net income returned to positive territory at $0.2 million, or $0.01 per diluted share.
• Data center-related revenue rose from less than 1% of total revenue in Q2 to 17% in Q3 after deliveries began under a short-term commissioning contract.
• Aerospace revenue grew 49% year over year, supported by higher launch and testing activity and an expanding commercial space customer base.
• A roughly $200 million, two-year data center bridge-power contract remains scheduled to begin in mid-Q1 2027 and reach its expected full run rate by Q4 2027.
• Management expects 2027 to be a record year and said operating leverage could support adjusted EBITDA margin expansion into the high teens as execution accelerates. This is not formal 2027 guidance.

Core Financial Data

Business and Operating Performance

The main sequential growth driver was a short-term behind-the-meter power contract supporting the commissioning of a U.S. data center. LNG deliveries began in August, lifting data center revenue to 17% of the quarterly total. The project is scheduled to conclude in Q4 2026.

The company’s larger data center contract is expected to generate roughly $200 million over an initial two-year term. Mobilization and testing are scheduled to begin in mid-Q1 2027, followed by increasing LNG deliveries through the first three quarters. Management expects the project to reach its anticipated full run rate in Q4 2027.

More than $15 million of project-specific equipment was on order. The company has received the full $25 million of customer advance payments, which are intended to fund equipment purchases and preparations. Stabilis is also finalizing primary and backup LNG supply arrangements.

Management said the data center opportunity pipeline had expanded substantially. The company is pursuing construction, commissioning, bridge-power and long-term backup applications. Backup power showed the strongest recent increase in customer activity, followed by bridge power.

Aerospace remained the other near-term growth engine. Revenue increased 49% year over year as existing customers raised launch and testing activity and additional commercial space customers began purchasing LNG. Stabilis is discussing multiyear offtake agreements with several customers, including potential infrastructure and capacity additions.

For the proposed Galveston marine bunkering project, Stabilis continues to work with customers and financing partners. The project has an estimated total cost of $350 million and planned production capacity of 350,000 gallons per day. Approximately 25% of capacity is covered by committed offtake, but management said additional commitments are required before financing and final investment decision conditions can be satisfied.

Management Outlook

Management expects Q4 2026 revenue to reflect the completion of the short-term data center project. It nevertheless anticipates meaningful revenue growth and a company record in 2027, led by the larger bridge-power contract.

The existing fixed-cost base is not expected to rise in proportion to revenue. Stabilis also plans to source much of the incremental LNG from third parties, limiting additional capital requirements and preserving internal plant capacity for aerospace and established customers.

The company said its contracts pass through commodity price risk. Combined with a materially larger revenue base, management believes these factors could produce significant adjusted EBITDA growth and margin expansion into the high teens as execution accelerates. Stabilis did not provide formal 2027 financial guidance.

Risks and Key Watchpoints

• The short-term data center contract ends in Q4 2026, creating a transition period before the larger 2027 project ramps.
• The duration of bridge-power demand can depend on when a data center receives its permanent grid connection. The initial two-year contract could be extended, but management said the timing remains uncertain.
• Aerospace schedules can be affected by program changes, technical anomalies and regulatory processes, reducing visibility into launch and testing cadence.
• The Galveston project has no committed final investment decision timeline and depends on sufficient long-term offtake and a completed financing structure.
• Most quarter-end cash was restricted for the 2027 contract, leaving $1.5 million of unrestricted cash.

Analyst Q&A Highlights

Management said the aerospace customer base and activity levels are both expanding. Multiple customers are discussing multiyear supply agreements, which could eventually support additional liquefaction or logistics infrastructure, although no capacity plan or financial outlook was provided.

For the 2027 data center contract, management confirmed an initial two-year term and a value of approximately $200 million. The project is expected to start in mid-Q1, ramp through Q3 and reach its anticipated full run rate in Q4 2027.

Management described the data center sales pipeline as substantially larger than three months earlier but cautioned that pipeline opportunities are not contracted revenue. Long-term backup applications are showing the fastest increase in activity.

On marine bunkering, the company confirmed that it has one long-term customer relationship in place. About 25% of the proposed Galveston facility’s capacity is committed, while more contracted offtake is needed to support project financing.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

Ladies and gentlemen, this is the operator. We will be getting started in just a few minutes. [Operator Instructions] I would now like to turn the call over to Andy Puhala, Chief Financial Officer.

Mr. Puhala, please go ahead.

Andrew Puhala

Good morning and welcome to Stabilis Solutions' third quarter 2026 results conference call. I'm Andy Puhala, Senior Vice President and CFO of Stabilis, and joining me today is our Executive Chairman and Interim President and CEO, Casey Crenshaw. We issued a press release after the market closed yesterday detailing our third quarter operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at stabilis-solutions.com.

Before we begin, I'd like to remind everyone that today's conference call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company's expectations and beliefs as of today, November 5, 2026. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected.

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

Further, please note that we may refer to certain non-GAAP financial information on today's call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today's call is being recorded and will be available for replay. With that, I'll hand the call over to Casey Crenshaw for his remarks.

Unknown Speaker

Thank you, Andy, and good morning to everyone joining us today. Our third quarter results were in line with our expectations and consistent with the outlook we provided on our call last quarter. Revenue improved 25% sequentially and adjusted EBITDA improved to $1.9 million. Following the conclusion of multiple large contracts at the end of 2025, we have now turned the corner with momentum continuing to build ahead of what we expect will be a record 2027 for Stabilis.

The driver of the sequential improvement from the second quarter was the short-term behind-the-meter power generation contract we secured earlier this year to support the commissioning of a U.S. data center. We began delivering LNG under the agreement in August. As a result, data center-related revenue represented 17% of our total revenue in the third quarter compared to less than 1% in the second quarter. This project will conclude in the fourth quarter.

Looking ahead, our focus is squarely on 2027. Our multiyear agreement to supply LNG for behind-the-meter bridge power at a U.S. data center, expected to be the largest contract to date in our company's history, remains on track to begin in the first quarter of 2027 and will ramp during the second and third quarters. We're progressing as planned on the pre-commissioning for the project, with more than $15 million of specific project equipment on order and scheduled for delivery ahead of startup. The investment required for readiness is fully funded by customer advance payments under the contract. We are finalizing LNG supply agreements for the project, along with backup supply alternatives to support reliable delivery.

Beyond the contracts in hand, demand for small-scale LNG to support behind-the-meter power at data centers remains robust. We think about these opportunities in 4 phases: construction, commissioning, bridge power, and long-term backup. Our commercial team is bidding on work across multiple phases of data center demand. We believe we are well positioned to extend our growth runway well beyond 2027 and the contract that begins next year.

Outside of the data center market, aerospace remains the other key growth engine of our business. Revenue from aerospace customers increased 49% year-over-year in the third quarter, driven by an increasing pace of launch and testing activity and a growing number of commercial space customers. These customers have demanding purity and delivery requirements, and the operating track record we have built with them is difficult to replicate. We are currently in discussions with multiple space customers for long-term offtake agreements.

Turning to Galveston, we continue to engage with prospective customers and financing partners, and we believe the project offers an attractive long-term growth opportunity for Stabilis. That said, we are not ready to commit to a timeline for FID, which remains subject to arranging a final financing structure and securing sufficient commercial offtake. While we remain super excited about the long-term value of the project and what it could and we believe will create, our primary short-term and near-term growth opportunities remain in the aerospace and behind-the-meter data center power projects.

To close, the third quarter marked the beginning of a transformational period for Stabilis. While fourth quarter revenues will reflect the conclusion of our short-term data center project, we expect meaningful revenue growth in 2027. We have returned to profitability on a net income basis. Our largest contract is funded and on schedule, and our growth end markets are expanding. We expect this momentum to build in 2027, and we remain committed to delivering value for our customers and our shareholders through disciplined capital allocation and focused execution. With that, I'll turn the call over to Andy for a detailed review of our financials.

Andrew Puhala

Thank you, Casey. I'll begin with a discussion of our third quarter performance, followed by an update on our cash flow, balance sheet, liquidity, and capital spending. Third quarter revenue was $14.8 million, a decrease of 27% compared to the third quarter of 2025. Similar to the first 2 quarters of the year, the year-over-year decline reflects the completion of large marine and power generation contracts in the fourth quarter of 2025, partially offset by continued growth within aerospace, where revenue increased 49% compared to the prior year period, as well as growth in our legacy industrial business. On a sequential basis, revenue increased $2.9 million, or 25%, from $11.9 million in the second quarter. That increase was primarily driven by the short-term data center contract that began deliveries in August, which took data center-related revenue from less than 1% of the total in the second quarter to 17% in the third.

Adjusted EBITDA was $1.9 million in the third quarter compared to $2.9 million in the prior year period, with the decrease attributable to the completion of the 2 large multiyear contracts in the fourth quarter of 2025. Sequentially, adjusted EBITDA increased to $1.9 million from $0.1 million in the second quarter, primarily due to the higher revenues. Net income was $0.2 million, or $0.01 per diluted share, compared to net income of $1.1 million in the third quarter of 2025 and a net loss of $4.6 million in the second quarter. I would also note that SG&A was $2.5 million in the quarter, essentially flat with the second quarter and down from $2.8 million a year ago.

Turning to cash flow, operating cash flow was $3.9 million in the third quarter compared to $2.4 million a year ago and included a $5 million customer advance payment for our 2027 data center contract. The second quarter operating cash flow was $7.1 million, which also included a $5 million advance payment. So the sequential decline primarily reflects changes in working capital. Year-to-date, cash flow from operations totaled $23.4 million, reflecting the full $25 million of advance payments we've now received under the contract.

At quarter end, cash, cash equivalents, and restricted cash totaled $18.4 million, compared to $18.9 million at the end of the second quarter. Of the $18.4 million, $16.8 million is restricted to support equipment purchases and other preparations for the 2027 data center contract, and $1.5 million is unrestricted. Capital expenditures totaled $4 million during the quarter, compared to $2.3 million in the second quarter, bringing year-to-date capital spending to $11.5 million. These expenditures were primarily related to equipment and infrastructure for the upcoming data center contract. Looking ahead, we expect to continue investing to secure equipment and guaranteed supply ahead of the first quarter 2027 start, and we expect those investments to continue to be funded by the advance payments already received.

Before I close, a brief reminder on the points we made last quarter about the earnings profile of the business as we continue to scale. Nothing here is new, and we're not providing 2027 guidance, but with the third quarter now behind us, they're worth keeping in mind. First, our fixed cost base is largely in place and we do not expect those costs to grow in proportion to revenue as the 2027 contract comes online, which should drive meaningful operating leverage. Second, we'll service much of the incremental power generation demand with third-party LNG, so it requires limited incremental capital and preserves our plant capacity to support continued growth with our aerospace and other existing customers. The equipment for the 2027 contract is being funded by advance payments already received. And third, our contracts pass through all commodity price risk. Taken together and in the context of a materially larger revenue base in 2027, this should translate into meaningful growth in adjusted EBITDA dollars and margin expansion into the high teens as execution accelerates.

That concludes our prepared remarks. Operator, please open the line for the Q&A session.

Operator

The floor is now open for questions. [Operator Instructions] Our first question is coming from Martin Malloy with Johnson Rice. Please go ahead.

Question-and-Answer Session

Martin Malloy

First question, I just wanted to ask about the aerospace—

Unknown Speaker

Good morning, Marty.

Martin Malloy

—markets, and your prepared remarks sounded incrementally positive on what's going on there. Could you maybe talk a little bit more about the volumes involved with these discussions with customers for long-term offtake contracts versus your current business? And perhaps could this lead to investment in additional liquefaction capacity?

Unknown Speaker

Yes, let me start, Marty. And, again, thanks for joining the call today covering the company. I'll take it from a high level and then let Andy try to come in and answer anything additional. But look, if we weren't clear, we believe Stabilis has 3 really dynamic markets that we operate in. 1 is the behind-the-meter power business that works in the hyperscale data centers, distributed power markets, like all types of different end markets. 2nd is this giant marine bunkering infrastructure opportunity. And finally, it's the aerospace business that we've been heavily involved with since, I guess 2018, 2019, quite some time. And we provide high purity, reliable supply to people in aerospace, primarily related to rockets and launching rockets, primarily for telecommunications, satellites, different things of that nature.

We don't know exactly everything they do, but mainly those end markets. And we are just seeing the maturing of the business with both additional customers, so more clients that are real clients that buy product and need product, and the expansion and increasing of launching and testing by all of those clients. Both the expansion of the customer base and maturing of the customer base and the increased activity of all the customers across that industry is driving the growth. And our historic performance is leading us to be successful in some of the market. We certainly don't have all of anything, but we have proximity to some clients and historical relationships with others, and we expect it to be a meaningful growth area for us.

One of the challenges with the customers is due to the newness of some of the programs, you have anomalies, you have changes in timing, you have regulatory stuff that everybody's going through, so that changes some of the visibility of cadence of everything, but we're starting to see clients ask for multiyear offtake arrangements, and we're having multiple customers that we're involved with on that. At the same time, you know, there's conversations out there about some of the clients wanting to vertically integrate. So you have a lot of noise out there, but the growth is kind of beyond any of the negative noise out there. So I've touched it from a high, high level and then I'll let Andy add to it if there's anything to add, but we expect it to continue to grow in volume and revenue.

You know, as a percentage of the overall company, when you see the new behind-the-meter activity that's contracted, that may grow, as you look at percentages, that may just outgrow that growth rate next year. But we're seeing some tremendous growth rate and multiyear contracting happening in the aerospace industry.

Your last question was, will we have enough demand or term contracts to add capacity? We hope to, and if they want a contract, we're in some discussions to add infrastructure and capacity. We've talked about contracting even in the Galveston facility to bring it inbound, inland from there. We've talked about additional expansion opportunities with infrastructure. So we're actively involved with that, but we don't have anything to give you any forward guidance on that other than multiple customers now, multiple term contracting negotiations going on. So real positive overall market movement.

Operator

Your next question comes from the line of Barry Haimes with Sage Asset Management. Please go ahead.

Barry Haimes

I had a couple of questions. One is the new data center contract that's starting up in the first quarter. Is there an end date to that or just a little bit more feel for the term there? That's the first question. I have a couple others, but that's the first one.

Unknown Speaker

Well, first of all, thanks for being on the call. It's a multiyear contract. I'll let Andy give the details of what we can go over on that.

Andrew Puhala

Yes, Barry, good morning. What we've disclosed publicly is that it's roughly a $200 million contract over 2 years, and it'll ramp starting in the beginning of next year. Now, it's bridge power, so a lot of these bridge power contracts depend on when the data center gets their permanent connection. So the initial contract is for 2 years. I think it is possible that that gets extended depending on the timing of grid connections and that sort of thing, but we just don't know yet.

Barry Haimes

Got it. Okay. Second question, could you give a little more of an update on the marine market, and do you still have the cruise customer you used to have and just a little bit more color in that market? Thanks.

Unknown Speaker

Yes, so I'll take it from a high level, then let Andy come in after that. But, yes. The cruise, or I should say marine bunkering business, is something we've been doing. We talk about it a lot. We have a specific project that we've talked a lot about in the Houston Ship Channel, specifically Galveston, related to a couple different cruise customer opportunities. We have 1 contract in hand with a long-term customer relationship. And when you look at the macro right now and you look at the alternatives of our really strong, high credit-worthy cruise customers, they can either use marine gas oil, which is kind of a diesel-based product, or LNG, and their ships have switching capability.

And because of the disruptions globally and the increased cost around those alternatives, their need for a fit-for-purpose asset to make LNG molecules and then have fit-for-purpose delivery capability and bunkering vessel is high and the macro is better than it's ever been for us to get an asset financed with enough adequate offtake to help that process happen. And one of the challenges with these offtake agreements to get the project financing is the duration of contracting and how the contracting works to make the project financing work.

This project's a $350 million total project, and it requires significant committed offtake over a significant amount of time to make the project financing work for everybody. And so we're just working through those processes, but the macro is really strong on moving that project forward and Stabilis' project is the furthest along and we believe the most efficiently cost process in the Gulf Coast region. And so we believe we're the leader of the pack in that area. We still haven't gotten the project to final FID.

Barry Haimes

Okay, great. And just 1 quick follow-up on that is, in terms of how much offtake is committed, I mean, just ballpark it. Is it 1/3 committed, 1/2, 2/3? Just where are you in that process? What inning are we in, if you will?

Unknown Speaker

Yeah, well, right now we've got about 25% of the committed offtake of that facility, the 350,000 gallons a day production. We don't need 100% offtake, but we need more than what we have now.

Barry Haimes

Got it. Fair enough. And then just last question, the 3 key markets you mentioned: behind the meter, the marine bunkering, and the aerospace. Could you give a rough sense of what percent of revenues each of those were and whatever you think is most representative, either the third quarter just reported or year-to-date estimate for '27? I'm not looking for precision. I'm just looking for ballpark. Thanks.

Unknown Speaker

Yes, let me give you the ballpark real quick. I think the best thing to do is to think about '27, '28, what we have booked and contracted right now. So we've already disclosed that we're assuming we have 1 contract that's a $200 million contract, plus or minus, think about it, $100 million in revenue a year. We have other behind-the-meter power opportunities that we are bidding and actively working on and intend to execute on. And then we have the aerospace market, which is growing really fast, but a lower base when you think about percentages of growth rate. And then you talk about marine, where we really see marine being very strong for us is out past, not next year, but hopefully getting some real revenue and earnings back during 2028.

And when you look at the 10 years past there, we're really excited about that being an anchor term duration while we have ups and downs from both aerospace and behind-the-meter projects. So that is a not perfectly clear explanation, but we see short-term those kind of percentages happening, and then when you look 3 years out and further and you start talking about how that backup power on behind-the-meter apps demand starts happening where you need like peaking opportunities with LNG around large behind-the-meter projects, and you continue to see the aerospace growing, those can be major, major long-term contributors, consistent.

But obviously, once we get the asset in on an FID, the marine project, that would be a meaningful percentage of revenue at that point in time. But that's not in our kind of next year plan, which we expect to be a record year for Stabilis.

Operator

Our next question comes from the line of Matt Dane with Titan Capital Management. Please go ahead.

Matthew Dhane

Had a couple of questions here. First one, the data center contract that starts here in Q1 of '27. Just was looking for a little bit more detail. Does that start January timeframe? Does it start later in the quarter? And then secondarily, please confirm I heard correctly so it ramps over Q2 and Q3, so does that imply that Q4 is finally the full run rate for that contract?

Andrew Puhala

Yes, good morning, Matt. Appreciate you joining the call today. So, second question first, it'll ramp over the first 3 quarters of the year. And so by the fourth quarter of next year, yes, we expect that to be kind of at the full run rate. In terms of startup, it'll start middle of the first quarter. It'll start with mobilization of equipment and testing and some things like that. And then the deliveries will start to, the LNG deliveries will start to ramp from there. So that's kind of the schedule and really the level of detail that we can go into at this point.

Matthew Dhane

Okay, great. Appreciate that, Andy. Then also I want to get a little bit more color, if I could, on the pipeline of data center opportunities. I know you talked about the 4 different buckets they fall in. Just was curious, how would you, I guess, first off, classify the overall pipeline? Does it continue to grow? Is it pretty much stable with what you saw last quarter? And then what is the largest bucket where a lot of those opportunities fall into? I assume bridge would be the largest just because of the size of the contracts, but just, yes, if you could add more color where things tend to fall within the pipeline, that would be helpful.

Unknown Speaker

I'll try to give a little color. I don't know that we can give just all the detail around our kind of sales funnel, but I would say the first 3 categories are the biggest. That's the construction, where they're trying to, you know, try to get, wean themselves off diesel. That's a really good opportunity where we're doing customer education and trying to show them how that's working. The commissioning has become kind of a new and now robust area where they're like, we need to get the construction and the projects commissioned even before they get permanent power solutions in. And bridge is becoming, the size of bridge is pretty extreme, and it's not something that the customers are kind of anticipating, so it's becoming kind of a more and more needed area when they have disruptions on their time schedules on getting their grid connections or pipeline interconnections into the facility. So that's becoming a more and more needed issue as you see delays or unexpected things happen.

One that we're probably seeing the most activity in the last quarter and we think in the future is going to be this backup area where we're providing kind of backup solutions long term for our clients that are active in behind-the-meter activity around data centers. And so that's the newest area that we're starting to see ramped-up activity and questions around. Super excited about that. So I'd say if you talk about, like, increased activity, that's the one that's increasing the most. And then I'd say next increasing is just the bridge activity due to delays and so many projects coming online and having connection delays. So I hope I answered it without giving the specifics. All 4 of those areas are active and exciting to us, and obviously with the price of diesel and the intent on having environmental compliance with construction being a focus of communities, having LNG and a better environmental footprint on construction is important to the owners of the facilities.

Matthew Dhane

Okay, that is helpful. The overall size of the pipeline as of the end of the quarter or here today relative to say what it was like 3 to 6 months ago, let's say 3 months ago, how would you say that? Does it just continue to increase the opportunities that you are bidding and talking to people about?

Unknown Speaker

Correct, substantially. Now again, I mean, a pipeline, you don't get to bill against a pipeline. A pipeline is a pipeline. So I'm talking, there's significant projects out there. We do not have to land—

Matthew Dhane

Okay, great. Thank you. I mean—

Unknown Speaker

—all of the very many of the opportunities to be super successful in this area, this growth area of our company. So that's the way we're kind of looking at this area. The opportunities are pretty extreme. There's broad, deep need for infrastructure and execution in this space. I'd say we're a little bit more tighter focused in marine where we're much more focused on a specific project in a specific region. This area is pulling us into just where they're having issues on behind the meter or where they think they have a cost advantage.

Matthew Dhane

Understood. I hope you win more than your fair share, though.

Unknown Speaker

We are hoping to win enough to make our shareholders happy.

Operator

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the floor over to Andy Puhala for closing remarks.

Andrew Puhala

Well, thank you, everyone, for joining the call today. We appreciate your time and your continued interest and support of Stabilis. If you'd like to learn more, please reach out to me at our Investor Relations contact numbers, and we'll be happy to talk further.

Operator

Thank you. This concludes today's Stabilis Solutions third quarter 2026 earnings conference call. Please disconnect your line at this time.

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