Good morning, ladies and gentlemen, and welcome to Stabilis Solutions Third Quarter 2021 Earnings Conference Call. Joining us today are Westy Ballard, President and CEO; and Andy Puhala, Chief Financial Officer. 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 Reform Act of 1995 and other security laws. These forward-looking statements are based on the company's beliefs and expectations as of today November 11, 2021. Forward looking statements are subject to the risks and uncertainties that may cause actual results to differ materially from those projected. The company undertakes no obligation to release updates or revisions to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in the company's filings with the SEC, and the press release announcing the company's results. Investors are cautioned not to place undue reliance on forward-looking statement. Please also note that the company 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 and the company's earnings press release. Today's call is being recorded. At this time, I'd like to turn the call over to Westy Ballard, President and CEO of Stabilis Solutions. Please go ahead, sir.

Thank you and good morning everyone and thanks for joining us today. Considering this is my first conference call as CEO, I thought it would be helpful for me to provide a few initial observations, as well as how I feel our company fits into the grand scheme of our world's environmental transformation to one that is cleaner and more sustainable. In doing so one thing that remains abundantly clear to me is that a variety of solutions will be required to make this happen. Each of these solutions have their own unique characteristics and have and will continue to garner significant investment of time, intellect, research, capital and political thought. Regardless of the industry application realizing a cleaner and more sustainable environment is about efficiency, it's about the transformation of how products are designed, delivered and used and it's about the drive to renewable. Renewable solutions will undoubtedly be the primary source for new power generation globally. And while there has been progress to date, many challenges including legislative volatility, uncertainty of global participation, unreliability and economic viability continue to inhibit and greatly postponed their comprehensive and widely accepted adoption, but that's not the case for all solutions and one solution natural gas is available now. This fuel is sustainable, secure, reliable, and economically viable, and will play a key role in the bridge to renewables. It is important to note that while liquified natural gas is our current offering, we do not view it as the end game, but rather it's the starting point. As many of you know, I joined the company late in August and albeit a short period of time my time here has only reinforced my initial thoughts on why this is such an exciting platform, and it starts with our people. Stabilis is…

Thanks, Westy, and good morning, everyone. I’m pleased to report that for the third quarter of 2021, Stabilis reported its highest ever quarterly revenues of $19.7 million, 23% higher than the second quarter of this year and 118% higher than the year ago quarter. Revenues from the company’s LNG segment were also a record of $17.8 million, a 24% improvement from the second quarter of this year and 132% improvement over the same quarter last year. The company delivered a record of 15 million gallons of LNG during the quarter, 10% higher than the second quarter of this year and 82% higher than the year ago quarter. Plant utilization of our or two LNG plants was combined 73% during the quarter. Our ability to further improve this utilization along with our network of third-party LNG providers allows us to further grow the organic revenue base to support some of the exciting growth opportunities that Westy mentioned in his opening remarks. Revenues from our power delivery business were $1.9 million in the quarter, 16% above the segment’s Q2 revenues, and 42% above the same quarter last year. SG&A expenses were $6.2 million during the quarter, primarily due to approximately $3 million of charges related to severance, legal expenses and an immediate vesting of long-term incentives related to our CEO transition during the quarter, which should not be recurring. Without these costs, our G&A would have been approximately $3.2 million 17% lower than Q2 of this year in part due to cost control initiatives currently underway. SG&A for the comparable quarter last year was $2.3 million, as our cost structure was significantly reduced to support the lower revenues during the height of the pandemic. The company also recorded an impairment charge of $376,000 during the quarter related to determination and settlement of…

Thanks, Andy. As Andy mentioned, we have some work to do on the incremental pricing side of the equation to ensure that we are keeping pace with cost inflation and to reverse those year-to-date decremental margins. This will definitely be a focus of ours in the coming quarters. And we look forward to updating you in future calls on our progress on both our cost controls and all of our exciting growth opportunities that we believe we have in front of us. So with that, I’ll open it up for questions. Moderator?

[Operator Instructions] Your first question is coming from Barry Haimes from Sage Asset Management. Your line is live.

Thanks so much and welcome. So just came back to the pricing for a second. Is there anything in the marketplace from a competitive point of view or a customer resistance point of view that would make it tough for you to get those price increases through? Or does it look like you've got the pricing power to be able to execute on that? And assuming you do get it through, what's the customer lag time? So is it a month, a quarter or a longer just a feel for that? Thanks very much.

Yes, thanks, Barry. I I'll take that. We – so when you think of just kind of the composition of our customer mix, the contracts usually aren't long-term contracts, they're called it less the year and many of which are kind of on a monthly – think of it by month. And so, I think, the real risk here is lag time. And so, we don't think there is a lot of resistance. Certainly, we'll go customer by customer to make sure we're being thoughtful on our approach, but we don't think there's going to be a lot of resistance from the customer's perspective. They too are facing inflationary pressures like everybody else. It's just really more of a lag. And it's hard to say because as I mentioned the turnover of our customers could be anywhere from a month to three months. And so not a lot of latitude in those contracts that are in existence, but as they roll off and new ones roll on rest assured we'll be – we'll address appropriate increases to more than offset the inflationary headwinds that we've realized since the beginning of this year.

Great. Thanks very much.

Thank you. Your next question is coming from Bill Dezellem from Tieton Capital. Your line is live.

Hi, thank you. I have a group of questions. First of all, let's start with the overall strategy. Westy, you laid out some of your initial thought. How does your strategy differ from what – from the strategy prior to your arrival?

Yes, I don't know that my strategy right now differs holistically. Certainly, we want to continue to optimize and enhance our core business. We think there were a lot of interesting drivers in the U.S. alone. So I think as I've mentioned that should do so. I think that not too – similarly to how the company has been thinking about some of those incremental growth drivers, whether it's in the marine bunkering as well as in some of those space initiatives. So I don't know that it's totally different there, but I think as we think more broadly down that continuum, thinking about what are some of the other broader capabilities we can add to the portfolio, whether it's in the renewable side of natural gas, on the compressed side of natural gas. And then I think it's the further leveraging of our technical competency and kind of commercial capabilities to think even further down the spectrum with hydrogen. And all those other I'll call it pre-combustion fuels, hydrogen obviously one of them. I think also we're going to be thoughtful around kind of I'll call it the post combustion and that's that carbon capture side and are there organic and inorganic opportunities to add muscle in that aspect of our portfolio too. And so, I think, I think there are similarities. The company was doing a good job and I think a thoughtful job in their approach, but I think there are also some other areas further down that spectrum that would also arguably be natural extensions and continuation of what we do pretty well.

That's helpful. And then you did mention in your opening remarks that Mexico is historically listed as the single largest opportunity. How are you viewing Mexico now?

Yes. So, I think, my position, I have quite a bit of experience operating internationally. And internationally, it requires scale and it requires balance sheet capacity. And so, Bill, we want to be very thoughtful in our approach to going internationally. Mexico isn't an exciting opportunity and I think there's some areas that we can really win, but again we want to be thoughtful in that approach. And I don't know that we want to necessarily be overly measured, but we certainly want to make sure that we are thoroughly evaluating the pros and cons of extending that balance sheet into international markets. It doesn't have to be Mexico, it could be Mexico or beyond. So it's exciting. But again, we want to be careful and as I keep saying thoughtful in our approach,

Thank you. And then in the press release, there was a quote that goes something like exciting growth drivers intended to expand our portfolio of products. Would you discuss that or have you already done that relative to the CNG, the hydrogen, potentially carbon capture? Is that what that was referencing or something else?

That's what that's referencing.

Okay. Then given that I'm going to hit you with a couple quarter questions relative to the quarter. The LNG product gross margin decline that you experienced – was that the cost factors that you're referencing here in the discussion, or does that have something to do with bringing the Port Allen facility on that that maybe we don't fully understand yet?

No, it's the former. It's driven by inflationary pressures and transportation, labor costs, just liquefaction costs kind of the aggregation of all those costs and really our now I think impetus to go ahead and offset those with incremental price increases. As I mentioned earlier, I think it was to Barry about our strategies and ability to do so. So, it's really driven by some of those non-Port Allen costs. It's just more third-party cost.

And then continuing down the Port Allen path, you had a sequential decline in third-party volume. Was that a function of switching that volume to Port Allen? Or is there another dynamic that present?

Yes, I think, it's the former. I think the more that we can absorb our own molecules, the better. We have a much more reliable cost effective fuel source. And to the extent that that’s an option we are going to do that. And if you remember in the second quarter, we didn’t really bring Port Allen on until really the latter part of the quarter. And so now you’re getting the full velocity of that infrastructure throughout the third quarter.

Great. Thank you. And then lastly, you had really good sequential volume growth as you’ve noted the profitability wasn’t at historic levels, but really good volume growth. Would you discuss the drivers behind that?

Sure. So when you think about really just overall, you’ve got some of that is or a lot of that is driven just by the expansion of customer demand. We had some bad weather that occurred in the quarter, and so that absorbed more capacity as a result of the hurricane. We also had some rental as well as other capacity absorption in Mexico. And so it wouldn’t, you can’t pinpoint it or attribute to one thing, but certainly the market has picked up in the third quarter from of volume perspective. And as you mentioned, we’re going to work hard to make sure that incremental margins follow along.

And so what about individual large pieces of business, whether it be frac fleet, mining, or some of these space or I should say aerospace or some of these other areas that can drive really big volume did, were there contributors there also?

No, I wouldn’t single out one. I’ll tell you one of the things that I’m delighted about is that we have a diversified customer base. And we serve anywhere at any given time, eight to 10 sectors. And so I wouldn’t attribute that spike to one customer over another. I think it was pretty widely dispersed across a variety of sectors.

Great. Thank you for allowing all the questions in the commentary.

Of course. Thanks Bill.

Thank you. There are no further participants in the queue at this time. [Operator Instructions] Your next question is coming from Eric Beder from CG Capital. Your line is live.

Good morning.

Good morning, Eric.

Good morning. Could you talk a little bit about you’ve signed a number of agreements for Gulf Coast marine bunkering, the different ports where – how should we be thinking about this in terms of as a driver and in terms of timing for some of these port agreements to start generating revenue?

Yes, we – as you’ve, I think noted, we’ve leaned into five ports along the Gulf Coast and think that our ability to expand that kind of U.S. LNG bunkering is very interesting as I mentioned. And in doing so, I think it’s more of an iterative process. And so we’ll start using molecules from our George West facility truck them down to the port with what we think are some likely customers. But I don’t think that’s a Q4. I think that’s probably a Q1 endeavor. And I think, look for that to build throughout the year, next year. We haven’t completely modeled out the 2020 LNG bunkering scenario, and we are working hard on that. So I think there’ll be more to follow and kind of more commentary around that as we proceed into the first quarter. But I would say that’s really more of a first quarter. And then again escalating throughout the year, next year.

And in terms of capacity and production, are you – would you consider an acquisition of another facility as you did with Port Arthur, excuse me…

We would. We’d consider, I think a variety of things. We’d consider not only inorganic acquisition similar to a Port Arthur, but I think we’d also look at if reach inflection points that require additional CapEx for expansion in our George West facility. George West facility is pretty busy these days. And it stands the reason that there may be a point in time where we do reach an inflection point. So look for us to be, I think, open minded about not only potential acquiring of additional capacity, but also the expansion of preexisting as well.

Great. Thank you. Good luck.

Thank you.

Thank you. Your next question is coming from Bill Dezellem from Tieton Capital. Your line is live.

Great. Thank you. During the quarter there was an 8K that highlighted an extension or a change of Jim’s Consulting Agreement. Would you discuss that change and explain kind of what you were trying to accomplish there?

Jim Aivalis is a tremendous resource for our company and has, I think wonderful insight. And as a new CEO transitioning, he’s been a great sounding board. And I think just a really great leader across a variety of our departments. And so what I didn’t want to do was lose that really institutional knowledge, and I didn’t want to lose the ability to have him act in a way that could be additive to the men and women who are have a history with him. I think that what we were trying to do is make sure that it was a much more streamlined and cost effective approach. He is also a Director of our company. And so we want to make sure that that his remuneration was commensurate with what his services.

Great. Thank you.

Yes. Thank you.

Thank you. [Operator Instructions] Thank you. There are no further questions in the queue. I’ll now hand a conference back to Westy Ballard for closing remarks. Please go ahead.

Thank everyone for joining us this morning. And we look forward to seeing you down the road into the next quarter.

Thank you ladies and gentlemen. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.