Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew 65% year-over-year, indicating strong business performance.
- Gross profit almost doubled, showcasing improved profitability.
- Adjusted EBITDA improved from a loss to a healthy margin of 20%.
- Awarded a major contract for a subsea safety control system, highlighting trust and capability.
- Implemented a new approach to planning and forecasting, enhancing operational efficiency.
Negative Points
- Service revenue has not grown despite the increase in product revenue.
- Cash balance dipped at quarter-end due to funds deployed towards building working capital.
- Ongoing market consolidation and capital discipline partially offset demand increases.
- Lower R&D costs might impact future innovation and development.
- Dependence on forming partnerships for overseas market expansion due to being a small company.
Q & A Highlights
Q: Can you provide more details on the major contract awarded for the subsea safety control system?
A: (Erik Wiik, CEO) The multimillion-dollar contract includes engineering, procurement, manufacturing, installation, and testing of Koil's well-proven technology. This project is a testament to our team's achievements in developing integrated product solutions and is currently on schedule.
Q: What drove the 65% increase in revenue year-over-year?
A: (Trevor Ashurst, VP of Finance) The year-over-year improvement in revenues reflects an increase in product-oriented fixed-priced project activity.
Q: How did you achieve the 6% increase in gross margin?
A: (Trevor Ashurst, VP of Finance) The relative improvement in gross margin was mainly associated with recognizing higher revenues during this past quarter.
Q: What factors contributed to the 19% decrease in SG&A expenses?
A: (Trevor Ashurst, VP of Finance) The decrease was driven by lower R&D costs and increased labor allocations to cost sales to support our increased project activity.
Q: Can you elaborate on the strategic initiatives that have driven Koil's growth?
A: (Erik Wiik, CEO) Our growth strategy includes deepening our share of spending by existing key accounts, leveraging standardized product solutions, boosting maintenance revenue streams, and following our current clients abroad.
Q: What are your plans to grow service revenue?
A: (Erik Wiik, CEO) We are launching a program to undergo an extensive review of our service portfolio to identify and pursue service opportunities. This initiative will be accompanied by targeted capital investment and the hiring of additional service technicians.
Q: How is Koil positioned in the current market situation?
A: (Erik Wiik, CEO) Demand for our services and products is driven by operators' long-cycle offshore project developments and production enhancements. We are well-positioned to drive further growth given our contract profile and service to a diverse range of subsea clients.
Q: What is the current state of Koil's financial health?
A: (Trevor Ashurst, VP of Finance) As of June 30, 2024, we have $4.4 million in working capital, including $1.5 million in cash and $5.5 million in net receivables. We are currently free cash flow positive for the year.
Q: What are the future projections for Koil's growth?
A: (Erik Wiik, CEO) While we have tripled product revenue year-over-year, we see great opportunities in growing our service revenue. We are confident that there is further upside as we continue to drive maturity in our growth journey.
Q: How does Koil plan to maintain its competitive edge?
A: (Erik Wiik, CEO) We offer mission-critical deep-water solutions with a high barrier to market entry and are in a preeminent position to service offshore renewable energy projects. We have no long-term debt and a strong foundation for growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
