Koil Energy Solutions, Inc.

Good morning, everyone. Thank you for joining us today.

In this briefing, I'll be presenting an overview of our financial performance for the fourth quarter and the entire year of 2025. I'll also share an update on our strategic road map and discuss how Koil Energy is positioned for further growth.

Finally, I'll be happy to answer any questions you may have. I'm incredibly proud of the Koil Energy team for delivering an outstanding quarter and achieving a new milestone in our growth journey.

In the fourth quarter, we achieved a revenue of $7.3 million and EBITDA of $700,000, resulting in a 10% margin. This represents a 22% year-over-year increase in quarterly revenue and 14% sequential growth from the third quarter of 2025.

Koil Energy is growing again. For the full year 2025, we achieved revenue of $24 million, marking a 6% year-over-year increase.

Adjusted EBITDA was $1 million in 2025 compared to $3.5 million in 2024. The reduction was driven by investments tied to our growth initiatives.

Koil remain focused on long-term growth by deploying free cash flow to acquire new rental equipment, fund growth-related expenses, including development of the intellectual property, the establishment of our Brazil operations and bidding activity that supports our international sales pipeline. These investments are already delivering positive growth results.

And with that overview, I'll now turn the call over to our Chief Financial Officer, Kurt Keller.

Thank you, Erik. Let me walk through our fourth quarter results in more detail.

For the 3 months ended December 31, 2025, Koil Energy generated revenues of $7.3 million, a 22% increase compared to revenues of $5.9 million the same period last year. Gross profit for the quarter totaled $2.5 million or 35% of revenue, representing a 5% increase in gross profit compared to $2.4 million or 41% of revenues in the fourth quarter of 2024.

The decline in margin reflects the shift in revenue mix and volume. Sequentially, quarter-over-quarter, gross margin improved from 32% of sales to 35%.

Selling, general and administrative expenses during the quarter equaled $2.1 million. The increase was largely driven by increased sales efforts and legal assistance with patents, master service agreements and international contracts.

Moving to net income. We reported a gain of $370,000 for the fourth quarter, which translates to a $0.03 earnings per diluted share.

This compared to net income of $541,000 or $0.04 per diluted share recorded in the fourth quarter of 2024. This reduction in earnings reflected higher SG&A expenses.

The full year's financials reflected a 6% increase in revenue, driven by a 45% increase in service revenue. The relatively modest overall growth was primarily due to a slump in fixed price contract revenues in the first half of the year.

Gross margin increased steadily throughout the year from 32% to 35%. The gross margin for the full year was 33%, down from 39% in 2024.

This was driven by increased direct overhead as a result of 15% higher head count levels and lower labor utilization during the first half of 2025. Selling, general and administrative expenses were $8.3 million for the year compared to $6.2 million incurred during the previous year.

EBITDA for the year was $960,000, which was $2.6 million lower than in 2024. The reduction reflects $1.3 million in expenses related to our growth initiatives, with $680,000 resulting from higher head count levels, and lower utilization in the first half of 2025 and a $570,000 receivable write-down, which we are actively pursuing through legal action.

This led to a breakeven earnings per share compared to $0.22 per share the previous year. Turning to our balance sheet.

As of December 31, 2025, we reported $4.8 million in working capital, including $1.5 million in cash and $4.7 million in net receivables. This compares to $5.7 million in working capital at year-end 2024 with $3.4 million in cash and $2.8 million in net receivables.

The shift is primarily due to the timing of billing and collections tied to fixed price contract milestones. Before I hand the call back over to Erik, I want to briefly acknowledge that while 2025 was not the year we had hoped for, the significant improvements throughout the year that led to a great fourth quarter, demonstrate the ability of the Koil team to carefully manage our growth journey.

During 2025, we restructured and strengthened the finance team and successfully implemented NetSuite as our new ERP system. Our focus remains on profitable growth disciplined execution and scaling investments appropriately.

Thank you.

Thank you, Kurt. My congratulations to the men and women of Koil Energy.

And particularly our sales team delivering a record order intake in 2025 and our service team who delivered a 45% annual growth in service revenue. The culture of Koil can be described as exceptional responsiveness and safe workmanship.

This is our business DNA. Speed and collaboration are cornerstones of our work culture.

Our clients continue to entrust us with critical project awards. For instance, during the year, we installed over 70 multi quick connector plates for Beacon Offshore Energy at its Shenandoah Deepwater field in the Gulf of America.

We secured a significant contract to supply steel to flying leads and associated equipment for a project in the Gulf of America. We also announced the award of a significant contract for control equipment for a subsea isolation valve system.

Earlier in the year, we won a significant contract to supply multi quick connector plates for a high-pressure system in the Gulf of America. Although we secured numerous smaller contracts on a weekly basis, it is a significant and major awards that drive our growth.

We are very excited for our future. In 2026, our team will remain focused on growing the company and delivering on our growth strategy.

The consensus among our customers is that global energy demand continues to rise. Deepwater fields naturally decline at an average rate of 7% per year underscoring the urgency for new development just to maintain current output.

From our perspective, we're seeing global operators allocate more capital towards deepwater and ultra deepwater developments, particularly in Brazil, the U.S. and West Africa.

Subsea tieback developments continues to gain momentum as a preferred approach among offshore operators. These projects allow operators to access nearby reservoirs, utilize available topside capacity and leverage existing subs infrastructure.

A key advantage of subsea tieback development is the potential for shorter payback periods than traditional greenfield projects. Leveraging existing assets, these projects frequently have the potential to achieve first oil within 2 years of final investment decision.

Proven practical design backed by a deep team experience in subsea development and commissioning plays a critical role in ensuring reliability and staying on schedule. Koil Energy, is in a uniquely strong position to win subsea tieback projects.

Billing activity and order intake for subsea tieback projects continued to increase throughout the year. During 2025, we have continued to invest in new talent and additional assets to support our long-term growth strategy.

We remain disciplined in balancing profitability with investment and are confident that our expanded capabilities position us well to execute on our growing backlog. We remain focused on our strategic objective to becoming the leading provider of integrated subsea distribution systems and services globally.

One indication of subsea activity is the number of subsea trees awarded and later installed. For both greenfields and brownfields, industry analysts such as Westwood Global Energy Group on March 6, 2026, reported an expected increase from 247 subsea tree awards in 2025 to 296 awards in 2026, a 20% increase.

Koil's product sales tend to correlate with subsea tree awards as we supply the controls infrastructure linking subsea trees to the topside production facility. Analysts also expect subsea tree installation activity closely correlated with Koil service activity to increase by approximately 8% even when compared against last year's elevated installation levels.

We are 2 years into an ambitious 3-year strategy focused on achieving continued profitable revenue growth. While our growth strategy continues to push Koil's business performance domestically, we have also advanced our international activities.

Our facility in Macae, Brazil is up and running. While we are waiting for a significant contract in that region, we are currently serving clients with rental equipment that we built in country.

The bidding activity in South America is at its highest level and we are pleased to share that we are now qualified to bid for key customers in that region. While Brazil is our main focus, we continue to pursue opportunities in the North Sea, together with our alliance partner, SubseaDesign.

We have also hired a channel partner, pipeline network, LLC to pursue service work in Africa and Southeast Asia. Before we conclude, I would like to share that we are currently refining our growth strategy and setting ambitious new goals through 2030.

We look forward to presenting these plans at an in-person and online investor conference in Houston on May 7 and 8, 2026. The held in conjunction with the Offshore Technology Conference, OTC Formal invitations will be in shortly.

That concludes our prepared remarks today. So I'll turn the call back to the operator to take investor questions.

Operator?

Question is the Iran war and increasing oil prices, what kind of a scenario assessment? Can you tell us when you get into the situation with oil prices increasing, increasing fast?

Are your customers increasing their activity? Are they taking a wait and see?

Is this more profitable for them? Is it better, worse or no change?

What can you tell us?

Well, that's a question for someone with a higher pay grid than me perhaps. But thank you, Mike, for the question.

So I'll refer to our customers what they say. And last week, we had the CERAWeek in Houston.

This is an excellent conference where you have not only executives from various international oil companies present, but you also have government officials from various countries that are engaged in oil and gas policies. So two things relate to this.

First of all, as you said, the oil price going up. And for a while, we don't know how that will go and how long it will stay.

But while it does, obviously, our customers are getting their cash flow improved. They always have and referring to a similar situation in the past, they always have projects sitting on the shelf that they would like to develop, but didn't get included in the budget.

So when cash flow increase, what we often see is that we release more projects for that reason. Obviously, that has very little to do with the business case, the long-term business case because all these projects take years to develop.

So who knows what the oil price is going to be 5 to 7 years from now. But the other part of this that again, referring to what I learned from my customers, is that the [ foremost ] trait as being something we always have talked about but not too often, perhaps in the recent years.

We always knew it was a risk when so much of the resources come from that region. But now we know it's real.

That risk is now on everybody's mind. And even if there is hopefully a piece coming shortly here, we will have this in mind.

Too many resources are coming from one place. So officials from various countries have reflected that they obviously want to make sure that they have resources in their country or with a trusted neighbor.

And for sure, the subsea developments is the best way to address that. There are so many subsea regions around the world and so many countries participate in developing subsea developments.

And we hear now that they're more interest in going after that resource than perhaps before this conflict.

That sounds like somewhat of a positive assessment long term, though.

Well, I hate to connect our earnings to a conflict, but that's what I learned from these people, yes.

Right. Can you give us more color on the longer-term growth plan that you mentioned going out to 2030?

Yes. So we are preparing that now.

We have been working so far on a 3-year strategy. The road map is now 2 years into the 3-year plan.

So obviously, we need to hammer out some more details on what we're going to do in the next 3 years or actually 4 years, which gets us to 2030. So that is what we're working on right now.

And then we plan to present that at an investor conference in the second week of May, the 7th and 8th of May.

And is that -- is there going to be a link for us to watch that?

Absolutely. So you can either be present here or we're going to have an online conference as well.

I was wondering what is your exact head count today in Houston and Brazil, respectively.

So the exact head count is 68 today. Is that correct?

Kurt?

If you don't include Brazil. And then if we include our people in Brazil, we have three people in that are dedicated to Brazil.

Okay. And with respect to operations in Brazil, are you -- it doesn't sound like you're doing any fabricating with employees in the new facility.

It's with subcontractors.

So the initial work we did was with the subcontractors and -- but then we brought the equipment to the facility for inspection there and also had contractors working at the facility to do inspection and then we shipped it to the field. So all the -- is complete.

And as time proceeds in Brazil and you -- let's say, you get a significant contract. What kind of margins do you see compared to Houston on fabrication and service work, respectively.

I mean, the labor is a bit cheaper and the facility lease is cheaper, but then I imagine that -- when you facilitate a sale, it's going to be less revenue? Or how would that work?

So our margin policy will be the same there as it is here. So we're trying to get the same margin on every project basically.

And -- but as you indicated, winning the first project, perhaps we have to go lower, but not necessarily. We think that Brazil is a mature competitive region.

You can manage risk well and the competition there is not necessarily you want to lose money either. So it doesn't mean that we necessarily need to give up margin.

But as you indicated in the beginning, it might be a little less.

So you're looking 40% target, 35% to 40% range roughly?

So yes, the gross margin range, we want to be in the high 30s with that, then 40% would be a great target, absolutely.

All right. What became of the receivable turned bad debt from last quarter or the engineering firm in Britain?

We are still pursuing that, and we received a default judgment here in the States and now are going after them in U.K. legal system.

And is that a long and winding road, so to speak?

It's one that's maybe not as clear a path as the U.S., but it is in the U.K. And so...

There is a path.

All right. Thank you, operator, and our thanks to all of you who joined our call today.

We appreciate your interest in Koil Energy and look forward to the next earnings call. This concludes our call.

Thank you.