10-K: Koil Energy Reports 6% Revenue Growth, Net Loss in 2025

Koil Energy Solutions, Inc. reported a 6% increase in revenue for 2025, driven by strong service growth, but posted a net loss and a significant decline in Modified EBITDA amidst increased operating costs and a material weakness in internal controls.

Summary

• Revenue increased by 6% to $24.051 million in 2025, up from $22.734 million in 2024, primarily driven by a 45% increase in service revenue.
• The company reported a net loss of $38,000 in 2025, a significant reversal from a net income of $2.620 million in 2024.
• Modified EBITDA decreased by $2.567 million to $970,000 in 2025, down from $3.537 million in 2024.
• Gross profit declined by 9% to $7.957 million, with the gross profit margin falling from 38% to 33%, mainly due to underutilization of personnel.
• Selling, general, and administrative (SG&A) expenses increased by 34% to $8.326 million, driven by higher headcount, employee benefits, a $569,000 reserve for a receivable, and increased legal expenses.
• Cash on hand decreased from $3.422 million at December 31, 2024, to $1.535 million at December 31, 2025, with net cash used in operating activities totaling $901,000.
• A material weakness in internal control over financial reporting related to share-based payments was identified, with remediation efforts currently ongoing.
• The company opened a new 180,000 square foot facility in Macaé, Brazil, in February 2025, expanding its international operations.
• The WW Champion Developments lawsuit was settled in June 2025 for $590,000, resulting in a $333,000 gain, with all payments completed by January 2026.
• A favorable judgment of approximately $575,000 was received in January 2026 against OMS International Limited for $569,000 in unpaid invoices, for which a reserve was recorded in Q3 2025.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a challenging period for Koil Energy, with significant declines in profitability and cash flow from operations, coupled with internal control issues, despite some positive revenue trends and a favorable industry backdrop.

Positives

• Overall revenue increased by 6% in 2025 to $24.051 million, demonstrating top-line growth.
• Service revenue showed exceptional growth, increasing by 45% compared to 2024, indicating strong demand for core services.
• The company successfully opened a new 180,000 square foot facility in Macaé, Brazil, expanding its international footprint and capabilities in a key deepwater region.
• Settlement of the WW Champion Developments lawsuit resulted in a $333,000 gain, improving other income.
• A favorable judgment of approximately $575,000 was received against OMS International Limited for unpaid invoices, indicating potential recovery of the $569,000 receivable.
• The company is investing in new talent and additional assets to support its long-term growth strategy, signaling commitment to future expansion.
• The industry outlook for subsea activity is positive, with analysts expecting a 20% increase in subsea tree awards in 2026 and an 8% increase in installation activity, which bodes well for the company's business.
• The company's product offerings are energy source agnostic, allowing for application in offshore wind, wave energy, hydrogen, and LNG markets, diversifying its revenue potential.

Negatives

• The company reported a net loss of $38,000 in 2025, a significant reversal from a net income of $2.620 million in 2024.
• Modified EBITDA decreased substantially by $2.567 million to $970,000 in 2025, reflecting reduced operational profitability.
• Gross profit declined by 9% to $7.957 million, and the gross profit margin decreased from 38% to 33%, primarily due to underutilization of personnel in the first half of 2025.
• Selling, general, and administrative (SG&A) expenses increased significantly by 34% to $8.326 million, outpacing revenue growth.
• Cash on hand decreased by $1.887 million, from $3.422 million in 2024 to $1.535 million in 2025.
• Net cash used in operating activities was $901,000 in 2025, indicating that core operations are consuming cash.
• A material weakness in internal control over financial reporting was identified, specifically related to the accounting for share-based payments, raising concerns about financial reporting reliability.
• The company recorded a $569,000 reserve for credit losses against the OMS International Limited receivable in Q3 2025, impacting profitability.
• Product revenue saw a slight decrease in 2025, despite overall revenue growth.
• Increased invoice factoring expense contributed to a decrease in net interest income.

Risks

• Economic uncertainty and financial market conditions may impact the customer base, suppliers, and backlog.
• The volatility of oil and natural gas prices could adversely affect demand for the company's services and products.
• The use of percentage-of-completion accounting could result in volatility in the company's results of operations.
• A portion of the company's contracts may contain terms with penalty provisions, which could negatively impact profitability.
• Fluctuations in the price and supply of raw materials used to manufacture products may reduce profits and impact the ability to meet customer commitments.
• Operations could be adversely impacted by continuing effects of government regulations, including evolving impacts from new tariffs and potential retaliatory measures.
• International and political events may adversely affect the company's operations.
• Operating results may vary significantly from quarter to quarter.
• The company may be unsuccessful at generating profitable internal growth.
• The departure of key personnel could disrupt the company's business.
• The business requires skilled labor, and the company may be unable to attract and retain qualified employees.
• More sophisticated and targeted cyber-attacks and other security incidents pose risks to the company's systems, data, business, and relationships with customers and other third parties.
• Unfavorable legal outcomes could have a negative impact on the company's business.
• The impact of global health crises, including epidemics and pandemics, could adversely affect operations.
• The identified material weakness in internal control over financial reporting, if not fully remediated, could lead to material misstatements in financial statements.
• The company's dependence on a few large customers (two largest accounted for 39% of 2025 revenue) creates concentration risk, where the loss of one or more significant customers could materially impact results and cash flows.
• Uncertainties regarding changes in the financial condition of customers, either adverse or positive, could impact the amount and timing of any additional credit losses that may be required.
• The company cannot predict with certainty its ability to meet future operating requirements due to inherent volatility in oil prices and global economic activity.

Future Outlook

The company maintains a positive outlook on customer inquiries and views this as an opportunity to capitalize on its product, service, and rental offerings to address the subsea distribution and cable management needs of its customers. Global energy demand continues to rise, necessitating incremental oil and natural gas production alongside growth in renewable energy sources. Years of underinvestment in offshore exploration and development are fueling a resurgence in subsea activity, particularly in deepwater and ultra-deepwater developments in Brazil, the U.S., and West Africa. Subsea tie-back projects are gaining momentum as a preferred approach due to shorter payback periods and the ability to leverage existing infrastructure. Industry analysts expect a 20% increase in subsea tree awards in 2026 (from 247 in 2025 to 296) and an 8% increase in subsea tree installation activity, which correlates with the company's product and service activities. The company plans to continue investing in new talent and assets to support long-term growth while balancing profitability and maintaining discipline in capital investments and cost containment initiatives.

Management Comments

• "We are seeing global operators allocate more capital toward deepwater and ultra-deepwater developments, particularly in Brazil, the U.S., and West Africa."
• "Subsea tie-back development continues to gain momentum as a preferred approach among offshore operators."
• "Bidding activity and order intake for subsea tie-back and maintenance projects continued to increase throughout the year."
• "During this period, 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 backlog."
• "We remain focused on our strategic objective of becoming the leading provider of integrated subsea distribution systems and services globally."
• "The Company believes it will have adequate liquidity to meet its future operating requirements through a combination of cash on hand, cash expected to be generated from operations, and potential sales of Property, Plant and Equipment (PP&E)."
• "To mitigate this uncertainty and preserve liquidity, the Company will concentrate capital investments on key growth needs and pursue opportunistic cost containment initiatives, which can include workforce alignment, restricting overhead spending and limiting research and development efforts to only critical items."

Industry Context

StockSavvy.ai notes that Koil Energy's performance and outlook align with broader industry trends indicating a resurgence in subsea activity, particularly in deepwater and ultra-deepwater oil and gas, driven by years of underinvestment and the natural decline of existing fields. The company's strategic focus on subsea tie-back projects reflects an industry shift towards more capital-efficient and quicker-to-production solutions. The expansion into energy-agnostic solutions like offshore wind, hydrogen, and LNG positions Koil Energy to capitalize on the global energy transition, diversifying its revenue streams beyond traditional oil and gas, which is a key trend for many energy service providers. The projected increase in subsea tree awards and installations by industry analysts like Westwood Global Energy Group provides a positive backdrop for Koil Energy's core business, suggesting a favorable market environment for its products and services.

Comparison to Industry Standards

• The filing does not provide specific comparable company data or industry benchmarks for direct financial comparison.
• The company's expansion into Brazil, a key deepwater region, aligns with the industry trend of global operators allocating more capital to deepwater and ultra-deepwater developments in regions like Brazil, the U.S., and West Africa.
• The emphasis on subsea tie-back projects reflects a broader industry preference for projects with shorter payback periods and the ability to leverage existing infrastructure, a strategy adopted by many offshore operators to enhance project returns.
• The company's ISO 9001 certification for its manufacturing facility in Houston indicates adherence to international quality management standards, which is a common benchmark for reputable manufacturers in the energy services sector.
• The company's diversification into energy-agnostic solutions (offshore wind, wave energy, hydrogen, and LNG) positions it in line with larger industry players who are adapting to the global energy transition and seeking to broaden their market reach beyond traditional fossil fuels.

Management Changes

Corporate Governance

Legal Proceedings

• WW Champion Developments Lawsuit: Settled in June 2025 for $590,000, resolving a breach of lease agreement claim. The company recognized a $333,000 gain as a result. All payments were completed by January 2026.
• OMSi Lawsuit: The company filed a civil action against OMS International Limited on September 29, 2025, to recover $569,000 in unpaid invoices for work completed in March 2025. A reserve of $569,000 was recorded in Q3 2025. A favorable judgment of approximately $575,000 was received in January 2026, and the company intends to pursue full recovery.

Related Party Transactions

• David J. Douglas, a director, is the Principal of Jamaka Capital Management, LLC, which is the company's largest institutional investor, holding 14.0% of common stock as of August 4, 2025.
• The company entered into an employment agreement with Erik Wiik (CEO) on April 1, 2024, and with Kurt Keller (CFO) on April 21, 2025, which include compensation, stock awards, and options.
• Independent directors receive a combination of cash and equity-based compensation, including fees, stock awards, and option awards.

Stakeholder Impact

• Shareholders: Experienced a net loss in 2025, a significant decline from the previous year's profit, and a decrease in Modified EBITDA, which could negatively impact share value. The identified material weakness in internal controls may also concern investors regarding financial reporting reliability. However, the positive industry outlook and strategic investments could offer long-term growth potential.
• Employees: Increased headcount and employee benefits contributed to higher SG&A expenses. The company is investing in new talent and mentions "workforce alignment" as a cost containment initiative, which could imply potential restructuring.
• Customers: The company continues to provide innovative solutions and expand its global footprint (e.g., Brazil facility), aiming to meet complex customer challenges in a safe, cost-effective, and timely manner. The increase in service revenue suggests strong customer engagement in this area.
• Suppliers/Creditors: The company utilized a factoring arrangement with Amegy Bank for short-term liquidity, indicating reliance on external financing for working capital. The $569,000 reserve for the OMSi receivable highlights potential credit risk with customers.
• Regulatory Authorities: The identified material weakness in internal control over financial reporting will require close monitoring and validation of remediation efforts by regulatory bodies.

Next Steps

• Continue investing in new talent and additional assets to support long-term growth strategy.
• Remain disciplined in balancing profitability with investment.
• Execute on the existing backlog of projects.
• Concentrate capital investments on key growth needs.
• Pursue opportunistic cost containment initiatives, including workforce alignment, restricting overhead spending, and limiting research and development efforts to critical items.
• Continue remediation efforts for the material weakness in internal control over financial reporting, including validation and testing of controls over sustained financial reporting cycles.
• Pursue full recovery of the approximately $575,000 judgment against OMS International Limited.
• Assess the potential impact of ASU 2025-06 on financial statements and disclosures, effective January 1, 2028.

Key Dates

Recommendation

While Koil Energy demonstrated revenue growth and strong service segment performance, coupled with a positive industry outlook for subsea activity, the shift to a net loss, significant decline in Modified EBITDA, negative cash flow from operations, and the disclosure of a material weakness in internal controls present considerable concerns. The company's strategic investments and expansion into new markets are positive long-term indicators, but the immediate financial performance and internal control issues warrant a cautious approach. A "hold" recommendation allows investors to monitor the effectiveness of remediation efforts and observe if the company can translate increased bidding activity and strategic investments into sustained profitability and positive cash flow.

Keywords

Energy Services, Offshore Industry, Subsea Engineering, Oil and Gas, Offshore Wind, Umbilical Terminations, Flying Leads, Energy Solutions, SEC Filing, 10-K, Financial Report, Koil Energy