Koil Energy Q2: Revenue Down 10%, Small Profit and Positive Adjusted EBITDA Amid Rising SG&A

Koil Energy Solutions, Inc. (OTCMKTS: DPDW)

Quick summary: The company reported lower revenue and margin pressure in Q2 2025 vs. Q2 2024, but still delivered a small GAAP net income and positive Adjusted EBITDA. Management is investing in headcount and Brazil operations while working to remediate a previously disclosed material weakness in controls. Liquidity is adequate today but cash declined in the first half of 2025.

Key facts & figures (as reported)

- Revenues (Q2 2025): $5,183K vs $5,779K (Q2 2024) - down 10%.

- Revenues (6 months 2025): $10,433K vs $11,570K (6 months 2024) - down 10%.

- Cost of sales (Q2 2025): $3,454K; Gross profit Q2 2025: $1,729K (33% margin) vs $2,249K (39%) in Q2 2024.

- SG&A (Q2 2025): $1,964K (38% of revenue) vs $1,268K (22%) in Q2 2024 - +55% year-over-year for the quarter.

- Operating (loss) / income (Q2 2025): $(235)K vs $981K (Q2 2024).

- Net income (Q2 2025): $61K; Net income (6 months 2025): $32K vs $1,560K (6 months 2024).

- EPS (basic, Q2 2025): $0.01; weighted average shares basic: 12,088K.

- Adjusted EBITDA (Q2 2025): $163K vs $1,167K (Q2 2024). Adjusted EBITDA (6 months 2025): $500K vs $1,901K (6 months 2024).

- Cash & working capital (June 30, 2025): Cash $2,193K; Working capital $5,082K. Cash decreased $1,229K during the six months.

- Accounts receivable (net): $5,551K (June 30, 2025) vs $2,767K (Dec 31, 2024) - large increase in AR.

- Contract assets: $1,162K (Jun 30, 2025) vs $3,080K (Dec 31, 2024); Contract liabilities $715K.

- Property, plant & equipment, net: $3,355K (Jun 30, 2025) vs $2,791K (Dec 31, 2024).

- Lease right-of-use operating assets / liabilities: ROU assets $6,176K; total lease liabilities $7,062K.

- Capital expenditures (6 months): Purchases of PP&E $714K.

- Notable one-time items: $250K gain from settlement of WW Champion lawsuit recognized in Other (income), net; $34K insurance dividend; $42K Employee Retention Credit.

- Share-based comp: $79K (Q2) and $149K (6 months) recorded in SG&A.

- Material items in disclosures: Full deferred tax asset valuation allowance recorded; management disclosed an existing material weakness in internal control over financial reporting and remediation expected before year-end 2025.

Positive aspects (income statement & operations)

- GAAP profitability: Company reported positive net income in Q2 ($61K) and for the six months ($32K), not a loss - shows ability to eke out profit despite headwinds.

- Positive Adjusted EBITDA: $163K in Q2 and $500K for six months - operating cash-generation measure remains positive after adjusting for non-cash items.

- Cost control on COGS: Cost of sales fell modestly (Q2 COGS down 2% YoY) even as revenue fell 10%, indicating some control over direct costs.

- Strategic investment: CapEx ($714K) and increases in PP&E and intangibles suggest investment to support growth (Brazil operations, equipment).

- One-time benefit realized: $250K settlement gain boosted other income and offset some operational softness.

Negative aspects (income statement & risks)

- Revenue decline: Revenues down 10% YoY for both the quarter and first half - lower fixed-price contract activity is the driver.

- Margin compression: Gross margin fell to 33% (Q2) from 39% a year earlier; six-month gross profit fell 21% - lower utilization and higher direct overhead (benefits, Brazil rent) hurt margins.

- SG&A jump: SG&A rose 55% in Q2 and 35% for six months - driven by hiring, legal/audit timing and consulting, materially pressuring operating income.

- Lower Adjusted EBITDA and operating income: Adjusted EBITDA fell materially vs prior year ($1,004K drop Q2); operating loss reported in the quarter.

- Working capital dynamics / cash burn: Cash fell $1,229K in six months; AR increased sharply to $5.55M, which may pressure near-term cash if collections lag.

- Contract asset contraction: Contract assets fell from $3,080K to $1,162K, while AR rose - mix and timing of billings vs. costs may be creating collection timing risk.

- Governance & tax conservatism: Material weakness in internal control (disclosed) - remediation in progress; full valuation allowance on deferred tax assets limits near-term tax benefits.

- Leverage via leases: Large ROU assets and lease liabilities (~$6.2M assets; ~$7.06M liabilities) constrain flexibility and add fixed costs.

Bottom line / analyst take

Koil Energy Solutions shows it can remain modestly profitable and generate positive Adjusted EBITDA while investing in capacity and international operations. However, declining revenue, falling margins, sharply higher SG&A and a rising accounts receivable balance are red flags that require monitoring. Key near-term items to watch: collection of AR, success of utilization and backlog conversion, progress on remediation of the control weakness, and whether recent investments (capex, hires, Brazil) translate into higher-margin revenue in the second half of 2025.

Source: Koil Energy Solutions, Inc. Form 10‑Q for the quarter ended June 30, 2025 (figures in thousands as reported).