Good morning, ladies and gentlemen. Welcome to Koil Energy's third quarter 2026 conference call. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you will be invited to participate in a question-and-answer session. As a reminder, this call is recorded today, Friday, November 13, 2026. A detailed disclaimer related to Koil Energy's forward-looking statements is included in the press release issued this morning and filed with the SEC. It is also available on the company's website, koilenergy.com, or upon request.
A reconciliation of non-GAAP financial measures used in the press release and on today's call is included in the press release and on the website. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Koil Energy also undertakes no obligation to revise any of its forward-looking statements to reflect events or circumstances after the date made. At this time, I would like to turn the call over to CEO Erik Wiik. Please go ahead.
Welcome to our earnings call. I will be presenting an overview of our financial performance for the third quarter of 2026. Kurt Keller, Chief Financial Officer, will provide more details on the numbers. Then we will briefly discuss our team achievements and the way forward. Finally, we will be happy to answer any questions you may have. Koil Energy delivered another record quarter with revenue of $10.3 million, up 62% from the year-ago period and 13% from the previous quarter. This marks our fifth consecutive quarter of double-digit sequential revenue growth. We also generated adjusted EBITDA of $837,000 or 8% of revenue. Behind those results is a team delivering for our customers and doing so safely. During the third quarter, we surpassed 1 million work hours without a recordable incident, a milestone I am especially proud of. We are also putting our growth strategy into action.
We secured our first significant contract in Brazil and successfully completed the first major project deployment of our new 3,500 metric ton mobile carousel, handling approximately 50 miles of subsea umbilical cable. These projects demonstrate how we are expanding our capabilities to support our customers. Following quarter end, we announced a $5.6 million equity financing intended to expand our rental fleet and strengthen our service capabilities. With strong momentum across the subsea industry, Koil's team remains sharply focused on the execution and growth, delivering record financial performance quarter after quarter. I will now turn the call over to our Chief Financial Officer, Kurt Keller.
Thank you, Erik, and good morning, everyone. As Erik noted, KOIL delivered another strong quarter, driven by solid demand and disciplined execution. I will review our financial performance, cash flow, and balance sheet. For the current third quarter of 2026, revenue increased to a record $10.3 million, or 62% year-over-year from $6.4 million in the prior year period. On a sequential basis, revenue grew 13%. Growth was driven by service contracts, which accounted for approximately 70% of revenue. Service revenue increased by $4.9 million from the year-ago period, primarily reflecting a large project involving two of our carousels. The increase is partially offset by a decline of $923,000 in fixed-price project revenue, reflecting our strategic decision to prioritize execution of service projects and capitalize on strong customer demand within subsea services.
Gross profit equaled $2.8 million, or 27% of revenue, compared with $2.1 million, or 32%, in the third quarter of 2025. That is a decline of approximately 530 basis points. The lower margin is primarily attributable to pass-through expenses such as transportation of rental equipment, third-party logistics work, and travel costs for service personnel, which support revenue growth but carry more limited margin. In dollar terms, gross profit still grew 35% year-over-year. Selling, general, and administrative expenses equaled $2.3 million, a decrease of $187,000 from the prior year. The decrease reflects the non-recurring $569,000 OMSi receivable write-off recorded in the third quarter of 2025. On a sequential basis, SG&A was essentially flat, even as revenue grew 13%. These results highlight the operating leverage in our model as we optimize employee utilization and leverage our overhead functions.
Operating income totaled $447,000, compared with an operating loss of $462,000 in the prior year quarter. Net income was $207,000, or $0.02 per fully diluted share, compared with a net loss of $413,000, or $0.03 per share in the prior year period. Adjusted EBITDA was $837,000, or 8% of revenue, an improvement of nearly $1.1 million from the prior year, reflecting higher project throughput and the earnings power of our organization. Turning to cash flow and the balance sheet. For the first nine months, net cash used in operating activities was $1.1 million, primarily driven by an increase in accounts receivable. Net receivables rose to $9.5 million from $4.8 million at year-end, reflecting the large carousel project and the timing of associated billings and collections. On a year-to-date basis, we invested $2.6 million in property, plant, and equipment, primarily in rental equipment.
As of September 30, we had $561,000 in cash on hand and $3.4 million in working capital, compared with $1.5 million and $4.8 million, respectively, at year-end 2025. The quarter-end balance do not include the proceeds of the private placement discussed later. As a reminder, in May, we entered into an asset-based lending facility with nFusion, with a maximum borrowing capacity of $5 million. At quarter-end, borrowings under the facility were $3.5 million. Subsequent to quarter-end, on October 7, we also entered into approximately $1.1 million through an equipment financing agreement. Also, following quarter-end, we completed a private placement for our common stock.
We closed the securities purchase agreement on October 29, generating approximately $5.6 million in gross proceeds, with Lucid Capital Markets acting as our sole placement agent. We intend to use the net proceeds for investment in rental equipment, working capital, and other general corporate purposes. Together with the nFusion facility and equipment financing agreement, Koil has ample liquidity to support growth initiatives while maintaining a strong balance sheet. I would like to thank the Lucid team for their hard work in executing this successful offering, and our new and existing investors for their confidence in Koil's strategy and growth outlook.
Thank you, Kurt. The Koil team demonstrated impressive flexibility and responsiveness in meeting increased customer demand for subsea services, with service contracts accounting for approximately 70% of revenue. Our Operations Team successfully completed the first campaign utilizing our newly acquired mobile carousel. The 3,500-metric-ton modular offshore carousel system was deployed to transport approximately 50 miles of subsea umbilical cable, which was then transported and transferred over to our existing land-based carousel for long-term storage. This successful first deployment demonstrated the expanded capabilities and flexibility the new equipment brings to our service offering. This award was a pivotal moment for Koil and further validates our strategy to expand the rental equipment and services platform. During the quarter, it was announced that Koil secured a significant contract in Brazil, marking the company's first subsea umbilical maintenance campaign in the world's largest deepwater market.
This first significant contract in Brazil represents a major step towards establishing Koil as the preferred provider of subsea umbilical services throughout the region. The contract includes the re-termination and testing of umbilical elements, including chemical injection and hydraulic control lines, as well as electrical cables. This project represents an important milestone in establishing Koil as the preferred provider of subsea services in Brazil. Subsequent to September 30, 2026, Koil announced that it had secured a significant contract for subsea cable management services, where the company will deploy a dedicated team of experienced service supervisors and technicians to provide operational support and coordination, including umbilical spooling and operations. The scope also includes specialized rental equipment and highlights Koil's ability to complement its subsea equipment offerings with experienced field service personnel and ongoing operational support.
To further expand Koil's global reach, the company also announced a strategic alliance with Pipeline Network, designed to expand our international presence, operational capabilities, and customer support across the Eastern Hemisphere. Demand forecasts boost confidence in offshore markets and see the offshore industry firmly in an upcycle. 63 offshore final investment decisions, FIDs, has already been recorded during 2026, with another 26 expected by year-end, taking the potential total to 89 versus 57 in 2025. Subsea outlook remains robust. 1,380 trees forecast through 2030, with award activity expected to accelerate over the next few years, according to market analysts. Our roadmap to 2030 will focus on three growth pillars: one, distribution systems; two, Brazilian expansion; and three, rental equipment. We are advancing quickly on all three pillars, reflecting momentum behind our strategy. Our focus remains clear: execute for our customers, invest in our capabilities, and advance our KOIL 2030 strategy.
Thank you to our employees, customers, and shareholders for your continued support. I would like to extend a special welcome to our new shareholders that signed up for the PIPE. I also want to thank our board of directors that provided critical guidance and assistance during this process. For our full results, visit the investor relations sections of our website. Shareholders can find a more detailed overview of our strategy by visiting our investor webpage. That concludes our prepared remarks today, so I will turn the call back to the operator and take investor questions. Operator?
At this time, we will begin the question and answer session. If you would like to ask a question, please press star and then one using a touchtone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the numbers to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from Ian Cassel from MicroCapClub. Please go ahead with your question.
Yeah, congrats on the quarter. I just have a couple questions. I know you just finished this or completed this capital raise recently, and I know you were pretty maxed out on your rental fleet. You needed to get some more equipment. Can you talk about kind of the utilization of that rental fleet and also the potential kind of payback on new rental equipment and what they usually get in the field?
Yes. Thank you, Ian. We were really pleased being able to raise the capital. Yes, we have a plan for how to spend the money. The top of the list is to acquire more pre-commissioning equipment. This is equipment that is used to test the subsea infrastructure before you start producing oil and gas from the system, and it requires pumps and electrical testing equipment and other test instrumentation. We only have one set right now, and it is being used in West Africa on a project there. So we intend to at least acquire two more of those sets, which enables us to do three projects in parallel. The goal is to move to four projects in parallel around the world. So that is on the top of the list, and we will execute that as soon as we win the next project.
We actually do have time to acquire that equipment before we purchase it, so we're going to be careful with how we do it, but that is the priority for that investment. The payback budgetary that we have is two to three projects and within two years. So within two years, we should have full payback on that investment, and it is, as you can imagine, a fairly good investment because not only do we get cash flow from the day rate, but we also get it from the personnel that operates it.
Thank you. Can you give us some color into the amount of bid activity, you know, you're currently seeing and maybe kind of what regions you're seeing the most robust activity?
The most active region is still Brazil, where we have a very interesting pipeline of projects, both service jobs as well as product manufacturing jobs. So that is definitely the biggest market. Meanwhile, we have seen an uptick in West Africa, several countries along the coast of West Africa. We have seen an uptick in requests from the Mediterranean. Several deep water projects there is being started.
And very recently, we also see more requests from Southeast Asia, Malaysia, and Indonesia specifically. So things are picking up in more basins than we anticipated earlier. At the same time, here in the U.S., our home market, it is pretty active on the bidding activity. It has been a little bit slow over the last couple of months on the local startup of projects, but the pipeline and the drilling activity indicates that it's going to pick up significantly. In summary, more activity in Brazil, more new activity internationally in general, and then perhaps flat right now in the U.S.
Okay. Thank you.
Once again, if you would like to ask a question, please press star and one. To withdraw your questions, you may press star and two. At this time, showing no additional questions, I would like to turn the floor back over to Erik for any closing remarks.
Thank you, operator, and thank you for joining our call today. We appreciate your interest in Koil Energy and look forward to the next earnings call. This concludes our call today. Thank you.
With that, everyone, we will conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.