Accelerant Holdings' (NASDAQ:ARX) ROIC is 0.85%, indicating challenges in generating returns above its cost of capital.Comparatively, CompX International Inc. (CIX) showcases a ROIC of 12.03%, demonstrating superior capital efficiency among peers.The analysis underscores the significance of ROIC and WACC in evaluating a company's ability to efficiently utilize capital for generating returns.Accelerant Holdings (NASDAQ:ARX) is a company that focuses on providing innovative solutions in its industry. The comp ...

Core Viewpoint - CompX International Inc. reported strong financial results for the third quarter of 2025, with significant growth in net sales and net income, although the stock has shown modest underperformance compared to the S&P 500 index [1][2][3]. Financial Performance - Third-quarter 2025 net sales reached $40 million, a 19% increase from $33.6 million in the same quarter of 2024 [2]. - Net income grew approximately 20% to $4.2 million (34 cents per share) from $3.5 million (28 cents per share) year-over-year [2]. - For the nine months ended September 30, 2025, revenues climbed 12% year-over-year to $120.6 million, while net income rose 23% to $14.8 million ($1.20 per share) [3]. Segmental Performance - The Security Products segment generated third-quarter revenues of $30.3 million, up 14% from $26.6 million a year earlier, driven by stronger government-security orders [4]. - The Marine Components segment recorded revenues of $9.7 million, a 36% year-over-year increase, supported by higher sales to industrial, towboat, and government markets [4]. - Operating income for Security Products rose 9%, while Marine Components saw a remarkable 156% increase in operating income, indicating strong profitability growth [4]. Margin Analysis - The gross margin for Security Products decreased to 28.3% from 30.4% due to higher inventory costs and increased employee-related expenses [5]. - In contrast, Marine Components experienced margin improvement to 25.4% from 19.5%, benefiting from better fixed-cost coverage [5]. - Overall, the company's gross margin was 27.6%, slightly down from 28.1% a year earlier [5]. Management Insights - Management highlighted broad demand across both divisions, particularly strong government-security orders, which offset weaknesses in healthcare and tool-storage markets [6]. - The company emphasized disciplined cost control and manufacturing flexibility, with all operations based in the U.S. to limit supply-chain disruptions [7]. - Input price pressures, especially for electronic components imported from Asia, continue to impact margins [7]. Operational Factors - Third-quarter operating income expanded 42% year-over-year, reflecting higher sales volume and improved fixed-cost absorption [8]. - Operating expenses as a share of sales decreased to 15.7% from 18.2% in the prior year, partially offsetting the gross margin contraction [8]. - Interest income fell to $0.8 million from $1.3 million due to declining average cash balances and rates [8]. Cash Flow and Dividends - Net cash provided by operating activities decreased to $10.8 million for the first nine months of 2025, down from $15.6 million in the same period of 2024 [10]. - Cash and equivalents stood at $46.3 million as of September 30, 2025, down from $60.8 million at the end of 2024 [10]. - The company paid out dividends totaling $23.4 million in the first nine months, including a special payout of $1 per share declared in August 2025 [11]. Future Outlook - CompX International anticipates continued demand strength across both segments for the remainder of 2025, although input-cost pressures are expected to persist [12]. - Security Products sales are projected to remain strong due to government-security demand, but may be tempered by softness in transportation and tool-storage markets [12]. - Marine Components is expected to achieve year-over-year growth in both sales and margins, supported by fixed-cost leverage and sustained demand [13]. Other Developments - On November 5, 2025, the board declared a regular quarterly dividend of 30 cents per share, payable December 9 to shareholders of record as of November 21 [14]. - No acquisitions or divestitures were disclosed, and there were no changes to the company's operating footprint or capital-allocation strategy beyond ongoing share repurchase authorization [14].

Financial Performance - Net sales for Q3 2025 were $40.0 million, a 19.0% increase from $33.6 million in Q3 2024[1][9] - Operating income for Q3 2025 was $4.8 million, up 45.5% from $3.3 million in Q3 2024[1][9] - Net income for Q3 2025 was $4.2 million, or $0.34 per share, compared to $3.5 million, or $0.28 per share, in Q3 2024[1][9] - For the nine months ended September 30, 2025, net sales increased to $120.6 million from $107.5 million in the same period of 2024, representing a 12.9% growth[2][9] - Operating income for the first nine months of 2025 was $17.0 million, a 40.5% increase from $12.1 million in the same period of 2024[2][9] - Net income for the nine months ended September 30, 2025, was $14.8 million, or $1.20 per share, compared to $12.1 million, or $0.98 per share, in the same period of 2024[2][9] Sales Growth Drivers - The increase in net sales was attributed to higher sales in Security Products and Marine Components segments[3] Company Operations - CompX operates from three locations in the U.S. and employs approximately 558 people[4] Risks and Uncertainties - The company faces risks including supply chain disruptions, raw material cost fluctuations, and competition from low-cost manufacturers[6][7] - Future results may differ due to various uncertainties, including new product development and potential litigation[5][6]

Financial Performance - Operating income for Q3 2025 was $4.8 million, up from $3.3 million in Q3 2024, and $17.0 million for the first nine months of 2025 compared to $12.1 million in the same period of 2024[46]. - Net sales increased by $6.3 million in Q3 2025 and $13.1 million for the first nine months of 2025, primarily driven by higher sales in the Security Products and Marine Components segments[50]. - Security Products net sales rose by 14% in Q3 2025 and 8% for the first nine months, with significant contributions from the government security market[58]. - Marine Components net sales surged by 36% in Q3 2025 and 29% for the first nine months, largely due to increased sales to the industrial and government markets[60]. - Operating income margin for Q3 2025 was 11.9%, an increase from 9.9% in Q3 2024, driven by higher sales and improved cost management[53]. - Sales for the first nine months of 2025 exceeded those for the same period in 2024, driven by improved demand in government and industrial markets[63]. - Marine Components sales and operating income for the first nine months of 2025 exceeded prior year levels, with a notable one-time stocking event for a towboat OEM customer in Q1 2025[63]. Cost and Margin Analysis - Gross margin as a percentage of net sales for Q3 2025 decreased to 27.6% from 28.1% in Q3 2024, while it increased to 29.9% for the first nine months of 2025 compared to 28.2% in the same period of 2024[51]. - The gross margin for Marine Components increased to 30.5% in the first nine months of 2025, up from 19.7% in the same period of 2024, reflecting improved cost coverage[62]. - Operating costs and expenses for Q3 2025 were comparable to Q3 2024, but increased by $1.0 million for the first nine months of 2025 due to higher employee-related costs[52]. Cash Flow and Capital Expenditures - The net cash provided by operating activities for the first nine months of 2025 decreased by $4.8 million compared to the same period in 2024[68]. - Capital expenditures for the first nine months of 2025 were $3.1 million, up from $1.2 million in the same period of 2024[72]. - The company expects capital expenditures for 2025 to be approximately $4 million to meet existing customer demand and maintain facilities[81]. Market and Operational Risks - The company anticipates potential risks including supply chain disruptions, competition from low-cost manufacturers, and uncertainties in new product development[48]. Shareholder Actions - The board declared a special dividend of $1.00 per share in August 2025, totaling $12.3 million[74]. - The company has 523,647 shares available for repurchase under an authorized stock repurchase program as of September 30, 2025[82]. Inventory and Receivables Management - Average days sales outstanding for Security Products increased from 36 days in September 2024 to 42 days in September 2025[71]. - Average days in inventory for Security Products increased from 85 days in September 2024 to 91 days in September 2025[72]. Future Sales Expectations - Security Products net sales in 2025 are expected to improve over 2024, primarily due to higher sales to the government security market, despite softness in transportation and tool storage markets[64].

Core Insights - CompX International Inc. reported net sales of $40.0 million for Q3 2025, an increase from $33.6 million in Q3 2024, indicating a growth of approximately 19% year-over-year [1] - Operating income for Q3 2025 was $4.8 million, up from $3.3 million in Q3 2024, reflecting a significant increase of about 45% [1] - Net income for Q3 2025 reached $4.2 million, or $0.34 per share, compared to $3.5 million, or $0.28 per share, in the same quarter of 2024, marking a growth of around 20% [1] Financial Performance - For the nine months ending September 30, 2025, net sales were $120.6 million, compared to $107.5 million in the same period of 2024, representing a year-over-year increase of approximately 12% [2] - Operating income for the first nine months of 2025 was $17.0 million, up from $12.1 million in 2024, indicating a growth of about 40% [2] - Net income for the nine months ended September 30, 2025, was $14.8 million, or $1.20 per share, compared to $12.1 million, or $0.98 per share, in the same period of 2024, reflecting an increase of approximately 22% [2] Sales Drivers - The increase in net sales for both Q3 and year-to-date 2025 was attributed to higher sales in Security Products, particularly to the government security market, and increased Marine Components sales across various markets, including towboat, government, and industrial sectors [3] - Operating income growth in Q3 and for the first nine months of 2025 was driven by higher sales and improved gross margins in both the Security Products and Marine Components segments [3] Company Overview - CompX International Inc. is a leading manufacturer of security products and recreational marine components, operating from three locations in the U.S. and employing approximately 558 people [4]

Core Insights - CI Financial is a leading independent asset and wealth management firm in Canada, with a diversified portfolio of investment products and advisory services [2][28] - The company reported CAD 135 billion in assets under management (AUM) as of March 2025, alongside CAD 376 billion in assets under advisement (AUA) [8][10] - CI Financial operates through multiple brands targeting different client segments, including retail, institutional, and private clients [3][4] Company Structure and Market Position - CI Financial's primary listing is on the Toronto Stock Exchange under the ticker CIX, and it ranks as the second-largest non-bank-affiliated asset manager in Canada [4][25] - The firm's flagship brands include CI Global Asset Management, Assante Wealth Management, and CI Direct Investing, which collectively support a multi-channel distribution strategy [4][12] - CI's market presence is bolstered by a combination of traditional fund management and digital advisory platforms, allowing it to adapt to changing distribution preferences [2][3] Financial Metrics - As of March 2025, CI Financial's AUM was CAD 135 billion, with CAD 36 billion managed for its wealth-management subsidiaries [8][10] - The company also reported CAD 36 billion in custody assets, highlighting its diverse revenue streams from management fees, advisory fees, and custody services [8][10][33] - CI's advisory footprint includes significant contributions from US wealth management operations, which account for approximately CAD 274 billion of its AUA [8] Revenue Drivers and Business Model - CI Financial's revenue is primarily driven by management fees from AUM, advisory fees from AUA, and custody/service fees [13][33] - The firm's operational model encompasses fund management, wealth advisory, and digital distribution, with a focus on integrating acquired firms while maintaining distinct brand identities [12][18] - CI's strategy emphasizes scale and diversification to mitigate the impacts of market cyclicality and shifts in distribution channels [18][22] Competitive Landscape - CI Financial competes in a concentrated market dominated by bank-affiliated managers, positioning itself as a flexible partner for independent advisors and third-party platforms [31][34] - The company’s multi-brand reach and advisory scale provide a competitive edge, allowing it to capture a diverse range of fee streams [21][31] - CI's growth strategy includes acquisitions to expand AUM and distribution, alongside product innovation in areas like ETFs and model portfolios [22][20]

Core Viewpoint - CompX International Inc. is set to announce its third quarter 2025 earnings on November 5, 2025, after market close, pending the completion of quarter-end closing procedures [1] Company Overview - CompX International Inc. is recognized as a leading manufacturer in the security products and recreational marine components sectors [1] Financial Reporting - The earnings report will be released in a press release format after the market closes on the specified date [1]

Core Viewpoint - CompX International Inc. has demonstrated strong financial performance in Q2 2025, with significant stock price appreciation and positive investor sentiment, contrasting with the broader market decline [1][2]. Financial Performance - For Q2 2025, CompX reported net sales of $40.4 million, a 12.4% increase from $35.9 million in Q2 2024 [2]. - Net income rose 12.2% to $5.5 million, or 44 cents per diluted share, compared to $4.9 million, or 39 cents per share, in the previous year [2]. - Operating income improved 23.5% to $6.3 million from $5.1 million year-over-year [2]. - Gross margin increased to 31.9% from 31.1% year-over-year [2]. Segment Performance - **Security Products**: Net sales reached $30.7 million, up 9% year-over-year, driven by a $3.3 million increase in government security market sales and a $0.5 million boost from healthcare [3]. Operating income increased 6% to $5.8 million, although gross margin slightly declined to 31.1% from 31.7% [3]. - **Marine Components**: This segment saw a 26% year-over-year increase in net sales to $9.7 million, supported by strong demand from government and towboat markets [4]. Gross margin expanded from 28.8% to 34.5%, and operating income surged 73% to $2.4 million [4]. Management Commentary - Management highlighted robust demand across both segments, particularly in Marine Components, which benefited from a one-time stocking order and consistent government demand [5]. - There are concerns regarding margin pressure due to rising employee-related costs, which affected Security Products but were offset in Marine Components by increased volumes [6]. Market Influences - The improved performance was supported by favorable macroeconomic trends and government spending, which bolstered order volumes [7]. - Challenges include ongoing cost inflation in raw materials, particularly electronic components, which began in Q3 2024 and intensified in Q2 2025 [8]. Guidance - CompX expects elevated revenues in Security Products for the remainder of 2025, driven by government and healthcare demand, but anticipates margin challenges due to increased inventory costs and tariffs [10][11]. - For Marine Components, continued growth in revenues and margins is projected, supported by higher demand from industrial and government markets [11]. Shareholder Returns - The board declared a special dividend of $1 per share, payable on August 27, 2025, in addition to a regular quarterly dividend of 30 cents per share [13]. - The company's strong balance sheet and cash flow generation facilitated this distribution, reflecting a strategic return of excess capital [13]. Capital Expenditure and Financial Health - No acquisitions or restructuring activities were reported, with a focus on organic growth and capital discipline, alongside an expected capital expenditure of $3.4 million for 2025 and no debt on the balance sheet as of June 30, 2025 [14].

Core Insights - CompX International reported significant year-over-year increases in revenue and profit for Q2 2025, with revenue reaching $40.3 million, up 12.3% from $35.9 million in Q2 2024, and earnings per share rising to $0.44, a 12.8% increase from $0.39 [1][2] - The company operates in two main segments: Security Products and Marine Components, focusing on high-quality, reliable parts [3] - The second quarter showed robust gains across both business lines, with increased sales to government markets being a key driver [5] Financial Performance - Revenue for Q2 2025 was $40.3 million, a 12.3% increase from $35.9 million in Q2 2024 [2] - Earnings per share (EPS) rose to $0.44, reflecting a 12.8% increase from $0.39 [2] - Operating income grew to $6.3 million, up 23.5% from $5.1 million a year earlier [2] - Gross margin increased to $12.9 million, a 16.2% rise from $11.1 million in the previous year [2] - Net income for the quarter was $5.5 million, up 12.2% from $4.9 million in Q2 2024 [2] Business Overview and Strategy - CompX focuses on premium product applications, emphasizing design, quality, and durability, while maintaining strong customer relationships, particularly with significant buyers like the United States Postal Service [4] - The company manages raw material costs and adheres to safety and environmental regulations, which are crucial in manufacturing [4] Risks and Considerations - Customer concentration remains a notable risk, with the United States Postal Service accounting for 21% of total sales in FY2024, and the top ten customers representing approximately 47% of revenue [7] - The company did not provide forward-looking financial guidance, maintaining typical risk warnings about fluctuating raw material costs and customer dependency [9][10]

Part I. Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents CompX International Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flows, with notes on organization, segments, and policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (Jun 30, 2025 vs Dec 31, 2024) (in thousands) | | :------------------------ | :-------------------------- | :-------------------------- | :------------------------------------ | | Cash and cash equivalents | $60,782 | $56,215 | -$4,567 | | Accounts receivable, net | $14,113 | $16,914 | +$2,801 | | Inventories, net | $28,366 | $32,901 | +$4,535 | | Total current assets | $105,296 | $107,596 | +$2,300 | | Total assets | $163,044 | $164,768 | +$1,724 | | Total current liabilities | $15,775 | $14,367 | -$1,408 | | Total stockholders' equity | $146,145 | $149,453 | +$3,308 | [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | YoY Change (6 Months) (%) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net sales | $35,887 | $40,366 | +12.5% | $73,858 | $80,638 | +9.2% | | Cost of sales | $24,722 | $27,476 | +11.1% | $53,026 | $55,585 | +4.8% | | Gross margin | $11,165 | $12,890 | +15.5% | $20,832 | $25,053 | +20.3% | | Operating income | $5,081 | $6,320 | +24.4% | $8,796 | $12,189 | +38.6% | | Net income | $4,844 | $5,453 | +12.6% | $8,598 | $10,584 | +23.1% | | Basic and diluted net income per common share | $.39 | $.44 | +12.8% | $.70 | $.86 | +22.9% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - **Total stockholders' equity** increased from **$146.1 million** at December 31, 2024, to **$149.5 million** at June 30, 2025[17](index=17&type=chunk) - **Net income** for the six months ended June 30, 2025, was **$10.6 million**[17](index=17&type=chunk) - **Cash dividends** of **$0.60 per share** were paid for the six months ended June 30, 2025, totaling **$7.4 million**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | Change (YoY) (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | | Net cash provided by operating activities | $11,499 | $4,591 | -$6,908 | | Net cash provided by (used in) investing activities | $24,670 | -$1,765 | -$26,435 | | Dividends paid (financing activities) | -$7,390 | -$7,393 | -$3 | | Net change in cash and cash equivalents | $28,779 | -$4,567 | -$33,346 | | Cash and cash equivalents at end of period | $70,172 | $56,215 | -$13,957 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - **CompX International Inc. (CIX)** is approximately **87% owned by NL Industries, Inc. (NL)**, indirectly controlled by Lisa K. Simmons and the Family Trust[21](index=21&type=chunk) - A **special cash dividend of $1.00 per share** on Class A common stock was declared on August 5, 2025, payable on August 27, 2025[23](index=23&type=chunk) - The company operates in two segments: **Security Products** and **Marine Components**, with performance evaluated based on segment operating income[25](index=25&type=chunk) Segment Net Sales | Segment | 3 Months Ended Jun 30, 2024 Net Sales (in thousands) | 3 Months Ended Jun 30, 2025 Net Sales (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 Net Sales (in thousands) | 6 Months Ended Jun 30, 2025 Net Sales (in thousands) | YoY Change (6 Months) (%) | | :---------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Security Products | $28,213 | $30,683 | +8.8% | $58,100 | $60,913 | +4.8% | | Marine Components | $7,674 | $9,683 | +26.2% | $15,758 | $19,725 | +25.2% | | **Total Net Sales** | **$35,887** | **$40,366** | **+12.5%** | **$73,858** | **$80,638** | **+9.2%** | Segment Operating Income | Segment | 3 Months Ended Jun 30, 2024 Operating Income (in thousands) | 3 Months Ended Jun 30, 2025 Operating Income (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 Operating Income (in thousands) | 6 Months Ended Jun 30, 2025 Operating Income (in thousands) | YoY Change (6 Months) (%) | | :---------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Security Products | $5,442 | $5,768 | +6.0% | $10,892 | $11,289 | +3.6% | | Marine Components | $1,387 | $2,394 | +72.6% | $1,421 | $4,635 | +226.2% | | **Total Operating Income** | **$5,081** | **$6,320** | **+24.4%** | **$8,796** | **$12,189** | **+38.6%** | Accounts Receivable by Segment | Segment | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :---------------- | :-------------------------- | :-------------------------- | :----- | | Security Products | $12,149 | $12,933 | +$784 | | Marine Components | $2,034 | $4,051 | +$2,017 | | Total | $14,113 | $16,914 | +$2,801 | Inventory by Type | Inventory Type | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :--------------- | :-------------------------- | :-------------------------- | :----- | | Raw materials | $5,652 | $5,773 | +$121 | | Work-in-process | $17,638 | $22,213 | +$4,575 | | Finished goods | $5,076 | $4,915 | -$161 | | Total | $28,366 | $32,901 | +$4,535 | - **Total accounts payable and accrued liabilities** decreased from **$15.0 million** at December 31, 2024, to **$13.4 million** at June 30, 2025, primarily due to a decrease in employee benefits[30](index=30&type=chunk) - The **One Big Beautiful Bill Act (OBBBA)** was signed into law on July 4, 2025, with no expected material impact on the company's tax provision[31](index=31&type=chunk) - The company is involved in various claims and disputes, but their disposition is not expected to have a **material adverse effect** on financial statements, operations, or liquidity[32](index=32&type=chunk) - The company has an unsecured revolving demand promissory note with Valhi, Inc. for up to **$25 million**, with an outstanding principal balance of **$8.9 million** at June 30, 2025[34](index=34&type=chunk) - New accounting pronouncements, **ASU 2023-09 (Income Taxes)** and **ASU No. 2024-03 (Reporting Comprehensive Income)**, effective for 2025 and 2027 Annual Reports respectively, are being evaluated for disclosure requirements[35](index=35&type=chunk)[36](index=36&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=13&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results, covering performance drivers, segment results, outlook, liquidity, capital resources, and forward-looking statements [Business Overview](index=13&type=section&id=Business%20Overview) - **CompX International Inc.** is a leading manufacturer of engineered components, operating through **Security Products** and **Marine Components** segments[38](index=38&type=chunk) - The **Security Products segment** manufactures mechanical and electrical cabinet locks for postal, recreational transportation, office furniture, cabinetry, tool storage, and healthcare applications[38](index=38&type=chunk) - The **Marine Components segment** produces wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs, and related hardware for recreational marine and other industries[38](index=38&type=chunk) [General (Forward-Looking Statements & Risks)](index=13&type=section&id=General) - The report contains **forward-looking statements** involving substantial risks and uncertainties that could cause actual future results to differ materially from expectations[39](index=39&type=chunk) - Key risk factors include future supply and demand, changes in raw material and operating costs, price and product competition, new product development, litigation, intellectual property, environmental matters, tax audits, government regulations, global economic and political conditions, and operating interruptions[39](index=39&type=chunk) [Operating Income Overview](index=15&type=section&id=Operating%20Income%20Overview) - **Operating income** increased to **$6.3 million** in Q2 2025 (from $5.1 million in Q2 2024) and to **$12.2 million** for H1 2025 (from $8.8 million in H1 2024)[42](index=42&type=chunk) - The increase in operating income was primarily due to **higher sales and gross margin** in both the Security Products and Marine Components segments[42](index=42&type=chunk) [Results of Operations (Consolidated)](index=15&type=section&id=Results%20of%20Operations%20(Consolidated)) - **Net sales** increased by **$4.5 million** in Q2 2025 and **$6.8 million** in H1 2025, driven by higher sales in government security (Security Products) and government and towboat markets (Marine Components)[44](index=44&type=chunk) - **Cost of sales as a percentage of sales** improved by **0.8%** in Q2 2025 and **2.9%** in H1 2025, increasing gross margin percentage, primarily due to higher Marine Components gross margin[47](index=47&type=chunk) - **Operating costs and expenses** increased by **$0.5 million** in Q2 2025 and **$0.8 million** in H1 2025, mainly due to higher employee-related costs, but decreased as a percentage of net sales due to higher sales coverage[48](index=48&type=chunk) - **Interest income** decreased by **$0.4 million** in Q2 2025 and **$0.8 million** in H1 2025, primarily due to lower average interest rates and decreased cash balances[50](index=50&type=chunk) [Segment Results](index=17&type=section&id=Segment%20Results) [Security Products Segment](index=17&type=section&id=Security%20Products%20Segment) | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | YoY Change (6 Months) (%) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net sales | $28,213 | $30,683 | +9% | $58,100 | $60,913 | +5% | | Gross margin | $8,952 | $9,554 | +7% | $17,724 | $18,552 | +5% | | Operating income | $5,442 | $5,768 | +6% | $10,892 | $11,289 | +4% | | Gross margin % | 31.7% | 31.1% | -0.6 pp | 30.5% | 30.5% | 0.0 pp | | Operating income margin % | 19.3% | 18.8% | -0.5 pp | 18.7% | 18.5% | -0.2 pp | - The increase in Q2 2025 sales was primarily driven by **$3.3 million higher sales** to the government security market and **$0.5 million** to the healthcare market, partially offset by declines in transportation, tool storage, and distributors[53](index=53&type=chunk) - **Gross margin and operating income percentages** decreased slightly in Q2 2025 due to higher employee-related costs, despite increased fixed cost coverage from higher sales[55](index=55&type=chunk) [Marine Components Segment](index=19&type=section&id=Marine%20Components%20Segment) | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | YoY Change (3 Months) (%) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | YoY Change (6 Months) (%) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net sales | $7,674 | $9,683 | +26% | $15,758 | $19,725 | +25% | | Gross margin | $2,213 | $3,336 | +51% | $3,108 | $6,501 | +109% | | Operating income | $1,387 | $2,394 | +73% | $1,421 | $4,635 | +226% | | Gross margin % | 28.8% | 34.5% | +5.7 pp | 19.7% | 33.0% | +13.3 pp | | Operating income margin % | 18.1% | 24.7% | +6.6 pp | 9.0% | 23.5% | +14.5 pp | - The increase in Q2 2025 sales was primarily due to **$1.3 million higher sales** to the government market and **$0.6 million** to the towboat market[56](index=56&type=chunk) - **Gross margin percentage** increased due to increased coverage of fixed costs from higher sales and a more favorable customer and product mix[57](index=57&type=chunk) [Outlook](index=19&type=section&id=Outlook) - **Sales for the first half of 2025** reflect continued robust demand across both segments, surpassing prior year sales[58](index=58&type=chunk) - **Security Products net sales** are expected to improve in 2025 due to government security and healthcare markets, but gross margin and operating income percentages will be challenged by higher raw material costs and tariff-related surcharges[59](index=59&type=chunk) - **Marine Components net sales** are expected to increase in 2025, predominantly due to higher sales to the government and industrial markets, leading to improved gross margins and operating income percentages[59](index=59&type=chunk) - **Raw material price increases** and tariff-related surcharges on electronic components from Asia continued through H1 2025, with the company working to increase selling prices to offset these costs[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) - **Net cash provided by operating activities** decreased by **$6.9 million** for H1 2025 compared to H1 2024, primarily due to a **$10.7 million increase** in net cash used by changes in inventories, receivables, prepaids, payables, and non-tax accruals[64](index=64&type=chunk)[67](index=67&type=chunk) - **Days Sales Outstanding (DSO)** increased from **33 days** (Dec 31, 2024) to **38 days** (Jun 30, 2025), and **Days in Inventory (DII)** increased from **94 days** (Dec 31, 2024) to **109 days** (Jun 30, 2025)[65](index=65&type=chunk)[66](index=66&type=chunk) - **Capital expenditures** were **$2.2 million** in H1 2025, up from **$0.7 million** in H1 2024, with no proceeds from marketable securities maturities in H1 2025 compared to **$24.0 million** in H1 2024[69](index=69&type=chunk)[70](index=70&type=chunk) - The company paid aggregate quarterly dividends of **$0.60 per share** in H1 2025 and H1 2024, and a **special dividend of $1.00 per share** was declared in August 2025[71](index=71&type=chunk) - Management believes cash from operations, cash on hand, and external financing will be sufficient to meet liquidity needs for the next 12 months and five years, with expected capital expenditures of approximately **$3.4 million** for 2025[74](index=74&type=chunk)[75](index=75&type=chunk) [Commitments and Contingencies](index=23&type=section&id=Commitments%20and%20Contingencies%20(MD%26A)) - The company is subject to certain commitments and contingencies, as described in its 2024 Annual Report and Note 7 to the Condensed Consolidated Financial Statements[77](index=77&type=chunk) [Recent Accounting Pronouncements](index=25&type=section&id=Recent%20Accounting%20Pronouncements%20(MD%26A)) - Refer to Note 10 to the Condensed Consolidated Financial Statements for information on recent accounting pronouncements[79](index=79&type=chunk) [Critical Accounting Policies](index=25&type=section&id=Critical%20Accounting%20Policies) - There have been no changes in the company's critical accounting policies during the first six months of 2025[80](index=80&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risks from interest rate and raw material price changes, noting no material changes since the 2024 Annual Report - The company is exposed to market risk from changes in **interest rates** and **raw material prices**[81](index=81&type=chunk) - There have been no material changes in these market risks since the 2024 Annual Report[81](index=81&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and internal control over financial reporting, confirming effectiveness and no material changes during Q2 2025 [Evaluation of Disclosure Controls and Procedures](index=25&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, with CEO and CFO participation, concluded the company's **disclosure controls and procedures were effective** as of June 30, 2025[82](index=82&type=chunk) [Internal Control Over Financial Reporting](index=25&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) - There have been **no material changes** in the company's internal control over financial reporting during the quarter ended June 30, 2025[84](index=84&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to previous disclosures on legal proceedings, indicating no new material information for this quarterly filing - Refer to Note 7 to the Condensed Consolidated Financial Statements and the 2024 Annual Report for descriptions of certain legal proceedings[87](index=87&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the company's 2024 Annual Report for a comprehensive discussion of business risk factors - Reference is made to the 2024 Annual Report for a discussion of risk factors related to the company's businesses[88](index=88&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including various certifications and Inline XBRL documents - The exhibits include **Certifications (31.1, 31.2, 32.1)** and **Inline XBRL documents** (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[89](index=89&type=chunk)