Core View - United-Guardian's second-quarter 2025 results indicate a challenging sales environment, particularly in the cosmetic ingredient segment, while showing resilience in pharmaceuticals and medical lubricants [11] Financial Performance - For Q2 2025, net sales were $2.84 million, a decrease of 16.3% from $3.39 million in Q2 2024 [2] - Net income fell 34.5% year-over-year to $626,826, or 14 cents per share, down from $956,225, or 21 cents per share [2] - On a six-month basis, net sales declined 20% to $5.32 million from $6.65 million, and net income slid 36.9% to $1.19 million, or 26 cents per share, from $1.88 million, or 41 cents per share [2] Cost and Expenses - Cost of sales as a percentage of net sales increased to 47% in Q2 2025 from 46% in the previous year [3] - Operating expenses rose 15.1% to $694,050, driven by higher marketing and selling costs [3] - Research and development expenses decreased slightly by 3.4% to $107,868 [3] Sales Performance by Product Category - Pharmaceuticals sales grew 11%, and medical lubricants rose 12% in the first half of 2025 [4] - Cosmetic ingredient sales dropped significantly due to reduced orders from the largest distributor, Ashland Specialty Ingredients, attributed to inventory overstock and softer demand in Asia [4] Management Insights - Management expressed optimism about resolving ASI's inventory issue to restore growth in the cosmetic segment [5] - The company is pursuing a strategic initiative to expand Renacidin's inclusion in drug formularies, which is expected to boost sales in the coming years [5] Factors Influencing Revenue - The year-over-year revenue decline was primarily due to weakness in cosmetic ingredient sales, which outweighed gains in pharmaceuticals and medical lubricants [6] - Higher marketing and selling costs contributed to rising operating expenses, impacting margins alongside the lower sales base [6] Future Outlook - Management anticipates a rebound in cosmetic ingredient sales in the second half of the year, contingent on resolving ASI's inventory overhang [8] - Long-term growth prospects may be supported by the expansion of Renacidin's formulary inclusion, dependent on successful execution of current initiatives [8] Other Developments - No acquisitions, divestitures, or major restructuring activities were disclosed in the quarter [10] - The company's dividend policy remained intact, reflecting continued capital return to shareholders despite profit pressures [10] - Management reaffirmed that its cash position and working capital are sufficient to meet operational needs and support strategic projects over the next 12 months [10]

Ethical Sourcing & Child Labor in Cosmetics - The beauty industry faces scrutiny regarding ethical trade practices, particularly child labor in sourcing cosmetic ingredients [4] - UNICEF reports 138 million children globally are engaged in detrimental labor [6] - The United Nations calls for the end of child labor in all forms by this year (2024) [6] - World Vision's "High Price of Beauty" report (2023) found millions of children work to produce ingredients for cosmetics [3] Company Initiatives & Partnerships - Sable Labs partners with World Vision to address child labor in cosmetic ingredient sourcing, focusing on traceability and responsible sourcing [2][3] - Sable Labs aims to source ingredients responsibly and traceably, supporting rural communities [3] - World Vision collaborates with women's cooperative groups and fair trade projects to promote ethical cosmetic trade [4] Consumer & Company Responsibility - Consumers are encouraged to inquire about brands' supply chains and ingredient sourcing [7][9][10] - Companies have a responsibility to ensure their supply chains are responsibly sourced [8] - Consumers should look for information on company websites and sourcing statements, particularly for common ingredients like mica, shea, and cocoa [9][10] Obstacles to Ending Child Labor - Farmers facing unfair wages or quota pressure may resort to child labor due to financial constraints [5] - Lack of access to education contributes to the problem of child labor [6]

Core Insights - United-Guardian, Inc. reported a decline in both net sales and net income for the first quarter of 2025, with net sales at $2.48 million, down 24% from $3.25 million year-over-year, and net income falling 39% to $560,895 or 12 cents per share from $925,442 or 20 cents per share [2][6] Business Segment Performance - The cosmetic ingredients segment experienced a significant decline, with sales dropping 63% year-over-year to $698,998 from $1.88 million, primarily due to a 74% reduction in orders from its largest distributor, Ashland Specialty Ingredients [3] - Pharmaceutical sales rebounded, with net sales increasing 23% to $1.17 million from $950,323 in the previous year, driven by the normalization of Renacidin supply, which saw gross sales rise 38% year-over-year to $1.23 million [4] - Medical lubricant sales grew 43% year-over-year to $613,671, benefiting from increased demand in India and China, making it the strongest performing segment [5] Management Commentary - The company's president acknowledged the challenging start to the year, attributing revenue shortfalls to the cosmetic ingredient business but highlighted the strength in medical lubricants and pharmaceuticals as positive signs [6] - Concerns were raised regarding evolving trade policies and tariffs by the U.S. government, which could introduce uncertainty for product lines tied to China markets, although the company is monitoring these risks [7] Financial Metrics - Cost of sales decreased to $1.12 million from $1.56 million year-over-year, improving as a percentage of revenues to 45% from 48% [8] - Operating expenses rose 11% to $632,735 due to higher payroll and marketing costs, while research and development expenses also increased by 11% to $114,394 [8] - Investment income and gains on marketable securities fell to $97,037 from $139,569 a year earlier, attributed to lower interest income and reduced unrealized gains [9] Future Outlook - The company expressed confidence in its long-term strategy, particularly in product development and market expansion, with plans to begin manufacturing and sales of the Natrajel product in 2025 [10] - In February 2025, United-Guardian expanded its partnership with Azelis Group NV to include South Korea and broadened coverage in the U.K. and Ireland [11]