Group 1: Investment Strategy - The combination of high free cash flow yield and dividends is a powerful investment strategy that has been proven over 30 years of data across multiple market cycles [2][26][27] - From 1990 to 2016, stocks in the top quintile for both dividend yield and free cash flow yield generated an annual excess return of 6.03% compared to the market [3][16] - High dividend yield stocks without free cash flow produced only a 0.10% excess return, while high free cash flow yield stocks without dividends achieved 3.57% [4][16] Group 2: Importance of Free Cash Flow - Free cash flow is a more reliable indicator than earnings, as it reflects actual cash available for dividends [8][10] - Companies that generate strong free cash flow but do not pay dividends often waste cash on unproductive projects, which can destroy shareholder value [9][10] - High free cash flow dividend payers have shown superior characteristics, including lower leverage and higher returns on equity [10][11] Group 3: Payout Ratios and Dividend Growth - The optimal payout ratio for dividends is around 40 to 50% of free cash flow, allowing for sustainable dividend growth [12][13] - Companies with a 40 to 50% payout ratio can maintain dividends during economic downturns, while those with higher ratios are at risk of cuts [15][21] - The Pacer Cash Cows Index, focusing on high free cash flow yield companies, has delivered annual dividend growth of 9.2% while maintaining a sustainable payout ratio [13][18] Group 4: Performance During Market Cycles - High free cash flow dividend payers recover faster from market downturns, averaging 15 months compared to 28 months for non-payers [11][22] - The S&P study from 1990 to 2017 found that the top quintile combining dividend yield and free cash flow yield outperformed 75% of the time [16] - During bear markets, this strategy provided meaningful downside protection, outperforming 50% of the time [16] Group 5: Company Examples - Archer-Daniels-Midland (ADM) has a dividend yield of 3.4% and a payout ratio of 24%, demonstrating stability and strong free cash flow generation [28][31] - HNI Corp. has a dividend yield of approximately 3.3% with a payout ratio of 43 to 45%, showing resilience despite market uncertainties [33][37] - OneSpan operates in digital security with a dividend yield of 4.03% and a low payout ratio under 8%, indicating strong cash flow and growth potential [39][41] - Luxfer Holdings has a dividend yield of approximately 4.3% and a payout ratio of 43%, focusing on high-performance materials with steady demand [45][48]

Financial Highlights - Adjusted Sales reached $92.9 million, a 1.6% increase compared to the prior-year third quarter[5] - Adjusted EBITDA was $13.6 million, up by 0.7% compared to the prior-year third quarter[5] - Adjusted EPS increased by 11.1% to $0.30[5] - Free Cash Flow stood at $10.3 million[5] - Net Debt was $37.3 million[5] Consolidated Results (Q3 2025 vs Q3 2024) - Adjusted Sales increased by 1.6% to $92.9 million[10] - Adjusted EBITDA increased by 0.7% to $13.6 million, with a margin of 14.6%[10] - Adjusted EPS increased by 11.1% to $0.30[10] Consolidated Results (YTD 2025 vs YTD 2024) - Adjusted Sales increased by 5.3% to $280.5 million[10] - Adjusted EBITDA increased by 8.1% to $38.9 million, with a margin of 13.9%[10] - Adjusted EPS increased by 18.6% to $0.83[10] Segment Performance - Elektron segment sales increased by 2.5% to $50.0 million, with an Adjusted EBITDA margin of 19.8%[16] - Gas Cylinders segment sales increased by 0.7% to $42.9 million[23] 2025 Raised Guidance - The company raised its full-year guidance for Adjusted EPS to $1.04 to $1.08 and Adjusted EBITDA to $50 million to $51 million[28]

Financial Data and Key Metrics Changes - Adjusted earnings per share increased to $0.23 from $0.20 year-over-year, with net debt maintained at approximately $42 million, reflecting a leverage ratio of 0.7x [5][9] - Sales revenues grew by 8.9% year-over-year to $90.5 million, with adjusted EBITDA rising 9.7% to $11.3 million, resulting in a 12.5% margin [9][10] - Cash generated from operations was $5.1 million, an increase of $1.5 million compared to the previous year [10] Business Line Data and Key Metrics Changes - The Electron segment saw sales rise to $49.4 million, up 31% from $37.7 million a year ago, with adjusted EBITDA increasing to $8.7 million and an EBITDA margin of 17.6% [11][12] - Gas cylinders revenue decreased by 9% to $41.1 million, with adjusted EBITDA at $2.6 million, reflecting a margin of 6.3% [15][16] - Specialty Industrial posted a notable 25% increase in revenue, driven by electronic and calibration gas applications [16] Market Data and Key Metrics Changes - Overall order books increased by 12%, indicating strong demand across various sectors, particularly in defense and aerospace [6][8] - Demand for flameless ration heaters and meals ready to eat products remained elevated, contributing to the positive outlook for the defense sector [28] Company Strategy and Development Direction - The planned divestiture of the Graphic Arts business is on track to close by mid-2025, allowing the company to focus on higher-margin growth opportunities [6][22] - The company is expanding its international gas solutions portfolio, highlighted by securing an order for its first bulk gas transportation system in Europe [6][19] - The Luxfer business system emphasizes innovation and efficiency, with a focus on customer needs and profitable growth [20][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic risks, including potential tariffs and supply chain issues [8][19] - The company reaffirmed its full-year 2025 guidance, expecting flat revenue growth and adjusted diluted earnings per share in the range of $0.95 to $1.05 [17][18] - Management remains attentive to foreign exchange volatility, which could impact earnings, and is prepared to adjust strategies accordingly [18] Other Important Information - The company is maintaining a share repurchase program with authorization for up to $10 million for opportunistic buybacks [31][32] - Capital expenditures are expected to increase to a range of $12 million to $15 million for the year, reflecting growth opportunities [32] Q&A Session Summary Question: Any special factors in the quarter and guidance outlook - Management noted strong performance in the defense market, particularly in sales of flameless ration heaters and UGRE products, contributing to a positive outlook for 2025 [27][28] Question: Strength in Specialty Industrials - The increase in Specialty Industrial gas cylinders is attributed to long-term trends in high-purity gases for electronics applications, indicating a growing market [29][30] Question: Capital allocation and buybacks - The company is considering opportunistic buybacks and plans to increase capital expenditures this year, with a focus on growth opportunities [31][32][33] Question: Sustainability of strong defense business performance - Management highlighted that the strong performance is driven by both the ramp-up of UGRE and elevated military stocking levels, indicating a positive trend [34]

Financial Performance - Adjusted sales reached $90.5 million, representing an 8.9% year-over-year increase[5, 9] - Adjusted EBITDA was $11.3 million, a 9.7% increase compared to the previous year[5, 9] - Adjusted EPS stood at $0.23, reflecting a 15% increase year-over-year[5, 9] - Net debt was maintained below $42 million, with a low leverage ratio of 0.7x[6] - Cash from operations increased by $1.5 million to $5.1 million[9] Segment Results - Elektron segment sales grew to $49.4 million, a 31% increase year-over-year, with an adjusted EBITDA of $8.7 million[15, 20] - Gas Cylinders segment sales were $41.1 million, a 9.5% decrease year-over-year, with an adjusted EBITDA of $2.6 million[26, 55] - Elektron segment achieved a 17.6% adjusted EBITDA margin[15] - Gas Cylinders segment experienced a margin compression, with adjusted EBITDA margin falling to 6.3%[26] Outlook and Strategy - The company reaffirmed its 2025 outlook, projecting adjusted EBITDA between $48 million and $52 million and adjusted EPS between $0.95 and $1.05[29] - The company anticipates interest expense of approximately $4 million, capital expenditures between $12 million and $15 million, and a tax rate of around 23%[31]

Financial Performance - Q4 2024 - Adjusted sales for Q4 2024 were $96 million[7], a 9.3% increase year-over-year[7] - Adjusted EBITDA for Q4 2024 was $13.8 million, with a margin of 14.4%[5, 7], a 45.3% increase year-over-year[7] - Adjusted EPS for Q4 2024 was $0.29[5, 7], a 61.1% increase year-over-year[7] - Free cash flow for Q4 2024 was $30 million[5, 7], a $15.9 million increase year-over-year[7] Financial Performance - Full Year 2024 - Adjusted sales for FY 2024 were $362.3 million[5, 11], a 3% decrease year-over-year[42] - Adjusted EBITDA for FY 2024 was $49.8 million, with a margin of 13.7%[5, 11], a 1.2% increase year-over-year[42] - Adjusted EPS for FY 2024 was $0.99[5, 11], a 2.1% increase year-over-year[42] - Free cash flow for FY 2024 was $47.7 million[11, 42], a $30.9 million increase year-over-year[42] Segment Performance - Elektron Q4 2024 sales were $47.5 million, a 31.6% increase year-over-year[12, 35], with an adjusted EBITDA of $9.4 million, a 213.3% increase year-over-year[12, 36] - Gas Cylinders Q4 2024 sales were $48.5 million, a 6.2% decrease year-over-year[17, 39], with an adjusted EBITDA of $4.4 million, a 32.3% decrease year-over-year[17, 40] 2025 Guidance - The company expects flat sales revenue[22] - Adjusted EBITDA is projected to be between $48 million and $52 million[22] - Free cash flow is expected to be between $20 million and $25 million[22] - Adjusted EPS is projected to be between $0.95 and $1.05[22]