Flexible Solutions International (FSI) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Q1 2024 sales decreased by 6% to $9.2 million compared to$ 9.8 million in Q1 2023 [9] - Q1 2024 profit was $457,000, or$ 0.04 per share, compared to $884,000, or$ 0.07 per share, in Q1 2023 [9] - Operating cash flow for Q1 2024 was $1.34 million, or$ 0.11 per share, down from $1.73 million, or$ 0.14 per share, in Q1 2023 [38] Business Line Data and Key Metrics - NanoChem division (NCS) represents approximately 70% of FSI's revenue, focusing on TPA, SUN 27, and N Savr 30 products [14] - Food division sales were weak in Q1 but are expected to grow substantially for the full year 2024, with an increase of $1 million to$ 2 million in gross billings [16][30] - ENP division, focused on greenhouse, turf, and golf markets, is expected to see revenue growth in 2024, particularly in Q3 and Q4 [35] - Oil, gas, and industrial sales of TPA were stable in Q1 and are likely to continue through 2024 [36] Market Data and Key Metrics - Agricultural products in the US face resistance from growers due to crop prices not increasing at the rate of inflation, with most growth expected internationally through sales to the Florida LLC [7] - Florida LLC investment showed improved margins in Q1 and is expected to grow sales and profits in 2024, focusing on international markets [17] Company Strategy and Industry Competition - The company is focusing on increasing sales in existing businesses and expanding into the food industry to spread wage and base costs over more revenue dollars [19] - The company has streamlined operations by closing the Naperville R&D facility and moving operations to the Peru Illinois building, with exit costs mostly taken in Q1 [37] - The company is exploring new opportunities in the food and nutraceutical markets, with several products in development expected to generate revenue in 2024 [37] Management Commentary on Operating Environment and Future Outlook - Management expects growth to resume in sales, cash flow, and profit for the rest of 2024, with progress made in resolving issues from the previous year [37] - Shipping prices are stable but higher than pre-COVID levels, and raw material prices are stable and increasing with inflation [8] - Tariffs on raw materials imported from China since 2019 are negatively affecting costs, cash flow, and profits, with over $1 million in rebates still pending [18] Other Important Information - The company has adequate working capital and lines of credit with Stock Yards Bank for ENP and NCS subsidiaries [20] - The company acquired 80% of an LLC called 317 Mendota, which purchased a large building in Mendota, Illinois, with 240,000 square feet available for use or rental [38] Q&A Session Summary Question: What are the three most promising products in terms of improving profitability? - The top three products are: 1) the liquid stability agent made from polyaspartates, 2) a personal nutritional health product for a large company, and 3) a second product for the same company in the personal nutritional health field, likely vitamins [22] - Margins for these products are in the 35% to 45% range, which are considered excellent for the industry [23] Question: Why are accounts receivable up, and is there concern about collectability? - The increase in accounts receivable is likely due to a bolus of sales at the end of the quarter, with no concerns about collectability [27][28] Question: Any updates on the tariff rebate situation? - The company is determined to recover the rebates, even if legal action is required, but there is no timeline for when this might happen [29] Question: Can you provide more details on the expected growth in food product sales? - The company expects an increase of$ 1 million to $2 million in gross billings for the food product compared to last year [30]