Q3 2025 Flexible Solutions International Inc Earnings Call
EMT represents most of our other Revenue.
EMP is focused on sales into the greenhouse, turf, and golf markets.
We experience strong revenue in Q3, which we estimate will continue in Q4.
First half 2026 will likely have higher Revenue than first half 25.
But followed by strong sales in the second half of 2026 leading to year-over-year growth.
The Florida, LLC investment.
The LLC had a small loss in Q3 the companies focused on International agriculture sales into multiple countries.
Its management has advised us that they estimate a return to growth in 2026, which should translate into increased revenue for FSI.
International markets. Like the US market are stressed.
So we expect the growth rate to be low.
Agricultural products in the United States. Remain Under Pressure. Prop prices are still not increasing at the rate of inflation.
And extreme uncertainty is present due to tariff changes.
Growers are facing a conflict between Rising costs and low crop prices, aggravated by political actions.
In some cases sales have been lost for the whole season.
As a result, we saw weakness in Q3, which we expect to continue in Q4 and on into the start of 2026.
The Arabs.
The current tariff on all our imports of raw materials from China into the United States is between 30% and $58.5 million.
We will be careful not to import materials unless destined for us—customers who are certain to purchase and are aware that increased tariffs will be added to their invoices.
We've not managed our transition to Panama's Perfection and we've had to import some raw materials into the US and Q3
some of this tariff costs will be passed on to customers. Some will qualify for the rebate program and some reduced, our Q3 margins.
The Panama Factory for international sales.
We've nearly completed a duplicate Agriculture and polymer Factory in the country of Panama that will be capable of producing, nearly all the products we sell to International customers.
We estimate that the first production from this factory could begin in Q4 2025.
All of the equipment has arrived raw. Material inventory, inventory is on hand leasehold improvements are complete.
And Equipment installation is close to finished. The remaining hurdles is obtaining an occupancy permit from the Panamanian government which could slow startup.
Capex and expenses to develop the new plant have been funded by cash flow and retained earnings. There will be no need for debt or equity financing.
Once operational, nearly all our product for international sales will be made in Panama using raw material sourced without the US tariffs.
There will also be shipping advantages. The new plan is 30 minutes from the port inbound raw materials, and outbound finished. Goods will not have to be shipped across the United States to and from Illinois.
For our International customers. Delivery times will be shortened by many days.
Reduced shipping time and no exposure to us. Tariffs on international sales could allow us to increase sales to existing customers and obtain new customers over the next two years.
We're already providing quotes for potential Q1 delivery.
Moving most Agriculture and polymer production to Panama free space at the Illinois plant. So that food grade production in the United States can be optimized and expanded substantially, as more us customers are found
Shipping and inventory.
Shipping prices are stable, and shipping times are reasonable on the roots. We use.
raw material prices.
They are stable, but they're increasing in line with inflation.
Highlights of the financial results.
Sales for the quarter were up 13% compared to Q3 2024, reaching $10.56 million versus $9.31 million.
Profits.
Q3 recorded a loss of $503,000 or 4 cents a share, compared to a gain of $612,000 or 5 cents a share in Q3 2024.
Many costs incurred to prepare for the potential new revenue, from the food grade contracts announced in January and August.
Negatively affected Q3 profits because they're being expensed as they occur.
Some costs for the Panama factory, also to be expanded quarter by quarter. This will continue.
In Q4 for Panama.
And Q4 for food products, but at a lower level.
We've done our best to maintain profitability as we built the new Factory and repurposed the existing 1 for the new revenue streams and food products.
Unfortunately, we did not manage it in Q3 and we are uncertain about Q4 because we don't know exactly when Panama will start or when revenue from the August contract will exceed costs.
In Q1 2026, we do expect profits to revert to past levels and increase as our food product revenue grows.
Operating cash flow is a non-GAAP number useful to show our progress, especially with non-cash items removed for clarity. For the 9 months of 2025, it was $4.26 million, or $0.34 a share.
Down from 5.91 million or 47 cents. A share in 24.
Cash flow has been reduced by the same costs as noted for profits, and it's expected to rebound in Q1 26.
Long-term debt.
We continue to pay down our long-term debt, according to the terms of the loans,
The loan we used to buy our ENT division was paid in full in June of this year. Our 3-year note for equipment will be fully paid in December 2025.
This will free up over $2 million in cash flow per year for other purposes.
Working capital is adequate for all our purposes. We have lines of credit with Stockyards Bank, for the INTP and NCS subsidiaries.
We're confident that we can execute our plans with our existing capital and without resorting to any Equity actions.
The text of this speech will be available as an 8K filing on www.sec.gov.
By Wednesday November 19th.
Email copies can be requested from Jason Blum at jason@flexiblesolutions.com.
Thank you. The floor is open for questions. And Paul. Will you make that happen, please?
At this time, we will open the question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad and you'll be placed into the queue in order to receive
You may remove yourself from the queue at any time by pressing pound and 1.
Once again, to ask a question, please press star and 1 on your phone now.
And we'll take our first question from Tim Clarkson of Van Clements capital.
Hey, uh, great quarter. Um,
You know, in terms of getting ready for the, the new business obviously, losses are never good. So I was, I was wondering, um, you know, when you talk about the the margins being somewhat lower than nutritional business, 22 to 25%. Are those gross margins are net margins.
Those are the uh our expectation for uh gross margin before tax. So, okay,
So what, what, what kind of a, what kind of a, a net number after, everything. You think you'll make on this business would be more like 5% or 10% or 15%.
Well, it's, uh, let's just take the bottom end. Our 20% anticipated growth before tax in Illinois, we pay roughly 31% tax rates. So, 20 times 0.69 is around 14%.
Okay. Well, those are still good margins. Now, you mentioned on on the, on the first food additive product, uh, the wine product. It's it's, it's kind of a, a preservative. What, what's the functionality on these food food products? If you can say,
um, I'm actually not allowed to say by contract, on either of the food, uh, either the food contracts, the, uh, the companies involved really want to keep, uh,
There themselves secret. So I I'm sorry about that.
It makes the customer happy. Okay.
Yeah. Well, I'm I'm guessing it would be, you know, either a preservative or a a taste kind of a thing, would probably be what, what it would impact now. Are these, are these
chemicals, brand new chemicals or these chemicals that you guys have have some some Legacy with
We have no legacy, but the chemicals are not new to the industry. We've been targeted as a supplier because of our quality and our willingness to work with the customers. So, this is an existing technology and, um,
There aren't going to be any like, health concerns or areas of that, uh, worried.
Did you, did you have some personal relationships with these comp with these guys? Or, or, or or, or how did how did the, uh,
The relationships actually develop.
um, we developed personal relationships based on on, um,
Meetings. One of them, uh, the one I can talk about openly, was a meeting at a trade show. So.
We we go about tell people that that you know, our second name is is Solutions, and do they have any problems? And eventually, we find people with a problem either, um, Quality cost performance location. Um,
And we solve their problem and we give them a solution and we get a contract.
Okay, well, great. Well, I appreciate it. Uh, great results. We'll stay in touch.
Thank you, Tim.
And our next question comes from David, March, March of singular research.
Hey, thanks for taking the questions again. Um,
Just wanted to touch uh touch on the the new contracts. I I wasn't following the entirely. It sounded like you've begun realizing revenue on 1 but the there's a second 1 that you have not yet. Begun realizing Revenue you are anticipating.
Recognizing revenue on that in the fourth quarter. Is that correct?
Yes. Um, maybe this is a great chance to explain how, um,
The time frames make this a confusing situation.
Sure.
We, we obtained a contract in January.
That we are not going to be able to begin providing product and getting revenue until late in Q4, because we have to install all the equipment and the clean room.
Then we got a second contract in August that we actually had all the equipment and clean room for, so we were able to get the second contractor running before the first one was ready to go. That's why it's as confusing as can be. Um, have I explained that adequately?
Yeah, no, that's very helpful. Are you expecting to be able to recognize revenue on that January contract in the fourth quarter? Or is it possibly going to slide into Q1 just with getting a clean room ready and everything?
We think that Q4 is possible, we know that q1 is for sure. Um,
Like Christmas.
Breaks that cause us to slide into Cube Q1, but it is that close. So, uh, no guarantees, uh, for Q4, uh, definite guarantees for revenue in Q1 2026.
Got it. Um, and are you providing any guidance for Q4 at this time? Or are you just gonna
Hold off for now, just because of the uncertainty around that second contract.
Yeah, uh, Dave, we almost never provide guidance, uh, unless it's about a specific item, um, because we've been wrong in both directions so many times when we did it in the past that we feel it's we're too small.
Too Nimble for our own good. And, uh, we just can't give guidance that we feel as Val valid. So we don't give it.
Yeah, I understand. Um, let me ask 1 another question around the top line if I could, um, when when all 3 of the contracts, the January, the August contract and then the ongoing wine contract are, you know, running and hitting on all cylinders. What do you think that the Run rate? Uh,
you know, annual revenue for those 3 contracts is going to look like
When when and if now let's say if because I it's up to the customers. But if we get all the business from the customers,
Uh, that they believe they have to for us to earn.
Its.
The total is between 50 million and 60 million, and the time at which we would hit that run rate would be in 2027, not 2026.
Perfect. Okay, understood. Hey, thanks very much. I appreciate you taking my questions. Have a great rest of the day.
Thanks Dave.
All right. Next question comes from Greg Hilman, an investor.
Uh yeah. Hi Dan.
Um,
Yeah, two things. Going back to one of your older products, you know, the water saver. I was looking at a PowerPoint recently where you were talking about the water saver.
Yeah, saving up to like 40%.
Of evaporation, you know, for like reservoirs and lakes. And I thought in some of your prior information that you put out, it was only like 20% savings. Did that product improve?
Over time.
No, um 40% is the the largest that's possible. Um, it is a biodegradable product, it's typically uh in a set of good conditions you'll see 40% evaporation control on day 1 uh Day 2. It's likely to drop uh into the 20s and day 3 into the 10 to 15 to 20 range um and then taper off rather rapidly unless it's reused. Um,
So the PowerPoint shows the best of the available situation; the average situation might be in the 20% range. The greater problem with that product is how to sell it to people, who A) can't see it because it is an invisible transparent layer, and B) are...
in bureaucratic situations, where
Uh, continuous proof of function.
Um, and if it's already on the reservoir and you've already tested it but you can't keep track of it on a day-to-day basis, it's an extraordinarily hard sell. Um, I often tell people...
Bring me a partner.
who has satellite technology to show the
Actually, the evaporation rate off all surfaces all the time, and that's how we will condense the governments of the world. Until then, we're definitely going to have difficulties, um.
Selling to governments. We are successfully selling to oil field companies who know how much water they have for things like, um,
um, um,
Uh, they know how much the water is worth, and they, they'll spend to, to save the, uh, evaporation. So it's a, it's a difficult problem. And a difficult product is certainly why we've taken emphasis off of it?
Okay. And, uh, switching to, uh, your food. Great aspartic acid with these new contracts, uh, can any other, uh,
Substance, uh, do, uh, similar function like, uh, I don't know, acrylic acid, or I don't know if acrylic acid is used for food at all, but, you know, some other product.
There are alternative systems. Um, uh,
1 uses a cellulose, um,
Filtration program. Now, there's another one that uses, um, uh,
um,
Acrylic acid columns, not to add the acrylic acid directly to the wine but AC acrylic acid, uh,
um,
ionic columns.
The problem with that, and also the best alternative, is chilling the wine all the way down to, I believe, minus 3 degrees Celsius and holding it for several days.
All of these methodologies are
more expensive than using a poly aspartate solution, and as you guessed, uh, a polyacrylate solution is not allowed for, uh, for food in several countries and
uh,
In the wine industry, because things get shipped everywhere, it's not approved for food in any country. It's not going to be used by winemakers.
Okay.
Okay, that that's fine. And then um you know in your recent you know press release about you had a deal that you called off and you gave the terms of um
I was wondering how much time you have been spending on that deal over the past 12 months?
Um,
Well, it was a 5-month process. Um,
I would say I put a couple of hours a day in. Uh, so did our Operations Manager.
It never reached the stage of, um,
Documentation and full due diligence. So,
we came to a, a
A dead end before the major amount of the uh, work had been done. We did, uh, set up uh, financing subject to due diligence. But again, these are things that uh, didn't consume a large amount of my time, uh, or the corporate time, uh,
Sad. It didn't go through. It was extremely synergistic and uh, we were
Still close to the end. We thought it was working. So, uh, yeah, sad about that.
But you, you never inspected their books, right?
Oh yeah. I saw their financials.
Okay, you did.
Okay. Fine. And also in regards to future deals, uh,
Do you have a pipeline of future uh you know deals so you're looking at or are you were working with an investment banker?
We do not have an investment banker under contract looking for deals. We would only, um, consider deals that we found ourselves, or that were accidentally, um, referred to us, uh, too hard with an investment banker. Uh, they want to get paid, so they find you all sorts of stuff. And then you have to just keep saying, no, um,
uh, as to your question about a pipeline, uh, we are always looking, uh, we don't have a pipeline at the moment, but, um,
That can change momentarily as well. And it I, I would really would not uh, want to call it a pipeline even if it did change, let's just say, we take it each Target singularly and and uh, move through it because, um,
It's got to get through some pretty severe screens before we even look at it.
Okay. Thanks. Dan.
Take care.
And our next question comes from William Grow Groski of Greenbridge Capital.
Hey Dan, uh I've got a couple questions for you.
In regards to the more one-time expenses you mentioned in the third quarter from Panama and the food products, can you give an idea of how much of an impact that was on the expense line in the third quarter?
um, you know, Bill if
I'd really.
Giving, giving, uh, numbers like that over the phone is not how I'd like to do it, but I'd be happy to give you, uh, after talking to our controller, a reasonable number by email. Um, I could tell you two things. Um, you'll notice that our agriculture, uh, traditional, uh, row crop agriculture was pretty weak in Q3, including weakness in the LLC out of Florida. Um, what that did was it? Um,
It weakens our financials and you'll notice that our ENT division did a great job. Uh, it sells into the part of the agriculture Market that is still vibrant the, uh, Turf for people to send their kids to play soccer on or football. Um, uh, ornamentals to keep their houses looking great and golf courses, uh, so that the golf courses are green and wonderful. Um,
So, agriculture has become bifurcated. Um,
We're all interested in growing in the areas that are, uh, vibrant. And we're not going to, uh, put large amounts of effort and capital into growing the areas that are not vibrant until.
Uh, the cycle comes round and, uh, crop agriculture becomes important again.
So, that was that split between our...
Uh, EMP division, which we only show 65% of the profits from, and our row crop division where we get 100% of the profits, but had weakness that was a big effect on Q3. And um,
Just for the actual numbers. I'd really like to take that to, uh, an email stream and get you things that are not just off. The top of my head. Does that seem fair?
Yep. Yep. No that's totally fine. Um and then with with the the ENT and how strong that was because that was a heck of a quarter and you mentioned expecting similar numbers in the fourth quarter is that kind of a trend that you guys are focusing on, you know, is this a good number for like a Q3 because obviously, it's somewhat
Um, you know, it's not stable every quarter, but is this kind of a good base going forward? Do you think?
I think that would be a, a good strong Q3 Q4. Um, we're working through the um, early buy from the customer base and I don't think it's going to be a barn burner like Q3 was, um,
It's going to be quite strong. And I think that...
That's the way to look at that division going forward. It's going to have...
a much stronger second half than first half, and that's because our customer base is transitioning to a much
More early buy-oriented, um, system in there. So if the customers are tilting their, um, their sales towards Q3 and Q4, it automatically...
Tilts our sales towards Q3 and Q4. So, um,
Rather than saying, "Hey, we're going to just keep doing these same numbers," I think what I'd like to say to you is that the second half is always going to be stronger than the first half, and that's when we will show our growth for the year.
Okay.
Um, on the kind of the core nanochem product lines or previous ones, you know, excluding food, um, is there because that was down quite a bit in the third quarter.
Is there any hope for, I mean, you talked about egg quite a bit already. But is there any hope that oil or any other industrial application will show growth?
In Q3. Or is this going to be just kind of a weaker segment for you guys until things turn around?
It's going to be very interesting to discover whether we are more competitive and...
As a result of being in Panama, um, and if we are, uh, and our historic customer base recognizes that.
um,
We believe that it's possible that we'll get back. Um,
Uh, to historic numbers in oil. Uh,
It's a little difficult to tell. Um,
And I'd really like to get Panama operational and see not only whether the customers appreciate us and appreciate the quicker shipping and the, and the better service that we can do out of out of Panama. Um, but I'd also like to find out whether that is actually the best use of our Panamanian uh, production while we're spooling up, it may be that other product lines in the agriculture World. Um, are
More profitable and growth is easier to come by. So you've seen us for, I guess you've known me for 22 or 23 years now. Um, we are pretty opportunistic. We go where.
Where we're appreciated and we try not to, uh, continue down paths that are not working properly, so it's it's going to be up in the air until we know uh what the what the customer base thinks of our Panama, uh changes.
Okay, and the last question I have is: can you talk a little bit about the reason for the Mandoa facility sale and leaseback? And then, will you ever move your ENP production to Peru, or will that just stay?
Outside of Peru and Peru, just focus on the food products.
Okay. Well, the first part of the second part of the question is easy, uh, Peru is going to be food products. Um, it will expand and food products. It won't do anything other than food products except accidentally, um,
Mandoa. Uh, we sold it because it was not Central. Uh, we got a lease back, uh, for 60,000 roughly of the, uh, 240,000 square feet. We removed the risk of expensive repairs to buildings that we were uh, hadn't been able to, at least yet. Uh,
We have a new landlord who's going to have that responsibility?
And we now have a single spot where EMP can do all the business and grow as needed with us, without us having to take on the responsibilities and risks of being a landlord.
So, uh, that was a very specific choice.
In order to limit risk and allow us to use our available bandwidth for things that we think are going to work a lot better than being a landlord in Mandoa.
All right. Sounds good. Thanks. Dan.
Thanks Bill.
As a reminder, if you would like to ask a question, please press * and 1 on your phone now.
And our next question comes from Manny Stoupakis of Geo Investments.
Hey guys, thanks uh, for taking the questions. Just have a couple of want to get through. Can you first touch on how much were the 1-time costs associated with the contract ramp and, and the Panama moving Q3,
Well, you see that's not a number that I have in my, uh, in my, um, in my brain.
For a phone call. But, uh, we happily will. Again, we're going to be doing it for Bill Gregg's associates. Uh, we'll happily respond to an email from that. I can tell you that, uh,
It was responsible for a very large percentage of the loss. Uh, if not all of the loss, so it was very significant. Uh, and you can imagine that starting a brand new Factory and rebuilding a another Factory in a in a food grade quality. In fact right up almost a drug grade quality, uh, it's not cheap. Uh, it's amazing. We've done as well as we have this year. I I got a compliment my, my team.
Uh, they’ve just done a fantastic job of making sure that we’re not spending money on anything we don’t need to.
What I heard you contract.
Pardon me. Oh, both margins. Both margins will be similar.
Okay. All right, and then I guess lastly and um I'm just just curious is there is there a possible data center angle for parts of your business?
None whatsoever. Not, not whatsoever. Okay, I just thought maybe with the energy conservation side of possible, but I just thought I would ask. All right, I appreciate you taking the question. No.
No, but hey, uh, is that something that, uh, if you want to help the company, uh, data centers, use energy energy, often needs water, water evaporates. If it's left out in the open, we don't have any connections, but if someone gave us 1, we'd follow it, uh, and see if we could turn it into money.
All right. Well, we'll do that. My investment will reach out to you, and we'll talk on the side then.
Okay, perfect. Thank you.
All right, there you go. Thanks.
All right. Next question comes from Raymond how of cfp Inc.
Good morning, Dan.
Morning Raven.
Uh, my question has mostly been answered. It was about the 317 Mendota sale. What does the 60,000 square feet that you are leasing back involve? What gets produced there?
That produces all the ENT products that result in the EMT revenue that we show. Um,
In the, in the financials. So of the roughly I I think it's roughly the, we're expecting somewhere around.
13 to 15 million this year, out of EMP, that 60,000 ft produces those 13 to 15 million dollars.
Gotcha. And, uh, so that portion of the business there, and then food products in Peru, correct?
Correct.
Right, right. Thank you.
Appreciate it Ramen.
Our next question comes from Greg, Hillman and investor.
Uh yeah Dan. Just another follow-up on INTP. Um,
You know, the products for the turf and the golf course are, um, any of those products, you know, biological in nature? You know, that increase the, uh,
Basically that affect the anarchic bacteria, aerobic, bacteria in the soil. You know, that in effect caused the roots to grow deeper
And speaking of roots, uh, how much deeper, uh, do your products cause the roots to grow, then not using anything.
Oh, my okay. Greg you, you, you you should be applying for my job.
And I know you're bored out there in New Jersey. So, um, uh,
Is it New Jersey? Never mind. If I'm wrong, I'm sorry, Pennsylvania. But no, no, no, no, no, no, big deal.
Okay, sorry about that. Uh, I I couldn't give you anything in centimeters. I could give you research the, uh, product. We'd we'd have to go to the email for that, um, and form a biological yet, but there are a couple of, uh, a couple of the products made by EMP have Biologicals in them, uh,
Also, some of them contain poly aspart, which has a huge amount of effect on root growth. We've got enormous amounts of data and photographs from our row crop business in that field. So, um,
The.
Many of the products from ENT. Um, and in fact, actually the the best research would be to, um, search foulure pack, f o l. I a r.
P a k, all 1 word, that's the trademark and, uh, there would be a huge amount of information on that. Um,
Regarding root growth durability and maintaining greenness in the turf, ornamental, and golf market.
it's
it's green. This is extremely valuable and the foulure pack. And other ENT uh products often aim at maintaining greenness along with keeping the turf durable.
and resistant to the abuses that it, you know, that it gets.
Was that helpful? Yeah, it's helpful and and just 1 or is any of the products being used on football fields, you know, like college or pro football fields?
Yes, absolutely.
Okay, great. Uh, well, that answers my question, at least for now. Okay, thanks, Ken.
Okay, thanks very much Greg.
And our next question comes from managers to practice of Joe Investments.
Hey guys, I just had 1 follow up question, regarding the gross margins on the the contract where where would you expect margins to be on new contracts moving forward?
Um we don't have anybody lined up. We as I mentioned, in my speech, we're looking for a new customers. Um, we'd be much happier in the 30-35% margin range. I don't know if we could get it, but that's where we're going to be aiming.
That's the target. Okay, all right, great. I appreciate it. Thank you.
Thank you.
And it appears that we have no further questions at this time. I will now turn the program back to our presenter for any closing, remarks.
Thanks Paul. Uh everybody, thank you. That was an interesting Q&A session. I enjoyed it very much looking forward to talking to you. Uh, next year when we uh, when we reconvene for the uh the full year financials. Thanks again for taking time to listen to this and uh, talk to you next year. Bye now.
Thank you. This does conclude today's Flexible Solutions International Inc.'s third quarter 2025 financials conference call.
Thank you for your participation. You may disconnect at any time.