Gregory Kitt

Gregory Kitt asked for clarification on the $9.4 million in Q4 2025 wins versus the previously announced $10+ million annualized revenue win, and if the $7.1 million from the new customer program has potential to grow. He also questioned the contribution of 2025 wins to last year's results, the rationale behind investing in capability expansion given underutilized assets, and whether Q4 2025 gross margin performance altered future margin targets. Additionally, he inquired about the materiality of a litigation settlement in SG&A and the company's capital allocation strategy, including share repurchases versus M&A.

Answer

CEO Bryan Kitchen clarified that the $9.4 million represents Q4 wins based on firm purchase orders, with $7.1 million from the new customer program, and confirmed the $7.1 million has potential to grow to $10 million. He took an action item to follow up on the 2025 wins' contribution. Bryan Kitchen explained that capability expansion involves revitalizing existing assets (e.g., storage tanks, rail capability) to support new business, not adding new capacity. CFO Ryan Kavalauskas stated that Q4 2025 gross margin compression was due to one-time items (over $0.5 million) and a mix shift towards higher volume, lower margin wins, not structural issues, and reiterated long-term targets of +30%. Ryan Kavalauskas noted the litigation settlement was a little over $200,000. For capital allocation, he prioritized reinvestments in assets, opportunistic share buybacks when the stock was attractive, and M&A for product lines that enhance utilization, rather than distressed assets.

Gregory Kitt from Pinnacle sought clarification on the $9.4 million of new business wins in Q4 2025 versus the previously announced $10 million+ program, and how much of the total 2025 wins contributed to last year's results. He also questioned the decision to invest in capability expansion given existing asset underutilization, the factors behind the Q4 gross margin decline, and the impact of a litigation settlement on SG&A. Finally, Mr. Kitt asked about Ascent's capital allocation priorities, including share repurchases and M&A strategy.

Answer

CEO Bryan Kitchen clarified that the $9.4 million in Q4 wins represents firm purchase orders, with $7.1 million from the new customer program, which has potential to grow beyond $10 million. He noted that some of the $10 million program's revenue would bleed into Q1 2026. Mr. Kitchen explained that investments were for 'capability' expansion (e.g., reactivating old storage tanks, restoring rail access) to support new business, not adding new 'capacity' like reactors. CFO Ryan Kavalauskas attributed the Q4 gross margin decline to mix shift towards higher volume, lower margin wins, and some one-time inventory adjustments, stating it was not structural. He quantified the litigation settlement at just over $200,000. Mr. Kavalauskas outlined capital allocation priorities as reinvesting in assets and people first, opportunistic share buybacks when the price is right, and M&A only for attractive product lines or assets that don't compound existing underutilization.