Tim Clarkson

Tim Clarkson of Van Clemens Capital inquired about the expected gross and net margins for the new food-grade business, the specific functionality of the new food products, whether the chemicals involved are new or existing technology, and how the customer relationships were initially developed.

Answer

Daniel O'Brien, President, CEO, CFO, CAO, and a Director, clarified that the 22%-25% are anticipated gross margins before tax, translating to approximately 14% net after Illinois tax rates. He stated that contractually, the specific functionality of the new food products cannot be disclosed, but confirmed they are existing industry technologies, not new chemicals, and pose no health concerns. O'Brien explained that relationships are built through meetings and trade shows, where Flexible Solutions identifies and solves customer problems related to quality, cost, performance, or location.

Tim Clarkson inquired about the expected gross and net margins for Flexible Solutions International's new food additive contracts, the specific functionality of these new food products compared to the existing wine additive, and the origin and development of the relationships leading to these contracts.

Answer

President and CEO Daniel O'Brien clarified that the 22-25% margins are expected gross margins before tax, translating to approximately 14% net after Illinois taxes. He stated that contractually, the company cannot disclose the functionality of the new food products but confirmed they are not new chemicals to the industry, with FSI being chosen for its quality. O'Brien explained that relationships developed through meetings and trade shows by offering solutions to customer problems.

The analyst inquired about the long-term growth potential of the new food division, the technical advantages of the new products, and their expected profitability.

Answer

The executive confirmed that the food division has the potential to double the company's size due to a large addressable market and domestic production advantages. The new products address various needs beyond crystallization (like sleep aids) and are expected to have margins equal to or better than current ones.

Inquired about the sequential improvement in operational profits, the cost-effectiveness and sales investment in the oil and gas segment, the profitability of the China business, the application of their products in EVs, and new developments in the compostable plastics business.

Answer

The company confirmed sequential profit improvement and the cost benefits of their oil and gas technology. They detailed the increased investment in the oil and gas sales team, which is about $1.3M annually. They affirmed that the China subsidiary is profitable and growing, driven by domestic demand. They also noted that while EVs use less of their product per vehicle, the high production volume is a positive. Finally, they are developing a less permeable compostable plastic for food packaging, with potential revenues in the next two years.