Executive Summary

Q1 2023 revenue declined 9% year over year to $9.85M, with net income of $0.88M ($0.07 EPS) versus $1.53M ($0.12 EPS) in Q1 2022; non-GAAP operating cash flow was $1.73M versus $2.47M a year ago .
Management cited higher cost of goods, product mix and reduced volume as profit headwinds, but reiterated an outlook for 2023 growth in revenue, operating cash flow, and profits, with increases most likely in Q3 and Q4 .
Agricultural demand was softer in Q1 due to timing (distributors/farmers delaying orders), but management expects H1 agriculture sales to exceed H1 2022; oil/gas TPA sales expected to remain steady in 2023 .
A special dividend was declared April 13 and paid May 16 to shareholders of record April 28, signaling confidence in capital position .
Near-term stock catalysts: normalization of ag ordering into Q2, progress on inventory/COGS normalization, and tariff rebate recovery efforts; risks include persistent inflation in inputs and tariff-related cash flow drag .

What Went Well and What Went Wrong

What Went Well

Oil & gas TPA and industrial demand remained a stabilizing end market; management expects sales to remain steady in 2023 (with potential temporary reductions if customers destock or do maintenance) .
Florida LLC remained profitable in Q1, with management expecting top-line growth in 2023 despite compressed margins; sales to the LLC continue to grow with positive margins for FSI .
Capital structure and liquidity improved: consolidation of debt at Stock Yards Bank increased credit lines and lowered rates; working capital described as adequate, with confidence to execute plans; special dividend paid on May 16 .
Quote: “We are reasonably pleased with the results for Q1 2023… We still believe that revenue, operating cash flow and profit can grow strongly in 2023” .

What Went Wrong

Revenue and profits declined YoY, driven by higher cost of goods, product mix, and reduced volume; Q1 revenue fell 9% YoY to $9.85M and EPS to $0.07 from $0.12 .
Agricultural demand timing: distributors/farmers delayed orders into Q2, weighing on Q1; management highlighted shift in buying patterns and just-in-time behavior as a headwind to Q1 .
Tariffs and inflation continue to pressure margins and cash flow; 25% tariffs on certain China-sourced inputs persist, with slow rebate recovery “well in excess of $1 million” outstanding .
Shipping costs have normalized in speed but remained elevated in price; 2022 inventory build to ensure supply carried costs that were difficult to pass on, with efforts in 2023 to reduce inventory and rotate lower-cost inputs .

Financial Results

Multi-Quarter Trend

Metric	Q3 2022	Q4 2022	Q1 2023
Revenue ($USD Millions)	$11.69	$12.10	$9.85
Net Income ($USD Millions)	$1.11	ND	$0.88
Diluted EPS ($)	$0.09	ND	$0.07
Operating Cash Flow (Non-GAAP) ($USD Millions)	ND	ND	$1.73

Notes: ND = Not disclosed in the cited releases/transcripts for that period.

Q1 2023 vs Q1 2022

Metric	Q1 2022	Q1 2023	YoY
Revenue ($USD Millions)	$10.78	$9.85	-9%
Net Income ($USD Millions)	$1.53	$0.88	Declined
Diluted EPS ($)	$0.12	$0.07	Declined
Operating Cash Flow (Non-GAAP) ($USD Millions)	$2.47	$1.73	Declined

Drivers called out by management: “higher cost of goods, lower sales and product mix” .

Segment/Business Mix

Segment/Business	Q1 2023 Commentary
NanoChem (TPA, nitrogen conservation, food-grade tolling)	Represents approximately 70% of revenue; focus areas include agriculture, oilfield scale prevention, cleaning/water treatment, and food products .
ENP (greenhouse/turf/golf; home gardening)	“Represents most of our other revenue”; expects 2023 revenue growth near historic rates, more weighted to H2 .
Florida LLC (50% investment)	Profitable in 2022 and again in Q1; revenue strong but margins compressed due to high COGS; FSI sales into LLC growing with positive margin .

KPIs and Other Items

KPI/Item	Q1 2023	Prior Year/Notes
Operating Cash Flow (Non-GAAP)	$1.73M	$2.47M in Q1 2022
Special Dividend	Declared Apr 13; paid May 16 to holders of record Apr 28	N/A

Non-GAAP reconciliation provided in the 8-K (Operating Cash Flow excludes certain items and investment gains/losses; see notes in 8-K) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue/Profit/Cash Flow (qualitative)	FY 2023	Expect continued growth in 2023 (from FY22 call)	Expect YoY growth in 2023 with increases most likely in Q3–Q4	Maintained positive growth outlook; timing emphasis shifted to H2
Agriculture sales timing	H1 2023	Early-buy strength in Q4 may have pulled orders from Q1 (FY call)	Q1 ag weaker; expect H1 ag sales to exceed H1 2022 as orders shift into Q2	Clarified timing; H1 still up YoY
Oil/Gas TPA demand	2023	Expected steady in 2023 (FY call)	Expected steady in 2023 with potential temporary reductions from inventory/maintenance	Maintained; added risk caveats
Tariffs/COGS/Inflation	2023	Tariffs and inflation pressuring COGS and cash flow	Same; rebates outstanding well >$1M; margin stabilization possible as inventory normalizes	Maintained; incremental color on margins/inventory
Dividend	N/A	None	Special dividend paid May 16 (record Apr 28)	New event

No formal quantitative guidance (ranges) was issued; management provided qualitative outlook and timing commentary .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2023)	Trend
Agriculture demand timing	Q3’22: strong Q1 seasonality expected; pricing pressures/inflation noted . FY’22 call: strong early buy in Q4; H1 2023 ag to exceed H1 2022 .	Q1 ag weaker as distributors/farmers delayed orders; H1 ag still expected to exceed H1 2022 .	Timing push-out into Q2; H1 still up YoY
Oil & gas TPA	Q3’22: strong 2022; expected to remain strong into Q4 . FY’22: expected steady in 2023 .	Expected steady in 2023; temporary reductions possible if customers destock/do maintenance .	Stable to cautious
Tariffs/COGS/Inflation	Q3’22: 25% tariffs; rebates >$1M outstanding; legal help engaged . FY’22: tariffs continue; rebates “well in excess of $1MM” .	Tariffs/COGS continue to pressure margins/cash flow; rebates outstanding well >$1M .	Persistent headwind
Shipping/Inventory	Q3’22: shipping improved but still slow/costly; inventory built to ensure supply . FY’22: speeds back to pre-COVID; prices higher; plan to lower inventory/swap to lower-cost inputs .	Similar; inventory reduction and lower-cost replacement expected to stabilize margins slightly higher .	Normalizing ops; price still elevated
Food-grade products	Q3’22: FDA number; one product commercialized; pipeline building . FY’22: equal focus with other verticals; margin opportunity .	Pipeline of 5 advanced products; commercialization gated by distributor demand .	Building pipeline; commercialization in 2H
Lygos (strategic)	Q3’22: merger terminated; ongoing collaboration possible . FY’22: same; sustainable aspartic acid opportunity .	Merger did not proceed; continue to work with Lygos on sustainable feedstocks .	Unchanged strategic optionality

Management Commentary

“Year over year revenue and operating cash flow were down… Profits were negatively affected by product mix, cost of goods and reduced sales volume. We estimate that year over year growth in revenue, cash flow and profits will continue in 2023 with the increases most likely to occur in Q3 and Q4.”
“Agricultural products were not as strong in Q1 2023 as they were in Q1 2022… we still feel that agriculture sales for the first half will exceed the same period in 2022.”
“Oil, gas and industrial sales of TPA… Sales are expected to remain steady in 2023 with the possibility of temporary reductions if customers reduce inventory or do maintenance…”
“Rebates can take many years to arrive… The total dollar amount due back to us is well in excess of $1 MM. We will persevere until we succeed in recovering our funds.”
“We… consolidated all our debt for ENP and NCS with Stock Yards Bank… increased lines of credit with lower interest rates… Working capital is adequate… We are confident that we can execute our plans with our existing capital.”

Q&A Highlights

Florida LLC performance: Management confirmed Q1 did not pull forward from prior quarters; tone suggests a “good year” for the LLC despite margin compression .
Agriculture demand dynamics: North American farmers/distributors are more tentative and skewing to just-in-time purchases; explains Q1 softness with expectation of catch-up in Q2 .
Food product pipeline and commercialization: ~5 products at advanced stage; FSI will prioritize products with immediate distributor interest rather than direct retail marketing .
Capital deployment/Trio investment: ~8% guaranteed with potential up to 11.5% annualized via periodic bonus; viewed as long-term parking for cash to cover Cayman executive costs; board does not plan to add more to this specific investment .
Insider selling: CEO clarified small personal sales were to fund expected tax obligations (tone neutral) .

Estimates Context

Wall Street consensus (S&P Global) for Q1 2023 revenue and EPS was unavailable due to data access limits today. As a result, we cannot provide “vs. consensus” comparisons in this recap. We searched for “Primary EPS Consensus Mean,” “Revenue Consensus Mean” and counts of estimates for Q1 2023 but the request exceeded daily limits. We recommend revisiting S&P Global consensus to update “beat/miss” framing once access is restored [GetEstimates error].

Key Takeaways for Investors

Q1 delivered expected seasonal and timing-related softness in agriculture while maintaining profitability; management expects H1 ag to exceed H1 2022 and stronger growth skewing to Q3–Q4—monitor order flow in Q2 for validation .
Margin headwinds from COGS, tariffs, and inventory mix remain the primary constraint; watch for margin stabilization as inventory is rotated and lower-cost inputs replace higher-cost 2022 purchases .
Oil/gas TPA demand remains a steadying factor; temporary reductions are possible if customers destock or do maintenance, but the baseline outlook is steady for 2023 .
Florida LLC contributes to top-line momentum but margins are compressed; confirm trajectory through 1H/2H and potential pass-through of costs to customers .
Balance sheet/liquidity flexibility is solid post debt consolidation; special dividend underscores confidence, though future dividends will be opportunistic rather than recurring .
Medium-term optionality from food-grade products and sustainable aspartic acid via Lygos relationship could expand addressable markets and margins; commercialization timing will likely be gradual and distributor-led in 2H and beyond .
Once consensus becomes available, reframe Q1 with a beat/miss lens; near-term share reaction likely tied to confirmation of Q2 ag catch-up, evidence of margin stabilization, and any updates on tariff rebate recovery .

FLEXIBLE SOLUTIONS INTERNATIONAL INC (FSI)·Q1 2023 Earnings Summary