Company Overview
Flexible Solutions International, Inc. (FSI) is an environmental technology company that has been at the forefront of developing and manufacturing innovative, biodegradable solutions for various industries. With a focus on water conservation, crop enhancement, and sustainable polymer production, FSI has established itself as a leader in the field of eco-friendly technologies.
Flexible Solutions International, Inc. was incorporated on May 12, 1998 in the State of Nevada. In 2019, the company redomiciled into Alberta, Canada. The company develops, manufactures and markets specialty chemicals which slow the evaporation of water. One of the company's key products is HEATSAVR, which is marketed for use in swimming pools and spas where it helps retain heat by slowing the evaporation of water. Another product, WATERSAVR, is marketed for water conservation in irrigation canals, aquaculture, and reservoirs. In addition to the water conservation products, the company also manufactures and markets water-soluble chemicals utilizing thermal polyaspartate biopolymers (TPAs), which are used in the petroleum, chemical, utility and mining industries to prevent corrosion and scaling in water piping. The TPA division also manufactures two nitrogen conservation products for agriculture.
Recent Developments
Over the years, Flexible Solutions International has continued to innovate and expand its offerings. In 2022, the company entered the food and nutrition markets by obtaining FDA food-grade approval for its Peru, Illinois plant. This strategic move has opened up new avenues for growth, as FSI leverages its expertise in biodegradable polymers to develop specialized ingredients for the food and nutraceutical sectors. This allowed the company to commercialize one food product based on polyaspartate that was developed fully in-house.
Financials
Financially, Flexible Solutions International has demonstrated a solid performance in recent years. As of the company's latest reported quarter (Q3 2024), FSI generated revenues of $9.31 million, a 7% increase compared to the same period in the previous year. The company's net income for the quarter stood at $611,858, or $0.05 per share. It's worth noting that the Q3 2024 profit of $0.05 per share was reduced from $0.07 per share due to a one-time accounting loss of $385,000 on the sale of the Florida LLC.
For the first nine months of 2024, operating cash flow (a non-GAAP metric) was $5.91 million or $0.47 per share, up from $3.28 million or $0.26 per share in the same period of 2023. This indicates a strong improvement in the company's cash generation capabilities.
Looking at the full fiscal year 2023, FSI reported revenue of $38.32 million, net income of $2.78 million, operating cash flow of $6.99 million, and free cash flow of $2.00 million. These figures demonstrate the company's ability to generate consistent profits and cash flow.
One of the key drivers behind FSI's financial success has been the strong performance of its two main business segments: Energy and Water Conservation Products (EWCP) and Biodegradable Polymers (TPAs). The EWCP division, which includes the HEATSAVR and WATERSAVR products, has continued to see steady demand from its customer base. Meanwhile, the TPA division, which accounts for approximately 70% of FSI's revenue, has been instrumental in the company's growth, with new opportunities unfolding in various applications such as detergents, food, nutraceuticals, oil field extraction, turf, ornamental, and agriculture.
In terms of segment performance, the TPA segment generated $28.57 million in revenue during the first 9 months of 2024, compared to $500,000 for the EWCP segment. The TPA segment also demonstrated higher profitability, contributing $2.45 million in segment profit compared to $91,000 for EWCP.
It's important to note that FSI has a concentrated customer base, with three primary customers accounting for 52% of sales during the first 9 months of 2024. These customers are in the TPA segment, highlighting the importance of this product line to FSI's business.
Liquidity
Flexible Solutions International's financial position remains robust, with a healthy balance sheet and sufficient cash resources to support its ongoing operations and future growth initiatives. As of September 30, 2024, the company reported cash and cash equivalents of $10.62 million, up from $5.02 million at the end of 2023. This strong liquidity position allows FSI to invest in new product development, expand its manufacturing capabilities, and pursue strategic acquisitions or partnerships, if deemed necessary.
The company's debt-to-equity ratio stands at 0.25, indicating a conservative approach to leverage. FSI has access to a $2.00 million revolving line of credit with Stockyards Bank, of which $0 was drawn as of September 30, 2024. Additionally, its ENP Investments subsidiary has a $4.5 million revolving line of credit with Stockyards Bank, also undrawn as of the same date.
FSI's current ratio of 3.17 and quick ratio of 2.22 as of September 30, 2024, further underscore the company's strong short-term liquidity position and ability to meet its near-term obligations.
Challenges and Adaptability
Despite the challenges posed by the COVID-19 pandemic, tariffs on raw materials imported from China, and other macroeconomic factors, Flexible Solutions International has demonstrated its resilience and adaptability. The company has streamlined its operations, including the consolidation of its Naperville R&D facility into its Peru, Illinois location, and has negotiated price increases to offset the impact of rising costs. Over the years, the company has faced various challenges, including high shipping costs. However, the company has been able to maintain growth, with its NanoChem division and ENP subsidiary continuing to be the dominant sources of revenue and cash flow. The company has also made strategic investments, such as acquiring 80% of a company called 317 Mendota in 2023 that owns real estate the company intends to occupy and rent out.
Future Outlook
Looking ahead, Flexible Solutions International remains optimistic about its growth prospects. The company has identified several large new opportunities in the food and nutraceutical markets, which are currently in the pipeline and expected to contribute to revenue growth in the coming years. Additionally, the company continues to explore new applications for its TPA products across various industries, further diversifying its revenue streams.
FSI expects growth to continue in sales, cash flow, and profit for the rest of 2024 and the first half of 2025. The company's NanoChem division, which represents approximately 70% of FSI's revenue, has a pipeline of five new food products, each with seven-figure revenue potential, that are in the final stages prior to purchase orders. This development is particularly exciting as it could significantly boost the company's revenue in the near future.
The company's ENP division, which focuses on sales to the greenhouse, turf, and golf markets, is expected to see mild growth in the second half of 2024 and continue into 2025. Food division sales are anticipated to grow rapidly in the first half of 2025, depending on when orders are received and the increased uptake of existing food products. Meanwhile, oil, gas, and industrial sales of the company's thermal polyaspartate acid (TPA) product are expected to remain stable through 2024 and the first half of 2025.
The global water treatment chemicals market, which is relevant to FSI's operations, is expected to grow at a compound annual growth rate (CAGR) of 5.6% from 2023 to 2030. This industry trend bodes well for FSI's future prospects, particularly in its water conservation and treatment product lines.
Conclusion
In conclusion, Flexible Solutions International is a well-established environmental technology company that has carved out a niche for itself in the sustainable solutions market. With its innovative product portfolio, strong financial position, and strategic growth initiatives, FSI is well-positioned to capitalize on the increasing demand for eco-friendly technologies and continue its trajectory of success. The company's focus on biodegradable polymers and water conservation products aligns well with global trends towards sustainability and environmental protection. As FSI continues to expand its product offerings and explore new markets, particularly in the food and nutraceutical sectors, it appears poised for continued growth and success in the coming years.