Flexible Solutions International Inc. (NYSE:FSI) is a diversified specialty chemicals manufacturer that develops and markets a range of biodegradable and environmentally-friendly products for the oil and gas, agriculture, and water treatment industries. With a strong focus on innovation and sustainability, the company has established a diverse portfolio of products that address critical needs across multiple sectors.
Financials
In the fiscal year 2023, Flexible Solutions reported annual revenue of $38,324,806, a net income of $2,775,864, and operating cash flow of $6,989,965. The company's free cash flow for the year stood at $1,999,290. These financial results demonstrated the company's ability to generate consistent revenue and profitability, even in the face of challenging market conditions.
Business Overview
Flexible Solutions operates through two primary business segments:
Energy and Water Conservation Products (EWCP):
This segment focuses on products that slow the evaporation of water, such as liquid swimming pool blankets and water conservation solutions for irrigation and aquaculture.Biodegradable Polymers (BCPA):
This segment, which accounts for approximately 70% of the company's revenue, specializes in the production of thermal polyaspartic acid (TPA), a biodegradable polymer with a wide range of applications in the oil and gas, agriculture, and cleaning industries.Recent Developments
In the first quarter of 2024, Flexible Solutions reported revenue of $9,224,872, a 6% decrease compared to the same period in the prior year. The company's net income for the quarter was $457,226, or $0.04 per share, compared to $884,369, or $0.07 per share, in the first quarter of 2023. The decrease in revenue and net income was primarily due to lower customer orders in both the EWCP and BCPA segments.
Outlook
Despite the challenging start to the year, Flexible Solutions' management remains optimistic about the company's growth prospects for the remainder of 2024. The company's food division, which received FDA certification for its Illinois plant in 2022, is expected to see a substantial increase in revenue compared to the previous year. The management team has also highlighted a pipeline of five new products in development, each with the potential to generate seven-figure revenue, with the expectation that at least two of these products will receive purchase orders in 2024.
In the BCPA segment, the company's TPA products continue to see stable demand from the oil and gas, industrial, and agriculture industries. The company's investment in a Florida-based LLC, which focuses on international sales, is also expected to contribute to the company's growth, with the LLC reporting improved margins in the first quarter of 2024.
Flexible Solutions' geographic revenue breakdown shows that the majority of its sales are generated in the United States and other international markets, with a small percentage coming from Canada.
Liquidity
The company's liquidity position remains strong, with adequate working capital and access to lines of credit with Stock Yards Bank for its ENP and NCS subsidiaries. Flexible Solutions continues to pay down its long-term debt according to the terms of its loans, further strengthening its financial position.
Risks and Challenges
One potential risk factor for Flexible Solutions is the ongoing tariff issue related to raw materials imported from China. The company has been unable to recover over $1 million in tariffs through the available rebate program, which has negatively impacted its cost of goods, cash flow, and profitability. The company has stated that it will continue to pursue legal action to recover these funds, as it believes the situation is "criminally unfair."
Conclusion
Overall, Flexible Solutions International Inc. appears to be well-positioned for growth in the coming years. The company's diversified product portfolio, focus on sustainability, and strong liquidity position make it an attractive investment opportunity in the specialty chemicals sector. While the first quarter of 2024 saw a decline in revenue and profitability, the company's management team has outlined a clear path forward, with new product launches, international expansion, and continued cost optimization initiatives expected to drive improved financial performance in the remainder of 2024 and beyond.