Flexible Solutions International Inc (FSI) Q3 2020 Earnings Call Transcript

Good day everyone and welcome to today’s Third Quarter 2020 Financial Results. At this time, all participants are in a listen-only mode. Please note this call may be recorded. It is now my pleasure to turn today’s program over to Dan O’Brien. Please go ahead.

Thank you. Good morning, this is Dan O’Brien, CEO of Flexible Solutions. The Safe Harbor provision, the Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for forward-looking statements. Certain of the statements contained herein, which are not historical facts, are forward-looking statements with respect to events, the occurrence of which involves risks and uncertainties. These forward-looking statements may be impacted either positively or negatively by various factors. Information concerning the potential factors that could affect the Company is detailed from time to time in the Company’s reports filed with the Securities and Exchange Commission.

It looks like our first question is from William. Your line is open. Please go ahead.

Hey, Dan, was there anything specific that drove the strong ENP quarter and is that growth or higher profit margin repeatable in the future?

Good morning, Bill. They have identified and closed new customers and there was a strong use of chemistry in the golf and turf markets this summer once the fields and golf courses opened fully. I believe that this is probably a representative third quarter. But let’s also remember that ENP is seasonal and Q4 and Q1 are weaker than Q2 and Q3 and also subject, as I noted earlier, to variability strictly depending on the customer’s analysis of the economy.

Okay, alright. In regards to the Florida LLC, it looks like, you know they had a strong first half, and the sales growth slowed a bit in the third quarter, and then the net margin was back down. Can you give a sense for, I mean what we should expect for top line growth or a normalized net margin for them?

Without sharing details of their pricing structure that I’m not authorized to disclose, I can’t really tell you much about the net margin, except that you should look at it as an annualized number, because things are variable through the quarters. I do believe that each year, we are going to see significant growth from this investment. And as you know, we manufacture most if not all of the product that goes into their sales. So it is going to be beneficial for both the NanoChem division and our profits from the LLC. A year-over-year analysis is going to be much more accurate than trying to predict quarters.

Okay, but looking annualized then on a net margin basis, I mean are we talking low double-digit like 10% to 12% range?

Yes, we are looking at the same ranges…

Just 22% last quarter was an outlier?

I would say so, yes. It would probably be in the 10% to 15%. But yes.

Okay. And then last question was, have you applied for the PPP loan forgiveness and any word on that?

We have applied for it. It is pretty complicated—well, no, it is not complicated at all. The application is simple; finding out exactly where to send it, when, and how is a little more complex. The bankers are not making this easy. We are doing everything we are being asked to do and told to do. And we are awaiting updates. So, rather similar to the tariff situation.

Okay. So likely, it won’t be forgiven and that income benefit for the income statement probably won’t be on the fourth quarter?

That seems likely to me. Although, in theory, once these applications are in place, for simple companies like ours, where we used 100% of the PPP for payroll support and nothing for any other purposes, we should, if the process is handled correctly by the government, see a very rapid approval.

Okay, alright. Thanks Dan.

Thank you, Bill.

It appears that we have no further questions at this time. I will now turn the program back over to Dan.

Thank you, everyone who called in this morning. Thank you very much for listening. I look forward to talking to you again next year and good luck and good health to you and all your families. Bye-bye.

This does conclude today’s program. Thank you for your participation. You may disconnect at any time.