All right. Good morning, everyone. This is Tyler Batory with Oppenheimer here. Thanks for joining us for our next session. Really happy to have the management team from Ascent Industries here. Bryan and Ryan are with us. They're going to go through a presentation, and then I have some questions prepared. If anyone in the audience, if you do have questions for management, there should be a chat box, a Q&A box on your screen. You can put your questions in there. I'll get them addressed. You can also email me to tyler.batory@opco.com, and I'll be sure that those are addressed. With that, I'm going to turn it over to Bryan, who's going to go through the presentation here.
Okay. Great, Tyler. Appreciate the time, and thanks everyone for joining. We promise that this is not going to be death by PowerPoint. We've got a few slides just to kind of tee up a little bit about who we are, what we do, and kind of our story. With me on the phone, I've got Ryan Kavalauskas, our CFO. Let me just jump right into a little bit of context on Ryan and I. Ryan and I have been together for about the past 10 years at a variety of different companies. Prior to joining Ascent, we were with another company called Clearon, a specialty chemical manufacturer that was very much a turnaround. When we joined the company, we were losing roughly $8 million of adjusted EBITDA a year.
At the time we sold it, roughly four, four and a half years later, we turned that around, and we were delivering right around $35 million of adjusted EBITDA on a trailing 12 basis. Ryan and I have learned a lot through that process, cash management being at the top of the list. We always said if we had the opportunity to do it all over again, we'd learn from those mistakes and learnings and apply those forward. We're excited that we have the opportunity to do that here at Ascent. A little bit about Ascent.
For those of you that are not familiar with the story, we are a 75-year-old industrial manufacturing company that up until now has two different operating segments, one being specialty chemicals, which is where Ryan and I kind of grew up in our careers, and the other one being stainless steel tubular assets. We started off back in 1945 as a pure play specialty chemical manufacturer. About 20 years into that, in 1965, we lost our way a little bit. We decided to execute a diversification strategy and bolted on some stainless steel tubular assets. We have been operating under two different segments now for the past number of decades. Ryan and I joined the company—I joined the company back in Q4 of 2023 with the express mandate to build out our specialty chemicals business.
Shortly thereafter, a few months later, I got a phone call from the chairman of our board who said, "Just kidding. Can you please take over the whole company?" The next phone call that I made minutes after was to Ryan, and I said, "Please." Ryan and I have been together now at Ascent for the better part of over a year now. That first year back in 2024 was all structured around stabilization and turnaround. We've made a lot of progress. What I would say right now is we're in the final innings of a turnaround and a portfolio optimization play. If you look here on the screen, you'll see that we exited, successfully sold one of our stainless steel tubular holdings back in early April. We're very excited about that: $45 million of proceeds from that sale.
That leaves us with one remaining stainless steel tubular holding in the portfolio. Again, a little bit more context around who we are today. You can see 2024 was really a transformational year for us. We drove a roughly $20 million turnaround in adjusted EBITDA, significant bump in GP, strong improvements in working capital improvements. Again, it was really just a function of the team that Ryan and I put in place back in 2024. Many of the folks that have joined the company we have worked with in the past, a tremendous amount of synergies, as we know how to work together incredibly effectively. Strong performance last year. We're really just getting started. As we look at 2025, the major areas of focus for us are just an incredible amount of self-help. The market is not doing us any favors.
We're focusing in now on driving organic growth. We'll touch on why that's incredibly important here in a couple of slides. Executing the final stages of portfolio optimization. Again, we have one remaining holding in our stainless steel asset base. Obviously driving towards an organic growth. A little bit about the Bristol transaction. Again, we sold that back in early April, roughly a 10% premium on book value, $45 million of proceeds. We get very excited about that. We have the cash on the balance sheet, and we're ready to deploy that appropriately. A little bit about Ascent today. I mean, our focus is on making good businesses great. We have incredibly good bones, three assets across the U.S., one in Tennessee, one in Virginia, and one in South Carolina.
Really, the model that we're putting in place is a customer-centric chemical supply chain model that comes alongside of our customers to help them to help innovate solutions to solve their most difficult problems. In some cases, those problems are technical in nature. Maybe they have a problem with their formulation. In some cases, it's supply chain offerings, stocking strategies to meet their just-in-time requirements. Again, we have three different assets, and we have that multi-site advantage. We do have incredibly diverse capabilities. I would say that our agility really in the space is unmatched. We are a $100 million specialty chemical company, but we act and behave from an agility standpoint like a much smaller enterprise. We have the ability to innovate very, very quickly when the phone rings and our customers have acute challenges.
You can see on the right-hand side there, we do have $55 million of cash on hand on our balance sheet. We have really been driving towards just building out a scalable, high-quality business over the past year. The foundation has been laid. One of the areas that we have been applying a tremendous amount of focus over 2024 was really building out a portfolio of business that was truly ratable, predictable, and generally more margin accretive. When you take a look back at our operating model in 2023, by and large, we were a custom manufacturing house. What that is, is when customers would call us, they would say, "Hey, can you please make our product or our formulation in your asset base?" Generally with that, the demand is incredibly lumpy.
If you think about a bell-shaped curve, we're engaged with them on the front end as maybe they're going through their development process. We're with them in the middle, maybe when they max out of their own internal capabilities, their own internal capacity, they'll call us and say, "Hey, can you please help us out with surge capacity?" Then on the back end, when products are generally end of life. Because of that, again, the demand profile is not incredibly relatable and predictable, very challenging. We started to make a purposeful shift in 2024. One of the great things about Ascent is we actually had a portfolio of branded products or IP just sitting on the shelf and effectively collecting dust. We've dusted those off. We've started to take that out to market.
What you see on the slide is really just the outcome of that. We drove a pretty significant increase in those branded products or IP-based product sales in 2024. Along with that, we saw a nice increase in average selling prices and a nice increase in our margins. Again, 2023, our mix was roughly 90% custom manufacturing, 10% branded product sales. As we shifted into 2024, we ended the year with roughly 75% custom manufacturing, 25% branded product sales. We are going to continue to drive that purposeful shift over time. Our asset base has been incredibly well cared for. You can see on the right-hand side, very minimal capital requirements each year to maintain safety and reliability and compliance.
That is not because we are attempting to run the company with duct tape and popsicle sticks, but the processes that we're running just do not require significant reinvestment. You can see on the left-hand side, we're grossly underutilized, both problem and opportunity. Obviously, from an asset utilization, fixed cost spread can be pretty challenging when you don't have a huge base load, but it also presents a really compelling upside opportunity for our investor base. That's why driving towards that organic growth becomes incredibly important for us. Ryan, you want to jump in and talk a little bit about growth levers?
Sure. One of the first things we had to face when we came to Ascent was the margin profile of the business was poor, to say the least. It forced a lean-back office to be SG&A spend-conscious. For us, looking at this business model, it was a high touch. There should be high margin when you are a high-value partner to your customer. In that, you have to invest in SG&A. Our focus was to reset that margin profile of this business. When we came, gross margins were sub 10%, so 5-10% gross margins. Obviously, not a lot to work with as that drops down to adjusted EBITDA. That is before you even add in corporate costs. As a public company, those can add up.
We walked into a business doing roughly 4% adjusted EBITDA. Through the actions Bryan talked about, investing in areas such as strategic sourcing, business operations, FP&A for analytics, we really drove accountability and really visibility that had not existed prior to either of us being here to just create a sense of ownership across the three sites. We saw a lot of early opportunities and savings within the sourcing space. We brought along, as Bryan mentioned, people we knew from our past to kind of attack what we always think is some of the lowest hanging fruit at an organization like this. Between that and a commercial refresh with some pricing actions, we were able to reset that margin profile modestly in 2024. We were able to get to about 8% adjusted EBITDA, low teens on a gross margin basis.
That is simply only part of the journey. Really where we're focused is gross margins of no less than 30%, work to keep SG&A no higher than 15%, and we will target adjusted EBITDA to be that 15% kind of pass-through. That is kind of our long-term kind of stakes in the ground. As you can see, we've done a lot of work in 2024, but Bryan said a lot of that was just stabilization and foundational work. As we pivot now into 2025 and 2026, it's going to be more focused on growth. As we continue to kind of reset that product mix for some of that lower margin business with some of the higher margin branded products, we should start to see some organic growth levers there, some operating leverage that we'll get with fixed cost absorption.
We believe roughly 9% of that will flow through organic. We will, with a strong balance sheet, be opportunistic and look at inorganic growth opportunities. That is kind of how we walk through at a high level, how we plan to kind of reset the margin profile for this business to where it should be as a specialty chemical manufacturer. Again, we are investing in SG&A today. We are seeing tangible real results, and we believe that is the right model for this type of higher margin value at business. That is kind of the high-level overlook as we look to 2030. As Ryan mentioned, we have been slowly optimizing our portfolio. Ryan and I are specialty chemical guys by trade. Our long-term vision is for Ascent to be a pure-play specialty chemical company. We believe the margin profile is more attractive.
We believe that is the best place for shareholder value to be created. Prior to Bryan and I joining, we did divest one steel asset that was able to clear our debt table. Throughout 2024, with a lot of the work we've done, we built a modest pile of cash. Early in April, we were able to divest one of the steel assets for cash. Our balance sheet is pretty strong. We have the ability to go out and borrow a little bit extra. We still have one more piece of the tubular assets to divest. We'll have a lot of optionality when it comes to either inorganic growth, potentially buying back some more of our shares.
We've given ourselves a lot of options as we kind of look through this next phase of growth after some of the stabilization work we've done.
Why invest in Ascent? As we talked about a little bit earlier, we are in the final ending of portfolio optimization. We have one holding left. It is important not just from a cash standpoint, but it will allow us to focus in exclusively on one segment and to hit it out of the ballpark. We are stabilized. A lot of the work that we did last year, critically important. The only reason why Ryan and I are right now able to begin thinking about planning for working on M&A is because of all of the stabilization activity that took place last year and the improved results that were driven. We do have, again, an incredible amount of growth capacity that is in place that does not require significant capital. We are excited about that.
We've got the sales resources in place deployed to go fill that up with high-quality, high-value business. There is near-term upside, and we're demonstrating that quarter on quarter as we continue to drive improvements, not just through stabilization, but as we go out and drive that organic growth. As Ryan mentioned, we've got a strong balance sheet. We've got sufficient firepower in our hands, and there will be soon more behind that. Look, we're incredibly undercovered, and we believe incredibly undervalued as well. We're very excited about the company. We're excited about where we're at. We're excited about the team that we put in place and the results that we've just now started to deliver over 2024 and into 2025. We've got a great future ahead of us. With that, really appreciate your time.
If there are any questions, Ryan and I are happy to answer those.
Okay. Okay, great. Friendly reminder, for those in the audience, there's the chat box on your screen. Put questions in there. I'll get them asked. The first one for me, I mean, I think I want to start more high-level, more on the revenue side of things in terms of industry dynamics. You mentioned briefly the market not doing you any favors right now. Just kind of talk a little bit more about the market environment and also talk a little bit more about the total addressable market in terms of where you're playing in the overall space here.
Yeah, sure. Happy to. When we look at it from a branded products standpoint, our total addressable market is roughly $9.2 billion based on the products that we actively produce today. An incredibly large TAM. Inside of that, though, there are several different markets, right? There is HI&I, so think cleaners, sanitizers, things like that, oil and gas, pulp and paper, personal care, coatings and adhesives. Just a wide array of markets that our products go into. When Ryan and I joined the company, there really was not a lot of focus. Quite frankly, again, we were not selling those products actively. We were really a custom manufacturing house. It really gives us an opportunity to step back, figure out where we can win, and just drive an incredible amount of focus.
A real good example of that is what we've done last year inside of the oil and gas market. Our participation in oil and gas when we joined the company was virtually zero. We brought in a technical sales representative that knows the market, knows the industry, knows the products, and has been incredibly successful in going out and driving new customer demand. A real-life example of kind of how we come alongside of our customers when we innovate solutions, we got a phone call on Good Friday of 2024 from a customer perspective, a customer that said, "We have a problem. Can you help us?" We developed three formulations in the lab over that weekend, kicked out the samples to them. They tested it in their lab that following week. Within a month, we were doing active field trials in the market.
As a result of that, we solved their problem. We solved their technical problem, and we were awarded a book of business north of $6 million on an annualized basis with EBITDA margins north of 20%. It is a real-life example of how we are coming alongside of our customers and solving their most difficult problems. The output of that is a really sticky relationship with those customers moving forward.
Tyler, I just want to add to that. I think that question we get asked a lot, kind of like, "Where do you guys play and what are the end markets and kind of size?" Bryan said, "We participate in a broad kind of swath of the markets." That was actually a challenge when we, I think, stepped into our roles. It was, "We focus everywhere," which means you're focusing nowhere. For us, it was trying to understand, because we have these broad capabilities, great, right? We can be deliberate in where we play. We're not beholden to one end market, things like that. It was also someplace where we needed to decide, "We have to go at one or two or three or four of these.
We can play in a lot and always have the option to take business when it comes. Like Brian mentioned, a few of those HI&I, oil and gas case, right? Coatings, adhesives, sealants, and elastomers. Those areas, those are attractive for us. There is a little bit more margin in some of those. We have just proven that there is a right to exist in a lot of these things. For us, that is always an interesting question because it is so broad. I think we are going to do our best to start to focus in on a few, get some technical resources in, become one of those first few calls you think of when you are trying to solve a problem in oil and gas and you are in a space like this. That is always a question where I just want to kind of caveat that.
We have the optionality to play in a lot of markets. For us, it's about focusing and always having that door open to continue to kind of always be that call, but yeah.
I think you were fading out there a little bit, Bryan, in terms of your audio, but I think we got the gist of what you're trying to say. I think one of the things I'm trying to ask, or one of the things I always ask all my companies in this state of the world, is the tariff question. Headwinds, tailwind for you? What's the impact on your business?
Yeah. Two different things. From a top-line preservation perspective, we're covered up really well. Ninety-five percent of our top line is supported with domestically sourced raw materials. On the flip side of that, is there a tailwind there? There is an emerging tailwind. We're actively working on projects to reshore, onshore supply chains for critical ingredients from Europe, from Asia, and from Canada right now. I would say it's still early days, but we're very encouraged by the increased level of nearshoring or onshoring activity that's really started to blossom since all of the tariff discussions.
One of the company-specific drivers you were talking about that I think is interesting is shifting a little bit more towards the branded side. Just talk a little bit about kind of the, I think you said the mix right now is like 75-25. Kind of where do you see that going in the near future, in the long term? Kind of what are some of the benefits of maybe doing a little bit more branded versus custom too?
Yeah. Again, when we started off 90-10 last year, 75-25, we believe we can get to a 65-35 split by the end of the year. We are going to continue to chip away at that over time. Let me be clear, right? We are not running away from custom manufacturing in and of itself. We do have a lot of specialized equipment inside of our asset base that cannot produce our current suite of branded products. We need to continue to look for high-value opportunities or applications to fill those very specialized assets up. I think we can get to a point in the coming years where we are in that kind of 50-50 range.
Maybe a segue into the next question from the audience, and I'll paraphrase some of these. In terms of the competitive environment, given you're a little bit smaller, but you're also a little bit broad, is the competition fairly intense in your specific product areas? Kind of how do you handle some of the other options that are out there and some of your competitors? How do you beat them out, so to speak?
Yeah. From a custom manufacturer, from a toll manufacturing standpoint, I would say that the competitive landscape is pretty intense from a pricing standpoint unless you get to kind of multi-reaction, very complex reactions. We can win when and where we choose to or where we want to. Generally speaking, it's a commoditized offering. Again, it's not our IP. It's our customer's IP. They're effectively running out capacity, so not incredibly compelling. As you shift to branded products, we are a batch manufacturer. By default, we're going to be incredibly scrappy and incredibly successful in that kind of small to mid-tier customer base. If we go up against a large manufacturer that's operating on a continuous basis, so they're making the same product on a 24/7 basis, we're just not going to have the economies of scale.
We're not going to be able to compete on price. When and where those smaller to mid-sized companies need smaller batch quantities or maybe they need a custom formulation, we can win all day, all night.
Thinking about some of the, lack of a better term, longer-term targets that you put out there, specifically on the margin, on the revenue side of things, I think you talked about your $80 million right now in terms of base sales. I think previously you've talked about getting to $120 million by 2030. You kind of addressed the margin a little bit more. I guess what's your visibility towards getting to some of those targets? I mean, because you've done a really good job improving the margin, and I think the turnaround is clearly in place. Just trying to get a sense of how much heavy lifting is still left. I mean, how much do you need the kind of the macro to cooperate to get there too?
What sort of timeline are we talking about as well in terms of some of the margin aspirations that you have?
Yeah. You said a lot just there. Taking a step back to 2022, we were actually north of $100 million in 2022. Is it realistic? Is it feasible? Have we done it before? Absolutely. We purposely pulled back on that, though, to get to our $80 million range that we're in today as we optimized kind of that book of business. By when do we believe we can get to kind of that $120 million-$130 million range from an organic growth standpoint? We will be able to get there by 2030. We have active projects in the pipeline right now north of $40 million.
These are projects that are specific and actionable and that are good fits within our existing asset base, not just from a product sales standpoint, but also niche custom manufacturing opportunities that would fit real nicely into some underutilized assets that we have today. We'll get there. It doesn't happen overnight. The sales cycle can be a bit painful at times. On the custom manufacturing side, the sales cycle can take up to 12-18 months. From a branded product standpoint, that sales cycle is quicker. It can be in that kind of 6-12 months. In some cases, much, much quicker if there's an acute need that a customer has.
I really want to go through some questions on the capital allocation side of things too. This is another one we got from the audience just asking about repurchases and how repurchases fit in and kind of dovetail on this question. I mean, just kind of given you're a little bit of a smaller company, kind of given where the liquidity is in terms of the stock, I mean, are repurchases something that are a little bit more opportunistic? I mean, do you see that as kind of a maybe consistent way to return capital to shareholders too?
Yeah, Ryan, I'll let you jump in on that.
Yeah. I think it's always an option. For us, we've been actively buying our shares back. We've had discussions at our board level of, is there a larger program we could look at? I think we want to continue to kind of look at how the market reacts to the portfolio optimization and see how that helps us make this decision more clear. For us, we're happy with the options right now. I think there's quite a bit of uncertainty in the markets. I think for a company of our size and our space right now to have kind of a strong balance sheet and be prepared to either action in an organic growth opportunity if the stock continues to be where it's trading today, maybe there's an option to buy some of our own shares back if that's the best use of capital at that point.
We've pressured our team for growth capital, things that we've just not looked at in years past because we haven't had this much cash. For us, there is really no one way to skin this cat right now. I think we like our options, and we're going to be patient at this point and kind of let things kind of shake out a little bit more in Q2 before we make any kind of broader decisions. For us, it's all about optionality right now, and all things are on the table. We'll continue to buy our shares back, maybe not as meaningfully as we would like, but that's just the fact of how much liquidity is out there right now.
You mentioned the inorganic side of things. I guess where does M&A fit in the strategy? I mean, would you look at doing something a little bit more transformational, or perhaps you don't really need to do that just given all of the potential with the portfolio you have right now?
Yeah. Let's talk about what we're not going to do. What we're not going to do is just go out and buy something for the sake of buying it, right? We're going to be incredibly disciplined in the opportunities that we pursue. In fact, in the fourth quarter of last year, we actually were at the final stages. We had an LOI in place. We got into diligence, saw some things that we didn't like, and then ultimately retraded or attempted to retrade value. We couldn't align on a final value that made sense for both parties. That's okay, right? We walked away from that. We didn't get caught up into dealing for it. We're going to continue to be incredibly selective.
We're also very mindful of one of our existing problem statements that we have today that we talked about was the fact that we're grossly underutilized from an asset utilization standpoint. The last thing that we want to do is go out and acquire a property that might actually compound that existing problem that we're actively working to solve for today.
How about I think there's one tubular asset that you have remaining. I guess what's kind of the best-case scenario, best-case plan in terms of how you're going to handle that?
Yeah. I mean, I'll take that one. I think we'd like to kind of see if that would transact this year would be ideal for us. We're talking ideal scenario, but we're going to get the best value we can for that. The asset we had sold earlier this year did take a lot of time and a lot of energy from the Ascent team as a whole. The remaining asset is performing. It's not a distraction. We're in no major rush. I would say kind of banding expectations for ourselves, the business does about $4 million-$6 million in adjusted EBITDA a year. We believe it will trade in roughly that same range, four to six times. On the higher end, right, is where we'd like to see that ideally go in both scenarios. On the low end is a potential scenario as well.
We believe we can get some value for that business this year, but we're in no rush because the business is performing well. The team's doing a great job, and they have our full support at this point. Yeah, we'd like to see that move this year and just focus on the specialty chemicals business is really the main focus there.
How about on the CapEx side of things? I think you addressed this on one of the earlier slides, kind of investing back in the business. I guess what kind of is a good maintenance sort of number to be using? I mean, are there some incremental investment opportunities that perhaps you're looking at? Just kind of how should we think about your perspective on CapEx spending overall?
Yeah. Over the past three or four years, we've been averaging $1 million-$3 million a year. That's a good number for the investor community to think about as we move forward outside of any very specific kind of project-based CapEx projects. If a team comes and says, "Hey, we've got a great idea. If you can cough up $500,000, this is the return on investment." They'll be viewed as one-off opportunities for us. That $1 million-$3 million range based on our current asset base is a really good number for just general maintenance, safety, and compliance CapEx.
Perfect. I mean, I think, well, we're pretty much out of time, but just the last question I want to ask. You both have a lot of experience in this industry, and I'm kind of interested if you could offer some maybe compare and contrast kind of with this opportunity, what it looks like versus your experience in the past. Maybe it's unfair to ask you to do this question in 60 seconds. I guess what's different with this opportunity versus some of your other opportunities? What kind of got you really excited to get on board with where you are right now?
Yeah. I mean, I think we learned a lot of lessons at the last company that we were at. One of the first changes that we made right out of the gate was in the strategic sourcing space. Just the incredible amount of value that experienced strategic sourcing professionals can unlock for the company. I think one of the other things that we learned also was hire fast, fire faster. Unfortunately, at the prior company, we really did not have that luxury because we did not have the cash to support that. We are in a much better cash position here. I think that discipline, Ryan, that we learned back at the prior company, we have carried that forward to Ascent as well.
All right. Very good answer. Very good presentation here. We are out of time. Bryan, Ryan, I want to thank you for joining us. Thanks to everyone in the audience for joining and for the questions as well. Enjoy the rest of the day. Enjoy the rest of the conference.
All right. Appreciate it, Tyler. Thanks, everyone.
Thank you.
Bye.