My name is Jacobo, and next up we have Ascent Industries trading as ACNT on the Nasdaq exchange. I would now like to introduce Bryan Kitchen, CEO.
Great. Thanks everyone for joining. I'm a little bit over-caffeinated, so if I go too quick, it's a small group, call me out. Just tell me to slow down. We'll try and make sure that we have enough time for questions on the back end. Before we go and jump in and talk about Ascent Industries, a couple of quick things. Ryan Kavalauskas, our CFO, and I have been working together for about 10 years at three different companies along the way. Starting with Advancion Corporation, then prior to Ascent at Clearon Corp. I think that's important context because at Clearon Corp, we joined the company, we were losing about $8 million a year of adjusted EBITDA. We were on the verge of bankruptcy on a couple of occasions. That's where cash management became very near and dear to our heart.
Over the course of about four or four and a half years, we turned the company around, we sold it, and at the time of sale to a strategic, we were doing about $36 million of adjusted EBITDA on a trailing 12 basis. So pretty good turnaround, pretty short period of time. But really blessed to have just a great team. It's not just Ryan and I that have worked together for a long time, but the vast majority of our management team has worked together previously. More specifically at the last company that we worked for. So great team, and that's really what's helped us accelerate the transformation of Ascent over the past two to three years.
For those of you not familiar with Ascent, we started off about 75 years ago as a specialty chemical company, and then about 20 years into that journey, a decision was made to acquire stainless steel assets. I get asked that question all the time, well, why in the world would anybody do that? It's a great question. I have no idea. We maintained two different operating segments literally for decades, up until last year. Ryan and I and the new management team came in in 2024. 2024 for us was a year of stabilization and fixing the foundation. We got settled into our roles, really focused in on the specialty chemicals segment, and then about three or four months into that journey, the board said, j ust kidding. Can you please take over the whole company? And we did.
After stabilizing and fixing the foundation, 2025, we focused really in on optimizing the portfolio. We spun off or sold off our stainless steel assets, and we walked out of the year, out of 2025 as a pure play, incredibly focused specialty chemical company. You can see some of the stats down there at the bottom. Roughly 200 employees. We have four manufacturing sites, six different manufacturing plants. Roughly 95% of our sales are supported with domestically supplied raw materials. We ended last year right around $75 million of sales. The other notable addition to this slide, for those of you that have seen this deck in the past, early May, we did announce our first acquisition, that took place May the 4th, if I am not mistaken. Great company, coatings for packaging applications. We will get more into that here in a little bit. Good foundation.
We are heading in the right direction. What I would say, look, we have been at this now for about 2.5 years. Our strategy has not changed at all. Our evidence has. Like I mentioned earlier, early on it was focused in on stabilizing, fixing the foundation, getting that scale through commercial execution, driving organic growth inside of our grossly underutilized assets, and being really disciplined in capital allocation. Now what we have been able to show over the past couple of years is we are beginning to deliver that organic growth, and not in an insignificant way. In fact, in Q2, we posted record revenues on a TTM basis all the way going back to the COVID days. The same thing from an adjusted EBITDA standpoint. Our pipeline, our sales pipeline continues to grow. Our conversion rate success continues to improve.
Like I said earlier, we are demonstrating our ability to be acquisitive in a smart way. Just taking a look back at the past 12 months, what have we done? We delivered 9.2% increase in our revenue, or $7 million. We have increased significantly our adjusted EBITDA. We optimized out about $2.1 million worth of cost. We announced a very large new commercial win in the fourth quarter of last year. As of late Q1, early Q2, that is actually at full run rate now. We are seeing that very important growth roll through the income statement. I mentioned capital allocation earlier. We have been very disciplined in capital allocation from January 1st, 2025 through the end of the second quarter. We have repurchased about 12.4% of our outstanding shares. As I mentioned a minute ago, our first acquisition was announced inside of Q2.
A little bit more context about who we are, and what we do and where we play. We manufacture specialty chemicals that go into a wide array of different markets. Markets like agriculture, personal care, water treatment, textiles, oil and gas, coatings, and you name it. When we came into the company a few short years ago, roughly 90% of our sales were in the custom manufacturing space. In other words, customers would call us and they would say, we have a product. We would like you to make it for us inside of your assets. Then about 10% were product sales. What we have been doing over the past couple of years is making that very deliberate shift over to more product sales versus contract manufacturing.
The reason why, it's because generally when you're selling your own products that are solving customers' problems, generally that business is more ratable, it's more predictable, and more margin accretive. Our strategy and operating model, really what we like to do is come alongside of our customers or come alongside of customers in the moments that matter most for them. What does this mean? What we really like to do is engage with the R&D organization to understand their most pressing challenges that they're dealing with and solve their most difficult problems. Because when we do that, what we have found is generally that relationship is lasting. It lasts for a very long time, and generally, again, volumes are more ratable, more predictable, and more margin accretive.
But in other instances, we come alongside of customers that may be experiencing service-related challenges and develop innovative supply chain strategies to help solve their problems. Just a couple of examples. This goes back to 2024. We received a phone call from a prospect that wasn't even an existing customer, and they said, okay, we're going to give you a chance. We have a very deep technical and service-related problem. Over the weekend, we developed three samples. We shot them the samples. They qualified those samples in the lab. They picked the one that they liked the most, and then they said, that's great. We want to go ahead and move to a commercial scale trial. Because we were able to operate at the speed of their need, we were awarded $7 million of net new business in a relatively short period of time, about two months.
Today that business is actually much larger than where we started. Again, this gets back to what we're not doing is selling products out of a catalog. What we're doing is we're selling customized solutions to solve customers' problems. Another example, this was a very large win for us, that we locked down in the fourth quarter of last year. A large programmatic win. Customer had some technical and more service-related challenges that they were dealing with. We took a look at a basket of products. It was 15, 20 different products that they had in the portfolio. They wanted to know if we could help manufacture those products for them.
We leaned in, we leaned in hard, we allocated the resources, and over a course of a six-month period of time, and after a lot of work on our part, as well as the customer's, we were awarded a $10 million piece of business in pretty short order. For some companies, $10 million of net new business is a rounding error. For us, as a $75 million company at the time, it was transformational. We have a variety of ways in which to engage our customers, and what we try to do is come alongside of them and meet them where they are. Some of our customers want dedicated manufacturing assets. We do that, and that's not normal. It's not a normal capability, but we have the ability, and we do that today. We buy, build, and operate plants for specific customer needs. Some other customers want custom manufacturing.
They've developed some IP. They don't want to invest capital to build a manufacturing plant, and we can come alongside of them and manufacture their products in our equipment. Other customers want an innovation partner, right? An innovation partner that can really come alongside of them and be an extension of their R&D organization. Just a deep solution set that's really structured around how can we best service each and every customer? We have three manufacturing assets, actually four. Got to update the graph. We have four manufacturing assets today, one in Danville, Virginia, one in Fountain Inn, South Carolina, so think Greenville, Spartanburg area, and then one in Cleveland, Tennessee, or in the Chattanooga area. This is a story of good news, bad news, right? The bad news is we have grossly underutilized assets, right? From a fixed cost absorption standpoint.
The good news is, from an investment standpoint, is, oh my gosh, we have a lot of available capacity that we can go out and monetize without significant CapEx required to do that. Today we're operating across those three assets at about 45-ish percent utilization. You can see our historical CapEx requirements over the past four years or so. We've averaged kind of in that $1.5 million range. I want to be clear, that's not because we're running our plants on the cheap. We're not running our plants with duct tape and popsicle sticks. We're investing the right amount of capital required to maintain our reliability and safety. What we've been focused on over the past couple of years from a commercial standpoint is really filling the plants with better quality business that's more ratable and more predictable.
When you're operating in a contract manufacturing environment, inevitably, you've got some built-in seasonality. We've been shifting our sales mix over to product sales. Again, getting back to how can we come alongside of customers and solve their most difficult technical challenges? You can see back in 2023, 90% of our sales were contract manufacturing, 10% were product sales. Through the first half of this year, it's about 65/35, so 65% being contract manufacturing, 35% being product sales. We're going to continue to drive that purposeful shift over time. You can see we've managed to improve the quality of our business over the past few years. No ticker tape parade, right? We're certainly not done. This is not the measure of success, but we're heading in the right direction. How are we going out and driving this growth?
The sales and marketing organization that we have in place today, it's net new. We've been building this up over the past couple of years. Last year, the team delivered or won effectively 100 selling projects. Our average cycle time was about three months, right? Again, we're not walking in with a line card saying, which product would you like to buy from me today? It's, how can I help you, and how can I solve your technical problems? Usually, there's some level of development work that's required to win that business. Conversion rate last year, 18%, a little bit better than industry standard. What we'd like to get that to is about 30% over time. There's a lot of data on this slide, but a couple of quick things. We are growing our share of wallet with our existing customers. We love our existing customers.
We're leaning in to figure out more ways that we can help support their strategic objectives. But we're also growing business with net new customers. You can see, from the time that we started measuring this, our selling project pipeline back in Q1 of 2025, we've increased our pipeline significantly by about $100 million. Now, are we going to win all of that business? No. For us, in order for projects to make its way into our selling project pipeline, either, A, we've manufactured it before, B, we know we have the capabilities to do it, but underpinning all of that is an expressed customer need. So a customer says, hey, I've got a problem. Can you help me out with it? Then and only then does it get entered into as a selling project.
We do not have any core R&D projects where we're talking about developing breakthrough technology, and just putting large numbers in a spreadsheet to make us all sleep better at night. That's not who we are. That's not what we do. The sales team has done a really good job building up a good quality selling project pipeline. Part of the major increase in our selling project pipeline, from Q1 of this year through Q2, is directly driven by our acquisition of Midwest. About half of the selling project gains that we put in were directly related to that. I'll talk more about the acquisition here in a couple of minutes. From a capital allocation standpoint, zero debt. We've got about $33, $34 million of cash on the balance sheet.
That includes about $5 million worth of escrow that's going to get released here in the very near future. So we've got plenty of capacity to invest. We have repurchased about 12.5% of our outstanding shares over the past six quarters. I would say that the message that I would leave you with is we've been incredibly disciplined with capital allocation. We were looking at M&A opportunities. Last year, we actually were under LOI on a couple of occasions. We never transacted and for all the right reasons. We're not going to do bad deals. But when we find something that we like, we're very well equipped now and confident that we can execute, which takes us to our acquisition of Midwest Graphics Sales. It's a very interesting situation. Midwest was actually a customer of ours.
Through conversations with Brad, we learned a little bit more about their objectives and kind of quickly came to a point where it was going to make sense for their family to pursue a transaction. I think it was roughly 21 days, Brad, between when we had the LOI executed and when we transacted. So it was a very short cycle time. Great job on diligence. We did it in a low-cost, scrappy way. No bankers were involved, no outside counsel, at least on our part. But very little outside investment to get this deal done. So who's Midwest? 40-year-old family-owned company that really focuses in on customized coatings for high-value packaging applications. So custom being the operative word.
When you look at what Midwest has been incredibly successful of over the past number of decades is exactly the type of model that we're working on building at Ascent. Anytime you can solve a customer's most difficult problem and spec in a customized solution, generally that relationship becomes sticky, and a lasting relationship. In fact, when you look at the top five customers that Midwest has, on average, they were 35- 40 years of a relationship. Just really good, high-quality business. We acquired the company for $14 million cash, held back about $1 million worth of escrow. Cash at close was about $13 million. Again, this closed about, I think May the 4th, if I am not mistaken. None of this transaction was not underwritten by crazy cost synergies or anything like that.
This is a really good quality business that we believe in partnership with Brad and Bryan and others, that we believe that we can make great. What are some of the different applications? Food contact products. Think disposable food service items, things like paper plates or paper bowls that are used in a variety of ways. For COVID, I know at least in our house, our household consumption of paper plates skyrocketed during COVID. Believe it or not, there is actually coatings that go onto the top side of the plate and the bottom side of the plate. Beverage packaging, printed materials, playing cards. Actually, Midwest coating for trading cards is actually the only approved coating for the World Series of Poker. Just a lot of high-value, niche-y applications. Just a little bit on the financials.
Last year, right around $11 million top line, right around $2 million worth of adjusted EBITDA. Really healthy adjusted EBITDA margins. Like I said, very little in outside spend in order to get this high-quality transaction executed. How have we done since the transaction was completed? In the second quarter, we had basically the majority of May and June to execute. Strong sales, accretive earnings from day one. Brad won a new customer. We actually executed price increases. The back-office integration and ERP integration happened a quarter ahead of plan. We were done with that by the end of the second quarter. By any and all measures, the transaction has been very successful thus far. The yellow item that you see up on the screen is not code for we have a problem.
To be clear, today, they have a manufacturing facility actually here locally in the Chicagoland area. Part of the reason why we liked this opportunity is we saw a great opportunity to acquire a product or product lines that we could then integrate into our grossly underutilized asset base. We are in the process. We are going to start the process of transferring production from the Chicagoland down to our other sites, beginning in the fourth quarter, and that process will conclude in the first quarter of next year and will be done by the time the lease is up, early April. The team has done just an incredible job. Zero retention issues from a customer standpoint. We are getting the cost synergies that we had assumed. Back-office integration done. Really strong quality and service.
And for me, one of the most exciting things about this transaction is being able to come alongside of Brad and help him unleash the fullest growth potential of Midwest. Some of their technology that has been developed and commercialized on a smaller scale, they just haven't been able to take it into larger customers because they were a $12 million company. And if you're dealing with a company that is consuming coatings, that is going into five or six or 10 manufacturing facilities, built-in redundancy and reliability is absolutely critical. And now what we're able to do with Midwest is come alongside of them and offer that confidence, that trust, and that scale. We have built-in redundancy.
We have multiple plants in the Southeast, and we have the wherewithal to go after and chase and win business that, again, customers love the technology, but they were unwilling to lean in. Now, they still love the technology, and they're leaning in pretty hard from an adoption standpoint. So very excited on that. Stay tuned. More to come in the coming quarters as we continue to report progress out on that. From a path forward standpoint, I get this question a lot, so I'm just going to frame it up. I get the question, okay, Bryan, you've got three manufacturing assets that are underutilized today, about 45%. What can you do with those assets?"
So again, looking at it through the lens of 2025, we were doing about $75 million. What can you take it to? We know that we can take our top line up to $120 million - $130 million inside of our existing asset base without significant capital. And when we do that, we believe that we should be able to deliver gross margin profile of about 30% - 35%.
Our SG&A that we're currently in the process of growing into will be about 15%, and then the flow through to adjusted EBITDA will be about 15% as well. So look, we're constantly looking for ways to unlock incremental capacity that we can then monetize. I'm pretty excited about some of the things that the team has done over the past two years. But we've got plenty of runway for growth inside of what we have today. And when we get the utilization up to call it 70%, 80%, that's going to be the time for us to go look for that next increment of capacity. From an M&A perspective today, the last thing that we want to do is go out and acquire something that compounds our current utilization problem that we have today. So why invest in Ascent? Look, we've optimized the portfolio.
A lot of blood, sweat, and tears to get that done, but we have clarity. We know who we are. We know who we want to be, and we're laser-focused in on that. We've stabilized the company, and we are growth-ready. We're taking on net new business every week, every month, and we've got plenty of headspace to do more of that. We do believe that we have pretty significant near-term upside, specifically as it relates to some of the near-term selling projects that Brad and team are working on with their very unique coatings. Balance sheet is still strong. Zero debt. Still have about $35 million of cash on the balance sheet, inclusive of the escrow. And up until now, I'd say we're relatively undercovered. And my bias is to say that we're also undervalued. We've got just an incredible team.
We would not have been able to do what we have done up until now if I did not have the team that I have today. Momentum is building. It is an exciting time. Q2 is another great proof point for us, but we are looking forward to doing a lot more in the future. With that, I am happy to take any questions that you guys might have. Yeah.
Are you generating cash from operations?
Yep. Yeah, as of Q2, we are basically cash neutral. Yep. Come on.
Where do you prospect
Yes, a great question. When we came into the company, we said, okay, give us all your sales information. We want to see products, we want to see customers. When we asked the question about what markets are we participating in, and more specifically, what are the applications, the answer was, I don't know. It took us a hot minute to get our arms kind of wrapped around what we had and where we were participating. What I would say is we participate today in about 15 different markets. From a focus standpoint, though, what I would say is we're laser-focused in on oil and gas, and we're laser-focused in on coatings. Doesn't mean we're not going to-
Sorry.
Coatings.
Coatings.
Yeah. Doesn't mean that we're not going to pursue compelling, good margin business in other applications that come our way. From a resource allocation perspective, we're very much focused on coatings and oil and gas. Yeah.
Hey, Bryan. Related to that recent acquisition of the coatings, were there any assets to be monetized when you moved to production?
Yeah. The current manufacturing facility is here in the Chicagoland area. It's currently leased.
Yeah.
We're not going to be monetizing that. We're just going to let the lease expire and avoid that expense moving forward.
Can you talk about some of the chemicals you use for oil and gas? Like surfactants or.
Surfactants, I would say, right out of the gate, we found a lot of our success in things like corrosion inhibitors. The reason why we kind of leaned in on corrosion inhibitors right out of the gate is what we saw was three manufacturing assets significantly underutilized, but they had some unique capabilities. It was really a game of Tetris to match up the unique capabilities versus where the best market opportunities were. We landed on corrosion inhibitors, and we were very successful. We're still growing in that area.
We're still growing our customer base, and we're still growing, from an application standpoint, our product line, in fact.
Product lines, what kind of margin range? What's the highest, what's the lowest you aspiring to?
I'll answer your question a little bit differently. When you think about contract manufacturing versus product sales, there's generally about a 10-ish percent spread, which is another reason why we were leaning in hard to product sales. It really differs, I'm not trying to dodge your question, but it really differs by the market and by the application. What we try to do at Ascent is really understand the value of our product and our customers' products and processes. This is not a commodity sale. When and where you start thinking about pounds out the door and your selling price, you unintentionally dilute value. We're big believers in value, and if it takes us a little bit longer from a market research standpoint to get it right, we'll invest that time on the front end. You guys need more caffeine?
What should we expect in terms of an M&A? Do you guys think like a year or I don't want to put it as an expectation but.
I'd love to do more than that, but they have to be the right deals. We've demonstrated we're not going to do deals just for the sake of doing deals. It's got to be the right deals. I think one of the things that we were trying to demonstrate to ourselves from a management standpoint is that we actually did have the bandwidth to not only focus in on organic growth, but it was organic growth and inorganic growth. And I think through this process, we've learned that not only can we do it, but we're actually pretty good at it. So that confidence, we're kind of carrying that forward.
Brad, he's got a number of ideas that are rattling around and phone calls that are being made, and we're optimistic that there's more value accretive opportunities for us to go pursue. Yeah.
How would you characterize the end markets in oil and gas, coatings?
Yeah. It's a great question. When we came into the company, what we told all of our employees and even our shareholders is the market didn't do it to us. The market didn't create the problems that we had, the systemic problems that we had in the company. And the market sure as heck isn't going to fix it for us. Everything that we do is going to be through an enormous amount of self-help, and that's self-help through cost, that's self-help through growth as well. I would say since COVID, in general terms, all of the markets have been incredibly soft. So our successes that we've seen from driving organic growth are through development activities that we have with our customers and capturing share. That's what we have to do. Now, what could change that?
Look, if all the stars align and interest rates start pulling back, is that going to stimulate some things like residential housing, and then you have kind of the coatings flow through along with it as an example? Sure. The conflict in Iran. Right now, if there is more production of oil and gas in the U.S., will that have a knock-on effect and will we have more tailwinds? Absolutely. Our business plan is not contingent on any of those external events happening. Yeah.
Less product supply, evaluate the price point break relative to supply. Is that unusual, typical, just a matter of circumstance, fortuitous circumstance?
Yeah, I would say that the multiple, that 7x multiple is very appropriate for a really good quality specialty chemical company. Are there other opportunities out there for lower multiples? Yes, but they tend to have some challenges that come along with them. Maybe it is a distressed asset or something like that. Yep.
The Q2 revenue
30-ish. Yeah.
Q2 revenue
30.
How much of that was
It was roughly 20% of that, I believe, was organic. The balance of it was through the transaction. So very significant growth, and look, it didn't happen overnight. What we communicated in the fourth quarter of last year was a very large programmatic win, $10 million of new business. It's not all going to appear magically on one day. It was a phased-in approach, and what we saw at the end of Q1 into early Q2, we got to full run rate, and we're seeing the benefit of that, and we're seeing the benefit of price increases that were announced based on elevated raw material costs. We're seeing the benefit of other selling projects that were won that are now beginning to roll through the income statement. So it's been a long time coming, but it felt good to start seeing that very real and structural change roll through.
You came to ask questions, right? No? Just kidding. All right. If there's no other questions, thank you guys for joining. Appreciate the-