Flexible Solutions International, Inc.
Q2 2021 Earnings Call Transcript

Published:

  • Operator:
    Good day everyone and welcome to today’s Second Quarter 2021 Financial Results. At this time, all participants are in a listen-only mode. Later you will have an opportunity to ask questions during the question-and-answer session. Please note this call maybe recorded. It is now my pleasure to turn the program over to Dan O’Brien. Please go ahead.
  • Dan O’Brien:
    Thank you, Carlette. Good morning, this is Dan O’Brien, CEO of Flexible Solutions. Safe Harbor provision
  • Operator:
    We will take our first question from Raymond Hao from Comprehensive.
  • Unidentified Analyst:
    Couple of questions for you. The new equipment, I know that most of the CapEx, I guess, was last year that has gone live this year and more so next year, and you said will produce substantial revenue. Is that revenue that is new revenue, or is that revenue that’s just taking from some other component of the business?
  • Dan O’Brien:
    No. It’s a combination. The largest proportion of it will be new revenue from new business and to a small extent relatively, we will be able to reduce our reliance on toll manufacturing. So, it will cut our costs for our existing product lines. So, that’s how we’re utilizing the equipment.
  • Unidentified Analyst:
    Okay. And secondly, any thoughts on timeline about the reinstatement of the dividend?
  • Dan O’Brien:
    It would be nice to have a date in mind, but every time we seem to think we’re getting out of something we thought were coming out of COVID, we may be going back in. We thought that last year that COVID was not going to have massive effects on shipping and lo and behold this year, we’re told that every container is in the wrong country, and it’s going to be a year or more before they get it organized. I wouldn’t -- I’m positively in favor and our Board is in favor of reinstating a dividend, but the timing is going to have to wait. And I’m not prepared to make us a guess at this point.
  • Unidentified Analyst:
    That’s fine. Are this Midland’s -- are there any restrictions on the Midland’s line of credit that would prevent you from doing so?
  • Dan O’Brien:
    We would have to let them know of our intentions. But, our loans and line of credit are -- they do not have a negative covenant against a dividend.
  • Operator:
    And we will take our next question from William Gregozeski from Greenridge Global.
  • William Gregozeski:
    Hey Dan. The supply chain issues you talked about, how big of an impact do you think we’re looking at? I mean, because you mentioned top line hits from delays and then margin hits on you having to eat some cost. I mean, how big of a net impact do you think this is going to be on at least the second half of the year?
  • Dan O’Brien:
    Well, good morning, Bill. I can point to the fact that it would seem likely that our earnings for Q2 would have been about $0.01 higher. So, I think that’s the general area of damage that we’re taking is about $0.01 per quarter in these two categories. Now, I wouldn’t want to be held to that estimate. It could be a little higher, or some of these issues could drop away a little more rapidly. But, I don’t think you’d be wrong in estimating anywhere from $0.005 to $0.015. We’re not being beaten up and knocked unconscious. We are being slowed down in our growth plans.
  • William Gregozeski:
    Okay, okay. With regard to the Florida LLC, they had big growth last year, and we were kind of expecting that this year. And they’re down a little bit first half this year versus first half last year. Any expectations if they’re going to have growth or even be able to exceed 2020 revenue?
  • Dan O’Brien:
    The strong expectations, they were damaged in the first half of this year by the drought in Brazil and slow ordering out of that country as a result. Their second half is likely to more than make up for the slow first half. And yes, as the speech says, I’m expecting growth out of them in the second half. And I’m expecting the growth for the year to be positive for the year as a whole.
  • William Gregozeski:
    Okay. Last question is about Lygos. I haven’t seen any of the terms of that investment. You put $1 million in now. Are you guys obligated to put any more in, and that $1 million has gone towards equity in Lygos? Can you disclose the percentage you own of that?
  • Dan O’Brien:
    I can answer the question, but probably not exactly, as usual. We do one -- part 1, no, we do not have any further obligations, and Lygos is obligated to continue the development to completion. Part 2, we invested in the form of a safe, which has capped the value of Lygos at no more than $150 million. So, depending on what their next capital raise price is, whether it’s at 150 or higher, we will have one 150 of their equity. If it is below $150 million capital -- sorry, below $150 million business valuation in the next -- in their next capital raise, our equity would be valued as a percentage of what that number is. So, let’s take a number like $100 million for ease of calculation in my head, our $1 million would represent 1% of Lygos in the event they did a capital raise with an imputed value of their company of $100 million.
  • William Gregozeski:
    Okay, perfect, perfect. Thanks, Dan.
  • Dan O’Brien:
    Good to talk to you, Bill.
  • Operator:
    It appears we have no further questions at this time.
  • Dan O’Brien:
    Carlette, would you please end the conversation and -- or shall I just thank everybody and hit over?
  • Operator:
    This does conclude today’s program. Thank you for your participation. You may disconnect at any time.
  • Dan O’Brien:
    All right. Thank you very much.
  • Operator:
    Thank you.

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