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DATE

Wednesday, May 6, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — J. Kitchen
  • Chief Financial Officer — Ryan Kavalauskas

TAKEAWAYS

  • Net Sales -- $19.4 million, reflecting 8.9% year-over-year growth and a 3.5% sequential increase.
  • Project Conversion -- 31 projects converted across 27 customers, with a 22% conversion rate and an average 3.5-month sales cycle.
  • Annualized Revenue from Newly Converted Projects -- $7.6 million, fully in production and delivering revenue.
  • Pipeline Development -- Pipeline increased 34% sequentially, reaching close to $24 million-$25 million, based on management statements regarding quarter-over-quarter growth.
  • Pipeline Win Mix -- 58% product sales and 42% custom manufacturing.
  • Gross Margin -- 14.5%, down 270 basis points year over year, primarily due to operational ramp-up effects rather than structural or pricing issues.
  • Material Margins -- Improved by approximately 200 basis points versus 2025 average and 300 basis points sequentially.
  • SG&A Expense -- $5 million, up about $300,000 year over year, but declined as a percentage of sales to 26.4% from 27.3%
  • Net Loss from Continuing Operations -- $2 million for the period.
  • Adjusted EBITDA -- Loss of approximately $1 million.
  • Gross Profit -- $2.8 million, a $257,000 decrease year over year despite higher sales.
  • Material Costs -- Standard material cost $0.61 per pound, compared to $0.71 in Q4 2025 and $0.66 for full year 2025.
  • Cash Position -- Ended the quarter with $47.8 million and no debt on the revolver.
  • Cash Usage -- Declined by $9.8 million during the quarter, with $3.9 million for share repurchases, $2.2 million for incentive compensation, $3.2 million to net working capital, and $400,000 for capital expenditures.
  • Share Repurchases -- 296,000 shares repurchased at $12.92 per share average; since January 1, 2025, 1.18 million shares repurchased for $14.9 million, representing about 11%-12% of the 2025 starting share base.
  • Midwest Acquisition -- Midwest Graphics Sales and Sigma Coatings acquired for $13 million in cash; 2025 unaudited revenue of $10.8 million and adjusted EBITDA just over $2 million (19%-20% margin), with 60 new customers added.
  • Midwest Acquisition Margin Profile -- Pre-synergy gross margin for the acquired business is about 25%; expected to be immediately accretive to annual adjusted EBITDA, according to management.
  • Expectation for Margin Normalization -- CFO Ryan Kavalauskas said, "as we progress through the year, we expect to be back into those low 20s," referring to gross margin percentage, and projected that on a full-year basis, gross margin will be "in that low 20s together."
  • Gross Profit Improvement Initiatives -- Management projected "more than $3 million to $5 million of incremental run rate gross profit improvement," with the majority expected by Q4 2026.
  • Escrow Release -- Approximately $5 million scheduled for release in July, with another tranche to follow in October.
  • Digital Strategy -- Significant increase in web traffic and inbound customer inquiries, including both net new customers and existing customers exploring new product offerings.

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RISKS

  • Gross margin declined 270 basis points year over year to 14.5%, with CFO Ryan Kavalauskas stating, "We are not satisfied with Q1 margin," and attributing the decline to "timing and absorption issue." from operational ramp-up and cost absorption not yet optimized.
  • Net loss from continuing operations totaled $2 million, with management explicitly linking a negative adjusted EBITDA of $1 million to lag between revenue conversion and operational optimization.
  • Cash consumption for the quarter was $9.8 million, with CFO Ryan Kavalauskas emphasizing, "This is not a recurring operating cash burn profile we are comfortable with or expect to normalize."

SUMMARY

The call disclosed an 8.9% year-over-year sales increase to $19.4 million, driven by successful conversion of high-quality pipeline projects and expanding customer relationships. Management detailed a 34% sequential pipeline increase, supported by both price and volume, but acknowledged near-term gross margin compression due to suboptimal cost absorption and operational sequencing as new programs ramp. The recent acquisition of Midwest Graphics Sales and Sigma Coatings was highlighted as immediately accretive, adding 60 customers, $10.8 million in revenue, and a pre-synergy 25% gross margin, aligning with Ascent's focus on integrated, formulation-driven product lines. Both leadership and the financial team projected a clear path to $3 million to $5 million in incremental annualized gross profit improvements by year-end, balancing margin-focused optimization and disciplined capital deployment. Management confirmed release of a $5 million escrow in July and ongoing digital strategy gains with increased qualified customer leads.

  • Management maintained a stated long-term goal of reaching 30% gross margin, and expects full-year margins to return to the "low 20s" percent range.
  • SG&A increase was characterized as intentional investment to support a platform able to handle 50%-65% revenue growth versus 2025, without equivalent overhead expansion.
  • Inventory produced a $1.3 million cash source in the quarter, demonstrating effective working capital management as programs scale.
  • No external market recovery assumptions underpin growth; management attributed results to "execution led" strategies, not industry cyclicality.
  • Careful capital management was reiterated, with management indicating flexibility to continue strategic buybacks if valuations remain attractive, but prioritizing growth investments.

INDUSTRY GLOSSARY

  • Custom Manufacturing: Production of chemicals or components tailored to specific customer formulations and requirements.
  • Conversion Rate: The percentage of active projects or pipeline opportunities that are won and converted into actual revenue-generating orders.
  • Subscale Production: Manufacturing operations conducted below optimal economic capacity, often resulting in higher unit costs or temporary inefficiencies.
  • Deferred Manufacturing Variance: Timing difference when previously capitalized manufacturing costs in inventory flow through the income statement as inventory is sold, potentially causing quarter-to-quarter margin swings.

Full Conference Call Transcript

J. Kitchen: Thanks, Ken, and good afternoon, everyone. We've got a lot to cover today, so let's jump in. In the first quarter, we saw a meaningful number of projects won in 2025, convert into real measurable revenue and that conversion is now showing up in the numbers. We delivered net sales of $19.4 million, nearly double-digit growth versus the prior year and 3.5% increase sequentially. In a market that remains flat uneven, this is not a market-driven outcome. It reflects the conversion of prior wins into revenue and continued execution across the business.

That momentum throughout the quarter and culminated into March, where we delivered our strongest monthly sales performance since March of 2023, a clear signal that what we are building is working and accelerating. During the quarter, we converted 31 projects across 27 customers with conversion rate improving to 22% and an average sales cycle of approximately 3.5 months. These are not early-stage opportunities. These are committed programs backed by purchase orders received, shipped and invoiced in Q1. Already in production and generating revenue, representing approximately $7.6 million of annualized revenue. This is not pipeline becoming potential. This is pipeline becoming revenue. This is exactly how we -- how the model is designed to work.

We build pipeline, we convert it with speed, and we scale it across the platform. And we've done this before. What's different now is the scale, and we're seeing that scale translate directly into revenue. From a mix standpoint, 58% of our pipeline wins came from product sales and 42% from custom manufacturing, reflecting how the team is intentionally shaping new business towards our core technologies and highly customized performance-driven solutions. The broader pipeline continues to build our pipeline in Q1 increased 34% as compared to the end of 2025. So we're delivering growth today through committed programs already in execution, while simultaneously building a larger pipeline that positions us for continued acceleration. We're not lowering our standards to grow.

We are scaling the right work. This is high-quality, margin accretive growth that we expect to convert into earnings as it is optimized across our platform. As we translate that growth into earnings, it's important to understand how we are choosing to win and how that shows up in the margin profile in the quarter. In the first quarter, gross margin was down approximately 270 basis points versus the prior year. Let me be clear on what that is and what that is not. This is not a structural change in the business, and it's not a breakdown in operating discipline. It does not reflect the underlying earnings power of the platform.

Material margins improved by approximately 200 basis points versus our 2025 average and 300 basis points sequentially. And we have not seen a structural change in our labor and overhead cost base. What you're seeing as a result of how we've chosen to use the flexibility of our multi-asset platform to move quickly, winning and onboarding new business across our platform and then optimizing how that work is sourced, routed and produced. And that sequencing matters. In many cases, we're not initially running that work in its optimal state. We're prioritizing speed to secure the business, leveraging available capacity and subscale production where necessary, knowing we will optimize from there.

The result is exactly what you see in the numbers under optimized sourcing, subscale production runs and variability in cost absorption, which shows up in gross margin in the near term. But importantly, the path forward is clear and already in motion. We've executed this playbook before and we've proven a track record of improving sourcing, simplifying operations and expanding margins over time. What you're seeing in this quarter, it's not a change in the model. It's the early stage of that same model being applied to a much larger and faster growing base of business. We have visibility. And so where the inefficiencies exist, and the flexibility to fix them across our asset base.

And we're actively realigning the sourcing and scaling of production and matching the right work to the right assets across our network. That work is already underway, and we expect margin improvements to begin flowing through as we move throughout the year. As we look forward, we're focused on both winning volume and maximizing value, driving growth while improving how that growth translates to earnings. This is not a stand-alone initiative. It's embedded into how we operate. We are systematically optimizing our workflows through our network, allotting volumes and sourcing and production to drive better outcomes.

At the same time, we're maintaining a relentless focus on cost control, driving accountability across sourcing and production and overhead to ensure that as we scale, more of that growth converts to earnings. Because we've identified where these efficiencies exist and how to fix them, we have a very clear and actionable path to more than $3 million to $5 million of incremental run rate gross profit improvement with the majority of that expected to be realized by the fourth quarter of 2026. This isn't a target. It is the output of specific actions already underway. And importantly, this is where our confidence comes from. We're not relying on external conditions or assumptions.

We're executing a set of actions that we have implemented successfully across the business over the past 2 years. We know how this plays out. This will require targeted time-bound investment in the near term. We expect returns in excess of 100% of invested capital. reflecting the fact that these investments are focused on optimizing existing volume and infrastructure, not building from scratch. When you improve how the business -- how you run the business you already have, the incremental returns are significant. The outcome is straightforward, stronger margins, more consistent performance and more durable earnings profile. Alongside of that growth, we maintained discipline on pricing.

We demonstrated the ability to pass through raw material inflation, particularly important given that approximately 65% of our inputs are petroleum-based. We acted early and with intent, while not always the first to move, we are a disciplined fast follower, acting quickly with the benefit of real market visibility. Our objective is clear: fully recover cost input pressure while ensuring continuity of supply. This is about reliability and trust in delivering in the moments that matter for our customers. And finally, subsequent to the quarter end, we announced the acquisition of Midwest Graphics Sales and Sigma Coatings. This is not just another transaction. It's a clear signal of how we intend to build this business moving forward.

We said we would be disciplined. We said we would focus on high-value formulation-driven product lines. And we said that we would allocate capital where we have a clear right to win, and this transaction delivers on all three. Midwest is a specialty formulator built on highly customized, application-specific coatings serving packaging, food service and other consumer applications. Markets where performance, durability and high switching costs. What makes us compelling is not just what the business is today, but what it becomes inside of a sense. On day 1, we're acquiring a durable embedded earnings stream supported by long-standing customer relationships and a strong margin profile. But importantly, we're unlocking a platform for acceleration. We expand our formulation capabilities.

We deepen our position in key markets, and we gain access to new customer base, creating a clean cross-selling opportunity across more than 60 active customers. We are not buying capacity, we're buying demand that can be integrated into our capacity. Demand that's customized, embedded and scalable across our asset base. As we integrate the business, we expect to transition production into our network over time. Importantly, the product mix aligns squarely within our existing capabilities, enabling us to in-source this work with little to no incremental capital investment. This is a critical advantage of our platform.

It allows us to capture the benefits of scale of sourcing and asset utilization without the need for meaningful new infrastructure, enhancing returns and accelerating the realization of synergies. We will apply our proven playbook, one that's already delivered measurable improvements across our platform, giving us the confidence in our ability to enhance margins and accelerate growth in this business. We know how to do this. And importantly, this transaction is supported by the existing earnings quality with upside driven by execution, not required to justify the investment. We didn't buy potential. We bought a business that's already performing. So before I turn it over to Ryan, let me leave you with this.

We are not waiting for the market to improve. We're executing. We're winning the right business, we're onboarding it with speed and optimizing it with discipline. We're unlocking margin with clear line of sight to improvement that is well within our control. And at the same time, we're taking share. We're converting pipeline into real revenue and allocating capital to increase the quality and duality of our earnings. And we're doing that while maintaining our relentless focus on cost control. Ensuring that as we scale, more of that growth translates into earnings. This is not a new model. We're scaling a system that we've already built, tested and proven.

And as we continue to scale and optimize and deploy capital with discipline, that will translate to stronger margins, more consistent performance and a more durable earnings profile. And that's exactly what we're building. So I'll turn it over to Ryan to walk through the financials and capital allocation in more detail. Ryan, over to you.

Ryan Kavalauskas: Thanks, Brian, and good afternoon, everyone. I'll build on Brian's comments by focusing on four areas: revenue quality, gross margin, cash usage in the quarter and capital allocation. Starting with the top line. Net sales were $19.4 million in the first quarter, up 8.9% versus the prior year. That growth was supported by both volume and price, with pounds shipped up 7.6% and average selling prices up 5.2%. In a soft and uncertain industry environment that is an important signal. Our growth is not market-dependent. It is execution led. We are winning business, expanding customer relationships and converting pipeline into revenue. That is the most important first step. In this environment, winning and holding the right business comes first.

Optimization follows. And as Brian said, we have a high degree of confidence in our team's ability to do that. That said, the key question in the quarter is not revenue growth. It is gross margin. But before getting there, I'll briefly walk through the rest of the P&L. SG&A was $5 million in the quarter, up approximately $300,000 year-over-year, but lower as a percentage of sales at 26.4% compared to 27.3% last year. The increase was primarily driven by salaries, wages and benefits, rent expense and stock comp. Partially offset by lower incentive bonus expense.

Importantly, we view part of the spend as investments in the commercial and technical capability required to support the type of business we are winning. These are not transactional sales cycles. They require responsiveness, formulation knowledge, regulatory awareness, production coordination and a willingness to work alongside customers to solve complex problems not simply ship product. That is why we continue to build the technical bench and customer support model needed to pursue higher value opportunities and deepen long-term partnerships. We also recognize that our current SG&A structure is heavy relative to the size of the business today. That is intention, but it has to translate into growth in earning leverage.

We have built the organization to support a materially larger specialties chemicals platform. Roughly 50% to 65% revenue growth from the '25 baseline without requiring the same level of incremental overhead as the business scales. Our objectives are clear as we invest in this area. Support growth with best-in-class service and technical execution while ensuring that each dollar of revenue growth carries more efficiently through to earnings over time. Further down the P&L, other income was favorable in the quarter, driven primarily by interest income from our cash balance and sublease income.

We had no debt outstanding on the revolver at quarter end, so the balance sheet continued to contribute positively below the operating line rather than creating a financing drag. Net loss from continuing operations was $2 million, and adjusted EBITDA was a loss of approximately $1 million. Those results are not where we expect the business to be over time, but they also reflect a quarter where reported earnings lagged the commercial progress and operational work already underway. Now turning to gross profit and margin. Gross profit was $2.8 million or 14.5% of sales compared to $3.1 million or 17.2% of sales in the prior year quarter.

In dollar terms, gross profit declined by approximately $257,000 year-over-year despite the higher revenue base. That is not the margin profile we expect from this business, and we are treating it with the level of focus it deserves. As Brian said, the margin compression in Q1 was not driven by a loss of pricing discipline for its deterioration in the customer book. In fact, the clearest evidence is in material economics. Standard material cost was approximately $0.61 per pound in Q1 compared to approximately $0.71 per pound in Q4 and approximately $0.66 per pound for full year 2025. The material side of the business was not the source of the compression.

Sourcing actions and cost discipline helped protect contribution dollars even as volumes increased. The pressure was concentrated in nonmaterial COGS, timing, absorption, routing, labor efficiency, overhead recovery, utilities, freight and other plant level costs that show up in new or growing programs move through the system before sourcing, production cadence, inventory positioning and plant loading are fully optimized. Utilities were a real example of that pressure in the quarter. January and February utility costs ran materially above the Q4 monthly run rate, creating roughly 150 to 175 basis point headwind to Q1 gross margin before considering any offsetting actions.

But the larger point is that these presses were concentrated in controllable conversion costs, not in raw material economics or broad pricing deterioration. Deferred manufacturing variance is also a meaningful timing headwind. As Q1 shipments increased and inventory declined, manufacturing costs previously embedded in inventory flowed through cost of sales. That effect alone represented approximately $600,000 or roughly 290 basis points of Q1 sales. And the sequential swing versus Q4 was approximately $900,000 to $1 million. That is exactly why we view the quarter as a timing and absorption issue. The cost was created as programs are being ramped and inventory was being built, then recognizes that inventory converted to revenue.

The key distinction is that pressure is operational, not structural. We want attractive business quickly, and now the work is to optimize that volume through better sourcing, routing, campaign planning, inventory positioning, production loading and absorption. In this market, winning and holding the right business comes first. Optimization follows what the volume is inside the platform. That creates near-term margin noise, but it also gives us control over the levers that drive durable improvement. We are not satisfied with Q1 margin, but we do view it as the -- we do not view it as a new baseline. The business is winning, material economics remain intact and corrective actions are underway.

As they take hold, we expect captured volume become more efficient, repeatable and profitable. Turning to cash. We ended the quarter with $47.8 million of cash and no debt outstanding under our credit facility. That compares to $57.6 million of cash at year-end. The cash balance declined by approximately $9.8 million during the quarter. The movement deserves a direct explanation. The largest use of cash was capital allocation. We repurchased approximately 296,000 shares during the quarter for $3.9 million at an average price of $12.92 per share. While we do not evaluate buybacks based on short-term stock movements, the discipline of that deployment is already evident.

Compared to the May 5 closing price of $14.94, those repurchases were made at an approximately 16% discount, representing roughly $600,000 of implied value creation in less than 2 months. More importantly, we believe those shares were repurchased at prices well below our view of long-term intrinsic value and not at the expense of operational flexibility as we ended the quarter with nearly $48 million of cash, no revolver debt and $14.2 million of remaining availability under our credit facility. Looking beyond the quarter, since January 1, 2025, we have repurchased approximately 1.18 million shares for roughly $14.9 million at a weighted average price of approximately $12.61 per share.

That represents roughly 11% to 12% of the beginning 2025 share base repurchased on a gross basis. While we are rebuilding the operating platform, we have also been materially reducing the share count at prices we believe are attractive relative to the long-term value of the business. The second major use of cash was investment in the business and our people. We paid approximately $2.2 million of incentive compensation during the quarter, reflecting the work completed in 2025 to reposition Ascent into a pure-play specialty chemicals platform. We fully understand that compensation will be scrutinized in a quarter with negative adjusted EBITDA and margin pressure. We do as well.

But we also believe retaining, aligning and rewarding the team that executed the divestitures, simplified the company, stabilize the platform and are now driving the commercial and operational reset is a rational investment in the durability of the business. The third major use of cash is working capital. Net working capital consumed approximately $3.2 million of cash in the quarter. That was driven primarily by higher receivables as revenue increased, timing of customer collections and vendor payments and the normalization of accruals after year-end. Inventory was actually a source of cash in the quarter, improving by approximately $1.3 million, which is an important point. We are not simply building inventory without discipline.

We are funding the working capital required to support new and growing programs while continuing to manage inventory tightly. So when you look at the roughly $10 million decline in cash, we would frame it this way. Approximately $3.9 million went to repurchasing shares and what we believe were attractive prices. Approximately $2.2 million went to incentive compensation tied to the transformational work completed last year, approximately $3.2 million went to net working capital, much of it connected to supporting the revenue growth and timing dynamics of the quarter and approximately $400,000 went to capital expenditures. This is not a recurring operating cash burn profile we are comfortable with or expect to normalize.

It is a quarter in which cash was used to support three deliberate priorities: return capital when the valuation is compelling, invest in the team responsible for execution and fund the working capital needed to convert pipeline into revenue and optimize the business we have already won. This also ties directly to our acquisition strategy. The Midwest acquisition is consistent with the same capital allocation framework. This is a relationship-driven transaction developed through the kind of industry knowledge, technical familiarity and long-term commercial connectivity that we believe are critical in disciplined small-cap industrial acquisitions. We are not pursuing scale for the sake of scale. We are not buying capacity to fill plants.

We are prioritizing higher-quality product revenue, customer intimacy, technical application know-how and opportunities where Ascent's platform can improve sourcing, commercial reach and operating support. The underwriting reflects that discipline. We are acquiring a business with existing earnings quality, a purchase price supported by current cash flow rather than speculative pipeline assumption and a pre-synergy gross margin profile of roughly 25% even before purchase accounting adjustments and the benefit of Ascent-led sourcing cost and commercial initiatives. This is not a transaction that requires us to manufacture the thesis after closing. The business already has the margin structure, customer relationships and product orientation we want more of the new portfolio.

Importantly, we expect Midwest to be immediately accretive to annual adjusted EBITDA with upside as we execute on identified costs, sourcing and commercial opportunities. That expected contribution is not dependent on aggressive market recovery assumptions. It is supported by existing earnings quality and the ability to bring a more complete operating platform around a high-quality product business. Our capital allocation priorities remain straightforward: protect the balance sheet, fund the operating improvements required to expand gross margin, invest behind our return organic growth, pursue disciplined acquisitions where the underwriting is supported by existing earnings quality and repurchase shares when the risk-adjusted return is compelling relative to other uses of capital.

Q1 was not a clean quarter from a margin standpoint, but it was a quarter in which the business grew. The balance sheet remains strong and capital was deployed towards assets we understand, our shares, our people, our working capital engine and a higher quality product portfolio.

Operator: [Operator Instructions] Our next question comes from [ Howard Ruth with Fairhope Capital. ]

Unknown Analyst: Can you give us some details on the Midwest acquisition? I mean the only thing I see is it $14 million in cash. But what can you tell us about the revenue that you're acquiring the assets and what you expect going forward from that business?

J. Kitchen: Yes, sure, Howard. Thanks for the question. So let's just start off from a revenue perspective. On an unaudited basis, 2025 revenue was roughly $10.8 million. Adjusted EBITDA came in just north of $2 million, adjusted EBITDA margins in that 19% to 20% range.

Unknown Analyst: So that's like 7x EBITDA is kind of in the middle of your acquisition kind of parameters going forward?

J. Kitchen: It's on the volume of business.

Unknown Analyst: Yes. Okay. And do you consider -- you believe that will be immediately accretive to you? Will that revenue hit kind of quarterly starting in the second quarter?

J. Kitchen: Yes.

Unknown Analyst: Okay. So then on margins, I get kind of what you're saying here. The kind of surprised me because I think in the last call, we were looking at maybe 20%. But given where your business is, small numbers can make a big difference on the percentages. What do you look going forward from that 14.5% Will we bounce back toward 20% in Q2 and up from there toward that 30% goal? Or is it going to take a quarter or 2 to get on that trajectory?

Ryan Kavalauskas: I think it's going to take a quarter or 2. I mean, as we progress through the year, we expect to be back into those low 20s. So again, we -- the focus was on winning business quickly. In some cases, that's not optimized. We are out of the gate as we learn kind of how to efficiently make the products, where to efficiently make those products. So we expect that the margins to normalize throughout the year. And as a full year basis, we expect those to be in that low 20s together.

Unknown Analyst: Is there any change on your goal of this being a 30% gross margin business overall?

J. Kitchen: Not at all.

Unknown Analyst: Okay. And then the pipeline conversion, last quarter, it was 31 projects, I think, about -- I guess this one is 31 projects, $7.6 million in annualized revenue. Last quarter, Q4 was a little bit more, 38 projects, $9.4 million. Is that -- is there a seasonality to your project conversion in Q4 being a little higher than Q1? Or is there any seasonality in that pipeline?

J. Kitchen: Yes. No, it was just how the projects came in inside of Q1. We saw a healthy influx, right, from a project count perspective, it was a little bit different. But the overall value of the pipeline increased exponentially, close to $24 million, $25 million from last quarter to this quarter. So we're -- we continue to be really pleased with how that pipeline continues to take shape. And I would say we're also pleased with the quality of projects that continue to come into the pipeline.

Unknown Analyst: Great. And then Q4, you said the margins on that pipeline was around 40% coming in. I don't think you said anything about that here for Q1. What do you have on the margins of the business you brought in, in Q1?

J. Kitchen: Yes. I think these are some larger scale wins, Howard. I believe they were in that 25-ish percent range, Ryan? Correct me if I'm wrong.

Unknown Analyst: Okay. Well, great. Well, congrats on the continued progress. I know this has been a tough slog going forward, but it seems like you're really getting things in place and look forward to a good kind of 2026 for you.

J. Kitchen: I appreciate that, Howard. I mean it's really good to see the momentum take shape and not just feel it, right, based on commitments, but to begin to see it roll through the income statement. Now yes, we're getting the top line, but we've got to work on improving that margin profile. And I assure you, the team has rallied around that, working to, as Ryan was talking about earlier, optimize the production scheduling and the sequencing and how we're allocating that out across our three manufacturing assets.

Operator: [Operator Instructions] Our next question comes from the line of [ David Siefried ].

Unknown Analyst: Yes. So a question. So you spent $13 million on the Midwest acquisition, $47 million in cash end of Q1, subtract out that Midwest acquisition. But now were you supposed to get a release of like $5.5 million from escrow and from past divestitures? I when is that going to be released?

Ryan Kavalauskas: In July.

Unknown Analyst: You said in July?

Ryan Kavalauskas: Correct.

Unknown Analyst: Okay. All right. Good. And then -- so now you've been with the company.

Ryan Kavalauskas: David, there's actually 2 tranches of that. So the larger portion, about $5 million will be released in July and then a separate tranche will be released in October.

Unknown Analyst: Okay. Good. And then you've been with the company now for a long -- for a while, a couple of years. You've streamlined the business. You have a very good handle on what's happening. Do you think at some point soon, you'll be able to give us like revenue targets, profitability targets for the business?

J. Kitchen: Not inside of 2026, David. There's still so many moving parts, as you've heard on the call today. So as we're out growing and building new platforms and winning new business and seeing how that phasing works, there's still quite a bit of lumpiness. So what we don't want to do is get into a habit of providing unrealistic or incorrectly phased assumptions to our shareholders. So we'll work this year on continuing to stabilize the business continue to build that momentum. Minimize some of the lumpiness we've historically seen, right, from a quarter-on-quarter basis and then reevaluate as we get towards the tail end of this year.

Unknown Analyst: Yes. Okay. Do you think you'll be in line for any tariff refunds?

J. Kitchen: No, no, nothing material, right? Because the vast majority of our raw material inputs, David, are sourced domestically.

Unknown Analyst: Got it. So you picked up 60 customers with the Midwest purchase. And then as capacity is filled in Midwest, if there's a need for more product, that can just be put into our existing footprint, correct?

J. Kitchen: Yes. I mean, look, ultimately, our plan is to transition from their current manufacturing facility into our manufacturing facility. What I would say is there's plenty of headspace to tack on large new pieces of business based on our underutilized process centers that we have. And again, the good thing is it's not just one plant. We have similar capabilities across the network. So we're super excited about the acquisition. It's everything that we set out for, right? It's -- we're not buying an asset with -- that's going to compound our problem statement that we've historically had from a utilization standpoint.

We're bring a product line that we can then integrate into our assets and equally as important, I mean, really sticky customized products that are developed for customer-specific problems. So exactly the types of sales that you've heard us talk about and get excited about over the past year with our solutions that we've developed in the oil and gas space just as an example.

Unknown Analyst: Yes. Excellent use of capital with the buyback and the investment into the team, the management team. I think that's money well spent. Who knows where the stock goes from here. But at some point, when you start showing a bottom line profit, it's going to be materially higher. So are you going to change your metrics as far as how much shares can be bought at these levels, even though it's higher than what you bought in Q1, but still cheap compared to where it's going to be in a year?

Ryan Kavalauskas: Yes. I mean we're going to continue to leave that optionality. I think where the stock moved in early Q1 gave us a great opportunity compared to where we believe the intrinsic value of the stock really should be. So we'll continue to monitor it. If the stock stays compressed and below where we believe it should be, we'll be opportunistic in buying it back. But again, we're being -- we like the optionality we have with our balance sheet right now, and we'll protect it first. We'll invest in the business to grow as kind of a first priority, and we'll always leave that last piece available to us to go out and repurchase shares where we can.

Unknown Analyst: Yes. Okay. And then one last question. I think in December, you rolled out the digital first market strategies. How is that -- how was the follow-through on that in Q1 with website traffic and any leads that got generated and that type of thing?

J. Kitchen: Yes. Sorry about that. No, I was going to say, David, I can respond directly to that. Somehow I got tagged on to all of the inquiries that come in through our website, which is very, very interesting, but it doesn't do my inbox any favors. We're seeing an enormous amount of traffic come in. And what's really encouraging is not just the volume of traffic, but the quality of earnings. In some cases, it's net new customers that we've never worked with that are asking for samples that they want to try a Dufomer in one of their paint formulations as an example. In other instances, there are customers out there looking for new surfactant supplier.

So we're very encouraged. I would say that there's just been continued tailwinds from Q4 when we've launched that into Q1 and now Q2.

Operator: At this time, I'm showing no further questions in the queue. I would now like to hand it back over to Brian for closing remarks.

J. Kitchen: Okay. Great. Thank you, Haley. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you again when we report our second quarter 2026 results.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.