Ascent Industries Co. Q2 FY2026 earnings call

• Overall Business Progress • Broad-based improvement across all key metrics, with volume, average selling price, revenue, gross profit, and adjusted EBITDA all improving sequentially and year-over-year. Trailing 12-month performance hit record highs for volume, net sales, gross profit, and adjusted EBITDA from continuing operations, validating the company's 2-year strategic plan. • Legacy business delivered 28% year-over-year growth, outpacing the broader soft specialty chemicals market. Q2 2026 was the strongest sales quarter for Ascent since Q3 2022, and June 2026 was the strongest sales month since March 2023.

• Commercial Performance • Converted 17 commercial opportunities across 13 customers to $5.8 million in annualized revenue, achieving a 26% conversion rate, far above the 10-15% industry benchmark. • 44% of new revenue came from core technologies (higher-margin, more predictable demand products), and 73% of new wins came from existing customers, growing share of wallet with deeper strategic partnerships. • The active sales pipeline reached a record $140 million, up 33% sequentially, driven by both Midwest Graphic Sales addition and legacy business growth.

• Operational Execution & Continuous Improvement • 65% of raw material spend is petroleum-based; the company faced meaningful raw material and freight inflation from Middle East geopolitical tensions, but strategic sourcing and real-time price increases (where contractually allowed) preserved supply continuity and business economics. • Company-wide platform optimization initiative remains on track to deliver $3-$5 million in annualized run-rate gross profit improvement, with full institutionalization expected by end of 2026. A recent de-bottlenecking project unlocked 500,000 pounds of incremental annual capacity for a key reaction asset, supporting growth without major new capital investment.

• Midwest Graphic Sales Acquisition Integration • Closed May 4, 2026, and integration is ahead of schedule: back-office integration was completed a full quarter early, cost synergies remain on track, and manufacturing transition is progressing per plan. Midwest entered the portfolio with a 26% gross margin and was immediately accretive to Q2 earnings. • The combined business has already secured a large prospective customer field trial program that neither company could have won independently, validating the acquisition's strategic value.

• Financial & Capital Allocation Discipline • Long-term target to reduce SG&A to ~15% of revenue on a run-rate basis as the business scales, driven by corporate function optimization and standardized operating processes. • Capital allocation follows a prioritized framework: (1) maintain sufficient liquidity, (2) fund working capital for attractive durable growth while enforcing cash conversion and margin accountability, (3) invest internally in safety, maintenance, productivity and capacity improvements, (4) pursue disciplined strategic acquisitions that improve portfolio quality, (5) opportunistic share repurchases when returns are compelling. • Ended Q2 with $28.1 million in cash and equivalents, no revolving credit borrowings, and $46 million in total liquidity.

This transcript does not break out performance into discrete product segments. Aggregate consolidated Q2 2026 net sales totaled $25.7 million, 37.6% higher than the prior year. The May 2026 acquisition of Midwest Graphic Sales contributed $1.9 million (7.4% of total Q2 2026 net sales), while legacy Ascent business contributed $23.8 million (92.6% of total net sales) with 28% year-over-year legacy revenue growth. Consolidated gross profit was $5.5 million (21.6% of net sales), up 14% year-over-year, with an adjusted EBITDA of $1.5 million (5.7% of net sales) compared to a $300,000 adjusted EBITDA loss in Q2 2025. SG&A expense was $5.5 million, equal to 21.5% of total net sales, down from 34.5% of net sales in the prior year.

• A moderate gross margin contraction in Q4 2026 is expected, relative to stronger Q2 and Q3 2026 results, aligned with historical seasonal patterns and program turnover in the custom manufacturing portfolio; this expected contraction is not a change in core business outlook, as quarterly results remain volatile at the company's current scale. • The full $3-$5 million annualized gross profit improvement from the platform optimization initiative will be fully institutionalized by the end of 2026, with benefits building gradually as improvements are embedded. • After excluding acquisition and share repurchase spending, first half 2026 operating cash use is expected to decline materially as margins are restored, working capital is normalized, and capital deployment is prioritized. Total cash is expected to recover to the mid $30 million range after the two pending divestiture escrow amounts are received, bringing total anticipated liquidity to the low to mid $50 million range. • The company targets an initial 5-day improvement in the cash conversion cycle (from the current 75 days), with the largest opportunities in inventory discipline and vendor terms. A 5-day improvement is expected to release $1-$1.5 million in cash, with a longer-term target of reducing the cash conversion cycle toward 70 days as the revenue base matures.

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections, with additional risks detailed in the company's recent 10-Q and 10-K filings. • Portions of the legacy custom manufacturing portfolio continue to face historical seasonality and program turnover that impact Q1 and Q4 performance, and these dynamics are expected to remain a near-term characteristic of the business. • Petroleum-based raw material and freight inflation driven by Middle East geopolitical tensions creates near-term margin pressure, with a timing gap between pricing actions and full margin recovery in reported results. • At Ascent's current sub-scale size, changes in production mix, timing, and asset utilization have a disproportionately large impact on quarterly gross margins, and recent revenue growth has not yet converted to gross profit improvements at the level management expects. • The current 75-day cash conversion cycle is higher than management targets, creating greater operating cash consumption than desired.

There were no participant questions submitted during the Q&A portion of the call.