Ascent Industries (NASDAQ:ACNT) executives highlighted accelerating revenue from prior project wins, near-term gross margin pressure tied to onboarding and absorption, and a recently announced acquisition during the company’s first-quarter earnings call.
Revenue growth driven by project conversion
Chief Executive Bryan Kitchen said a “meaningful number of projects won in 2025” converted into “real measurable revenue” during the quarter, helping the company deliver net sales of $19.4 million. Kitchen said the performance reflected execution rather than market conditions, noting that March marked the company’s “strongest monthly sales performance since March of 2023.”
Kitchen said the company converted 31 projects across 27 customers in the quarter, with conversion rates improving to 22% and an average sales cycle of roughly three and a half months. He described the projects as “committed programs backed by purchase orders received, shipped, and invoiced in Q1,” representing about $7.6 million of annualized revenue.
From a mix standpoint, Kitchen said 58% of pipeline wins came from product sales and 42% from custom manufacturing. He also said the broader pipeline increased 34% compared with the end of 2025, positioning the business for continued growth.
Gross margin declines as operational costs and timing hit results
While leadership emphasized sales momentum, both Kitchen and Ryan focused on the quarter’s margin profile. Kitchen said gross margin declined by about 270 basis points year-over-year, but argued it was not a “structural change in the business” or a breakdown in discipline. He said the company was prioritizing speed in onboarding and routing new work through its multi-asset platform, sometimes running programs “not initially” in their optimal state, which created near-term inefficiencies.
Ryan reported gross profit of $2.8 million, or 14.5% of sales, compared with $3.1 million, or 17.2% of sales, in the prior-year quarter. He said gross profit declined about $257,000 despite higher revenue and described the margin compression as concentrated in “non-material COGS,” including routing, labor efficiency, overhead recovery, utilities, freight, and other plant-level costs.
On raw materials and pricing, management stressed that material economics held up. Kitchen said the company maintained pricing discipline and passed through raw material inflation, noting about 65% of inputs are petroleum-based. Ryan added that standard material cost was about $0.61 per pound in Q1, compared with about $0.71 per pound in Q4 and about $0.66 per pound for full-year 2025.
Ryan cited utilities as a specific headwind, saying January and February utility costs were “materially above the Q4 monthly run rate,” creating roughly a 150 to 175 basis point drag to gross margin in the quarter. He also pointed to deferred manufacturing variance as a timing issue, explaining that as shipments rose and inventory declined, costs embedded in inventory flowed through cost of sales. Ryan said that effect represented about $600,000, or roughly 290 basis points of Q1 sales, with a sequential swing versus Q4 of about $900,000 to $1 million.
Asked during Q&A about the path from 14.5% gross margin back toward prior expectations, Kitchen said it would “take a quarter or 2,” adding that as the year progresses the company expects to return to “those low 20s” and that full-year margins are expected to be in the low 20% range. He also said there was “not at all” any change to the company’s longer-term goal of being a 30% gross margin business.
SG&A, earnings, and balance sheet position
Ryan said SG&A expense was $5 million, up about $300,000 year-over-year, but improved as a percentage of sales to 26.4% from 27.3%. He attributed the increase mainly to salaries, wages and benefits, rent expense, and stock compensation, partially offset by lower incentive bonus expense. He characterized part of the spending as investment in commercial and technical capabilities needed to support higher-value, more complex sales cycles.
Below the operating line, Ryan said other income benefited from interest income on cash balances and sublease income. He noted the company had no debt outstanding on its revolver at quarter-end.
Ryan reported a net loss from continuing operations of $2 million and an adjusted EBITDA loss of about $1 million. He said those results did not reflect where management expects the business to be over time, describing a quarter in which reported earnings “lagged the commercial progress and operational work already underway.”
Cash usage and share repurchases
Ascent ended the quarter with $47.8 million in cash and no revolver debt, compared with $57.6 million at year-end, reflecting a $9.8 million decline. Ryan broke down the movement into several major uses:
- Share repurchases: The company bought back about 296,000 shares for $3.9 million at an average price of $12.92 per share. Ryan said that compared with the May 5 closing price of $14.94, the repurchases reflected an “approximately 16% discount,” or about $600,000 of implied value creation in under two months.
- Incentive compensation: The company paid about $2.2 million tied to work completed in 2025 to reposition Ascent as a pure-play specialty chemicals platform.
- Working capital: Net working capital consumed about $3.2 million, driven mainly by higher receivables tied to revenue growth and timing of collections and payments. Ryan said inventory was a $1.3 million source of cash.
- Capital expenditures: About $400,000.
Ryan also said that since Jan. 1, 2025, the company repurchased about 1.18 million shares for roughly $14.9 million at a weighted average price of about $12.61, representing about 11% to 12% of the beginning 2025 share base repurchased on a gross basis. During Q&A, management said it would continue to monitor the stock price and remain opportunistic with buybacks, while prioritizing balance sheet protection and investment in the business.
Midwest Graphic Sales and Sigma Coatings acquisition details
Kitchen said that after quarter-end the company announced the acquisition of Midwest Graphic Sales and Sigma Coatings, describing it as aligned with Ascent’s stated focus on “high-value, formulation-driven product lines.” He said Midwest is a specialty formulator serving packaging, food service, and other consumer applications, and that the deal is intended to add formulation capability, deepen market positioning, and create cross-selling opportunities across “more than 60 active customers.”
Responding to a question from Howard Root of Fairhope Capital, management provided additional metrics. On an unaudited basis, they said Midwest’s 2025 revenue was roughly $10.8 million, with adjusted EBITDA “just north of $2 million” and an adjusted EBITDA margin in the 19% to 20% range. Management said the acquired revenue would begin to be reflected in quarterly results starting in the second quarter and that the deal is expected to be immediately accretive to annual adjusted EBITDA.
Ryan added that the acquisition fits the company’s underwriting approach, emphasizing existing earnings quality. He said the business has a pre-synergy gross margin profile of roughly 25% before purchase accounting adjustments and before Ascent-led sourcing, cost, and commercial initiatives.
Kitchen also said the company expects to transition production from Midwest’s current manufacturing facility into Ascent’s manufacturing network over time, arguing the company is “not buying an asset that’s gonna compound” utilization challenges, but rather “a product line” that can be integrated into existing capacity with little to no incremental capital investment.
During Q&A, management also said an escrow release tied to past matters would occur in two tranches, with about $5 million expected to be released in July and a separate tranche in October. Kitchen said the company does not plan to provide revenue or profitability targets “inside of 2026,” citing moving parts and historical quarter-to-quarter lumpiness. On tariffs, management said it did not expect any material tariff refunds, noting most raw material inputs are sourced domestically.
Kitchen also addressed the company’s digital-first marketing efforts launched in late 2025, saying the website was seeing “an enormous amount of traffic” and that the company was encouraged by the quality of inquiries, including requests from new customers for samples and sourcing discussions.
About Ascent Industries (NASDAQ:ACNT)
Ascent Industries Co an industrials company, produces and distributes stainless steel pipe and tube and specialty chemicals in the United States and internationally. The company operates through two segments, Tubular Products and Specialty Chemicals. It manufactures welded pipes and tubes, primarily from stainless steel, duplex, and nickel alloys; and ornamental stainless steel tubes for automotive, commercial transportation, marine, food services, construction, furniture, healthcare, and other industries.
