United-Guardian, Inc. (UG) Earnings Call Transcript & Summary

Good morning. Donna Vigilante, President of United-Guardian, and I hereby call to order the Annual Meeting of the Stockholders of United-Guardian, Inc., which is being held by video conference this 15th day of May, 2025. Andrea Young, Secretary of the corporation is present and pursuant to the bylaws of the corporation will act as Secretary of the meeting.

I present a copy of the notice of this meeting, which has been sent to each stockholder of record together with proof of mailing of such notice. I ask that this notice and the affidavit of mailing be filed in the records of the corporation.

I move that the notice of this meeting together with the affidavit of mailing be filed in the records of the corporation.

I second the motion.

All those in favor of the motion say, aye, all those oppose, say no.

Aye.

Aye.

The motion is carried. The Secretary is directed to file the notice of the affidavit of mailing with the records of the corporation.

We have a list of stockholders of the corporation as of April 2, 2025, the record date fixed by the Board of Directors for those stockholders entitled to notice of this meeting. The list has been prepared and certified by Continental Stock Transfer & Trust, registrar of the corporation. I ask for a motion that the list be filed in the records of the corporation.

I moved that the list be filed in the records of the corporation.

I second the motion.

All in favor of the motion say, aye, all oppose, say no.

Aye.

Aye.

The motion is carried and the secretary is directed to file this list of stockholders with the record of the corporation. I now call for nominations for the [ inspectors ] of election.

I nominate Andrea Young and Barbara Ricardo to the Inspectors of Election.

I second the motion.

Are there any further nominations? If not, I declare nominations closed. All those in favor of the election of Andrea Young and Barbara Ricardo as inspectors of election, please say aye. All oppose, say no.

Aye.

Aye.

Aye.

Andrea Young and Barbara Ricardo have now been elected inspectors of election. Will the inspectors please sign the oath of office and turn it into the company at the end of the meeting? The inspectors of election have reported that the holders of a total of 3,835,302 shares present by proxy. The total number of shares represent constituents a quorum and represents 83% of the 4,594,319 shares outstanding. The meeting may now proceed to business. Copies of the company's annual report for fiscal year 2024 have been mailed to all stockholders of record. In view of this fact, I ask for a motion dispensing with the reading of the report and directing the Secretary to file the report with the records of the corporation.

So I move that the reading of the annual report dispensed with and that it be filed with the records of the corporation.

I second the motion.

All those in favor of the motion say, aye, all those oppose, say no.

Aye.

Aye.

Aye.

The motion is carried, and the secretary is directed to file the annual report with the record of the corporation. The next order of business is the election of directors of the corporation for the coming year. I ask for nominations for the office of director.

I nominate the following as directors of the corporation for the ensuing year; Ken Globus, Lawrence F. Maietta, S. Ari Papoulias, Arthur M. Dresner, Andrew A. Boccone and Catherine Kolinski.

I second the motion.

Are there any further nominations? I ask for a motion to close the nominations?

I move that the nominations be closed.

I second the motion.

Okay. All those in favor, say aye, all oppose, say no.

Aye.

Aye.

Aye.

The motion is carried. Proxies contain the following proposals: To elect 6 directors to serve until the next annual meeting; approve the holding of an advisory vote every 1, 2 or 3 years on the compensation paid to the company's named executive officers; to approve, on an advisory basis, the actual compensation paid to the company's named executive officers; to ratify the appointment of Grassi & Co., CPAs P.C. as the independent public accountants of the company for the fiscal year ending December 31, 2025. Since there is no voting taking place at the meeting today, I can report that based on the information provided to the company by Continental Stock Transfer & Trust Company, the company's stock transfer agent, voting results were as follows. On the proposal to elect 6 directors to serve until the next annual meeting. Ken Globus received 2,307,185 votes for, 343,220 votes against, 3,785 abstentions and 1,181,112 broker non-votes. Lawrence F. Maietta received 2,243,644 votes for, 404,336 votes against, 6,210 abstentions, 1,181,112 broker non-votes. Arthur M. Dresner received 2,563,042 votes for, 85,357 votes against, 5,791 abstentions, 1,181,112 broker non-votes. Andrew A. Boccone received 2,559,577 votes for, 88,503 votes against, 6,110 abstentions, 1,181,112 broker non-votes. S. Ari Papoulias received 2,571,741 votes for, 76,189 votes against, 6,260 abstentions, 1,181,112 broker non-votes. Catherine Kolinski 2,624,230 votes for, 27,411 votes against, 2,549 abstentions, 1,181,112 broker non-votes. On the proposal to approve the holding of the vote every 1, 2 or 3 years on an advisory basis, on the compensation paid to the company's named executive officers. Proposal to do so every year has passed. The totals were for every year, 2,509,975; every 2 years, 12,792; every 3 years, 86,665; abstentions, 44,758; broker non-votes 1,181,112. On the proposal to approve on an advisory basis, the actual compensation paid to the company's named executive officers, the proposal has passed, votes totals were, for 2,568,277; against, 45,457; abstentions, 40,456; broker non-votes, 1,181,112. On the proposal to ratify the appointment of Grassi & Co., CPAs P.C. as the company's independent public accountants for the fiscal year ending December 31, 2025, the proposal has passed. The vote totals were 3,792,222 for; 26,296 against; 16,784 abstentions. Call for a motion that the vote certification of the inspectors of election be filed with the records of the corporation.

I move that the vote certification of the inspector of election be filed with the records of the corporation.

I second the motion.

All those in favor say, aye, all oppose, say no.

Aye.

Aye.

Aye.

The motion is carried, and the complete voting results will be posted on our website. At this time, I'd like to present a short discussion. I will share my screen. Okay. So the agenda for today's presentation will be: A review of the financial results for 2024; for a review of the financial results for Q1 2025; we'll have a brief discussion on tariffs; the current product pipeline; and what our forward focus is going to be. So for the financial results for fiscal year 2024 compared to fiscal year 2023, we saw our sales increase by 12% in 2024 compared to 2023. Increase was primarily due to an increase in our cosmetic ingredient sales, our main cosmetic ingredient distributor, Ashland Specialty Ingredients grew responsible for the largest increase in sales. For the balance sheet for fiscal year 2024 versus fiscal year 2023. In 2024, we increased retained earnings and stockholders' equity. We also increased dividends in 2024 as a result of increased revenue. Financial results for Q1 2025 versus Q1 2024, we had a slow start to the beginning of Q1 2025 compared to Q1 2024. While we saw increases in both pharmaceuticals and medical lubricant categories, we experienced a decrease in our cosmetic ingredient category. Ashland sales decreased in Q1 2024 compared to Q1 2020 -- compared to Q1 2024, this decrease was attributed to an overstock and order timings. Looking at the balance sheet for Q1 2025 versus Q1 2024, we saw retained earnings and stockholders' equity decrease in Q1 2025 compared to Q1 2024 due to lower earnings and increased dividends. In terms of tariffs, there have been a global impact. So tariff uncertainty has started to create global instability within supply chains, and we've seen some price increases. We have not experienced any supply chain disruptions at this time, but we've seen some price increases from raw material suppliers. The extreme tariffs that have been placed on China represent a main concern for our business. While all the tariffs are currently on hold -- the extreme tariffs are on hold and we did not receive the same tariff imposed on our products that was as steep as some tariffs imposed on other products for many other companies, the situation still remains very uncertain and fluid. Our strategy is to explore options to mitigate the risks from Chinese tariffs. So we're in the process of researching alternative manufacturing locations for feasibility and cost. We're having regular discussions with our distributors regarding tariff updates and possibly sharing of tariff burdens to mitigate losses of business for price-sensitive customers. Our goal is to secure our existing business while we hope that this tariff hold will turn into a more permanent solution. If necessary, we're prepared to reduce profit margins to maintain our market share. For the product pipeline, we have our Sexual Wellness category where we've seen increased interest in our new line. We have a customer that has approved one of our Natrajel products for production in Q1 of 2026. We expect to see sales later this year. For Cosmetic Ingredients, we have 2 new products that are in late-stage development. We have a moisture ingredient that provides 24-hour hydration, which will be sent to our distributors for evaluation this June and a hair care ingredient that we can provide benefits such as hold from a natural formula, which is not as popular. They're mostly synthetic formulas in hair care. So that is an exciting new venture. And hopefully, that testing will be completed shortly. We've been developing additional products for our medical lubricant customers, several products in various stages of development. And those products will be presented to our customers for approval once complete. And in terms of forward focus, we have 2 main concepts that we're focusing on this year. We're focusing on our pharmaceutical market as tariffs continue to raise uncertainty globally. One of our main initiatives has been on creating a stronger presence for our most important pharmaceutical product, Renacidin. Our recent Renacidin market study has been completed and offered paths to increase our market penetration, and we intend to actively pursue this in the second half of 2025. We'll be allocating additional resources to the growth of our U.S. market for Renacidin later this year. And we want to also continue to focus on brand awareness. One of our main initiatives in 2024, which has continued into 2025, is brand awareness for our Lubrajel products. We need to keep our products at the forefront of customers' minds. We'll continue to focus on improving our customer interactions and providing marketing support to our distributors. Customer and distributor interactions also present a great opportunity to innovate new products as unmet needs are discussed. And at this time, I'd like to open it up to questions.

I have a question Okay. My name is Douglas [indiscernible]. I'm a licensed securities analyst. I have been following the company for a while. The first thing I want to congratulate the Board of Directors for giving Donna the job. She stepped up in 2024 and she did a fantastic job. She really deserves a lot of credit for what she did. And I think that we should acknowledge what a wonderful job she did for the company in 2024. In a similar note, I'm hoping that the Board of Directors will take notice [indiscernible] is done and would consider adding her to the Board of directors, I think she would be -- she should be on the board. She is really coming in with some energy and some new ideas. And I think -- I really think that you might consider adding her to the Board of Directors. So my first question is, can you offer some commentary on what is happening with ASI and why it seems to be taking so long to get this new contract?

Yes. So we have constant conversations with Ashland and think because Ashland is such a big distributor for us, we are just making sure that all the terms of the contract are going to be appropriate for our business. So we want to make sure that we're looking at the contract very closely and making sure that it is in the best interest of our business. So it has taken longer than we expected, but we feel that the relationship with Ashland is very strong and hopefully should be moving along quickly.

So would you expect maybe it would be completed sometime in the second half of 2025?

I think it will be completed by 2025, but I don't know that it will be done in the second half.

And then it's really very positive news with the [ Brenntag ] Specialties. Can you give us any sense of how big the initial order might be?

I think the initial order will probably be relatively small because as a company is ramping up to production. They also don't know how well they are fished, formulation is going to do on the market. So typically, the orders are small in the beginning because they're getting an idea of how the market responds to the product. But I think if the product is well, I think that just opens the door for new business and greater volume and greater orders from additional customers.

So small and large sometimes are defined by like a percentage of revenue. So would you think it might be between 1% and 5% of the company's annual revenue, would that give you a sense of what it might be.

I wouldn't want to give a percentage right now because I really don't know how great the volume will be. So when I have a little more information, I certainly will provide an update to the shareholders.

And what about the -- the company deserves a lot of credit for the increased sales of the medical products and in getting the pharmaceutical sales back on track, can you -- do you feel like there's some traction and that this trend might be able to continue throughout the year?

Yes. I certainly think that the pharmaceutical business and the medical lubricant business should continue to grow. We have plans for expanding both of those markets and really focusing some more energy into generating more sales there. So I think we should see some continued growth in those 2 areas.

Thank you very much for answering my questions.

Absolutely. I think there are some questions in the chat. So let me just, I think actually Billy may have answered that for us. Question is how much is -- how much does it cost to comply with the more rigorous NYSE listing rules. And is it worth the cost, most companies with similar market caps list on the NASDAQ or OTC. So as Billy responded, we are listed on the NASDAQ. And the other question is, do you have any plans to do stock buybacks considering the current stock price? And I think I will ask our Board if they would like to provide any insight on stock buybacks?

Yes, I'll answer that. This question has come up over many years. And the problem with the idea of a stock buyback for us is the very small public float that we have. We're trying to hopefully increase the trading in our stock and buying back the stock would even reduce that public float even more. So we haven't felt that that's a positive thing for the company. I know that there are arguments on both sides, and I've gotten them all over the years. But for us, we don't think that would be a positive thing for the company. What we do is temporarily increase the stock price. We're not trying to increase our stock price artificially. We think we'd rather put our funds into the development work that Donna has been working on rather than kind of an artificial increase in the stock price by doing a buyback.

Thank you, Ken. Yes. There are no other questions. I'm not seeing any other ones come through. So if there are no other questions and no further business, I call for a motion to adjourn.

So I move that the meeting be adjourned.

I second the motion.

All those in favor of say aye, all oppose, say no.

Aye.

Aye.

The motion is carried and the meeting is adjourned. Thank you. Thank you for your time.

Thank you.

The directors, please go ahead and connect to the second meeting.