Hội nghị công bố kết quả kinh doanh Q3 2026 của Ascent Industries (ACNT): Doanh số tăng 37.8%, biên EBITDA đạt 13%

Các điểm nhấn chính

• Doanh thu thuần quý 3 tăng 37,8% so với cùng kỳ năm trước lên 27,1 triệu USD, bao gồm 26,3% tăng trưởng hữu cơ nếu không tính thương vụ thâu tóm Midwest Graphic Sales.
• EBITDA điều chỉnh tăng từ 1,4 triệu USD lên 3,5 triệu USD, trong khi biên EBITDA điều chỉnh mở rộng từ mức 7,0% của cùng kỳ năm trước lên 13,0%.
• Lợi nhuận gộp đạt 7,1 triệu USD. Biên lợi nhuận gộp cải thiện 460 điểm cơ bản so với quý trước lên 26,2%, dù vẫn thấp hơn mức cùng kỳ năm ngoái chủ yếu do chi phí nguyên vật liệu tăng cao.
• Quy mô danh mục dự án bán hàng tiềm năng đang triển khai kết thúc quý ở mức khoảng 135 triệu USD, cao hơn gần 60% so với cùng kỳ năm trước. Công ty đã chuyển đổi thành công 12 cơ hội thành khoảng 2,8 triệu USD doanh thu quy năm.
• Ascent tạo ra khoảng 2,2 triệu USD dòng tiền từ hoạt động kinh doanh trong quý 3 và kết thúc tháng 9 với 28,7 triệu USD tiền mặt, đồng thời không có dư nợ vay hạn mức tín dụng tuần hoàn.
• Ban lãnh đạo kỳ vọng doanh thu quý 4/2026 sẽ vượt quý 4/2025, nhưng dự báo lợi nhuận sẽ thấp hơn và biên lợi nhuận bị thu hẹp so với quý 3 do cơ cấu sản phẩm và yếu tố mùa vụ.

Dữ liệu tài chính chủ chốt

Kết quả kinh doanh và hoạt động

Ascent cho biết mức tăng trưởng của công ty diễn ra trên diện rộng, với đóng góp từ cả sự mở rộng hữu cơ và Midwest Graphic Sales. Trong quý 3, công ty đã giành được 12 cơ hội hợp đồng từ tám khách hàng, tương đương khoảng 2,8 triệu USD doanh thu quy năm. Một nửa số hợp đồng giành được đến từ các khách hàng mới, với giá trị quy năm bình quân mỗi hợp đồng vượt mức 200.000 USD.

Chu kỳ bán hàng bình quân đạt 7,5 tháng, phản ánh thời gian cần thiết để phát triển, thử nghiệm và thẩm định các giải pháp kỹ thuật phức tạp cho khách hàng. Tỷ lệ chuyển đổi trong quý đạt khoảng 13%, trong khi quy mô các dự án tiềm năng đang triển khai ở gần mức kỷ lục, vào khoảng 135 triệu USD.

Ban lãnh đạo cho biết công ty vẫn đang đi đúng hướng để đạt mức cải thiện lợi nhuận gộp quy năm từ 3 triệu đến 5 triệu USD tính theo tốc độ thực hiện (run rate) vào cuối năm, so với mức cơ sở của quý 1/2026. Nếu loại trừ Midwest, lợi nhuận gộp bình quân trong quý 2 và quý 3 đạt khoảng 5,8 triệu USD, so với mức 2,8 triệu USD trong quý 1.

Các sáng kiến vận hành bao gồm quản trị giá bán và cơ cấu sản phẩm, thu mua chiến lược, nghiên cứu và phát triển quy trình, kỹ thuật, tối ưu hóa logistics và nâng cao năng suất. Tại một cơ sở ở Tennessee, thời gian chu kỳ cho một dòng sản phẩm đã giảm từ 4,5 ngày xuống còn bốn giờ. Một quy trình ở Virginia ghi nhận mức cải thiện hiệu suất 14,7%.

Midwest đã giành được hai hợp đồng mới, dự kiến đóng góp hơn 500.000 USD doanh thu quy năm khi vận hành hết công suất dự kiến. Hơn 50 triệu USD trong danh mục dự án bán hàng tiềm năng của Ascent có liên quan đến Midwest sau thương vụ thâu tóm.

Dự báo của ban lãnh đạo

Ban lãnh đạo kỳ vọng doanh thu quý 4/2026 sẽ cao hơn quý 4/2025. Tuy nhiên, họ cảnh báo rằng lợi nhuận và biên lợi nhuận sẽ giảm so với quý 3 do cơ cấu sản phẩm mang tính mùa vụ, biến động hợp đồng thông thường và hoạt động giải phóng hàng tồn kho cuối năm của khách hàng. Công ty dự kiến mức giảm trong quý 4 sẽ ít nghiêm trọng hơn so với năm trước.

Ascent tin rằng chi phí SG&A cuối cùng có thể giảm xuống còn khoảng 15% doanh thu khi doanh thu hàng năm đạt khoảng 120 triệu đến 130 triệu USD. Ban lãnh đạo không đưa ra mốc thời gian cụ thể và cho biết sẽ tiếp tục đầu tư có chọn lọc vào nhân sự bán hàng, dịch vụ kỹ thuật và phát triển sản phẩm.

Sau khi kết thúc quý, Ascent đã nhận được toàn bộ 4,55 triệu USD tiền ký quỹ giữ lại từ Bristol Metals. Ban lãnh đạo cho biết khoản tiền này sẽ giúp nâng số dư tiền mặt lên vùng từ đầu đến giữa khoảng 30 triệu USD và tổng thanh khoản lên vùng từ đầu đến giữa khoảng 50 triệu USD trước khi thực hiện thêm các đợt phân bổ vốn tùy ý khác.

Rủi ro và các yếu tố cần theo dõi

• Biên lợi nhuận gộp vẫn thấp hơn cùng kỳ năm trước, chủ yếu do chi phí nguyên vật liệu tăng cao.
• Các sản phẩm nông nghiệp và phụ gia nhiên liệu máy bay truyền thống tập trung vào quý 2 và quý 3, trong khi quý 4 chịu ảnh hưởng bởi hoạt động giải phóng hàng tồn kho thông thường trong mảng sản xuất theo hợp đồng.
• Kế hoạch của khách hàng, tiến độ sản xuất, cơ cấu sản phẩm và mức độ sử dụng tài sản có thể làm dịch chuyển doanh thu và khả năng sinh lời giữa các quý.
• Vốn lưu động tiếp tục thâm dụng tiền mặt do các khoản phải thu tăng theo đà tăng trưởng doanh thu và một số hợp đồng mới đòi hỏi các điều khoản thanh toán có lợi hơn cho khách hàng.
• Tỷ lệ chuyển đổi danh mục dự án tiềm năng có thể biến động tùy thuộc vào cơ cấu dự án cũng như quy trình thử nghiệm và thẩm định kéo dài đối với các sản phẩm có độ phức tạp kỹ thuật cao.

Các điểm nổi bật trong phiên hỏi đáp với chuyên viên phân tích

Midwest đóng góp mức EBITDA điều chỉnh âm khoảng 200.000 USD trong quý 3. Ban lãnh đạo cho rằng nguyên nhân chủ yếu đến từ các khoản phân bổ chi phí doanh nghiệp và chi phí liên quan đến tài khoản ký quỹ, đồng thời cho biết thêm doanh nghiệp được thâu tóm này xấp xỉ hòa vốn nếu loại trừ các khoản mục đó.

Midwest đã tiến hành thử nghiệm thực địa với ít nhất ba khách hàng. Một dự án đã bước vào giai đoạn thương mại hóa, trong khi hai dự án còn lại vẫn đang trong quá trình bán hàng và thẩm định.

Ban lãnh đạo cho biết danh mục dự án tiềm năng trị giá 135 triệu USD đại diện cho các cơ hội sản phẩm - khách hàng cụ thể gắn liền với nhu cầu thực tế của khách hàng, thay vì các sản phẩm do nội bộ tự phát triển mà chưa xác định được người mua. Danh mục này bao gồm hơn 100 dự án với quy mô khác nhau.

Thứ tự ưu tiên phân bổ vốn lần lượt vẫn là thanh khoản, vốn lưu động, đầu tư nội bộ, M&A chiến lược và mua lại cổ phiếu khi có cơ hội. Ban lãnh đạo cho biết sẽ cân nhắc các thương vụ thâu tóm phù hợp với các thị trường tăng trưởng mục tiêu, đồng thời duy trì tính linh hoạt của bảng cân đối kế toán.

Toàn văn nội dung cuộc gọi công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, and thank you for standing by. Welcome to the Ascent Industries Co.'s Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kenny Herring, Vice President of Finance. Please go ahead.

Kenneth Wayne Herring Jr.

Thanks, Therese, and good afternoon, everyone. Before we continue, I would like to remind all participants that the discussion today may contain certain forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. These statements are based on information currently available to us and are subject to various risks and uncertainties that could cause actual results to differ materially. Ascent advises all of those listening to this call to review the latest 10-Q and 10-K posted on its website for a summary of these risks and uncertainties.

Ascent does not undertake the responsibility to update any forward-looking statements. Further, the discussion today may include non-GAAP measures. In accordance with Regulation G, the company has reconciled these amounts back to the closest GAAP-based measurement. These reconciliations can be found in the earnings press release issued earlier today and posted on the Investors section of the company's website at www.ascentco.com. Please note that this call is also available for replay via webcast link that is also posted on the Investors section of the company's website. With that, I'd like to turn the call over to Bryan Kitchen, Ascent's CEO, to discuss third quarter results.

Bryan Kitchen

Great. Thanks, Kenny, and good afternoon, everyone. We are encouraged by the progress we saw in the third quarter, not because of any single performance metric, but because the improvement was broad-based. Revenue and adjusted EBITDA improved sequentially year-over-year and on a trailing 12-month basis. For the past 2 years, we focused on strengthening our foundation, optimizing our portfolio, improving efficiency and margins, scaling through commercial execution in our core technologies and allocating capital to the highest return opportunities. Our strategy has not changed. What is changing is that we are seeing these capabilities produce measurable results. Q3 shows both the progress we have made and the work still ahead.

Ryan will discuss the financial results in greater detail, but the headlines are straightforward. In the third quarter, net sales increased 37.8% year-over-year to $27.1 million. Organic sales, excluding the Midwest Graphic Sales acquisition, grew 26.3%. Adjusted EBITDA rose $2.1 million to $3.5 million. Sequentially, revenue increased 5.7%. Gross profit increased approximately 28.3% to $7.1 million and adjusted EBITDA increased approximately $2.1 million to $3.5 million. Adjusted EBITDA margin expanded from 5. 7% to 13.0%. We are improving the business and its ability to generate earnings. Through September, net sales increased 28.5% to $72.2 million. Notably, $11.9 million or 21.2% of the growth was delivered organically, excluding the impact of the Midwest acquisition. Adjusted EBITDA improved by $3.43 million to $4 million.

On a trailing 12-month basis, continuing operations, including Midwest Graphic Sales, generated $91 million of revenue, an increase of $16.7 million or 22.4% year-over-year. Adjusted EBITDA was $2.86 million compared with $0.02 million in the prior comparable trailing 12-month period. These results should be viewed in the context of our business' built-in seasonality. Portions of our legacy custom manufacturing portfolio experienced normal program turnover and seasonal patterns, particularly in the fourth and the first quarters. We're working to grow out that seasonality over time, but it remains a near-term characteristic of the business. Customer schedules, product mix and production timing can shift results between the quarters, making the trailing 12-month view helpful in assessing our broader trajectory.

Even with quarter-to-quarter variability from seasonality and program timing, the broader results show that we are building a better business, not simply a bigger one. We've delivered material year-on-year growth in a muted market with significant contributions coming from new products and processes. Supporting that level of growth takes coordinated work across commercial, technical, quality and operations from qualifying raw materials and establishing processes to preparing our systems and people to service our customers reliably. Our priority is to scale efficiently while executing flawlessly. Our Q3 business wins provide another measure of progress. During the quarter, we converted 12 opportunities across 8 customers into approximately $2.8 million of annualized revenue.

Nearly half of the revenue came from our focused growth markets, 25% from coatings and 25% from oil and gas. Approximately 84% of that revenue came from sales and half of the wins came from new customers. Our average win size is also increasing and is now north of $200,000 of annualized revenue. Our 7.5-month average sales cycle reflects the technical challenges customers bring us and the time it's required to develop and validate solutions in the lab, in the plants and in the field. For the quarter, our conversion rate was approximately 13% within the specialty chemical industry benchmark of 10% to 15%. Our active selling project pipeline ended the quarter at approximately $135 million, near record levels and nearly 60% higher than 1 year ago.

A strong pipeline creates potential. Disciplined conversion into profitable, repeatable earnings creates shareholder value. We are managing SG&A with discipline while preferentially investing in market-facing talent across sales, technical service and product development to accelerate growth in our focused markets. At the same time, we're aligning operational resources around the highest value opportunities to improve gross profit. Earlier this year, we set a goal of $3 million to $5 million of annualized gross profit improvement at run rate by year-end, measured against our first quarter 2026 baseline. We remain on track, supported by actions already realized and initiatives in play. Excluding Midwest, gross profit averaged approximately $5.8 million in the second and the third quarters as compared with $2.8 million in the first quarter.

The improvement reflects disciplined pricing and mix management, strategic sourcing, process R&D, engineering and network and logistics optimization. We are seeing these efforts translate into operating gains. In Tennessee, process engineers reduced cycle time on a product line from 4.5 days to 4 hours, a 96.3% reduction. In Virginia, they improved yield by 14.7% on a specific process. These are examples of a broader pipeline spanning operations, logistics, quality, process R&D and commercial initiatives. Our focus is to sustain these gains and build on them to strengthen gross profit and earnings conversion. We are beginning to apply our commercial capabilities and operating discipline beyond our legacy platform.

In the third quarter, Midwest secured 2 new pieces of business expected to deliver more than $500,000 of annualized revenue at full run rate. We are also seeing early benefits of Ascent's marketing capabilities. SEO is driving a surge in web inquiries and trade show preparation has generated dozens of promising prospects. Customers are committed to advancing several selling projects into lab and production scale trials and the manufacturing transition into Ascent's network remains on schedule. By combining Midwest's application expertise and customer relationships with Ascent's marketing capabilities and broader manufacturing network, we are now pursuing opportunities that neither business could access on its own.

Before I turn it over to Ryan, I want to leave you with one final thought. Our strategy hasn't changed. We remain focused on improving the quality of our business through stronger commercial capabilities, greater operational discipline and disciplined capital allocation. The progress this quarter sequentially, year-to-date and across our trailing 12-month performance shows that the capabilities we have built are translating into measurable results. Our next priority is to convert more of our growth into stronger margins, more consistent cash generation and higher returns on invested capital. We're not waiting on the market to improve our business. We are improving it through disciplined execution, continuous improvement and thoughtful capital allocation. That is how we create lasting value for our shareholders. None of this would be possible without the dedication of our employees, the trust of our customers and the confidence of our shareholders. To each of you, thank you for your continued support. And with that, I'll turn it over to Ryan to review our financial results and capital allocation in greater detail.

Ryan Kavalauskas

Thanks, Bryan. The third quarter gives us reasons to be encouraged while also keeping our focus on the work still in front of us. Revenue and earnings improved meaningfully and importantly, our cash profile improved as well. Our objective now is to make that progress more consistent and durable by converting more of the growth already in the business into margin, cash flow and returns. Third quarter net sales were $27.1 million, up 37.8% from the prior year. As Bryan noted, that growth was broad-based with strong organic growth in sales, excluding the Midwest Graphic Sales acquisition, alongside positive contribution from Midwest. Adjusted EBITDA increased to $3.5 million or 13.0% of sales compared with $1.4 million or 7.0% a year ago.

We also continue to demonstrate SG&A leverage. SG&A declined to $5.3 million or 19.6% of revenue from 31.7% in the prior year quarter. Over time, we continue to believe a run rate SG&A level around 15% of revenue is achievable as we grow the revenue base, standardize processes and create additional operating leverage. Turning to gross profit. We generated $7.1 million in the quarter, an increase of 21.9% year-over-year, while gross margin improved approximately 460 basis points sequentially to 26.2%. We are pleased with that progression, but we are not viewing one quarter as a finish line. Gross margin remained below the prior year period, driven primarily by higher material costs even as gross profit dollars increased and conversion costs improved as a percentage of revenue. Pricing and mix have been important contributors to the improvement we have seen.

The opportunity from here is to complement that commercial execution with greater benefits from sourcing, process consistency, automation, productivity and better utilization of our cost structure. As revenue and volumes continue to grow, we have a larger base over which to improve absorption and standardize execution, which helps reduce the impact that customer schedules, production timing and asset utilization can have on an individual quarter. At the same time, as Bryan noted, normal program turnover and seasonality remain part of the business as we move through year-end and into the first quarter. For that reason, we continue to believe the trailing 12-month view is the clearest way to evaluate the direction of the business through normal quarterly variability.

On that basis, continuing operations, including Midwest, generated approximately $91.0 million of revenue, up more than 22% year-over-year, while gross profit and Adjusted EBITDA improved and SG&A continued to leverage against the larger revenue base. On a trailing 12-month basis, SG&A declined to approximately 25% of revenue from approximately 31% in the prior year period, an improvement of more than 600 basis points. Adjusted EBITDA increased to approximately $2.9 million from essentially breakeven in the prior year period. We believe that progression better reflects the underlying direction of the business and the opportunity to convert a larger revenue base into stronger margins, cash generation and returns over time.

Turning to cash. We ended September with $28.7 million of cash and no borrowings under our revolving credit facility, with $21.1 million of remaining revolver availability. More importantly, operating cash flow turned positive during the quarter. Cash used in operating activities improved from approximately $7.7 million through June to $5.5 million through September, meaning the business generated approximately $2.2 million of operating cash during Q3. That improvement is particularly important when viewed alongside the capital we deliberately deployed earlier in the year. Through September, we used approximately $13.6 million for the Midwest acquisition, $6.9 million for share repurchases and $2.3 million for capital expenditures. Working capital remained a use of cash, led by receivables as revenue grew, but the operating cash inflection in Q3 is encouraging and the cash use rate has moderated materially from the first half.

Subsequent to quarter end, we received the full $4.55 million Bristol Metals escrow holdback, which is additive to the September 30 cash balance. We remain focused on further improving cash conversion, particularly through inventory discipline, vendor terms and collections. At our current scale, we continue to estimate that each 5-day improvement in the cash conversion cycle could release approximately $1 million to $1.5 million of cash, depending on the mix of improvements. Consistent with the outlook we provided last quarter, the escrow release brings cash into the low to mid-$30 million range before any additional discretionary capital deployment. Together with more than $20 million of available borrowing capacity at September 30, that supports total liquidity in the low to mid-$50 million range and preserves meaningful flexibility as we move through year-end.

That brings me to capital allocation. Our priorities remain the same and importantly, remain in order: first, liquidity; second, working capital; third, internal investments; fourth, strategic M&A; and fifth, opportunistic share repurchases. The order does not take M&A or buybacks off the table. It means we intend to protect the balance sheet, improve the cash efficiency of the business and fund the investments in people, process, automation, maintenance and high-return growth that can strengthen the earnings power of the platform before deploying incremental capital elsewhere. We believe that discipline is particularly important at this stage of Ascent's development. Third quarter demonstrated the earnings potential of the revenue base we have built and provided an encouraging improvement in cash generation. The work now is to make those results more repeatable, improve the quality of the conversion and continue building the flexibility to invest when attractive opportunities arise. With that, I'll turn it back to the operator for questions. Thank you.

Operator

[Operator Instructions] Our first question comes from David [indiscernible].

Phần hỏi đáp

Unknown Analyst

Yes, pleased to see the legacy business having a good quarter and growing. I had a question about the Midwest acquisition. Why was there a negative $200,000 adjusted EBITDA contribution in the quarter from that?

Ryan Kavalauskas

David, that's largely due to the corporate allocation that we burden the business with now. So if you remove that along with the escrow that's also carrying on that business, it's roughly breakeven. So that's what's driving.

Unknown Analyst

Okay. And then the Midwest field trial, has that -- how is that -- has that advanced toward commercial production?

Bryan Kitchen

Yes. We've actually had several field trials, David, with 1, 2, 3, at least 3 different customers, and we're progressing each of those projects through the sales cycle. So we're not -- we're commercial on one of them, we are not commercial on the other 2. So the pipeline continues to grow. I mean we're incredibly pleased with how the pipeline is shaping up. There are opportunities over the past 2 weeks that we've gotten our eyes on that we didn't have access to 2 months ago. So very pleased with how Midwest acquisition is beginning to shape up.

Unknown Analyst

Got it. Now you did -- I think if I looked at Q2, the pipeline was, what, $140 million and then the Q3 pipeline, I think, was like $135 million, conversion rate 26% in Q2, 13% in Q3. So will you just expect a variable conversion rate going forward? You never really know how the customer is going to accept the formula or whatever that you've been working on?

Bryan Kitchen

Yes, it's largely a function of the mix of the projects that we have in the pipeline at that point in time. I mean what we're seeing now, if you remember, what, 2 years ago, the selling project cycle time was much lower than what it is today, and it's expanded or extended largely because of the technical challenges that we're being presented with and the time that it takes to innovate a solution, develop that, put it through our lab, get it qualified in our customers' lab and get it qualified in the field and then take it to full commercial scale. So it's really just a function of mix, not discourage...

Unknown Analyst

Yes. Okay. And then you talked about the legacy business having seasonality. So not that I'm asking for guidance, but do you think that you can consistently deliver and generate quarterly profitability going forward?

Bryan Kitchen

Yes, I think from a revenue standpoint, David, I mean, I would look for this Q4 to be better than Q4 of 2025, certainly. From a profitability standpoint, look, I mean, we're still going to have that funky mix that we have built into the existing book of business that we're still trying to grow through. So margins will be compressed without question in the fourth quarter. Ryan, I don't know if you want to add any additional color to that.

Ryan Kavalauskas

No. I mean I think, yes, you're going to see until we're able to kind of build the business a little bit differently. You're always going to have that ramp in Q2 that peaks in Q3 with some of the product mix that flow through. And like Bryan said, I think we'll see a little compression in earnings in Q4 compared to Q3. But I don't believe what we're seeing today is that it will be less pronounced than it was last year. So we do believe ultimately that the profile we're building that we've shown in Q3 can be built upon. It's -- right now, we're just -- we're still seeing that Q3 bump and then we'll always have that kind of Q4 until we can kind of build the business...

Unknown Analyst

Got it. And is that a function of just needing to grow the revenue $30 million a quarter, $40 million -- $35 million a quarter before you could optimize the margins and kind of get rid of the seasonality?

Bryan Kitchen

That's part of it, certainly. And I think one thing that we're encouraged by, I think I referenced earlier in the script that we still have work to do. And I think one of the things that I'm encouraged about is just how much improvement runway we have operationally to unlock additional earnings through optimization, things like cycle time, things like waste elimination, other structural costs. Like we did a lot in the early days of the transformation, but there's still much more to be done. I mean, look at it through the lens of one of the examples I gave earlier, we had a product at a 4.5-day cycle time, we were able to take that down to 4 hours. Now that might be an extreme example. But nonetheless, there are a number of opportunities that we have across the business to optimize.

Unknown Analyst

Good. Yes. And then SG&A, so I think you said 19% this Q3. The goal is 15%. Is that something that can be achieved kind of the 15% level like in 2027 as you grow your top line and optimize, you think you can get there sometime in 2027?

Bryan Kitchen

Yes. I think what we flashed initially was when we're at that kind of $120 million to $130 million mark, we should be in that 15% range. We're a little bit ahead of the curve right now. Like I mentioned earlier, we're -- any time that we can find incredible sales force, we're going to go out and we're going to bring them on because that return on that investment is enormous. But I think we're growing into our SG&A. It's exactly what we said we were going to do a couple of years ago. We're not quite where we want to be yet, and we're going to have to grow into...

Unknown Analyst

Yes. And then just capital allocation. So it looks like share buybacks are essentially -- if you could be opportunistic, obviously, but protect the balance sheet, which is wise, would you be opportunistic on an acquisition if the right one came along? I mean, is there anything you could talk about on that subject?

Bryan Kitchen

Yes. Go ahead, Ryan. Sorry.

Ryan Kavalauskas

Yes, I mean you could hear. We're both aligned there. So yes, absolutely. I think that's kind of what we're focusing on right now. We -- it's working capital, and we -- to win some business, we had to give some terms and that required a little bit more working capital than we've historically needed for the business. So we're comfortable knowing that that's where it's at and they are right now. So it's really all about protecting the balance sheet and leaving us with optionality. So if the right acquisition comes along, we're always looking and it supports the growth of the business in our targeted markets. We've left ourselves the ability to go do that. So we'll continue to look at that. If the share price provides an opportunity, too, we'll be opportunistic there as well. So I think really, it's about focusing on that optionality and looking for internal investments to drive the margin growth through process automation and things like that. It's really -- those are kind of the priorities we're looking at.

Operator

Our next question is from Eric McCarthy with InLight Capital.

Eric McCarthy

And just to echo David, great results. David did address a number of the questions that I had, but maybe just to dig in on them a little bit more. When you quote the sales pipeline number of, I believe it's $112 million, $120 million, is that to be taken as something that's an annual number that could become recurring in the future?

Bryan Kitchen

Yes, it's an absolute value of the overall selling project pipeline that we've built up. So the way in which we look at our pipeline, Eric, nothing makes its way into the selling project pipeline unless it's driven by an expressed customer need. What does that mean? Well we don't have projects in there just as fillers. We're not saying, well, we're going to go develop a product and hope that we sell it to 50 different customers. These are very discrete product customer combinations where a customer has said, I have a need for X, Y and Z can -- you help us. So there's ebbs and flows every month in and out of the pipeline.

But I'd say right now, I think one of the things that I'm most encouraged about is the quality of the pipeline continues to improve month-on-month, quarter-on-quarter. We're starting to see the pipeline really begin to be structured around our focused growth markets versus buckshot. I'm also encouraged to see that our average new win is increasing in size and scale. We're north of $200,000 right now for each new win. So for us, the selling project pipeline, I mean, it's 100-plus projects deep. There's going to be some singles in there. There's going to be some doubles in there, some triples and then few and far between, there'll be that home run. So again, encouraged by how that thing is beginning to be developed and structured by the commercial team.

Eric McCarthy

Great. And then with respect to Midwest and the integration of the acquisition, is there a particular portion of that pipeline that you could allocate to Midwest that shows the benefits of this acquisition and the potential that it still has in front of it?

Bryan Kitchen

Yes. I mean, I guess there's a couple of things. So if you look at the overall pipeline itself, over $50 million of the selling project pipeline is structured around Midwest. So those are relatively new entrants that we put into the pipeline post acquisition. Pipeline size is certainly important, but that conversion is also incredibly important. So we've already -- within this past quarter, we've already won 2 new pieces of business that will generate over $0.5 million a year of annualized top line growth. So these are good piece -- good quality pieces of business. So yes, very exciting.

Eric McCarthy

Great. And then just the last question for -- to unpack some of the seasonality in the business, what's the primary driver of that? Is it the industries in which you serve the end customers? Is it some sort of inventory restock, destock phenomenon? What drives the seasonality across the quarters?

Bryan Kitchen

I mean the primary driver for -- the outsized Q2, Q3 versus Q1, Q4 is built-in seasonality around there's some ag business that we have, a couple of 2, 3 pieces of ag business that squarely sit in Q2, Q3. There's also some legacy jet fuel additive business that's inside of Q2 and Q3 as well. That, coupled with normal Q4 destocking, especially when you're looking at it through the lens of contract manufacturing. Those are really the 2 primary drivers for that built-in seasonality. So our challenge is simple, right? We've got to grow out of it. It's not just grow with size and scale, but it's to find the right pieces of good quality business to put into the mix.

Operator

[Operator Instructions] We are showing no further questions at this time. So I would now like to turn it back to Bryan Kitchen for closing remarks.

Bryan Kitchen

All right. Great. Thank you, Therese. We'd like to thank everyone for listening to today's call, and we look forward to speaking with you all again when we report our fourth quarter 2026 results.

Operator

This does conclude today's conference. You may now disconnect.