Alpha Pro Tech, Ltd. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Consolidated net sales for the three months ended September 30, 2026, increased 12.3% year-over-year to $16.6 million from $14.8 million in the prior year period.
• Net income for the quarter increased 97.2% to $1.9 million ($0.19 per diluted share) from $976,000 ($0.09 per diluted share) in the third quarter of 2025.
• Gross profit rose 18.2% to $6.9 million, with the gross profit margin improving to 41.8% from 39.7% in the prior year period.
• Net income as a percentage of net sales increased to 11.6% from 6.6% in the prior year period.
• The company reported cash of $25.5 million and working capital of $52.1 million as of September 30, 2026, with no debt.
• The current ratio was 9:1 as of September 30, 2026, compared to 13:1 as of December 31, 2025.
• A $70,000 net change in gross profit and a $124,000 net change in net income were attributed to an IEEPA tariff refund recognized in late February 2026.
• For the nine months ended September 30, 2026, net sales were $49.9 million and net income was $4.5 million.

Guidance and Future Outlook:

• The building industry outlook for the remainder of 2026 is described as soft but generally stable, without a meaningful rebound.
• A modest increase in single-family housing starts is expected in 2027, assuming economic and financing conditions improve.
• The company plans to expand housewrap and synthetic roof underlayment product offerings in 2027 to enhance competitive position and support long-term growth.
• Management remains focused on growth in the Building Supply segment and has recently expanded its sales team.
• Uncertainty regarding market factors remains a concern for the outlook.

Business Segments and Product Lines:

• Building Supply Segment: Sales increased 1.7% to $9.4 million from $9.3 million. This was driven by a 13.1% increase in housewrap sales, partially offset by a 6.3% decrease in synthetic roof underlayment sales and a 22.0% decrease in other woven material sales.
• Disposable Protective Apparel Segment: Sales increased 30.2% to $7.2 million from $5.5 million.
  • Sales of disposable protective garments (90% of segment sales) increased 30.6%, driven by improved distribution network sales and higher selling prices.
  • Sales of face masks and face shields (10% of segment sales) increased 25.9%.
  • Shoe covers, lab coats, frocks, gowns, and bouffant caps all contributed to the improved performance.
• Other Woven Materials: Sales were down 22.0% in the third quarter of 2026, primarily due to order timing, though year-to-date sales were flat compared to the prior year.

Market and Competitive Landscape:

• Single-family housing starts declined 1.6% in the third quarter of 2026 compared to the prior year, though this represented an improvement from the prior quarter's decline.
• Alpha Pro Tech outperformed the market in core building products; housewrap sales grew 5.2% while the overall market faced headwinds.
• Synthetic roof underlayment sales declined 6.3%, outperforming the Asphalt Roofing Manufacturers Association (ARMA) reported industry shipment decline of 13.0%.
• The company continues to incur tariff costs under a new 10% tariff announced under Section 122 of the Trade Act of 1974, following the rescission of 50% IEEPA tariffs on goods from India.

Risks and Challenges:

• Exposure to foreign currency exchange risks related to unconsolidated affiliate operations in India.
• Potential failure to remediate material weaknesses in internal controls.
• Risks associated with the joint venture partnership in India.
• Potential loss of major customers or reduction in order volume.
• Challenges related to international manufacturing and supply chain access.
• Effects of tariff policies, ongoing trade disputes, and related litigation, including tariff refunds.
• Uncertainties regarding the development and deployment of artificial intelligence.
• Volatility in common stock price and investments.

Management Commentary and Tone:

• Lloyd Hoffman, President and CEO, noted that the company outperformed the market despite housing market weakness, citing specific growth in housewrap and better-than-industry performance in roof underlayment.
• Hoffman expressed encouragement regarding the breadth of growth in disposable protective garments and face mask/shield categories.
• Colleen McDonald, CFO, highlighted the company's strong cash position and ongoing stock repurchase activity.
• Management indicated a focus on deepening customer relationships and identifying opportunities to expand sales across the portfolio in 2027.

Other Key Points:

• The company repurchased 97,982 shares of common stock for $483,000 during the nine months ended September 30, 2026.
• As of September 30, 2026, the company had repurchased a total of 22.0 million shares at a cost of approximately $58.6 million.
• $914,000 remained available for additional stock purchases under the stock repurchase program as of September 30, 2026.
• All repurchased stock is retired.
• Future repurchases are expected to be funded from cash on hand and operating cash flows.
• The company has manufacturing facilities in Nogales, Arizona, and Valdosta, Georgia, and a joint venture in India.