NLI Holdings, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance

• Net income attributable to NLI stockholders was $12.7 million ($0.26 per share) for the third quarter of 2026, compared to a net loss of $7.8 million ($0.16 per share) in the third quarter of 2025.
• For the first nine months of 2026, net income attributable to NLI stockholders was $26.0 million ($0.53 per share), compared to a net loss of $6.8 million ($0.14 per share) in the same period of 2025.
• CompX net sales were $44.0 million for the third quarter of 2026, a 10% increase from $40.0 million in the third quarter of 2025, and $128.2 million for the first nine months of 2026, a 6% increase from $120.6 million in 2025.
• CompX segment profit was $6.4 million for the third quarter of 2026, up from $4.8 million in 2025, and $22.4 million for the first nine months of 2026, up from $17.0 million in 2025.
• NLI recognized equity in earnings of Kronos of $10.6 million in the third quarter of 2026, a significant improvement from equity in losses of $11.3 million in the third quarter of 2025.
• NLI recognized equity in earnings of Kronos of $13.8 million for the first nine months of 2026, compared to equity in losses of $8.6 million in the same period of 2025.
• Kronos net sales were $541.1 million in the third quarter of 2026, an 18% increase from 2025, and $1.6 billion for the first nine months of 2026, a 12% increase from 2025.
• Kronos income from operations was $57.9 million in the third quarter of 2026, reversing a loss of $19.2 million in 2025, and $108.1 million for the first nine months of 2026, compared to $26.6 million in 2025.
• Corporate expenses increased by $0.2 million in the third quarter of 2026 compared to 2025, primarily due to higher environmental remediation costs, but decreased by $0.2 million for the first nine months of 2026 compared to 2025.
• Interest and dividend income decreased in both the third quarter and first nine months of 2026 compared to 2025 due to lower interest rates and investment balances.
• Unrealized gains on marketable equity securities were $0.9 million in the third quarter of 2026 (vs. a $0.5 million loss in 2025) and $4.0 million for the first nine months of 2026 (vs. a $9.1 million loss in 2025).
• Kronos average TiO2 selling prices increased 11% during the first nine months of 2026, with Q3 2026 prices 5% higher than Q3 2025, though Q1-Q3 2026 prices remained 1% lower than the corresponding 2025 period.

Business Segments and Product Lines

• CompX sales growth in the third quarter of 2026 was driven by higher Marine Components sales to towboat and industrial markets, and higher Security Products sales to healthcare and tool storage markets.
• CompX sales growth for the first nine months of 2026 was driven by higher Marine Components sales to the industrial market and higher Security Products sales to healthcare, tool storage, transportation, and distribution markets.
• Kronos sales growth in the third quarter of 2026 was primarily due to market share gains in European and North American markets, anti-dumping duties, changing supply conditions, and higher average TiO2 selling prices.
• Kronos sales growth for the first nine months of 2026 was driven by market share gains in European and North American markets and currency exchange rate changes (primarily the euro), which added approximately $39 million in net sales.
• Kronos income from operations improvements were driven by higher sales volumes, higher production rates reducing unabsorbed fixed costs, lower raw material costs, and cost reduction initiatives implemented in Q4 2025, partially offset by higher energy and distribution costs and unfavorable currency impacts.

Risks and Challenges

• Key risks include future supply and demand fluctuations, the ability to realize cost savings from strategic initiatives, and the ability to integrate acquisitions.
• The company faces risks related to the cyclicality of businesses, particularly Kronos' TiO2 operations, and dependence on specific market sectors.
• Risks include unexpected industry capacity expansion, fluctuations in raw material costs (energy, ore, zinc, aluminum, steel, brass), and the implementation of tariffs.
• Global economic and political conditions, including tariffs, natural disasters, conflicts, and public health crises, could disrupt supply chains or reduce demand.
• Operational risks include labor disputes, leaks, fires, explosions, unplanned downtime, and technology disruptions such as cyber-attacks.
• Competition from Chinese suppliers with less stringent regulatory requirements and potential consolidation of competitors or customers pose challenges.
• Currency exchange rate fluctuations, particularly involving the euro, Norwegian krone, and Canadian dollar, could impact results.
• Pending litigation regarding lead pigment, environmental matters, and CompX's use of permitted chemicals, as well as income tax audits and environmental compliance regulations, present ongoing uncertainties.

Management Commentary and Tone

• Management noted that Kronos successfully implemented price increases and surcharges in response to rising operating costs, including energy and distribution costs.
• The press release highlights that Kronos' income from operations improved significantly due to favorable factors like reduced unabsorbed fixed production costs and lower raw material costs.
• Management acknowledges that actual future results could differ materially from forward-looking statements due to substantial risks and uncertainties.

Other Key Points

• Net income for the third quarter and first nine months of 2026 includes a $3.7 million ($2.9 million net of tax) non-cash deferred income tax benefit from Kronos related to proposed currency regulations under §987 released in August 2026.
• Net income for the first nine months of 2026 includes a $0.6 million ($0.5 million net of tax) expense related to Kronos' recognition of an uncertain tax position from a German tax audit.
• Net loss for the third quarter and first nine months of 2025 included a $5.9 million ($4.7 million net of tax) non-cash deferred income tax expense reflecting the impact of a rate reduction on Kronos' net German deferred tax asset.
• Net loss for the third quarter and first nine months of 2025 included a $1.1 million ($0.9 million net of tax) non-cash gain from the remeasurement of an earn-out liability related to Kronos' 2024 acquisition of the remaining ownership interest in Louisiana Pigment Company, L.P.
• Kronos' net sales for the first nine months of 2026 were impacted by currency exchange rates, which increased sales by approximately $39 million.
• The company operates in component products (security products, recreational marine components, custom metal fabricated parts) and chemicals (TiO2).