Q2 2024 Earnings Summary
- Strong Order Backlog and Record Growth: Nanophase has over $50 million in shipped or in-hand purchase orders for 2024 and expects to exceed that amount. They also have orders for 2025, indicating strong future demand. Notably, July was a record month for the company, highlighting their accelerating growth.
- Capacity Expansion to Meet Increasing Demand: The company is investing to expand their Solésence revenue capability to $100 million, ensuring they can meet growing opportunities without facing past capacity constraints. This positions them well for continued organic growth from $50 million to $75 million and beyond.
- Improving Profitability and Margins: Nanophase is targeting gross margins of 35% to 40% for the full year 2024, with long-term potential to achieve even higher margins. They are focusing on enhancing operational efficiency and expect to generate more cash, reducing the need for additional debt or equity financing.
- The company's margins are uncertain and timing-dependent due to lumpy demand from large customers, making profitability difficult to predict.
- Accounts receivable of $5.9 million significantly exceed cash of $2.3 million, with some receivables past due 30, 60, or 90 days, which may indicate cash flow concerns.
- Increasing staffing levels could lead to higher operating expenses, potentially impacting profitability if the additional staff does not result in proportional revenue growth.
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Revenue Growth Outlook
Q: Do you see bottlenecks to reach $75 million revenue? Is it organically possible?
A: The company plans to increase Solésence revenue capability to $100 million. They are investing ahead of the current $50 million run rate to avoid past capacity constraints, so they are in good shape to grow further. -
Gross Margin Targets
Q: Are we still on target for 35%-40% gross margin for the full year?
A: The plan is to achieve gross margins in the 35%-40% range by year-end. Achieving into the 30% range is reasonable, and long term, potentially reaching a margin with a "4 in front", meaning 40%, would be noteworthy. -
Backlog and Order Visibility
Q: Can we get color on the backlog of $40 million or $30 million in open orders?
A: The company has over $50 million in shipped or in-hand purchase orders for the rest of 2024. They expect this amount to increase and also have orders for 2025, although details are not yet disclosed. -
Profitability and Staffing
Q: When will there be more emphasis on profitability and less on increasing staff?
A: The company added staff to fill gaps that led to poor performance last year. The new hires are improving efficiency and are "more than paying for themselves". The focus is on increasing gross profit margin by reducing direct expenses. -
Accounts Receivable and Cash
Q: Can you comment on receivables of $5.9 million vs. cash of $2.3 million?
A: The company has many 60-day term customers and few 90-day. There are no significant uncollectible receivables; past-due amounts are generally only past 30 days. Better-financed customers pay quickly, so receivables are not a concern. -
Uplisting Plans
Q: Have you considered uplisting to Nasdaq or NYSE to open investment opportunities?
A: They recognize the advantages of uplisting and are evaluating it; it's definitely a priority. -
New Products for 2025
Q: Can you give more color about other products for 2025?
A: The company continues to focus on the beauty industry, specifically skincare and makeup products with SPF, across all categories—face, lip, body—to cover a broad market. -
New Customers
Q: Are there other company names you can announce publicly besides Colorescience?
A: Yes, brands like Tatcha, a Japanese-inspired beauty brand utilizing their branding. Also mentioned Bloomeffects, Relevant, and KINLÒ. There are others they cannot publicly announce.