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NANOPHASE TECHNOLOGIES Corp (NANX)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered record net revenue of $16.866M, gross margin of 36%, and net income of $3.045M ($0.04 diluted EPS), driven by Solésence growth and operational throughput/automation improvements .
  • Solésence revenue surged to $13.6M (+171% YoY), underpinning quarter strength and establishing a path to a record Q4 and strong Q1 2025 on shipped and open orders of $34M at 9/30 (expect >1/3 in Q4) .
  • Management expects FY2024 revenue to exceed $50M, with potential to finish in the mid–upper $50M; margin performance improving with 40% gross margin months viewed as possible amid capacity expansion to >$100M output .
  • No S&P Global Wall Street consensus was available for NANX (OTCQB microcap; missing CIQ mapping), limiting beat/miss analysis; catalysts include confirmed record Q4 setup, margin trajectory, uplisting consideration, and diversified supply versus tariff risk .

What Went Well and What Went Wrong

What Went Well

  • Record Q3 revenue ($16.866M), gross profit ($6.102M), operating income ($3.198M), and net income ($3.045M; 18% net margin), reflecting stronger mix and efficiency gains .
  • Solésence revenue reached $13.6M (+171% YoY); operations improved with >90% on-time-in-full shipments within Q3 and record throughput months, aided by overall equipment effectiveness (OEE) and automation .
  • Booked demand supports forward momentum: shipped/open orders of $34M at 9/30 (expect >1/3 realized in Q4); management sees FY revenue >$50M with potential mid–upper $50M and capacity in place for ~$100M+ .

What Went Wrong

  • Prior-year and earlier periods highlighted operational bottlenecks (OTIF <50% target in Q1), component obsolescence write-down in Q2 (~$500k) pressured margins; though remediation actions reduced these issues in Q3 .
  • Demand lumpiness and packaging/component type mix constrain universally balanced excess capacity (e.g., bottles/tubes/jars), increasing complexity to string together quarter-long 40% gross margins despite potential in some months .
  • External legal/shareholder noise: an August 8 shareholder investigation press release (not company-issued) may create headline risk despite operational momentum .

Financial Results

MetricQ1 2024Q2 2024Q3 2024
Net Revenue ($USD Millions)$9.868 $13.046 $16.866
Gross Profit ($USD Millions)$3.581 $3.740 $6.102
Gross Margin %36% 29% 36%
Operating Income ($USD Millions)$1.111 $1.047 $3.198
Net Income ($USD Millions)$0.893 $0.856 $3.045
Diluted EPS ($USD)$0.01 $0.01 $0.04
Adjusted EBITDA ($USD Millions)$1.505 $1.438 $3.589
Net Income Margin %n/a8% 18%
Segment/KPIQ1 2024Q2 2024Q3 2024
Solésence Revenue ($USD Millions)$8.0 $11.2 $13.6
Solésence YoY Growth %n/a+44% +171%
Other Revenue ($USD Thousands)$96 $123 $81

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD)FY 2024“Potential >$50M; H2 revenue to exceed H1 by >20%” “Expect >$50M; potential mid–upper $50M” Maintained/clarified upward range
Revenue ($USD)Q4 2024“H2 to exceed H1 by >20%” “Record Q4 revenue expected; >1/3 of $34M shipped/open to be recognized” Raised (explicit record callout)
Gross Margin %FY 2024Plan 35%–40% 40% months “possible”; quarter-long 40% depends on production regularity Maintained (with tone of confidence)
Capex ($USD)2024~$2M projects (lab, processing relocation, automation) $3M–$6M total capex (transcript) Raised scope (note: transcript figure likely $3M–$6M)
CapacityOngoingSupport ~$100M Solésence finished products within footprint In place to do $100M now; adding capacity for more Maintained/expanded
TaxesMulti-yearn/aUtilize federal/state NOLs and R&D credits; IL timing constraints noted New clarification

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Supply chain & OTIFInventory availability >95%; OTIF <50% of target; adopting OEE; KPI integration >90% of planned shipments completed in-quarter; record throughput months Improving execution; OTIF now strong
Throughput & automationThroughput rose to ~76% of target Q1; 72% of target Q2; planned automation OEE-driven uptime gains; labor efficiency improved; added automation Continuous operational gains
Capacity & capital planCapex ~$2M (lab, wet processing, filling); aim ~$100M capacity $100M capacity “in place”; adding redundancy across components Capacity in place; expanding
Product/brand momentumAwards (Allē; Cosmopack), strong brand launches (e.g., Tatcha), pipeline building Prestige and masstige growth; EU sell-through improving; broad category coverage Broadening demand; global
Tariffs/macron/aDiversified sourcing to mitigate potential China tariff impacts Risk managed (alternatives sourced)
Regulatory/legalBASF litigation settled; SG&A down accordingly Ongoing NOL/R&D credits utilization; IL NOL timing Clean legal path; tax asset use
Uplisting/liquidityBoard actively discussing uplisting; focus on strong quarters Uplisting remains under consideration to improve liquidity/capital access Strategic priority discussed

Management Commentary

  • “We expect 2024 revenue to exceed $50 million and with upside, we may well finish in the mid- to upper $50 million range.” — Jess Jankowski, CEO .
  • “Over 90% of all planned shipments were completed within the quarter… we expect to consistently improve our performance… focused on having our EBITDA performance rival some of the best-in-class companies.” — Kevin Cureton, COO .
  • “Our shipped and open orders at 9/30 are $34 million… we expect more than 1/3 of that in Q4… record Q4 revenue this year followed by record Q1 revenue expected in 2025.” — Jess Jankowski .
  • “We are in place to [deliver] $100 million now… adding more capacity… a multiple of that potentially.” — Jess Jankowski .

Q&A Highlights

  • Margin trajectory: Management believes 40% gross margin months are possible; quarter-long and multi-quarter sustainability depend on production regularity and mix; near-term trajectory improving with operational gains .
  • Capacity and scaling: NANX is already positioned to deliver ~$100M; adding flexibility/redundancy across packaging components to handle varied customer demand .
  • Demand seasonality: Business skewed toward skincare/color cosmetics with SPF (less seasonal), with retailer cadence driving late Q1/early Q2 launches and Q3 reorders; Q4 improving with globalization and growth .
  • Liquidity/uplisting: Board continues to discuss uplisting to expand investor access and reduce capital costs; focus on chaining strong quarters before executing .
  • Tariff risk management: Diversified raw material sourcing ensures non-China alternatives for key inputs to mitigate potential tariff impacts .

Estimates Context

  • S&P Global/Capital IQ consensus for NANX Q3 2024 EPS and revenue was unavailable due to missing CIQ mapping for this OTCQB microcap, so we cannot assess beat/miss versus Wall Street estimates at this time [GetEstimates error].
  • Given the strong actuals and explicit record commentary, sell-side models (where they exist) likely need upward revisions for FY revenue and margin trajectory; however, formal consensus is not accessible for comparison .

Key Takeaways for Investors

  • Sequential acceleration and structural margin improvement: Q3 marked records across the P&L with 36% gross margin and 18% net margin; >90% OTIF and OEE-driven throughput suggest durability into Q4 .
  • Solésence as the growth engine: +171% YoY Solésence revenue in Q3 and expanding masstige/Europe penetration support sustained multi-quarter strength; pipeline and reorders improving with on-time execution .
  • 2024 setup constructive: Management expects FY revenue >$50M with potential mid–upper $50M; record Q4 guided qualitatively with $34M shipped/open orders at 9/30 and >1/3 expected in Q4 .
  • Capacity de-risked: ~$100M capacity in place with ongoing investments to broaden component flexibility; supports 2025 volume growth and EBITDA scaling .
  • Risk management: Supply diversification mitigates tariff exposure; prior litigation resolved; NOLs and R&D credits available to offset taxes, aiding cash generation .
  • Strategic optionality: Uplisting remains under review, a potential catalyst for liquidity, coverage, and cost of capital; continued operational execution is key .
  • Trading setup: Near-term catalysts include record Q4 print and Q1 2025 trajectory; monitor margin progression, OTIF stability, and brand sell-through (prestige/masstige) to gauge durability and multiple expansion .

Appendix: Source Documents Read

  • Q3 2024 8-K 2.02 press release and attached financials: record revenue/profit and Solésence growth; full statements of operations and balance sheet .
  • Q3 2024 earnings call transcript: prepared remarks and Q&A covering revenue outlook, capacity, margins, supply chain, uplisting, tariffs –.
  • Q2 2024 8-K press release and earnings call: H2 guidance (>20% above H1), component write-down, KPI integration/OEE, Solésence +44% YoY – –.
  • Q1 2024 8-K press release and earnings call: gross margin plan 35–40%, BASF settlement, ~$2M capex projects, Solésence $8.0M – –.
  • Other Q3-period press release: shareholder investigation notice (headline risk) .