Q4 2024 Earnings Summary
- Strong profitability expected for 2025 - Management confirmed Q1 2025 will be profitable , with gross margins expected to generally be in the 30s with potential to reach the 40s in some quarters. When an analyst suggested they could double EPS in 2025, management acknowledged continued growth and improving margins while remaining focused on generating more cash.
- Significant manufacturing capacity expansion supporting future growth - The company expanded batch-making capabilities at their Bolingbrook facility with infrastructure for 6 production suites that will support annual capacity in excess of $200 million for consumer products. This expansion is already showing results, as they produced twice as much unit volume in Q4 2024 compared to Q4 2023.
- Growing brand partnerships with larger customers - The company now serves "north of 70 brand partners" , with management noting that "our average customer size is growing". This shift means they "may not need as many brand partners to achieve our goals in the future" as they attract larger customers who place bigger orders, providing a path to sustainable growth without needing to constantly add new small clients.
- Q4 gross margins severely underperformed at only 22% compared to the full year average of 31%, which management acknowledged was "not an acceptable number." Despite aspirations to reach the 30-40% range in 2025, this significant quarterly margin deterioration raises concerns about consistency in operational execution.
- Order growth appears to be slowing significantly, with open orders only up 10% year-over-year ($38 million vs. $35 million last year), which an analyst directly challenged as contradicting management's claim of "unprecedented demand." This suggests potential deceleration in the business despite management's optimistic outlook.
- The company is investing heavily in capacity expansion to support "$200 million on an annual basis" while running far below that level, which may be premature and strain resources. This aggressive investment approach prompted an analyst to question "what's the rush" and ask "are you guys running too fast?" signaling concerns about capital allocation efficiency.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Up ~57% (from USD 8,011k in Q4 2023 to USD 12,567k in Q4 2024) | Revenue increased significantly as enhanced production capacity and strong customer demand—key improvements noted previously in the Solésence business—helped drive sales well above prior levels, overcoming earlier supply chain challenges. |
Gross Profit | Increased from USD 471k in Q4 2023 to USD 2,766k in Q4 2024 | Gross profit experienced a dramatic improvement due to a more favorable product mix and improved operational efficiencies, including better cost absorption and production regularity compared to the previous period’s limited margins. |
Operating Income | Loss narrowed from USD (1,897)k in Q4 2023 to USD (223)k in Q4 2024 | Operating performance improved markedly as higher revenues combined with disciplined cost management—reflected in lower SG&A and stable R&D expenditures—helped reduce operating losses compared to Q4 2023, which had been impacted by earlier inefficiencies and lower sales volumes. |
Net Income | Loss reduced from USD (2,128)k in Q4 2023 to USD (558)k in Q4 2024 | Net loss narrowed significantly as the combined effect of increased revenue, higher gross margins, and better cost control contributed to improved bottom-line performance over Q4 2023, where historical supply chain and operational challenges had weighed on profitability. |
Interest Expense | Declined sharply from USD 1,451k in Q4 2023 to USD 108k in Q4 2024 | Financing costs were reduced substantially due to decreased borrowing or improved financing terms, marking a significant turnaround from the high interest costs in Q4 2023 that had stemmed partly from expanded debt usage to cover working capital needs. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | Indications of double-digit growth | Grows at a multiple of the beauty industry’s growth rate (~3% annually) | lowered |
Growth Expectations | FY 2025 | no prior guidance | Anticipates significantly better than industry growth | no prior guidance |
Gross Margins | FY 2025 | no prior guidance | Aims for gross margins in the 30% range, with potential to occasionally reach 40% | no prior guidance |
Operational Capacity | FY 2025 | no prior guidance | Expanded production capacity to support annual revenue of $200 million | no prior guidance |
Booked Orders | FY 2025 | $34 million, approximately 80% higher than same period in 2023 | no current guidance | no current guidance |
Revenue | Q4 2024 | Expected to set another quarterly revenue record | no current guidance | no current guidance |
Q2 2025 Performance | Q2 2025 | no prior guidance | Expected to be particularly strong, potentially outperforming Q3 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Q4 2024 Revenue | Q4 2024 | Expected to set another quarterly revenue record | 12,567 (thousands) | Missed |
FY 2024 Revenue | FY 2024 | Expected to exceed $50 million, with potential upside to finish in the mid- to upper $50M | 52,347 (thousands)(sum of Q1–Q4 2024: 9,868 + 13,046 + 16,866 + 12,567) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Profitability & Gross Margin Dynamics | In Q1–Q3 2024, the company consistently highlighted strong improvements: Q1 saw a swing from losses to nearly 36% margins ; Q2 discussed margins rising toward a target range of 35–40% ; and Q3 even projected the possibility of 40% margins when operational efficiencies were maximized. | In Q4 2024, despite gross margins expanding to 22% (up from 6% year‐over‐year), both management and analysts described this result as disappointing relative to expectations for margins in the 30s or 40s. | Recurring but with a shift in sentiment. Positive profitability improvements persist, yet Q4’s results generated caution as the margins fell short of ambitious targets. |
Manufacturing Capacity Expansion | Q1 2024 discussed a $2 million capital investment in projects to upgrade capacity and streamline operations. In Q2, investments aimed at boosting revenue capacity to $100 million were highlighted. Q3 further emphasized plans to push capacity into the $200 million-plus range and focused on throughput enhancements via OEE metrics. | Q4 2024 detailed the expansion of batch‐making capabilities—with six new production suites–and noted that unit volume production doubled compared to the prior year. | Consistently positive. The company has maintained a steady focus on capacity expansion through continual investments, with Q4 reinforcing operational scale-up and growth optimism. |
Order Backlog & Demand Visibility | In Q1, the backlog was over $40 million with forward‐loaded orders. Q2 reported over $50 million in shipped/confirmed orders, while Q3 noted an 80% increase year‐over‐year along with strong demand visibility heading into 2025. | Q4 2024 reported a $38 million backlog; however, only 7% of it applies to the latter half of 2025 (down from 23% previously), suggesting customers are now ordering closer to execution. | Recurring with a subtle shift. Order backlog remains robust, though the timing of orders has shifted toward nearer‐term demand, suggesting a cautious but active market sentiment. |
Customer Diversification & Global Expansion | Q1 and Q2 had no specific mention. In Q3, the company began discussing segmentation between prestige (>$30/unit) and masstige ($15–$20/unit) customers and touched on initial steps toward global reach through exports. | Q4 2024 emphasized a diversified customer base with more than 70 brand partners, noted increasing average customer sizes, and underscored global opportunities in Australia, the EU, and the U.K., as well as a strategic BASF tie. | Emerging and growing. Initially absent in early 2024, this topic gained prominence in Q3 and was expanded in Q4, indicating it could markedly influence the company’s long‑term market reach and revenue mix. |
Operational Efficiency & Throughput Improvements | Q1 2024 disclosed rising throughput from 50% to over 90% of target by March with improvements in OTIF and efficiency driven by capital projects. Q2 maintained a focus on OEE, despite some shortfall in meeting throughput targets, and Q3 celebrated record throughput days and on‐time shipments exceeding 90%. | Q4 2024 noted further improvements—unit volume production doubled compared to Q4 2023 and manufacturing capacity was expanded—while also flagging operational challenges like inventory buildup. | Steady improvement amid minor caution. Throughput and efficiency continue to climb consistently, though Q4 also flagged some process-related inefficiencies, indicating room for fine‑tuning despite robust gains. |
Capital Allocation & Investment Risks | Q1 highlighted detailed plans for $2 million in capital projects with quick payback periods. Q2 discussed funding growth solely through operating cash flow and avoiding equity dilution, minimizing investment risks. Q3 did not feature explicit commentary on this topic. | Q4 2024 did not mention capital allocation or investment risks, suggesting that these concerns may have been resolved or are no longer a prominent focus. | No longer mentioned. Earlier quarters featured detailed capital plans and risk management strategies; their absence in Q4 implies resolution of earlier concerns or a shift in focus to operational metrics. |
Cash Flow & Receivables Management | Q2 2024 provided robust detail on cash flow generation, noting positive cash trends and a $5.9 million receivables balance managed with 60-to-90-day terms. Q1 and Q3 had little to no commentary on this topic. | Q4 2024 reiterated positive operating cash flow achievements and stressed improved working capital management, though inventory levels remain higher than desired. | Steady and positive. While discussed intermittently, the overall narrative remains upbeat with healthy cash generation and a continued focus on optimizing receivables and working capital. |
Market Segmentation & Pricing Strategy | Q1 indirectly touched on market positioning through the success of the Solesence business. Q3 explicitly detailed a selective segmentation strategy contrasting prestige and masstige brands, emphasizing profitability per unit. | Q4 2024 did not offer detailed commentary on segmentation or pricing, aside from general references to gross margins and revenue performance; explicit discussion seen in Q3 is less prominent now. | Less explicit in Q4. While Q3 offered a clear segmentation and pricing strategy, Q4 shifted focus toward operational and capacity metrics, reducing the explicit emphasis on market segmentation and pricing details. |
Reduction in Legal Expenses & Litigation Settlements | Q1 2024 elaborated on reduced SG&A expenses—with about $400,000 savings from lower legal fees following the successful BASF settlement—and Q2 continued to cite reduced litigation expenses as a key factor in lowered operating costs. | Q4 2024 did not mention legal expenses or litigation settlements at all. | No longer mentioned. These topics were prominent earlier in the year as significant cost factors; their absence in Q4 suggests that litigation concerns have been resolved and are no longer a strategic distraction. |
NANX Q4 2024 Earnings Call Q&A Summary
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Revenue Outlook
Q: What is the current order backlog situation?
A: Current shipped and open orders are at $38 million compared to $35 million last year, with a key difference in timing. Only 7% of current orders apply to 2025 second half versus 23% last year. Management anticipates record revenues for Q1 2025 and expects more orders coming in for the second half. -
Profitability Guidance
Q: Do you expect Q1 to be profitable?
A: Management confirmed they expect Q1 2025 to be profitable. For the full year, they anticipate gross margins in the 30-40% range, improving from the 22% in Q4. The company achieved net income of $4.2 million for full year 2024, an $8.6 million improvement from 2023's loss. -
Nasdaq Uplisting
Q: What is the timing for Nasdaq uplisting?
A: Management is pursuing uplisting to Nasdaq in 2025, expected within "potentially months." They believe they're currently eligible without needing to issue additional shares, and are initiating a search for a dedicated CFO to strengthen the leadership team. -
Growth Trajectory
Q: Is growth still strong despite conservative order patterns?
A: Management confirmed they will grow "certainly" in the first half, with the second half less clear but still expecting to grow at "a multiple" of the industry's 3% growth rate. Average customer size is growing, and order sizes remain similar or larger than before. -
Customer Base
Q: How many brand partners are you currently serving?
A: The company is serving "somewhere north of 70 brand partners" including disclosed partners like Colorescience, Tatcha, and Credo, plus other undisclosed brands representing a large percentage of revenue. -
Manufacturing Capacity
Q: Are you expanding capacity too quickly?
A: Management expanded batch-making capabilities with infrastructure for 6 production suites, supporting capacity in excess of $200 million annually. They don't believe they're growing too fast, as some redundancy is needed for flexibility in manufacturing different product types. -
Quarterly Performance
Q: Will Q2 be stronger than Q3 this year?
A: Management indicated Q2 looks "particularly strong" and would likely be better than Q3 this year, which differs from typical seasonality. They expect "significantly better than industry growth" for the full year. -
Gross Margin Decline
Q: Why did gross margin drop to 22% in Q4?
A: The margin decline was due to overtime in December to accommodate launches, inventory build for facility consolidation, and some inventory becoming obsolete. Management stated 22% is "not an acceptable number" and they expect to be "in the 30s and possibly getting into the 40s" in 2025. -
Tariff Impacts
Q: How will potential tariffs affect the business?
A: Management acknowledged uncertainty around tariffs, noting they've seen increased conservatism from brand partners and some "anti-American sentiment" affecting Canadian shipping. They're also seeing suppliers becoming more aggressive with price increases in anticipation of higher costs. -
Patent Developments
Q: What new patents were recently granted?
A: The company received two new patents in Q4: one for plant-based antioxidant technology with expected product implementation in 2025-2026, and another for a skin-soothing agent delivery at high concentrations that's already in some formulations provided to brand partners. -
Inventory Management
Q: Are you improving inventory management?
A: Management acknowledged current inventory levels are "relatively high" but is focusing on improving working capital management in 2025. They've established better processes and relationships with their procurement team and will look to reduce inventory to "more manageable levels" going forward. -
Award Recognition
Q: What is the Au Lait Face Milk 50+ award?
A: Au Lait Face Milk SPF 50+ featuring Solesence Kleair technology won in the Best Prestige Finished Formula category at the 2025 C&T Alle Awards. This is their third consecutive win at the prestigious Alle Awards, recognizing achievements in novelty, sustainability, stability and efficacy.