• Q2 2024 Revenue: $13 million, a 32% increase over Q1 and a 10% increase over Q2 2023.

• First Half 2024 Revenue: $22.9 million, with a 32% gross margin.

• Gross Margin: 29% for Q2 2024, impacted by a $500,000 inventory write-down.

• Net Income Q2 2024: $900,000, a $500,000 improvement over Q2 2023.

• First Half 2024 Net Income: $1.7 million, compared to an $800,000 net loss in the same period of 2023.

• Operating Expenses: Decreased by about $1 million year-over-year.

• Inventory Increase: Up $3.8 million since year-end to support growth.

• Projected 2024 Revenue: Potential to exceed $50 million for the year.

• Capital Expenditures 2024: Estimated between $3 billion to $6 billion.

• Warning! GuruFocus has detected 9 Warning Signs with NANX.

Release Date: August 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nanophase Technologies Corp (NANX) reported a strong Q2 2024 with $13 million in revenue, marking a 32% increase over Q1 and a 10% increase over Q2 2023.

• The company achieved a 29% gross margin despite a $500,000 inventory write-down, indicating strong operational performance.

• Nanophase Technologies Corp (NANX) has improved its supply chain management, achieving 100% target performance for inventory availability.

• The company has a robust pipeline with over $50 million in shipped and confirmed sales orders for 2024, indicating strong demand for its products.

• Nanophase Technologies Corp (NANX) is investing in capital improvements to increase production capacity to $100 million in Solesence finished products, positioning for future growth.

Negative Points

• The company experienced a $500,000 inventory write-down due to obsolete components, impacting gross margins.

• Nanophase Technologies Corp (NANX) faces challenges in meeting demand due to production constraints, which have been a limiting factor for growth.

• The company's non-Solesence sales have been dragging down overall growth, with limited visibility and control over this segment.

• Operating expenses remain a concern, with the need for additional staffing and capabilities to support growth potentially impacting profitability.

• The company has only $2.3 million in cash, raising concerns about funding future growth without further dilution or debt.

Q & A Highlights

Q: Could you elaborate on the non-Solesence sales and what we might expect for those? Also, what would your target gross margin be for this year and next year? A: Jess Jankowski, President and CEO, explained that the non-Solesence business, primarily with BASF, has less visibility and control. They expect it to be a good year but have limited insight into 2025. The target gross margin for this year is in the 30s, with potential for improvement next year.

Q: What is your strategy for growth from a standpoint of using capital versus cash from revenues? A: Jess Jankowski stated that the goal is to fund growth from operations this year without accumulating more debt. They aim to avoid equity capital due to its high cost and focus on generating cash from operations to support growth.

Q: Can you comment on the receivables and inventory levels? A: Jess Jankowski noted that receivables are primarily on 60-day terms, with minimal uncollectible amounts. Inventory levels are robust to support demand, and they are comfortable with their current position.

Q: Are there any bottlenecks to reaching $75 million in revenue, and what are the plans for new products in 2025? A: Kevin Cureton, COO, mentioned that they are investing in capacity to reach $100 million in Solesence revenue capability. They continue to focus on skincare and makeup products with SPF, with several brands like Tatcha and Bloomeffects utilizing their technology.

Q: What are your plans regarding uplisting, and how will it impact investor opportunities? A: Jess Jankowski confirmed that uplisting is under active discussion, considering factors like strong quarters and potential dilution. Uplisting would open investment opportunities and improve liquidity, which is a priority for the company.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.