2016 THIRD QUARTER CONFERENCE CALL
Jess Jankowski, President & CEO
Thank you and good morning everybody. I'm glad that all of you could be here.
We're happy that you've joined us to discuss our third quarter 2016 financial results and business updates. Frank Cesario, our CFO, has joined me again today. We had an active quarter, partially clouded by revenue timing, driven to a great extent by growth in our existing Personal Care business, and through sales within our Diversified Technologies customer base. The third quarter of 2016 represented yet another milestone, as we posted a positive adjusted EBITDA for the first nine months of this year. Adjusted EBITDA is our proxy for positive operating cash flow, and we're getting close.
We're still focused on new business development as our main metric, but by managing our costs effectively, we're working hard to apply our business development resources to achieve their greatest impact. We're doing this, while generating as may dollars of margin as we can, as we focus on building new business. As we've recently shared, our business development is being focused on two key markets; Personal Care and Solar Control. We're continuing to deliver world class materials, and support, to our existing customers in other markets, but our business development focus has been narrowed to increase our effectiveness. As regular callers will notice, the timing of this call keeps moving around. This is, probably, along with my cold today, a function of our active and expanding business development effort, and we still aren't finished. We will keep expanding our marketing efforts as new products come on line. Our goal is to continue to market our new product lines and build related revenue streams, while we support our existing customers more efficiently.
I plan on covering all of these things in further detail after Frank provides a short overview of our financial results. With that, I'd like to introduce our CFO, Frank Cesario!
Frank Cesario, CFO
Thanks Jess. Good morning, this is Frank Cesario. Before I begin today's overview of our financial results for the third quarter of 2016, please remember that all financial results are stated in approximate terms.
Revenue for the third quarter of 2016 was $2.5 million, vs. $2.8 million in 2015. The net loss for the third quarter of 2016 was $0.4 million vs. $0.2 million in 2015, with both periods posting a loss of $0.01 per share.
For the first nine months of 2016, revenue was $8.4 million, vs. $8.0 million during 2015. Our net loss for the nine-month period was $0.6 million in 2016, or $0.02 per share, compared to $0.9 million, or $0.03 per share, in 2015.
We ended the third quarter of 2016 with a $1.7 million cash position and nothing drawn on our working capital credit line.
Jess Jankowski, President & CEO
We continue to expect this year to show overall growth. Two thousand sixteen should exceed two thousand fifteen in revenue, although second half two thousand sixteen volume will be lower than first half volume was. The bulk of our markets, particularly when dollar-weighted, are seasonal. Q4 should get a benefit from some Q3 volume slipping in to Q4, but it still won't approach the level of our second quarter performance. I continue to expect two thousand sixteen revenue, and margins, to exceed two thousand fifteen's. Due to our conservative approach to budgeting, we are seeing nice pickups in cash flow and earnings as volumes increase. Nanophase has posted a series of record financial results, and we look for that trend to continue in two thousand seventeen.
As I mentioned earlier, we're focusing our business development resources on two main areas:
- Personal Care: &
- Solar Control
It's been a strong quarter in terms of internal product development, particularly toward our White Label product offerings through our Solésence subsidiary for Personal Care. Our Solésence technology can both enhance the aesthetics of a sunscreen, from skin feel, to reducing whitening, while also addressing a growing concern in the industry, by aiding in photo stability, and in free radical "quenching". In addition to adding to a formulation's full spectrum UV protection, with our base zinc oxide particle, our new coated materials bring the added benefits of allowing other ingredients to perform better, by remaining stable, and reducing free radical formation. Recall that "White Label" products refer to a finished product, built to market-driven specifications that will be sold and marketed by another company.
Solésence will complete the entire development and production cycle, delivering a product in our customer's packaging. The customer will then be responsible for marketing, promoting and selling the product. Our goal is to have a series of read-to-go products that can be marketed either as they are, or with the addition of some specific ingredients or features that are desired by the company that will be consumer-facing.
The White Label finished products business is practically brand-new to us and still difficult to predict. We expect it to begin with a series of smaller customers, in this case, each with annualized dollar volumes in the high-five-to low-six-figure range. We're still early stage, with expected revenues to begin in Q2-Q3 of 2017, with volumes becoming more significant over time.
Regarding our Solar Control business, we have a customer that will be launching a product this quarter that should result in first half 2017 revenue.
While I don't expect this volume to be high initially, it has the potential to be high-six-figure revenue and we expect it to be repeatable with other customers, as we continue to develop this market and our products for it.
We're moving forward and expect to close 2016 ahead of 2015 in all important respects:
- We will have higher revenue
- We will be closer to positive cash
- Our base business is strong and growing
- Our two key areas of focus, Solar Control and Personal Care, have seen some new business in 2016, with more coming in 2017
- We have formed our first subsidiary, Solésence, based upon new technology and new formulating capability
- Market conditions for our products appear to be good, and
- We have the track record, internal experience, and skills in our two main areas of focus, particularly in Personal Care, to allow us to be competitive much more quickly than with past initiatives
While I know that most people catch the matinée version of our call online, at this time, I'd like to open it up to any questions those listening live may have. David, will you please being the Q&A?
I'll leave you with this: Your Company is doing well and moving forward. We will have a markedly stronger year in 2016 than in 2015, and we expect 2017 to be stronger yet. I'll look forward to speaking with all of you during the year-end call. Thank you, again, and let's make it a good day.