— Delivered $9.7 million in Q3 revenue
— In Beauty Science markets, Solésence revenue is up 39% YOY
— In Personal Care Ingredients markets, Nanophase revenue is up 61% YOY
Romeoville, Ill., November 8, 2022 – Nanophase Technologies Corporation (OTCQB: NANX), a leader in minerals-based and scientifically-driven health care solutions across beauty and life science categories — with innovations that protect skin from environmental aggressors and aid in medical diagnostics — today announced third quarter and nine-month 2022 financial results.
“Our Solésence revenues grew 39%, and our Active Pharmaceutical (“API”) revenues grew 61% from 2021 to 2022, when comparing the nine-month periods ending September 30. It’s clear that our strategy has us performing well in two markets with a high degree of consumer demand,” said Jess Jankowski, Chief Executive Officer. “Our brand partners continue to see success in the market as sun care becomes consumer-critical across beauty categories, and while our gross profit was down this quarter as we worked to satisfy our extraordinary growth in demand, we expect it to improve significantly going forward. The teams that we’ve built to manage the additional demand and growth are elevating the experience and level of service we are able to offer to our current and prospective brand partners.”
“This was a busy quarter for us – both externally as we took home two major beauty industry awards, and internally as we made changes in our manufacturing and supply chain teams to help us succeed in executing the transformational changes we are making in our operating departments,” Kevin Cureton, Chief Operating Officer, commented. “On the commercial side, we saw an increase in both lead volume and lead quality amidst a quarter that is historically a quarter during which customers are focused mainly on reorders of existing products. On the operational side, the executive management team completed our analyses of manufacturing costs and of the team charged with executing these departments. Some changes in manufacturing and supply chain have already been completed and others are underway to strengthen the team and bring it up to the world-class standards of our products. We expect the scale of improvement available to our Company over the next couple of quarters to result in a 7-figure reduction in today’s manufacturing expenses on an annualized basis.”
Jankowski continued: “We are thrilled about Solésence’s award wins this quarter. These milestones are consistent with the accolades our brand partners continue to garner based upon the products launched with us – and it is exciting for us to see more direct recognition of our company, our point of difference, and our impact, by the industry.”
Operational Highlights
Solésence Beauty Science and Kleair™ Win Two Major Beauty Industry Awards
• In July, Solésence and Multi-Cultural Magic, SPF 50+ Featuring Kleair™ won Best Formulation at Cosmopack North America. The Cosmoprof North America Awards and Cosmopack North America Awards “formally recognize the absolute best in beauty products, celebrate innovation, and honor excellence in packaging design and formulation,” according to the Awards website.
• In September, the Kleair™ technology – which is available only through Solésence products – won Most Significant Ingredient in the Sun/Light Protection Category at the Cosmetics & Toiletries Allē Awards. The Allē Awards bring “behind-the-scenes ingenuity in cosmetics and personal care R&D into the spotlight.” The Kleair™ technology was reviewed and rated by an esteemed panel of experts on parameters such as sustainability, multifunctionality, novelty, and proof of efficacy, among other aspects, according to the awards website.
Expansion into SPF-Infused Makeup at MakeUp in New York
• Solésence showcased health-driven, SPF-infused makeup at a successful trade show event, MakeUp in New York, in September where product concepts, formulas, and services were met with great energy and enthusiasm.
Brand Partnerships Continue to Drive Growth
• In the third quarter, over 1.4 million units of new products shipped.
• New launches represented approximately 16.4% of the Solésence shipments during the third quarter.
New FDA-Registered Facility Represents 100% of Warehouse Activities
• Consolidated from 3 different warehousing sites into a single site, with the addition of more than 3X the square footage and 6X in racking capacity, while implementing new scanning/barcoding tools that will streamline inventory management and tracking.
Production Milestone: Second Consecutive Record Quarterly Revenue
• Following warehouse consolidation in Q2, our new FDA-registered facility now represents 100% of warehousing activities. This infrastructure change further allows us to execute other changes to achieve cost improvement targets, as we have begun to transition the packaging aspects of our business over to the new facility, with targeted completion in Q1.
• Revenue for the third quarter was $9.7 million, vs. $7.9 million for the same period in 2021, a 22% increase over record revenue.
• Solésence revenue was $5.9 million, up 30% from $4.6 million in 2021.
• Personal Care Ingredients revenue was $2.9 million, up 34% from $2.2 million in 2021.
• We saw a loss in the third quarter amounting to $0.75M, in part due to investments in current and future growth across facilities, engineering, new intellectual property, and the resumption of trade shows. Some atypical expense items amounted to $0.53M or 70% of our loss for the quarter.
• Nanophase was the victim of cyber theft in September and October, amounting to $0.66M. We are pursuing the recovery of these funds aggressively; if unrecoverable, our insurance may reimburse 25% of the losses.
• We elected to recognize a loss of $0.19M in Q3, reflecting the portion of cyber theft that occurred in September.
Nine-Months
• Revenue for the nine months ended September 30th was $29.1 million, vs. $22.1 million for the same period in 2021, a 31% increase.
• Solésence revenue was $18.6 million, up 39% from $13.4 million in 2021.
• Personal Care Ingredients revenue was $8.6 million, up 61% from $3.4 million in 2021.
“We maintain a strong market position and see strong demand continuing. We have shown time and again the ability to create differentiated products that have helped us to capitalize on excellent growth opportunities in the markets we serve. We continue to see more opportunities to capture growth for the foreseeable future and expect to see marked margin improvement going forward,” continued Jankowski. “The beauty industry – particularly the segment we operate in – has shown itself to be resilient in times of economic uncertainty, and we look forward to continuing our growth in 2023 as we enhance consumers’ lives through our skin health products.”
Conference Call
Nanophase will host its Third Quarter Conference Call on Wednesday, November 9th, 2022, at 11:00 a.m. CST, 12:00 p.m. EST, to discuss its financial results and provide a business and financial update. On the call will be Jess Jankowski, the Company’s President & CEO, joined by Kevin Cureton, the Company’s Chief Operating Officer.
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FINANCIAL RESULTS AND NON-GAAP INFORMATION
Use of Non-GAAP Financial Information
Nanophase believes that the presentation of results excluding certain items, such as non-cash equity compensation charges, provides meaningful supplemental information to both management and investors, facilitating the evaluation of performance across reporting periods. The Company uses these non-GAAP measures for internal planning and reporting purposes. These non-GAAP measures are not in accordance with, or an alternative for, Generally Accepted Accounting Principles (“GAAP”) and may be different from non-GAAP measures used by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or net income per share prepared in accordance with GAAP.
About Nanophase Technologies
Nanophase Technologies Corporation (NANX), www.nanophase.com, is a leading innovator in minerals-based and scientifically driven health care solutions across beauty and life science categories, as well as other legacy advanced materials applications. Leveraging a platform of integrated, patented, and proprietary technologies, the Company creates products with unique performance, enhancing consumers' health and well-being. We deliver commercial quantity and quality engineered materials both as ingredients and as part of fully formulated products in a variety of formats.
About Solésence Beauty Science
Solésence, LLC, www.solesence.com, a wholly owned subsidiary of Nanophase Technologies, is changing the face of skin health with patented, mineral-based technology that is embraced by leading performance-driven and clean beauty brands alike. Our patented products for brands transform the way mineral actives look, feel and function — enabling textures never-before-seen in the mineral space and inclusivity never-before-seen in the sun care space. Solésence’s innovative formulations offer best-in-class UV protection, unparalleled free radical prevention to protect against pollution, and enhanced antioxidant performance.
Forward-Looking Statements
This press release contains words such as “expects,” shall,” “will,” “believes,” and similar expressions that are intended to identify forward-looking statements within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such statements in this announcement are made based on the Company’s current beliefs, known events and circumstances at the time of publication, and as such, are subject in the future to unforeseen risks and uncertainties that could cause the Company’s results of operations, performance, and achievements to differ materially from current expectations expressed in, or implied by, these forward-looking statements. These risks and uncertainties include, without limitation, the following: a decision by a customer to cancel a purchase order or supply agreement in light of the Company’s dependence on a limited number of key customers; uncertain demand for, and acceptance of, the Company’s engineered materials, ingredients, and fully formulated products; the Company’s manufacturing capacity and product mix flexibility in light of customer demand; the Company’s limited marketing experience; changes in development and distribution relationships; the impact of competitive products and technologies; the Company’s dependence on patents and protection of proprietary information; the resolution of litigation in which the Company may become involved; the impact of any potential new government regulations that could be difficult to respond to or too costly to comply with while remaining financially viable; the ability of the Company to maintain an appropriate electronic trading venue; and other factors described in the Company’s Form 10-K filed March 31, 2022. In addition, the Company’s forward-looking statements could be affected by general industry and market conditions and growth rates. Except as required by federal securities laws, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new events, uncertainties, or other contingencies.
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