Solésence, the parent company of Nanophase Technologies (OTCMKTS:NANX), used its fourth quarter and full-year 2025 earnings call to outline a new operational and growth framework dubbed “Transform and Transcend”, while also addressing margin pressure that accompanied rapid revenue growth in 2025.
Fourth quarter results: higher margin, return to profit
Chief Financial Officer Laura Riffner reported fourth quarter revenue of $12.5 million, “roughly even compared to the previous year.” Gross profit increased to $3.4 million from $2.8 million a year earlier, with gross margin rising to 27% from 22%.
Net income for the quarter was $163,000, compared with a net loss of $558,000 in the year-ago period.
Full-year 2025: record revenue, compressed profitability
For full-year 2025, Riffner said revenue reached a record $62.1 million, up 18.6% from $51.9 million in 2024. She attributed the increase primarily to “a large scale launch in the first half of 2025” and “20 new brand partners who launched products in 2025.”
Despite the revenue gain, gross profit was essentially flat at $16.1 million versus $16.2 million in 2024. Riffner said margins were compressed by three key areas:
- Labor costs: elevated labor expense “primarily driven by extended process changeovers and related downtime as we scaled our production volume.”
- Product design: “startup and quality costs associated with a complex launch in the first half of 2025.”
- Inventory control: the “most substantial headwind,” as the company experienced “yield volatility and associated losses.”
Adjusted EBITDA for 2025 was $4.2 million, which Riffner described as “less than 7% of revenue.”
2026 guidance: gross margin floor and EBITDA improvement
Looking ahead, management emphasized an operational reset. Riffner said the company is “establishing a 30% gross margin floor as our target for the year” and expects EBITDA improvement in 2026, “returning to double digits as we realize six-figure annual savings from our facility consolidation and the elimination of 2025’s operational inefficiencies.”
She also identified free cash flow as a priority, with a goal of increasing cash generation “by reducing safety stock and improving procurement operations.”
Riffner cautioned that first quarter results will be affected by “investments in training and restructuring associated with Transform and Transcend,” as well as changes in customer ordering patterns. She pointed to retail dynamics and “weak sell-through from one of our large mass-market customers.”
She added that the company’s “current shift in open orders stands at just under $33 million as compared to a year ago when they were at $38 million,” and said the company anticipates “a period of revenue normalization,” while remaining confident it can meet full-year guidance.
Transform and Transcend: four pillars for execution and expansion
President and Chief Executive Officer Kevin Cureton framed the initiative as a response to operational shortcomings that emerged during rapid growth. He said Solésence nearly doubled revenue over the past two years, expanded its patent portfolio by 20% to “over 120,” and built manufacturing capacity that “will enable us to generate over $200 million in revenue without further major investment.”
However, Cureton said 2025 exposed operating-model gaps—product design, labor efficiency, and inventory control—that limited the company’s ability to convert growth into income performance. The “Transform and Transcend” program is intended to “fundamentally correct the operating challenges we have identified while amplifying the innovation platform we created,” he said.
Cureton outlined four pillars:
- Operational excellence: implementation of lean management principles and a modernized sales, inventory and operations planning process (SIOP). Cureton said the company plans to increase gross profit margin “by at least 5% by the end of this year compared to 2025.”
- Technology-driven expansion: beginning in late Q2 to early Q3 2026, the company plans to expand into new product categories, including bringing technology behind its prototype Day Mode Hero Concealer to market and moving into adjacent prestige segments such as scalp care.
- Capturing more value in the supply model: a shift toward turnkey supply and collaborative marketing to drive sell-through and increase recognition of Solésence-branded technologies. Cureton said the company “kicked off our first major co-marketing activation two weeks ago with brand partners Colorescience and Bloomeffects.”
- Collaborative globalization: starting in the first quarter of 2027, the company plans to support select brand partners expanding internationally; Cureton said the regulatory complexity of global SPF markets could allow margins “by 10% or more relative to our domestic benchmarks.”
Q&A: EPS, margins, BASF, and production questions
In response to a question about whether 2026 EPS would match or exceed 2024 levels, Riffner said the company was “not prepared to provide guidance on that.” She reiterated that management is targeting EBITDA to return to double-digit levels in 2026. On margins, she described the 30% gross margin floor as “intentionally conservative,” adding that the company intends to improve it through the initiative.
Asked about the path to $200 million in revenue and potential gross margins near 40%, Cureton said the successful facility consolidation did not negatively impact “OTIF” (on time and in full) performance. He said the Transform and Transcend plan is designed to address operational execution challenges while amplifying the company’s innovation platform, adding that these initiatives are expected to “significantly increase our gross profit margin performance and therefore in the end, our EBITDA,” though he noted it would take time.
On BASF volumes, Cureton said the company can acknowledge certain brand partners but is “very careful not to provide specific guidance on their performance,” while stating the company continues to partner closely and has “a good working relationship with BASF.”
Responding to questions about production struggles, Cureton attributed difficulties to simultaneously growing faster than the industry while installing new capability, with emphasis on meeting cGMP quality standards and maintaining OTIF performance. He also said the company did not lose a brand partner, but referenced sell-through challenges at a mass-market customer.
Closing the call, Cureton said 2026 would be “our year of transformation,” focused on removing inefficiencies, modernizing the supply chain, and refining how the company works with partners to support mutual success at “both the top and bottom lines.”
About Nanophase Technologies (OTCMKTS:NANX)
Nanophase Technologies, Inc (OTCMKTS: NANX) is a specialty materials company that develops and manufactures advanced nanomaterials for a wide range of industries. The company focuses on producing high-performance nano-oxides, nano-ceramics and custom nanomaterial formulations designed to enhance product durability, functionality and aesthetic appeal. Through proprietary synthesis and coating technologies, Nanophase delivers materials with controlled particle size, shape and surface chemistry to meet specific application requirements.
Nanophase’s core product portfolio includes nanometer-sized oxides such as aluminum oxide, zirconium oxide and silicon dioxide, along with composite materials that integrate multiple metal oxides.
