Nanophase Technologies (OTCMKTS:NANX), reporting as Solésence, posted record third-quarter revenue and net income as manufacturing efficiency improved, but said it now expects its full-year EBITDA margin to fall slightly short of its earlier double-digit target.
Revenue rose 38% to $20.2 million in the third quarter of 2026 from $14.6 million a year earlier, Chief Financial Officer Laura Riffner said. Net income was $3.7 million, compared with a net loss of $1 million in the prior-year quarter.
Gross margin expanded to 39.3% from 23.8%, an increase of 15.5 percentage points. Riffner attributed the improvement largely to stronger equipment effectiveness, alongside a favorable product mix driven by growth among strategic brand partners.
Efficiency gains support margins
President and CEO Kevin Cureton said Solésence completed the primary investment and implementation phase of its lean management initiatives during the quarter. The initiatives are part of the company’s “Transform and Transcend” strategy.
Riffner said overall equipment effectiveness across production lines rose to 55% at the end of the third quarter from 40% a year earlier. Year-to-date direct labor costs declined by more than $2 million compared with 2025, while indirect labor costs fell by more than $400,000, she said.
Cureton said the company had expanded its manufacturing footprint from less than 80,000 square feet to approximately 300,000 square feet since 2022, increasing both capacity and fixed costs. He said year-to-date indirect costs were down by a seven-figure amount from the prior year, with further opportunities to improve labor efficiency, production yields and product mix.
Asked whether the third-quarter results were sustainable, Riffner said management did not view them as a fluke. She said the company expected to build on its operational improvements through the end of 2026 and into 2027.
Outlook calls for record year
Based on shipped and on-hand orders, Riffner said Solésence expects to reach at least $65 million by year-end. Management expects 2026 to mark a third consecutive year of record revenue and profit growth.
The company maintained its expectation that gross margin will be at least 30% for the year. However, Riffner said full-year EBITDA margin is likely to be slightly below the previous double-digit target, primarily because of softer first-half performance. She expects fourth-quarter EBITDA margins to remain well above first-half levels.
Cureton said the company tries to provide consistent, somewhat conservative guidance and does not want to forecast quarter-over-quarter performance because reorder and product-launch timing can vary. He said he expects growth in 2027 and potentially greater growth in 2028, while emphasizing that the latter was not official guidance.
Riffner also said the company completed the restatement of its historical financial statements and filed the related amendments. Solésence has implemented enhanced internal controls and is testing their operating effectiveness, she said.
New sunscreen ingredient offers opportunity
Cureton said the convergence of beauty and wellness could expand the company’s addressable market as consumers place greater emphasis on health and skin care. He also pointed to the U.S. Food and Drug Administration’s approval this year of bemotrizinol, or BEMT, a UV filter used in European and Asian beauty products.
Solésence has developed concept formulas combining BEMT with its proprietary skin-health technologies and shared them selectively with brand partners, Cureton said. Although there is no official release date, he said consumers could begin seeing the hybrid products in 2027.
The CEO said the company has more than 60 brand partners and, at the last count, more than 300 product SKUs. While some larger customers have grown substantially, Solésence aims to diversify by adding domestic and selectively chosen international partners, he said.
Cureton added that the company generally considers its business nonseasonal because its facial skin-care and cosmetic products are used year-round, although new SPF product launches tend to occur from late in the first quarter into early in the second.
About Nanophase Technologies (OTCMKTS:NANX)
Nanophase Technologies develops and manufactures engineered nanomaterials and advanced material formulations for consumer and industrial applications. Its products include mineral-based ingredients such as zinc oxide and titanium dioxide, which are used in skin care, cosmetics and sun protection. Through its Solésence business, the company also provides product development and manufacturing services for beauty and personal care brands. These services can include formulation, testing and production of finished products, including sunscreens and skin-care products.
