Good day, thank you for standing by. Welcome to Nanophase Technologies Corporation Third Quarter 2024 Earnings Conference Call. At this time, all participants are on the listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. Today's call is being recorded. The words beliefs, expects, anticipates, plans, forecasts, and similar expressions are intended to identify forward-looking statements. Statements contained in this news release that are not historical facts or forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect a company's current beliefs and a number of important factors that cause actual results for future periods to differ materially from those expressed in the news release. These important factors include, without limitation, a decision of the customer to cancel purchase order or supplies agreement, demand for and acceptance of the company's personal care ingredients, advanced materials and formulated products, changes in development and distribution relationships, the impact of competitive products and technology's possible disruption in commercial activities, occasioned by public health issues, terrorist activity, and armed conflict, and other risks indicated in the company's filings with the Securities and Exchange Commission. Nanophase undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. I will now hand the conference over to your speaker, Mr. Jess Jankowski, President and CEO. Please go ahead, sir. Thank you, Livia. Good afternoon to all of those listening live. We appreciate your flexibility and today's timing. Also, thank you to those following up later online. Kevin Cureton, our Chief Operating Officer, is joining me again today on the call. We have some brief prepared comments that will be available for some Q&A afterwards. Dare I say our progress has been scary good so far in 2024. I had to say that. Looking at our quarterly financial results and talking in approximate numbers, at almost $17 million in total revenue and over $3 million in net income for Q3 of 2024, we continue to set new milestones. Year-over-year, our bottom line went from an 18% loss in Q3 of 2023 to net income of 18% or $3.1 million in third quarter 2024. That's a $4.5 million swing. Looking at our nine-month financial results, again talking in approximate numbers, we're at a record pace, which is not an approximation. With a total of $40 million in revenue, our nine-month numbers have exceeded the prior year's nine-month numbers by more than $10 million or 36%. We've set a new revenue record for each quarter in 2024, and we expect to do it again in Q4. Just through 9/30 of 2024, we've exceeded total full-year 2023 revenue by $2.5 million or 7%, and we have a quarter to go. At $13.4 million in gross profit or 34% of sales, we exceeded nine-month 2023 gross profit by $6 million, and our gross profit percentage was up nine points, almost 40% over that of the same period in 2023. We also booked $4.8 million in net income for the nine months of 2024 versus a $2.3 million loss for the same period in 2023, more than a $7 million improvement. Looking forward, in the Solésence era, our Q4 revenue has typically been lower as a percentage of total revenue than Q2 and Q3. There are too many variables for us to give a clear indication of full-year results at this point, but we do expect 2024 revenue to exceed $50 million, and with upside, we may well finish in the mid- to upper- $50 million range. We're looking at solid customer demand into 2025, and while expecting a typical dip in Q4 results, we see more growth coming as we continue to improve operational efficiencies. Our top focus is preparing to deliver additional volume in 2025 and to increase profitability on every unit we ship. Now, I'd like to introduce Kevin Cureton, our Chief Operating Officer, to share his thoughts on our progress in 2024 and our forward outlook. Kevin. Thanks, Jess. As always, I'd like to thank our team for continuing to demonstrate why we are considered the platinum standard in the industry, our brand partners for the continued commitment to collaborative growth, our supplier partners for keeping their promises to us, and of course, our investors for their patience and faith in our organization. Q3 represents a milestone moment for our organization. Jess has already highlighted some of those financial successes, so I'll spend a brief bit of time on operational milestones that we've also achieved. I'm sure it's no surprise that our company in two of the three months of Q3 achieved record throughput levels. The improvement in throughput was largely driven by our adoption of OEE metrics that helped us focus our company on areas that would yield the biggest immediate improvement in performance. In Q3, that focus was on increasing uptime. While the improvement in uptime, we also saw an improvement in labor efficiency as compared to prior quarters. While there is still far to go, with the key additions in our production management and maintenance teams and the realization of the benefits from our automation investments, we expect to consistently improve our performance in these areas. Our other key metrics were also strong. We continue to have excellent inventory availability, allowing us for the first time this year to also achieve a significant improvement in on-time in full performance, where over 90% of all planned shipments were completed within the quarter. As we noted at the beginning of this year, we believe that we can simultaneously achieve continued growth at a multiple of the industry's growth rate while improving profitability. While combining these operational improvements with improvements in materials costs, it's clear that our company is now solidly positioned to continue to accomplish that objective. We plan to continue to grind hard at proving this quarter- after- quarter, and in fact, we are focused on having our EBITDA performance rival some of the best-in-class companies in the market, regardless of industry. In closing, I'd like to mention two additional items: our book of business and our people. It's great to be able to confidently state that we have a strong book of business similar in scope to what we had when we closed Q2. We are poised for excellent top-line growth in Q4 of this year versus the same period in 2023, and are already having volumes in 2025 that will look to be record levels. Turning to our teams, as I noted last quarter, this success is underpinned by the fabulous teams we have throughout the company. We know that while our world-class technology and know-how is how we got this journey started, it's our people that ultimately make the difference and will be the reason that we continue to outperform our market in terms of growth and profitability. We continue to raise our expectations and are excited about what the future holds. Back to you, Jess. Thanks, Kevin. To expand on the book of business point, for purposes of comparison, our shipped and open orders at 9/30 of this year are $34 million. That's about 80% higher than the same number for 2023. We expect more than a third of that in Q4. This is how we'll deliver record Q4 revenue this year, followed by record Q1 revenue expected in 2025. In terms of our commercial model, a good way to summarize our business is that with our active pharmaceutical ingredients or APIs, we're offering the market a way to achieve UVA, UVB, and other environmental protection in what we believe is the safest manner possible. While this was always a priority in our business, the advent of Solésence has helped us to bring our finished minerals-based solutions to entire new markets. Not only will we enhance your life by helping to protect your skin with minerals in the way most dermatologists believe is safest and most effective, but we'll also help you to look great while doing it. As you can see, we continue to see consumers of prestige cosmetics demand more of our market partners' Solésence-enabled products. These are large and deep markets for us. We expect the growth to continue. Consumers realize that safe skin protection is a critical part of overall health, as is feeling good about the way you look. That's what we're all about. While we know that most of our investors listen to the webcast or review the transcript after this call, we're happy to invite those of you participating live on today's call to ask any questions you may have or share a comment or two. Afterward, I'll offer a few closing comments. Livia, would you please begin the Q&A session? Finally, so please, ladies and gentlemen, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. Please stand by while we compile the candidate roster. Now, first question coming from the line of John Henderson with Inflection Consulting. Your line is open. Hey, guys. Congratulations. Wow. I think I can speak for everyone. We've been waiting years for this incredible inflection point. Congratulations comes immediately to mind, and well done. Thank you. So just one or two quick comments regarding the expectations for next year. So you guys already have booked significant orders for 2025, and relative to last year, up 80%. When did the majority of the orders really kind of J-curve for you guys each year? Is it during the spring and summer, obviously, with the seasonal aspect, or is this going to be a business where the seasonality just gets less and less because the brands are just selling so well, potentially even around the world? Thanks for the question, and yeah, I would say, first of all, our business, as Jess alluded to, is really non-seasonal, at least in terms of the use of the product. A lot of the products that we sell, in fact, the majority of the products that we sell are really skincare or color cosmetics with SPF, not just SPF. And so that gives it a lot less seasonality. There are, however, times when retailers really still like to bring these types of products into their brick-and-mortar environment, and those tend to be in late first quarter, early second quarter. So new launches, so to speak, typically happen there, and so you usually have a little bit of a surge there. Usually, we anticipate that, and it hasn't been true in the last few years, in part because of some of our operational difficulties, but you'd expect sort of the first quarter to early second quarter to be the big lift, and then if you've got good market success, third quarter is really usually a strong quarter because that's sort of your reorder times. With our business, because we're growing a lot, we still see a lot of Q4 orders, although, as Jess mentioned, those haven't been as big as, say, some of our launch period. Though, again, that's changing as well as we also see some, for lack of a better way of putting it, globalization, where we have EU or our U.S. customers are shipping ex-U.S., outside of the U.S., for the products that we make for them. A lot of information there, but that's usually the time frames that we would see and the rhythm that we would see in our business. Guys, I mean, honestly, I almost fell off my chair when I saw Solésence in earnings. I mean, I didn't think we'd see that till low 20s. That is just so impressive, and obviously, with all the shares that have been issued. I think to kind of actually hear that you guys are confident you can continue to improve efficiencies. Is it too crazy to start talking about potential 40% gross margins coming, Jess? I know you don't want to stick your neck out, but I mean, the momentum you have operationally, I mean, how consistent can it be? And is 40%, at least for a couple of quarters next year, viable? I think it's possible. Ultimately, the way we're growing and the ups and downs are what drives some of that. If you do $12 million at $1 million a month and it's relatively flat production, it's a lot easier to benefit from all the gains you make. That would be a small number for us at this point, but in terms of just the regularity of production, so our first goal internally has been to try to keep production as close to flat as we can and still satisfy our customers, so if we have a dip, a low revenue month, maybe we're still producing at the same rate so that we're as efficient as possible, and that's where the hedging comes on what our margins can or can't be. We actually had a higher gross margin in Q3 of last year based on a combination of product mix and where the production was relative to the shipment. So I definitely think it's possible. I think it's likely that we have months in there that are 40% or above. And the question about stringing them together in a quarter and then multiple quarters really has a lot to do with the trajectory of the business. If it's a steady, if it happened to be a steady growing year where every month we just do a little bit more and a little bit more and it goes, it's very possible. If it's up and down, it gets harder. But I don't think it's unrealistic to look at today's margins and say that they're achievable into the future, notwithstanding quarterly dips, and that we do expect to be improving on them. Final question. I'll get to the queue. You guys, are you in place already to get to 100 million in capacity, or do you need to add more lines, and you're going to be doing that over the course of 2025 to get to, hopefully, those levels, maybe as early as 2026? We're in place to do that now. We are adding more capacity to be in place to do more than that, a multiple of that potentially. And it's whether we do it, when we do it, has to do more with the growth of the business, the marketing, and the customer uptake. But we're capable of doing it now. And I think what we'll see over time is that we'll have more, we'll have redundancies that roll back and forth between types of production because all of these folks, all these customers want different packaging. We refer to these things as components, whether it's in a bottle or a tottle or a tube or a jar. And what we don't have is universal excess capacity in each type of component. And that has a lot to do with not knowing yet where that demand's going to be. So I think we're always going to have a higher capacity number than we're delivering because of that. And that's something to try to manage over time and understand. The better we understand it, the better we'll do at it. But we definitely have that capacity now. Great job, guys. I'm going to see the floor. Thanks. Thank you. Thank you. Thank you. Our next question coming from the line of James Lieberman with American Trust Investment Services. Your line is open. Thank you. These are great numbers. Congratulations all around. I know it's been quite a struggle getting there. As one might expect in business, it's uneven, a little bit lumpy, but it sounds like it's gaining momentum and getting a little bit of stream of business, which is easier to plan around. Again, congratulations. Do you think, not knowing fully how you play out and how you structure your products, can you provide your product to even a broader range of end users? I can see where it adapts really well to the high-end quality skincare business, but could you also provide more to the everyday over-the-counter people who want to just come in for a light cream with a sunscreen, a lower cost? I'll let Kevin start on that one. Thanks, JJ. James, thanks for the comments. I will say that our business, even being very careful because, as you know, there's only so many things we can say about the brands we support. But our brands range not just with the prestige brands, which typically sell north of $30 a unit, but now our brand partners are really some of the leading companies that are in that mass market space, which is more in that $15-$20 per unit. So that is a higher volume market space for us in terms of unit volume. We definitely, and I'm sure Jess would want to comment here as well, but we definitely do want to be selective so that we are really focused on delivering high-quality growth, meaning that the margin on every unit, as Jess mentioned earlier, is better and better as we continue to grow, so that's why we are a bit selective and why we like a lot of top-line growth. We definitely want to emphasize bottom-line growth over top-line growth as we go forward. Sure. Thanks, Jess. Jess, you had a mic. Sure. James, I would say that Kevin's got it exactly right, and the more efficient we get, the better it will be for us to cast a slightly wider net. We're seeing a lot of, we have more opportunities than we currently deliver on, partly because we want to remain as profitable as we can. It's always that balance because at some point, we want to be a $500 million company. You've got to pick and choose your customers, but you also need to have a bigger tent to have those volumes. I think through next year into the following, our strategy is going to unfold some more. We're going to get some more feedback internally from how good we can get at this and what it will be to get to the next step. I think that's going to be a critical inflection point. I think we're also happy about these results this far because the inflection point of sustainability, decent margins, and some profit has been something that's been elusive to us. But really, the next one will be, "Okay, you can make a really nice margin on relatively modest revenue," which isn't modest in the world we came from, but it's becoming modest based on what we know we can do and where we go with that. Yeah. No, I think that's a great picture in terms of I've thought of the company as structured toward a $100 million company, but you're actually providing a vision where you might see something significantly higher down the road. That's really creative and exciting. I have one more follow-on question. So do you have a certain amount of tax loss carry forward that you can sort of play these nice profits against, or how does that play out? We are in the process of looking at that both on the state and the federal side. We have a large NOL. A good portion of that is available based on the way the rules are and when we went public and all those things. We will be able to take advantage of some of those. We also have been taking advantage at a smaller level of some of the R&D tax credits that are available. So I think that will help over time. The state of Illinois is a little different because they've put some of these, they've suspended the use of some of the NOLs so that you can use them, but not right now, and they're also extending the life of them because it's partly related to the current state of the state, but we will see some benefits from that over the coming years. We do expect to mitigate some of our tax liabilities using that large NOL. Thank you again for this wonderful picture and vignette. And congratulations. This is exciting news. Thank you. Thank you. Thank you. Thank you. And as a reminder to ask a question, please press star one one and wait for your name to be announced. Now, our next question coming from the line of Tony Riven. Your line is open. Good afternoon, gentlemen. And thank you for the nice treat, as it were. Hi, Tony. So yeah. And as everyone has said, congratulations. It's nice to see what you guys have talked about for a while come together. So just to follow up to something that I probably asked last quarter, and that is, do you have a sense as to full-year 2025 growth and how that might even look going beyond that? I know in this call, I think for the first time, Jess shared a vision of going far beyond 100 million in sales and indicated you have the equipment to go beyond there even today and more on the way. So just generally speaking, what are you guys thinking in terms of revenues for 2025 and beyond in percentage growth or net dollars, however you? I have a deer in the headlights look right now for those not watching the video that doesn't exist. Yeah. I think over a period of time that the curve is going to flatten, and we won't grow as quickly. I mean, we had for three years there, we tripled, tripled, and tripled. Then it slowed down a bit. We had a nice uptick this year. I certainly think we're going to have growth. It'll be in the double-digit range for next year. I don't think it'll be a double or anything like that. But I do think part of it, Kevin and I were just discussing this, we get a much better look at what's going to happen at the end of the year and the next year when we get into mid to later summer. So it really is difficult to say because you've got a couple of things. The question that John had asked about cyclicality really speaks to the way that launches go and reorders. And it's all one of those things. If you deliver the orders on time, which we are getting much better at, then the reorders come sooner, which allows you to grow and grow. And we haven't had a full year yet of knowing that we delivered everything on time. And that all made it to the consumer on time. And their feedback on what they wanted more of comes back in in the same fiscal period. So next year should be a better year, a stronger year. I don't know if our results will be Q3 times 4, which would be a really nice year in a lot of respects. They very well may be on the revenue side. We'll just have to take it quarter by quarter. And I think when we get into Q1 in our announcement, which is typically in February, March, we should have a better idea of where 2025 can take us. And by the time we're getting into certainly Q3, potentially even our Q2 discussion, we may have some indications about 2026. Okay. No, I appreciate that. But it sounds like all systems are a go, and you should continue to accelerate. And then the other question I have is kind of a follow-up from previous quarters. And there's been a repeated request by long-term holders and probably any holders to have the company consider an uplisting. Now that you're making good progress on the operational heavy lifting, and I'm sure there's a lot of sausage-making in the background that is heavy, heavy lifting, is there any comment with respect to a potential uplisting? Sure. I think it's something we are talking about, and we've mentioned before, part of it is putting together a successive series of strong quarters, which we're on the way to doing. At the board level, we discuss it. It's been a regular item we've discussed, and I think strategically, we continue to address it without, there's certain things I can't really share, but going down that path, long-term, I'd say midterm, we certainly want to get more liquidity for all of you. Looking at the stock and the way it moves and the thinly traded nature of it, that's a direct feature to a certain extent of the exchanges we're on, and we recognize that, so it is a fairly ready, frequent discussion internally, and I think we'll be continuing to pursue that. As we get into 2025 and we lay another couple of quarters down, we'll definitely have more to talk about in that regard. All right, well, again, congratulations, and thank you, and keep up the good work. Thanks, Tony. Thank you. And as a reminder, to ask a question, please press star one one and wait for your name to be announced. And I see we do have a follow-up question from John Henderson with Inflection Consulting. Your line is open. I just want to kind of reiterate that I definitely feel as though you guys, with what you're doing, I think all shareholders are going to benefit tremendously. Along with the company, you're going to have greater access to less expensive capital and less dilution going forward to uplist, and it's something I think we all deserve, waiting as long as we've had to get it to this point. It's just such an amazing quarter, and as long as you guys are consistent in terms of building the profitability, this is the type of disruptive technology that it's going to get at eight times, 10 times price of sales on the Nasdaq, and it's a $10 stock at a $100 million run rate and then some, so definitely really looking forward to next year, but we're really just going to keep giving you a nudge every quarter. So hopefully, the board hears that too. And congrats. It's amazing. I mean, you can begin to sketch out how this becomes a much bigger company in three to four years. And so yeah, thanks for all your efforts. Thank you. Appreciate it, John. Thank you. And our next question coming from the line of Wayne Riven. Your line is open. Hey, Jess. Can you hear me? Hi, Wayne. I sure can. How are you? Well, I'm fine. I'm pretty optimistic with the company. And then Tony La Russa said that they'd be better next year. So now we got to win 42 games. Don't pick on my voice box. Anyhow, thank you for your. You got grit, Jess. You stayed right with the company, and I want to personally thank you for not running off. Thank you so much. Will the upcoming year from the production side get a little better than it was this year? Do you still want to do? And when you deliver on time, does that make for additional orders, and thank you again, Jess. You really made my day yesterday. Oh, well, thank you, Wayne. That's important to all of us here. I think we recognize we have some long-suffering shareholders. We're happy to have good news and hopefully continued good news. Trying to take those in order or remember the issues. We are continuing to expand our manufacturing capacity, and our goal is to get up into the 200 million-plus range. While we're doing that, we have added some more staff, both, as Kevin mentioned, not just in supply chain, but also on the supervisory floor, and with what we say maintenance, they're really kind of maintenance engineers in terms of getting the equipment running, getting it up running faster and more efficiently, and we've got a series of people that have almost identical experience from the mechanical side of manufacturing in the business now that we really didn't have a year or two ago. I think we're all expecting increased throughput and increased operational efficiency going into next year. That's going to really get better as the growth happens. Those things, I think, are-I think those things. I'd like to say they're a foregone conclusion, but they're certainly in our planning, a foregone conclusion that we're going to see more throughput, better profitability, higher abilities to put volume through. Your other question, that's something that we refer to them as reorders frequently. You have a launch, and the launch date, if we hit the launch on time, the launch date usually happens so that there can be reorders in that same year. That's something that we can't quantify what we've missed in the past, but we have missed those in the past by being late or incomplete on the degree we could deliver. And I think that's something that is going to bear some fruit for the business in almost every respect in a positive way in 2025. And we've seen some of it in 2024. So that's an exciting feature to look forward to. And that's also the happier your customers are, the more they're willing to push your products. And these products, while they are technically, we believe, superior to what's out there, we are selling through market partners that have other things to sell as well. And so if you fall short when you're supposed to deliver, they'll fill the hole somewhere. Shelf space is hard to get. So we are expecting really good things out of our added capabilities. This kind of quarter and this kind of success and being able to build a little cash and have some flexibility is going to have a multiplicative effect on the business. Thank you again, Jess. Thank you. Thank you, and again, to ask a question, please press star one one. The next question from John Henderson. Your line is open. Guys, I promise this is it. I got to go hit my daughter's Halloween party. So literally waiting years for this. So final question, two questions. Share count was around 71. I mean, is there still another tranche of the preferred not converted yet to common? No. No. They're all. All in right now is 71. Okay. Yeah. We're all in. Everything's converted. Great. And obviously, China, potential tariffs, I have to ask. You guys looked ahead just in case there's. Do you think you're affected? And have you planned for that scenario so we don't need to have something hit us out of the blue next year? Yeah. I think the key issue there is how much of our supply, John, is really from China specifically. There are sources that are important sources to us in China, but they are not our only source. It's been one of the points this year where we've said in prior calls that we've got our best operations team ever. And that includes our procurement team. And one of the things that they've been working hard on is diversifying our sources relative to key raw materials. So in pretty much every situation that we have a source that's from China, we have an alternative source that is not produced in China. So we do already have that built into our plan, not specifically because of the tariffs, but because we need to have that diversity of supply because things happen relative to people's ability to ship and produce and capacity and everything else. Thanks so much, guys. Again, congratulations. All right. Thank you, John. Thank you. I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Jankowski for any closing remarks. Thank you, Livia. And thanks to all of our investors and stakeholders for playing such a critical part in helping us to become a sustainable business as we develop critical mass. We couldn't do it without your financial investment or your emotional investment. I also need to amplify what Kevin has said. Our team makes this company, and we're grateful for all of their efforts, their willingness to work hard and take risks, and their daily investment in bringing an aggressive strategy to fruition. By continuing to raise our expectations, by doggedly pursuing our Solésence-driven growth strategy, and gritting it all out, we're becoming the exciting company we'd all hoped for. This is just the beginning. Our future is bright. I hope everyone has a good rest of your day, maybe helping the kids in your life to find the neighbor that gives out the full-size candy bars, or better yet, being the neighbor that gives out the full-size candy bars, and finish things today with a smile. Thanks, folks. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. And you may now disconnect.