Nanoxplore ((TSE:GRA)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call for NanoXplore presented a balanced sentiment, reflecting both optimism and challenges. On the positive side, the company celebrated the completion of a major graphene contract and saw improved EBITDA margins, bolstered by government support for battery innovation. However, these positives were tempered by significant revenue declines and challenges stemming from economic and trade policies. Overall, the sentiment was mixed, with a cautious optimism for future growth amid current market uncertainties.
Completion of Major Graphene Contract
NanoXplore has achieved a significant milestone by finalizing a substantial contract with a major U.S. oil and gas company for its Tribograph powder. This high-performance carbon powder is used in drilling fluids, marking a major achievement for the company in the graphene sector.
Improved Adjusted EBITDA Margins
Despite facing a decline in revenue, NanoXplore reported improved adjusted EBITDA margins. This improvement reflects a broader adoption of high-margin products and effective cost management, with adjusted gross margins increasing to 24.7%, up by 110 basis points year-over-year.
Completion of Statesville Expansion
The company has completed the installation and commissioning of equipment at its North Carolina facility. Preproduction parts have already been shipped to a new customer, and full production is expected to commence in October, marking a significant expansion for NanoXplore.
Government Support for Battery Industry Acceleration
NanoXplore has been selected to receive up to $2.75 million over the next three years from Natural Resources Canada. This funding is aimed at research and development on silicon graphene in ultra-high-powered cylindrical cells, providing a boost to the company’s battery innovation efforts.
Revenue Decline
The company reported a 17% year-over-year decline in total revenues for Q4, amounting to $31.7 million. This decline was primarily due to reduced demand from NanoXplore’s two largest customers, posing a significant challenge for the company.
Volume Reduction from Major Customers
The advanced materials, plastic, and composite segment is currently experiencing a reduction in volume from its two major customers. This trend is expected to result in a challenging first and second quarter of the next fiscal year.
Economic and Trade Challenges
NanoXplore is facing disruptions due to the current U.S. administration’s trade and economic policies. These policies have caused delays in some announced contracts and volume reductions in ongoing business, adding to the company’s challenges.
Forward-Looking Guidance
Looking ahead, NanoXplore provided guidance indicating a challenging start to fiscal 2026, with reduced demand from their two largest customers leading to a 17% decline in Q4 revenues. However, the company anticipates growth in the second half of fiscal 2026, driven by the ramp-up of new programs, higher-margin graphene powder sales, and the start of production at the Statesville facility. The upcoming fiscal year is expected to see growth and profitability weighted towards the second half, with gains anticipated from the launch of a major graphene contract and advancements in their dry process graphene project.
In summary, NanoXplore’s earnings call highlighted a balanced sentiment with both positive achievements and significant challenges. While the company has made strides in graphene contracts and improved margins, it faces hurdles from revenue declines and economic policies. The forward-looking guidance suggests potential growth in the latter half of fiscal 2026, providing a cautiously optimistic outlook for investors.