Nanophase Technologies Corporation (NANX), an FDA-regulated manufacturer of bulk pharmaceutical ingredients and developer of mineral-based cosmetic ingredients, has reported a significant increase in its Q2 2024 earnings. The company's quarterly revenue reached $13 million, marking a 32% increase over the previous quarter. With a net income of $900,000 for Q2, Nanophase expects its second-half revenue to outpace the first half, potentially exceeding $50 million for the year.
The company's subsidiary, Solésence, is contributing to this growth with a focus on expanding its product development and quality teams to increase capacity potential to $100 million in finished products.
Key Takeaways
- Nanophase Technologies Corporation reported a 32% increase in quarterly revenue, totaling $13 million.
- The company anticipates second-half revenue to surpass the first half, with a potential to exceed $50 million for the full year.
- Net income for Q2 2024 stood at $900,000.
- Nanophase aims to fund capital projects through operations, with a focus on increasing capacity for Solésence finished products to $100 million.
- The company is implementing Overall Equipment Effectiveness (OEE) to improve production efficiency and has lowered customer acquisition costs by 30%.
- Nanophase has over $50 million in shipped and confirmed sales orders and expects to double its volume in 2025.
Company Outlook
- Nanophase expects to achieve over $50 million in revenue for 2024, with further growth anticipated in 2025.
- The company's focus is on transitioning to products with SPF protection, which is expected to drive strong year-over-year growth.
- Executives have discussed the possibility of uplisting to NASDAQ or the American Stock Exchange to increase investment opportunities.
Bearish Highlights
- On-time and full (OTIF) performance is below target at less than 50%.
- The company faces challenges in meeting customer demand, which has been a limiting factor.
Bullish Highlights
- The company has a strong pipeline with over $50 million in purchase orders for the rest of 2024 and orders for 2025.
- Gross profit margins are expected to be in the range of 35% to 40% for the full year.
- Partnerships with brands like Tatcha, Bloomeffects, and Kinlo are contributing to the company's growth.
Misses
- Despite strong sales orders, the company has a significant amount of accounts receivable that is past due but still collectible.
Q&A highlights
- The company's executives emphasized funding growth through operating revenues rather than equity.
- Accounts receivable and inventory levels are healthy and robust.
- Nanophase is investing ahead of demand to avoid future capability issues and is actively recruiting additional production management staff.
Nanophase Technologies continues to build on its robust performance in the beauty industry, with a clear strategy to enhance its operational efficiency and market presence. The company's optimistic outlook is supported by its strategic investments in staffing, product development, and capital projects, which are expected to yield substantial growth in the coming years.
InvestingPro Insights
Nanophase Technologies Corporation (NANX) has shown a remarkable trajectory in its Q2 2024 earnings, but a closer look at the company's financial health through InvestingPro's real-time data and insights reveals additional layers to the story.
InvestingPro Data:
- The company's market capitalization stands at $97.11 million, reflecting the market's valuation of the business.
- With a negative P/E ratio of -39.87, extending to -53.41 over the last twelve months as of Q2 2024, it is evident that Nanophase is not currently profitable.
- The Price / Book ratio is high at 8.14, suggesting that the stock is trading at a premium relative to the company's book value.
InvestingPro Tips:
- Nanophase's stock has experienced a significant drop over the past week, with a 10.47% decrease in price total return, which may influence investor sentiment.
- Despite the recent price drop, the stock has seen a substantial price uptick over the last six months, boasting a 93.06% increase, indicating strong mid-term performance.
These insights provide a nuanced understanding of Nanophase's financial position and stock performance. For investors looking to dive deeper, there are additional InvestingPro Tips available at https://www.investing.com/pro/NANX, which include observations such as the company's trading at a high Price / Book multiple and its lack of dividend payouts to shareholders. With a total of six InvestingPro Tips listed, users can access a more comprehensive analysis to inform their investment decisions.
The InvestingPro data also suggests that while the company is navigating through unprofitability, the significant revenue growth and strategic investments in operational efficiency may set the stage for future profitability. The high Price / Book ratio could be indicative of investor confidence in the company's growth potential and market positioning, despite the recent stock price volatility.
Full transcript - Nanophase Technol (NANX) Q2 2024:
Operator: Good day and thank you for standing by. Welcome to the Nanophase Technologies Corporation Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only-mode. [Operator Instructions] Please be advised, that today's conference is being recorded. The words believes, 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 are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect the Company's current beliefs and a number of important factors that could cause actual results for future periods to differ materially from those expressed in this news release. These important factors include, without limitation, a decision of the customer to cancel a purchase order or supply 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 technologies, 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 would now like to hand the conference over to your speaker today, Jess Jankowski, President and CEO. Please go ahead.
Jess Jankowski: Thank you, Shannon. Good morning to all of those listening live and thank you to those following up later online. Well, we’re rolling. We had a strong Q2, following a strong Q1, and we’ve got our foot on the gas working to make 2024 a record year for Nanophase and Solésence. Kevin Cureton, our Chief Operating Officer, is joining me again on the call today. We have some prepared comments, then we’ll be available for some Q&A afterward. Q2 of 2024 saw us with quarterly revenue of $13 million. For the first half of 2024, we had almost $23 million in revenue. To put this in perspective, $23 million in revenue for the first six months of 2024 is 33% more than our $17 million in Full Year 2020 revenue, which was a major milestone at that time. We believe that second half revenue will exceed the first half, with the potential for us to achieve more than $50 million in revenue for the year. With upside, we can do better than that. Before I walk you through the numbers, I’m going to spend a minute describing our business at a high level. We’ve had several investors asking questions about this, and I want to be sure that we bring clarity to the story. The better we understand it, the more exciting our progress is. Nanophase, and its wholly owned subsidiary Solésence, are almost two sides of the same coin. Nanophase is an FDA-regulated manufacturer of bulk pharmaceutical ingredients. These active ingredients serve as the backbone for everything both companies do. We started with an active ingredients business in Nanophase, providing the safe and effective UVA and UVB protection found in minerals-based sunscreens, through BASF. This market grew significantly in the late teens and into the early '20s. There was a limiting factor in the growth of minerals-based sunscreens, however, and that was the whitening effect of most zinc oxide additives. Our initial claim to fame was that our coated zinc oxide active ingredient, which we exclusively supply to the market through BASF, was superior to other ingredients, minerals-based ingredients I should say. This continues to be a good market for us, as BASF continues to be a good partner in that market. In 2016 and '17, we realized that we needed to take a new approach to capitalize on the growing demand for minerals, particularly for zinc oxide, in the market for daily wear and functional cosmetics. Dr. Harry Sarkas, along with a cast of talented scientists, was able to take our particle performance beyond the next level. We developed the Solésence technology to allow larger zinc oxide particles, referred to as non-nano in the industry, to be incorporated into various lotions without exhibiting what is referred to as ghosting in the market. We then built a formulating team with solid industry experience to help us to show cosmetics companies, which we refer to as brands to see the benefits of Solésence technology. By enabling very uniform and flexible particles, then a series of methods by which to disperse and formulate with them, we were able to create finished prestige cosmetics products that had the functionality of sunscreens, built into everyday cosmetics. We found the Holy Grail in a respect. People getting ready for their day would be able to know they were getting protected against UVA, UVB, and other skin damage, which everybody wants, but by a product that otherwise seemed just like the high-end cosmetics they would typically use anyway. Coupling this massive advancement with the consumer trend against chemicals-based UV protection, along with the FDA’s repeated assertions that minerals are proven safe for use, whereas chemicals-based absorbers lack such public proof, we hit this market at an excellent time. We took our FDA-compliant practices, which presented a barrier to entry for many potential competitors, and with whom many were unfamiliar, many of the FDA compliance practises, I should say, were unfamiliar to our Solésence customers, and coupled it with 25 plus years of experience making safe, minerals-based active ingredients. We created a value proposition that is only just starting to show its true potential. Solésence sells through brands, not direct-to-consumers. This means you’ll rarely see mention of Solésence in brand advertising, or on packaging, but we are the enabling feature of the products our brand partners sell. That was a quick summary I know, but we wanted to take a few minutes to ground our new investors, potential investors in why we’ve been so successful, and as a refresher for everyone else. Okay. Now, let’s walk through the numbers. Unless identified otherwise, all numbers will be stated in approximate terms. We had a strong second quarter, with $13 million in revenue, a 32% increase over first quarter revenue, and a 10% increase over the second quarter of 2023. We had a 29% gross margin, including a write-down of our component inventory of approximately $500, 000, reducing our Q2 '24 gross margin by about 4%. For the six-month period, we had $22.9 million in revenue with a 32% gross margin. I want to spend a minute discussing our inventory, which you may have noticed is up $3.8 million since year-end. We intentionally bulked-up our inventory to ensure that we could support all of the growth we’re seeing now. I want to explain the write-down, and how we addressed the circumstances that created it. The write-down was related to components, think bottles, tubes, cartons, and labels, that became obsolete in Q2. Most related to two customers. Given our past struggles with supply, and the three to six month lead times on component supply, we decided to lean forward and order extra components in 2023, without having a guarantee that they would be used. We were focused on strengthening our supply chain by ensuring supply, which you may recall was a major issue at that time. For Q2, the customer’s demand changed, and product specs came with a question, resulting in obsolescence without an opportunity for us to claw anything back. We acquired these components in 2023, prior to implementing many of the changes we are seeing operate so effectively during 2024, which I’ll now review. To protect ourselves from production shortfalls, we’ve done several forward-focused things, that we believe will mitigate the demand issues we were plagued with much of last year, and certainly during 2022. We increased our staffing in our supply chain area, we are performing regular cycle counts of all of our inventory, and we review weekly KPIs with targets for raw materials requirements at four weeks and 12 weeks out. We hover between 98% and 100% on these metrics, giving us a much more comfortable margin of safety as we approach actual production dates. We've also added a full-time, dedicated scheduling professional with industry experience. This will allow our operating people to better focus on maximizing efficiencies and dealing with issues on the plant floor more immediately. Having such focus and familiarity with our inventory has resulted in a raised awareness of what our risks are, and how to control them. On the other side of the equation, we have adopted a uniform approach in the way we work with our customers, in terms of sharing responsibility for financing raw materials inventory, and managing market risk. Between our supply chain and sales teams, we have implemented policies that we believe have achieved a good balance, between having enough inventory on-hand to meet demand, not having to finance 100% of it in advance, and avoiding unnecessary cost exposure through the accumulation of inventory without supporting purchase orders, or customer deposits, or often both. Without this $500, 000 reserve, there would’ve been a 4% and 2% increase in Q2 '24 and first half 2024 margins, respectively, bringing our gross margins up to approximately 33% and 34% for the same respective periods. This was a long way of explaining that we don’t believe this type of write-down is something to expect going forward. In addition to our supply chain improvements, we also expect gross margins to improve, through the combination of additional order volume, better management of smaller production runs, and the addition of new capacity, as we go through 2024. We also expect second half '24 volumes to be at least 20% stronger than the first half. Operating expenses year-over-year were down about $1 million. The bulk of the savings in SG&A was due to the BASF litigation costs tapering off as we settled our lawsuit with BASF in Q1. We remain focused here on operating expenses, and expect to continue to control expenses. We’re also seeing the benefits of our Q4 2023 restructuring as operating expenses have not grown in light of our incredible growth in 2024. The bottom line showed excellent progress, with Q2 '24 net income of $900, 000, a $500,000 improvement over Q2 of '23, even with the $500, 000 write-down we just discussed. For the six months ended June 30th, 2024, we had $1.7 million in net income, compared to an $800,000 net loss for the same period in 2023, a $2.5 million swing. In a few minutes, Kevin’s going to address our operating performance. Many of our KPIs will be enhanced further through our investments in additional equipment and, at least as importantly, additional experienced technicians to keep them running smoothly. As we have had the opportunity to augment our production staff, we have benefitted from bringing in more people with significant industry experience. This has created not just the benefit of having more experienced hands doing the work, but also the advancement of knowledge among our loyal, hard-working, and talented internally developed team members. We expect both our units produced, and revenue generated per employee, to continue to improve through these efforts. We did a bit of a deep dive into capital projects last time, so today we’ll just leave it at a high level. We intend to fund any required capital through operations in 2024, with our initial projects focused on bringing our potential capacity up to about $100 million in Solésence finished products. Total capital expenditures for this year should be in the $3 million to $6 million range, some of which may well slip into 2025. Operationally, we’re focused on improving our labor per unit, while also ensuring that our throughput can meet expected demand, through targeted capital improvements. We have some opportunities in our current pipeline that could generate significant growth in 2025. This is in addition to the expanded demand we’re expecting to continue, from some of our existing Solésence customers. Now I’d like to invite Kevin Cureton, our Chief Operating Officer, to share his thoughts on our progress so far, and the approach we’re taking going forward. Kevin?
Kevin Cureton: Thanks Jess. As usual, I would like to begin by thanking our teammates who every day demonstrate that we are indeed best in the industry at what we do, and our investors who continue to trust our leadership as we prove that through enhancing lives through healthy skin we can profitably grow at more than three times the growth rate of our industry. I also would like to thank the families of our teammates for their energy and support as we take this journey together. During the Q1 conference call, we promised to not only review the operating KPIs we have discussed in the prior calls but to also introduce and discuss our growth KPIs. So let’s jump right in. First the operating KPIs. Starting with inventory availability, which our purchasing team considers the on-time in-full or OTIF metric for the materials and components we buy. We have improved on our performance from last quarter as this metric is now 100% of our target performance which is to have greater than 95% availability for materials due in 12 weeks and 98% availability for materials due in four weeks. This is both an excellent and vitally important result as without this outstanding performance, we wouldn’t be able to achieve our other two operating KPIs. Our purchasing team has also made good progress on implementing our vendor development and management programs which includes amongst other elements bringing in additional qualified sources from around the world for key materials to minimize our out-of-stock risks and reliance on single source suppliers where possible. Their work gives us a high level of confidence in our ability to support even greater volume growth with minimal risk of supply shortages. Our second operating KPI, throughput, remained essentially unchanged from Q1 at 72% of target, however this was done on an overall volume increase of 158% over Q1. This improvement in total units produced achieved by our manufacturing and supply chain teams is what enabled us to achieve the record performance for Solésence. In Q3, we will need to achieve a similar 150% improvement in throughput to meet what is record levels of demand for our products, which is largely a result of substantial increases in both domestic and European sell through for our largest brand partner Colorescience and over a dozen successful new launches with new brand partners such as Tatcha. Our final operating KPI, OTIF were on-time and full, remained below target at less than 50% of our goal. As you will hear when we discuss our growth KPI’s, our growth in Q2 significantly outstripped our improvements in output, which has meant that we had to make tough production decisions such as operating at suboptimal production runs to ensure our brand partners have the product quantities they need for its successful new launch. To put even greater focus on improving OTIF, our company is implementing Overall Equipment Effectiveness or OEE methodologies to target the specific changes needed to improve our operating uptime and therefore throughout. Our work in this area only began a little more than 60 days ago, and we are already achieving small wins as we have made solid progress in increasing up time. This improvement resulted in our company achieving the best revenue month in our history during July. Let’s now spend a little time on our growth KPIs, order velocity, customer acquisition cost, and pipeline value. Order velocity measures the rate that we are generating new sales orders for our business. While we measure this weekly, it is particularly informative when we look at the year-to-date order velocity versus plan. On a year-to-date basis, our order velocity is running at 125% of plan, an excellent result. Kudos to our business development and our product development teams for their outstanding work in this area. Similarly, the BD, PD and marketing teams are driving improvements in pipeline value, which measures the total value of new business opportunities we expect to convert to revenue and our Customer Acquisition Costs or CAC which measures how much it costs us to acquire the new business. While our pipeline value is not yet meeting our very lofty goal which is essentially to double 2024 revenue, we are at over 60% of target, still a very respectable result given the more than 40% year-over-year growth we will achieve in 2024. Further, we are doing this while lowering our customer acquisition cost by 30%. While this is a solid performance, it also suggests that it’s time for us to consider even greater investments in the departments that drive revenue growth. We’ve already started this work with programs underway to expand both the staffing and capabilities of our product development and quality teams. In closing, as I mentioned in the press release, our company, through the close collaborations we have had with our brand and supplier partners, is redefining what it means to have healthy, beautiful skin. This work is possible because of all the fabulous teams within our company. We have talked again and again about handling hard better and they answered the call. We then asked them to raise their expectations for what great looks like and they are achieving this too. We have and will continue to push our teams hard but every time every team from finance to quality and everyone in between rings the bell. While our technology and knowhow is second to none. It’s our people that ultimately make the difference and we - and will be reason we continue to outperform our market in terms of growth and profitability. Back to you Jess.
Jess Jankowski: Thanks, Kevin. We have more than $50 million in shipped and confirmed sales orders through this week, and we expect more to follow. As many of you know, we've not had problems generating customer demand. The markets like our Solésence products, and they want more. Our biggest challenge has been to meet that demand. It’s been a limiting factor for several years and while we’re not through yet, we have been successful in addressing that limiting factor this year, and we expect the second half to show more evidence of that, in addition to more growth. While we know that most of our investors listen to the webcast, or review the transcript, after the live call, we’re happy to invite those of you participating live on today’s call to ask any questions you may have, or to share your feedback. Afterward, I’ll offer a few closing comments. Shannon, would you please begin the Q&A session?
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Tony Rubin, private investor. Your line is now open.
Unidentified Analyst: Hi. Good afternoon, gentlemen. Congratulations on a very strong sales quarter. I have a couple of questions. The first is your Solésence growth has been the case for a while. It's been fantastic. Could you elaborate on the non-Solésence sales and what we might expect for those because they did drag down your overall growth? And both of you referenced very strong growth going into 2025. Do you have any sense of what 2025 top line might look like? There was discussion by Jess about the inventory issue. And I'll ask because I've asked in the past, what would your target gross margin be for this year and for next year? And lastly, I'm always thrilled with your top line growth and success and the market responsiveness in your rewards always fantastic. However, you have -- on a variety of occasions, not quite executed operationally, so the talk about adding staff and adding capabilities and just kind of running ahead of your perfection in operations does concern your investor base. So I'd appreciate any commentary on how you'll ensure that, that is done in a measured and optimal way. Again, keeping in mind that there have been missed up. But again, overall, just congratulations on growing the company and achieving those progress. One last thing I forgot to mention is, is there any plan or thoughts about uplisting, which has been alluded to in the past, but I don't believe there's been a schedule to. So with that, I'll set up and let you guys speak, and I'm in the car, so I apologize for any noise.
Jess Jankowski: That's like 12 questions Tony. So the one question I would say the non-Solésence business is we have a little bit less insight and less control. The vast majority of that is with our partner, BASF, and we are working on expanding that product suite as well. Visibility is not fantastic there, though. I think there so far shaping up to be a good year, exceeding some expectations. I really don't have a great feel for what 2025 relative to that business will look like. And part of that -- part of the reason that we created the Solésence business was because we wanted to be a lot more intimate with the customers as close to the end users as we can be. And that's why we just have much more visibility. The rest of the Nanophase non-personal care business is largely legacy business in some industrial or architectural coatings, and that's generally in the sub-$2 million range, and those are customers that we appreciate and enjoy, but we're not doing any further development and don't really expect that to grow a lot. So that's one. Next year's volume is pretty hard to predict based on -- I mean, as Kevin said, the lofty goal is that we double the volume. Realistically, that's tough to do, but not impossible. Generally, are one of the things your point about the production. One of the things has been being able to ramp up quickly enough to add capacity. So we're not constrained at this point with - the capital constraint isn't as big a thing as you've got so many engineers and so many mechanics and technicians to help build these things in such a supply chain in terms of having to get more equipment. And that, I imagine, is going to be part of the 2025 story and whether do we get a massive amount of growth or not. I think a lot of that's going to have to be with how much is installed on the floor going into '25 and then into the fall of '25 leading to the '26 launches, which is a big thing.
Kevin Cureton: Yes. Maybe just to add a little bit to what Jess said there because I think honestly, we end up, Jess and I end up thinking about a lot of these things as instead of six or seven questions is really two or three. So we may be answering multiple questions with one answer. Just going back to the growth -- the -- as Jess said correctly, we don't have great -- we have good visibility. Don't get us wrong. We know what the forecasts are from our partner, BASF, they've given that to us. But we don't know with the same clarity that we do with our Solésence business is the growth initiatives. And that's not to be -- that to be unexpected. We obviously control directly what happens with the Solésence business in a different way than we do with how the BASF business grows. However, we do expect it to be at least equal to or slightly ahead of where it was in the first half of this year as they are regaining sort of the balance between their inventory and our -- and the sell-through of the product. So I think that will normalize a little bit in the second half. To the operating question, which is sort of a mixed question of how are we growing and we're absolutely expecting to see continued strong growth. The trend in the industry is a lot of transitions from daytime products that didn't have SPF protection to daytime products with SPF protection, which is part of the reason why we grow at a faster rate than the industry grows. So that is something that we are expecting to continue to see is very strong growth on a year-over-year basis. But first things first for us is to finish up 2024, where we still have just a little less than half the year in front of us to do that, and we'll -- that's really the biggest part of our focus, at least from that standpoint. Two, the operating into, as Jess already indicated in his prepared remarks, we are putting in for, I would say, the first time since we've established Solésence, the capital ahead of the demand. So we're not going to be hamstrung with trying to meet the demand by installing capital when we already have the sales orders. We're actually going to have and are building out the capability to meet that demand ahead of having those sales orders. And that's in part because of the strength of the business that we're seeing right now. Our Board is really keen to make sure that we're in the right position to capitalize on the growth in a more profitable manner going forward. So we are making those types of decisions. We also, as we talked about before, have really changed our operating structure with the addition now over a year of a VP of Operations the expansion of our purchasing and buying team, the addition of operations, planning management, the real right now, we're actually heavily recruiting for additional production management staff to really support all of the work that's being done. We've already completed a significant increase in the staffing that we need on the engineering side to have line techs that are able to improve uptime. So all of those types of things that we really lagged on doing in the past, we're in a position to do proactively and are executing on them. So we definitely are keen to make sure that we don't grow and not grow profitably. We definitely want to grow profitably and really capture that, and that's an important part of the objectives that our Board and Jess and I have for our company.
Jess Jankowski: Your last question regarding the uplisting is an active discussion. We have been talking about it and we'll continue at the Board level, and we're working through some things, understanding how many strong quarters we went under our belt before we were to attempt that. Wondering if -- how much, if any how much of any dilution we would be willing to accept. And then within that, we all think that we are -- we could exercise without -- I don't want to say our stock is undervalued. I would say that our -- the things that we believe we are going to accomplish in the next year are pretty strong and will reflect really well on the -- anything we do moving forward. So that's a consideration. And we are working through that in the effort of whether we choose to share it or of development [Technical Difficulty] We are working toward developing a time line internally on that, which we may or may not choose to share, but that is something that is a very active discussion and we will probably have more to talk about as we go forward. And another thing that will help all of this is with a few more quarters of positive results. We will become a lot more bankable in a commercial sense. And at that point, we'll be able to look at the cost of capital and all these things and whether relative to dilution versus non-dilutive things and the uplisting and all that, which is obviously not a direct answer to your question because there are so many different features in it, but those are things that are all coming right up on our radar right now.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Rand Kay [ph] with RKA. Your line is now open.
Unidentified Analyst: Good morning, gentlemen. Nice quarter. Impressive.
Jess Jankowski: Hi, Rand. Thank you.
Unidentified Analyst: I want to move a little bit in the same direction that Bruce was. I think that a lot of the issues of the past, you guys have done a good job of curing. But I'm kind of curious and may be concerned, we have $2.3 million in cash right now. And I would like to better understand what your strategy is for growth from a standpoint of using this capital, which was put in, and we appreciate Brad's contribution but has significantly diluted shareholder value? And how much of that growth do you intend to fund from the capital versus cash from revenues? And is there some type of formula where you guys say -- or area where you say this is going to -- we're not going to take any fund this from cash -- from stock sales, but we're going to only take it from revenues generated by the company, by sales?
Jess Jankowski: Understood. We understood. We don't have a specific formula at this point in time. We do have a general view on it that what we don't want to do is accumulate any more debt at this point in time or use that capital that we do have and end up in a situation where we have to get another facility in any way. So yes, the goal is to fund the growth out of operating for this year. The ultimate discussion, which will probably be -- probably be a year or more down the line, we'll be -- do we want to make a big leap forward in growth? And then that will be the discussion about how do we fund it, whether it's through commercial banking or through equity. I think all of us are tied into the fact that the dilution is not a good thing and that the value we have here is something precious. I mean, you learn in business school that the most expensive capital in the world is equity capital. However, when you're in a situation where you don't make money for a long time, it's the only capital that's available. And as those choices come down, I think our last choice typically would be to use equity capital. And currently, we're at a point where we're not fully borrowed and we don't need to be. And we are seeing cash getting generated. And I believe -- I believe, expect, forecast and plan to quote some safe harbor language that our -- the amount of cash we're going to generate is going to go up, maybe not in a perfect sequence quarter-to-quarter. But generally speaking, we are clearing out some of the things that haunted us in the past. We are enhancing our ability to operate efficiently in the COGS level. And those things, I expect to lead to us generating more cash and then deciding, okay, do we spend it on this or spend it on that, but I don't see a need. The biggest need that I have heard our investors discuss relative to equity is enhanced liquidity and that to me is more important than looking for equity funding to fund anything that's in the immediate plan for '24 and '25.
Unidentified Analyst: I would also like to share with you one thing that has heartened me greatly recently in your calls, and that is -- there's always been a kind of an urge, okay, to explore and expand markets due to a lot of, I guess, sex appeal and so on and so forth, response from customers and that you guys are doing a much more diligent job of vetting your customers to make sure that they're real that they have cash, making them put cash upfront. And so shifting the responsibility of business development financially and putting more on the onus of the customer as opposed to, hey, let's do this just to get market share. And that shift in mentality has been my greatest I guess, joy that I've heard that you guys have done. And I just want you to know how much I appreciate that. And I like what you're saying about funding off of revenues as opposed to equity. So thank you. I appreciate it, again. I look forward to like Bruce uplifting because the market right now is very, very small and difficult for us to execute in. So I know it has to make sense, but I would appreciate sooner than later.
Jess Jankowski: Sure. Okay. Thank you, Rand.
Kevin Cureton: Thank you, Rand.
Unidentified Analyst: Thanks, guys.
Operator: Thank you. Our next question comes from the line of Jim Lieberman [ph] with American Trust Investment Services. Your line is now open.
Unidentified Analyst: Thank you. What a great quarter and kudos for the kind of work and the kind of execution that you've put in. And I have noticed that you -- although the cash is just $2.3 million, your receivables are $5.9 million. Can you comment on those? Is that -- are those like 90-day turn? How do you see that playing out the receivables?
Jess Jankowski: Hi, Jim.
Unidentified Analyst: Hi, there.
Jess Jankowski: A lot of that has to do with -- we do have some -- we have a lot of 60-day term customers. We have a few 90, but not a lot, but it's really growth oriented. We don't have significant -- we do not have significant uncollectible receivables relative to the entire balance, and I probably -- I look at it every week to -- when we look at our accounts receivable borrowing line. And at any given point, there might be several hundred thousand dollars that's past terms, but not uncollectible, just past 30, 60 or 90. And generally, when their past terms is past 30, not the later ones, the better finance customers are the ones that are more mature that have longer terms tend to pay quickly. So it hasn't been a concern. But I mean, generally, yes, I'd rather have ARB zero and APB [ph] huge and have no inventory but not the business we're in right now.
Unidentified Analyst: It looks very healthy and robust, especially with the 60-day terms, that's very comforting. And also your inventories, as you said, are pretty robust, so they should carry you through to at least get you a long way through meeting the demand is increasing. So I feel very comfortable, especially on a historical basis, how well positioned you are right now. So congratulations. Just a couple of comments, historical -- historically in sort of classical economics, business growth and manufacturing, you hear about companies reaching certain sort of critical points in a $50 million area. But you're already on an annualized basis above that. Do you see any other sort of bottlenecks at this stage of the game to get from like $50 million to $75 million? Do you feel that's organically possible?
Kevin Cureton: Thanks, Jim. Jess made a comment that I think it was important for everybody to hear perhaps again that our capital plan for this year was to take us to $100 million in Solésence revenue capability. And so I think that is sort of the answer to your question is that, yes, we're already investing ahead of where our current state is, which is, like you said, north of that $50 million run rate. To make sure that we don't have some of the same problems that we've had in the past where we were really - capability was shorter than the opportunities that are in front of us. So I think we're in good shape from there.
Unidentified Analyst: And I didn't hear it actually, but I had to hear it again because -- it's unusual in the business world in the manufacturing space to have that kind of planning and vision to be able to grow through that. And I really -- I'm very extremely pleased so that was my job there.
Kevin Cureton: Thank you.
Unidentified Analyst: And then the other thing I thought I heard Jess say something about other products for 2025. Can you give any more color to that, what that means?
Kevin Cureton: Maybe customers, yes, customers in the pipeline. As typical, we -- we're still continuing to focus squarely on the beauty industry and more specifically on skincare and makeup products with SPF, and we are doing that across all categories. So whether that's a face product, a lip product, a body product. So that gives us a pretty broad stroke for what we cover.
Unidentified Analyst: And other than color science, are there other company names that you can announce publicly. I thought I heard you mention some name Tatcha, but I didn't know if I was misunderstanding that.
Kevin Cureton: It's T-A-T-C-H-A, Tatcha and they're a Japanese inspired beauty brand. So they are one of some of the brands that actually utilize our branding, so we can talk about it or talk about them very successful brand available in Sephora near us. So go get that sunscreen. And then there are some other brands like that we've mentioned before, Bloomeffects being another one. We've mentioned Relevant [ph] before. There are a couple of others that are -- we've mentioned Kinlo before. So there are a few others that we've mentioned that we can't publicly announce.
Unidentified Analyst: Has been a treat. Thank you very much for the presentation and for the execution, regards.
Kevin Cureton: Thank you.
Jess Jankowski: Thanks, Jim.
Operator: Thank you. Our next question comes from the line of Augustya Mathad, who is private investor. You may begin.
Unidentified Analyst: Hi. Yes. Congratulations on the segment, great quarter, Yes, so two quick questions for me. First, last quarter, you mentioned a backlog of about $40 million or $30 million in open orders. I'm just wondering, can we get any color on that at the moment? And then second, I think Tony already asked about this, but are we still on target for a 35% to 40% gross margin for the full year? That's it. Yeah, thank you.
Jess Jankowski: The -- in terms of the -- we disclosed that we have in excess of $50 million in either shipped in July or so far in August or in hand purchase orders for the rest of 2024, and we expect in all likelihood, somewhere will come in. The less and less come in the further you get toward the end of the year, obviously, but we expect that to exceed that. So from that perspective, that's what we have. We also have orders for 2025, which we're not ready to disclose that yet, but there's -- that is happening. Regarding the total margins, I think our plan is right in that range for the end of the year, and it's going to depend -- a lot of it is timing dependent. As big as we feel right the second relative to the amount we've grown, we still have some large customers that have demand is a little bit lumpy. And while we have -- we know what the total is going to be in terms of month-to-month. As Kevin mentioned, we had -- July was a record month, and it really -- when you start talking about where the margin comes out in the end, the science isn't quite there yet as we just haven't had enough regular high-volume business to go there. But I think that's not unreasonable for us to be into the 30s and then long term, potentially, there could be a four in front of there, which would be really nice.
Unidentified Analyst: Perfect. Thank you so much.
Operator: Thank you. Our next question comes from the line of Ronald Richards, private investor. Your line is now open.
Unidentified Analyst: Yes. Well, hi, Jess. I'm encouraged to see the increased interest in your conference call this quarter. And I was encouraged by something Kevin said about concentrating on increased profitability. But then my usual concern came up and Kevin mentioned that they were looking at hiring more and more staff. I guess it's my constant question in all of these calls, when will there will be more emphasis on more profitability and less on increasing your staff or when will increases in staff result in more profitability?
Jess Jankowski: Yes. Thanks, Ron. Great question. I think one of the things that we also mentioned is a real focus with the team that we have established this year. And I should say a lot of that team is really filling in gaps that we knew were already contributing to core performance that we had last year as an example, where we were too heavily leaning on just a few key people that really outstripped their capacity and our capacity to execute. So the plan was and has been to add those teammates, and we have -- for the most part, we're not seeing anywhere near the same increase in staff levels, just to be clear, relative to our growth in terms of the top line and in particular, looking to add staff that actually improve our operating efficiency. So that's been the emphasis. Now we see -- we come -- sometimes are very careful in what we're saying about the impact of the staff because we're still not the biggest company in the world, and we can reveal things that are -- would put us at a competitive or negotiating disadvantage. But I can tell you that, that staff is for example, more than paying for themselves in terms of what our purchasing team has already done. And similarly, relative to the engineering team that we've added relative to improvements in cost with the increases in revenue at the same time. So it's a real nice mix of driving down the gross or I should say, the other way, driving up our gross profit margin by reducing our direct expenses. And we still have some work to do. We have some real opportunities still for the second half of this year to further do that. And I think that really is still an important part of this plan going forward.
Unidentified Analyst: Okay. Thank you.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Barry Blank with J.H. Darbie. Your line is now open.
Barry Blank: Hi, good morning. I just wanted to add a comment on some of -- some of that came up prior to this time uplisting. And I don't know if you know this, but there are many -- I work for a small brokerage firm, which we have permission to buy stocks that are not on NASDAQ and at a low price. But the majority of broker terms around will not allow clients to purchase stocks under $3 that are not on NASDAQ and some won't allow them to purchase even at $3 that are not on NASDAQ. A lot of firms have that. I think that should be important, and you're taking into consideration whether you want to uplift either on NASDAQ or the American Stock Exchange division of the New York Stock Exchange. It will open your whole investing opportunities and markets through a whole group of people who are not able to purchase it now because of those restrictions.
Jess Jankowski: Thanks, Barry. Yes, I recognize that completely. I actually -- I had that experience myself. I exercised a bunch of options and held them this first quarter, and they're sitting in a brokerage account that is other than my standard brokerage account for that reason. And I do -- I think we all understand that and view that as one of the advantages of the uplifting and just have to evaluate the other things that will be involved in doing so. But it's definitely a priority.
Barry Blank: And there's one other thing. Any person who wanting to borrow on the securities cannot do that. When it's uplisted depending on the price of the stock, brokerage terms will lend on it, and that could be important to people that they would have to sell if they didn't have that advantage to be able to do that?
Jess Jankowski: Yeah.
Operator: Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to Jess Jankowski for closing remarks.
Jess Jankowski: Thank you, Shannon. And thanks to all of our investors for hanging in there as we turn the corner. We're now seeing the results of executing on the strategy that we outlined several years ago. We've become the exciting company we'd all hoped for. We knew it would happen, but the win was elusive. We're just beginning at this point. And we think our future is bright. So I hope everyone can finish their day with a smile when you think about Solésence and Nanophase and the potential yet to be realized. Thanks for being with us today.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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