SOLESENCE, INC. Q4 FY2024 earnings call

• Rebranding and new investor relations website: Launched a new investor relations website and rebranding, reinforcing the beauty science platform's success with four consecutive years of growth.
• Financial results: Achieved record net profit, positive operating cash flow, and reduced outstanding debt in 2024. Fourth quarter revenue up 57% YOY, full year revenue up over 40%.
• Product awards and customer relationships: Olay Face Milk SPF 50 plus won an Alle Award; long-term exclusive relationship with BASF for nanoscale zinc oxide APIs; strong relationships with leading brand partners like Color Science, Tatcha, and Credo.
• Operational initiatives: Expanded batch making capabilities at Bolingbrook facility, increased throughput, launched over two dozen new SKUs, and obtained two new patents related to plant-based antioxidant and skin-soothing technologies.
• 2025 plans: Anticipate sustaining momentum, enhancing operational efficiencies, and aiming for NASDAQ uplisting in 2025, initiating search for dedicated CFO.

For the fourth quarter of 2024, revenue reached $12.6 million, representing a 57% year-over-year increase. The full year 2024 revenue was $52.3 million, a more than 40% increase. In the fourth quarter, gross margin expanded to 22% from 6% year-over-year. On a full year basis, gross margin increased to 31% from 21% year-over-year. The fourth quarter 2024 net loss was narrowed to $600,000 from a $2.1 million net loss in the prior year period. For the full year 2024, net income was $4.2 million, a sharp increase from a net loss of $4.4 million in 2023.

• Anticipate sustaining top and bottom line momentum in 2025 supported by solid demand from brand partners.
• Expect continued growth with demand for products outpacing market growth rate.
• Aim to achieve NASDAQ uplisting in 2025 pending eligibility, with efforts underway to bring on a dedicated CFO.

• Risks include customer order cancellations, competitive products, public health issues, terrorist activity, armed conflict, and tariffs. Also, inventory obsolescence due to factors like product launches and supply chain transitions.

Q: Sincere congratulations on growth and product innovation. Any insight on timing of uplisting?

A: In process, potentially months at most presuming eligibility, with more news likely in next month's quarterly update.

Q: Why did gross margin drop in Q4 and what to expect in 2025?

A: Factors like overtime in December, building inventory for facility consolidation; expect gross margins to improve to 30s and possibly 40s in 2025.

Q: What are the issues with pending NASDAQ eligibility?

A: Eligibility is present, but goes through underwriting process with some subjective areas; intent is to get uplisted as soon as possible.

Q: Was obsolete inventory a major factor in Q4 loss despite margin increase?

A: Some inventory obsolescence was a factor, but supply chain team efforts are underway to reduce it.

Q: Comment on BASF relationship and tariff impact?

A: BASF is a good partner, but impact of tariffs is uncertain; watching inbound costs and supplier price increases.