Solesence (SLSN) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue reached $13 million, up 10% year-over-year and 32% sequentially, driven by Solésence product growth, with first-half revenue at $22.9 million.

• Net income for Q2 2024 was $900,000, a significant increase from Q2 2023, with first-half net income at $1.7 million, reversing a prior year loss.

• Four largest customers accounted for 60% of Q2 2024 revenue, highlighting customer concentration.

• Settlement with BASF resolved litigation and amended zinc oxide supply terms.

• Solésence won its third consecutive Cosmopack North America Formulation Award for product innovation.

Financial highlights

• Q2 2024 gross margin was 29%, impacted by a $500,000 inventory write-down; excluding this, gross margin would have been approximately 33%.

• Six-month 2024 gross profit was $7.3 million, up 26% year-over-year.

• Operating expenses decreased by $1 million year-over-year, mainly due to lower SG&A from litigation settlement and restructuring benefits.

• Cash at June 30, 2024 was $2.4 million, up from $1.7 million at year-end 2023.

• Financing activities provided $5.6 million, mainly from preferred stock issuance converted to common stock.

Outlook and guidance

• Second-half 2024 revenue is expected to exceed the first half by at least 20%, with potential to surpass $50 million for the year.

• Gross margin for the full year is targeted in the 35%-40% range, with potential to reach the low 40s long-term.

• Capital expenditures for 2024 are projected at $3 million-$6 million, focused on expanding Solésence capacity.

• Growth is expected to be funded from operations, with no near-term plans for new debt or equity dilution.