Release Date: May 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nanalysis Scientific Corp (NSCIF, Financial) achieved a significant improvement in gross margin percentage for product sales, increasing from 47% to 66% year-over-year.
- The company reported a positive adjusted EBITDA of $180,000 for Q1 2025, compared to a loss of $104,000 in the same period last year.
- Net loss improved by $1.2 million year-over-year, attributed to better product sales margins and cost reduction measures.
- The company successfully launched its next-generation 60 megahertz technology, which has over twice the performance of the previous generation.
- Nanalysis Scientific Corp (NSCIF) negotiated a favorable renewal of its term loan, including a 12-month reduction in principal payments and company-friendly covenant testing.
Negative Points
- Consolidated revenue decreased by 5% compared to the same period in 2024, falling short of expectations.
- Security Service gross margin percentage declined from 8% to 6% due to higher service costs, including overtime wages.
- Revenue from third-party equipment sales remains a significant part of the company's revenue, indicating a reliance on selling other companies' technologies.
- The company experienced a softening of revenue in Q1 2025 due to macroeconomic uncertainties, particularly in the United States.
- Certain expected orders from major customers like the FDA and EPA were delayed, impacting revenue growth.
Q & A Highlights
Q: Can you speak to the labor dynamics affecting the Security Services side? Are there staffing challenges or are these one-off overtime situations?
A: Randy McRae, CFO: It's a combination of factors, including overtime outlays in certain situations. Our focus has been on getting projects up and running and ensuring customer satisfaction. We are now working on improving efficiency and deploying our labor force effectively across contracts, expecting progress in the next few quarters.
Q: Regarding tariffs and USMCA compliance, how are institutions' budget constraints affecting purchasing, and what does the pipeline look like given macroeconomic concerns?
A: Sean Krakiwsky, CEO: Despite uncertainties, we haven't lost business, but some have stalled, like the FDA and EPA. We expect these to clear up before year-end. Our sales funnel remains strong, and we are confident in our 2025 outlook.
Q: With Germany's increased defense spending, what are the implications for your detection business in Europe?
A: Sean Krakiwsky, CEO: We see opportunities in Europe, particularly in France, due to increased defense spending. It's developing slowly but steadily and should be a tailwind for us in the future.
Q: Any updates on the automated industrial analyzer for detecting illicit drugs?
A: Sean Krakiwsky, CEO: Progress is steady across AI, database, and hardware components. We have traction with beta users, including a law enforcement customer in Germany. While I can't provide a full product launch timeline, development is progressing well.
Q: How is the company managing the uncertainties stemming from the U.S. political environment?
A: Sean Krakiwsky, CEO: We are managing well despite some revenue softening in Q1. We remain confident in our 2025 forecasts and expect to recover lost ground throughout the year, supported by a strong sales funnel and opportunities to grow our services business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
