NanoXplore (TSX:GRA) released third-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.

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Summary

NanoXplore reported $32.3 million in revenue, a 6% increase year-over-year, with an adjusted gross margin of 22.9% and adjusted EBITDA of $1.2 million, reflecting improvements over Q2 2026.

The company continues to focus on four strategic priorities: executing with discipline, expanding into new markets, converting pipeline into revenue, and driving shareholder value.

NanoXplore has the largest graphene production capacity globally and introduced the XGMP D500 GP product for conductive carbon additives, aiming to capture market share from carbon black and carbon nanotubes.

Growth initiatives include the operationalization of the dry graphene manufacturing process and expansion into graphene-enhanced materials, with commercial material expected by fiscal 2027.

The company expects fiscal year 2026 revenues to be between $115 and $120 million, with incremental improvements in gross margins anticipated as new products and contracts ramp up.

Key partnerships, such as with Chevron Phillips Chemical, are progressing, with Tribograf reducing drilling times by up to 20% in challenging environments.

NanoXplore's leadership and board have made insider share purchases, indicating confidence in the company's strategic direction and market potential.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the third quarter 2026 non Explore earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session you need to press 1 1. On your telephone keypad you will hear an automatic message advising your hand is raised. To withdraw a question. Please press Star one on one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Liam Turner, General Counsel and Corporate Secretary. Please go ahead, sir.

Rocco Marinacchio (President and CEO)

Bonjour à tous et bienvenue à la conférence téléphonique du troisième trimestre de NanoXplore. Good morning everyone and thank you for joining this discussion of NanoXplore's financial and operating results for the third quarter of fiscal 2026. The press release reporting these results was published yesterday after market close and can also be found on our website along with our financial statements and MD&A. These documents are also available on SEDAR+. Before we begin, I'd like to remind you that today's remarks, including management's outlook and answers to questions, contains forward looking statements. These forward looking statements represent our expectations as of today, March 14, 2026 and accordingly are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially and listeners are cautioned not to place undue reliance on these forward looking statements. A description of the risk factors that may affect future results is contained in NanoXplore's Annual Information form, which is available on our corporate website and in our filings with the Canadian securities administrators on SEDAR plus. On the call with me this morning, we have Rocco Marinacchio, our Chief Executive Officer, and Pedro Azevedo, our Chief Financial Officer. After remarks from Rocco and Pedro, we'll open the call to questions from financial analysts. Let me now turn the call over to Rocco. Merci, Liam. Et bonjour à tous. I'm Rocco Marinacho, President and CEO of NanoXplore, and I'm pleased to have you with us today to discuss our fiscal third quarter 2026 results. Let me start with the key financial metrics. We delivered $32.3 million in revenue, adjusted gross margin of 22.9% and adjusted EBITDA of 1.2 million. These are sequential improvements over Q2, 2026 and year over year increases across all three metrics on a normalized basis excluding one time items from the prior year. The trajectory is clear and we are executing. The momentum we establish in the first half of this year is continuing. Revenues, gross margins and adjusted EBITDA all moved higher this quarter driven by steady volumes from the club car launch in Statesville, continued recovery in our transportation business and TriboGraph sales our lubricant product which are in line with our expectations. I'll now update you on each of the four priorities I outlined in my recent shareholder address. Number one execute with discipline and deliver on our commitments. We said Q1 was the trough. The past two quarters have proven this as we have delivered sequential performance improvements on the key business metrics. Over the medium term we believe this momentum will accelerate driven by the graphene and graphene enhanced solutions. Growth impacts on our dry graphene manufacturing process we committed to have it up and running by early April and we delivered. The equipment is powered on mechanically running and the team is executing a disciplined scale up in line with our robust manufacturing protocols. We expect to begin qualifying commercial material except Q4 positioning us to fulfill customer orders from this new platform in fiscal 2027. This is not a future promise. This technology is now in operation and progressing through scale up. Number two Expand into new markets and applications. NanoXplore has the largest graphene production capacity in the world, the highest purity, the most competitive pricing and now multiple product grades to serve multiple industries. That combination is unmatched. Our recently announced XGMP D500 GP product is the clearest example of how graphene is a disruptive technology at 99.8% purity with a surface area of 500 meters squared per gram verified at commercial production volumes. D500HP is purpose built built for the conductive carbon additives market, A three plus billion dollar space currently dominated by carbon black and carbon nanotubes across applications including lithium ion battery electrodes, electrostatic discharge, safe plastics and conductive coatings. D500 GP matches the conductivity of incumbent products, is price competitive and delivers double the flexural strength and stiffness. The result customers no longer need to trade strength for conductivity. D500 GP will be priced competitively with conductive carbon blacks giving customers graphene level performance without a graphene level premium. This is not an emerging opportunity. Competing in large carbon markets is now a reality for NanoXplore. Number three convert our growing pipeline into sustained revenue and and cash flow. This is where our capital investments are beginning to pay off in a tangible way. We have previously announced $50 million in business wins for our Solutions business. Of that, 15 million has been successfully launched in Statesville with Club Car on time and on plan, the remaining 35 million will ramp over the next 18 months as part deliveries start in line with customer forecast. These are contracted revenues with clear timelines. For the first time in our company's history, we have clear line of sight to free cash flow generation. As these programs ramp and revenues are recognized, the financial profile of this company changes materially. That inflection point is now within reach on TriboGraph. Our partnership with Chevron Phillips Chemical continues to advance. We are progressing through new end user customer lab and field trials, actively co promoting the product with a growing list of major customers across multiple geographies. The product is performing as intended, validated by customers moving from lab to field trials. By lowering the coefficient of friction and increasing lubricity, Tribograf is creating tremendous value for the end user user by reducing drilling times up to 20%. This is a clear cut example of our innovation creative massive breakthroughs in industries that have been stagnant for many years. Number four Drive Shareholder Value we are back in our conviction with action. Our leadership team and board have made meaningful insider share purchases in recent months. We are shareholders too and we are aligned with you on outcomes. With new product grades like D 500 GP, opening adjacent billion dollar markets and contracted revenues ramping up in our solutions business, we believe the market has yet to fully reflect the value being built. At Nano Explore, we will continue to communicate openly and regularly with the investment community as that value is realized. To summarize, we are executing on our commitments, expanding our addressable markets, converting our pipeline into revenue and investing in shareholder value with both capital and conviction. The story of NanoXplore is one of compounding progress and Q3 is another step forward. With that, I'll turn it over to Pedro to walk you through our financial results.

Pedro Azevedo (Chief Financial Officer)

Merci, Rocco. Bonjour tous. Good morning everyone. Today I will begin with a review of our Q3 financial results, followed by an update on financial aspects of our expansion initiatives and conclude with some commentary on near term CapEx spending and revenue guidance. For fiscal year 2026, total revenues in Q3 were 6% higher than Q3 last year at 32.3 million. This increase was mainly due to the new revenue streams from the Club Car program shipments on the CP Chem contract as well as higher tooling revenues. However, these were partly offset by lower revenues from government grants which were higher than usual last year, and by lower revenues from our two largest customers whose volumes are improving but were still lower versus last year. Nevertheless, since Q1, our revenues have increased by nearly 40%. Adjusted gross margins which exclude depreciation as a percentage of sales was 22.9%, an increase of 50 basis points versus 22.4% last year. We are pleased by the increase in gross margin, but it was limited due to higher mix of tooling revenues which have lower margins. As volumes continue to recover and sales of powder increase, we expect margins to continue to expand in the coming quarters. Adjusted EBITDA was $1.2 million, a decrease of $240,000 versus last year. Last year's adjusted EBITDA included $550,000 of grant revenues. That was a one time benefit. If we remove this impact, Q3 2026 adjusted EBITDA would have been $350,000 higher than than last year. Looking at the segments, adjusted EBITDA was 1.25 million in the advanced materials, plastics and composite product segment a decrease of 80,000 versus last year and a loss of 60,000 in the battery cells and materials segment a decrease of 160,000 versus last year. Regarding our balance sheet and cash flows, we ended the quarter with $24.4 million in cash and cash equivalent and and 16.8 million in short term and long term debt. Our cash along with unused space in our revolving credit lines resulted in a total liquidity of $34.4 million as of March 31. Operating cash flows were negative 3.5 million, mainly resulting from an increase in working capital largely due to higher sales and payments to supplier on tooling projects. Cash flows from financing activities were positive 900,000 resulting from equipment financing offset by debt and lease repayments. Finally, cash flows from Investing activities were negative 3.2 million mainly due to capital expenditure payments. At the end of March, the company had spent a cumulative cash amount of $2 million on capital expenditures for projects in progress that will be financed in Q4. Lastly, given the US Supreme Court decision in February on IPA tariffs, we expect to receive between $500,000 and USD $700,000 in IIPA tariff refunds in the coming months. These tariffs were paid on imported equipment installed in Statesville, North Carolina. Moving now to an update on financial aspects of our expansion initiatives. As a reminder, originally our focus was in three main areas anode materials, dry process graphene and graphene enhanced SMC and composite materials expansion. As explained during the last quarter's analyst call, we decided not to pursue the CSPG anode materials initiative and to continue on with the other two initiatives. Regarding dry process graphene, the first module of what we expect to be Several production modules has been installed and we are now in the process of scaling up the production line. Regarding the Graphene enhanced materials initiative, the equipment is operational in Statesville, North Carolina and we are in final stages scaling up the equipment in Bose, Quebec. As such, we expect by the end of our fiscal year 2026 to have the equipment installed and operational to generate new revenue streams during fiscal year 2027. Turning now to our near term CAPEX spending and fiscal year 2026 guidance. CapEx spending during the quarter was 3.2 million and was slightly lower than the anticipated 4 to 5 million. This was due to timing as some of these expenses took place in early April. We expect to spend 2 to 3 million during Q4 to complete the graphene enhanced materials and and dry process graphene line initiatives. Once these two projects are completed, we expect CAPEX to greatly reduce and represent less than about 1 million per quarter, excluding new initiatives. Regarding our fiscal year 2026 guidance, we remain confident with our previous guidance that revenues for the full fiscal year will be between 115 and 120 million. Thank you, Pedro.

OPERATOR

Operator, we may now open the call for questions. Thank you. Dear participants, As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star one and one again. Please stand by, we'll compile the Q&A roster. This will take a few moments. And now we're going to take our first question and it comes to the line of James McGarragol from RBC Capital Markets. Your line is open. Please ask a question.

James McGarragol (Equity Analyst)

Hey, good morning. I appreciate you having me on. Morning, James. James. Yes. So I just wanted to ask, you know, we saw some pretty positive demand commentary from Volvo and Packer. Can you kind of quantify the volume uplift that you're expecting from these customers into FQ4 and how sensitive your guidance range is to any softening in the heavy truck production rates? Absolutely, James. Yes. So you know, we saw a lower demand of that volume into Q1, right. Since then it's been progressively increasing and we see that demand continuing between now and the end of the calendar year. So volumes are still going in the right direction in the industry and we're going to benefit from that coming up. And in terms of your gross margins, I guess they came in a little bit softer than I would have expected. Just given the stronger top line, you kind of highlighted the lower tooling revenues and volumes. But how should we be thinking about normalized grouper gross Margins run rate kind of into Q4 and then into fiscal 27 as some of these new programs ramp up.

Pedro Azevedo (Chief Financial Officer)

Yeah, I'm thinking it's Pedro. So in terms of margins, the margins were a little bit slower, softer than probably we would have liked. We agree with you. And it really comes from the fact that we are ramping up some of the operations in Bose as the volumes are increasing. We had to rehire some people and there's been some, let's call it slight inefficiencies in the overhead that may have caused more limited benefit of the gross margin increases. So that's, I would say that's a timely aspect when it comes to the question. More into the future quarters, we expect the margins for Q4 to probably be about in line with what we saw now with some increases, probably another 50 basis points, let's say into Q4 and into Q1 and then forward. I think that you're going to continue to see that adjusted margin continue to grow as the new revenues continue to come in online. These new revenues that Rocco has talked about, that we've talked about for the last little while. This is not necessarily a ramp up. This is much more of a startup. A lot of these projects are going to be starting and they're going to be incremental revenues with limited additional overheads. So again, so over the next three quarters, you should expect the margins to continue to Increase at least 50 basis points into Q4 and then progressively a little bit higher into Q1 and 2. Appreciate the caller and I'll turn the line over. Thank you. Thanks. Thanks, James.

OPERATOR

Thank you. Now we're going to take our next question. And the question comes line of Michael Glenn from Raymond. James, your line is open. Please ask your question.

Michael Glenn (Equity Analyst)

Hey Pedro, just on what you described just now in terms of gross margin, is that 50 basis points, is that sequential from Q3 gross margin? Yes, that's correct. We expect Q4 margins to be slightly better again than Q3. Okay, and then just on. I'm just wondering if you could dig into CP Chem a little bit more for us. So what are you seeing in terms of where the product is having its most effective application? Are there specific types of drilling? Are there specific regions? I'm just curious what you're able to speak to on that.

Pedro Azevedo (Chief Financial Officer)

Yeah, Good morning, Michael. CP Chem. So again, the value we're adding is incremental. It's massive. Right. We're decreasing coefficient of friction, increasing lubricity, reducing drilling time by 20%. But you're right, it's Specific applications for horizontal drilling in really tough environments. Right. So it's a premium based product. You're not going to put this in an area such as the Permian where it's soft to drill through. Right. Areas in North Dakota, the Colorado rockies in the U.S. western part of Canada. See similar terrain in South America. Right. So they're in Australia, for example. These are all applications in areas where the product is being tested and trialed. Now, have not had any negative feedback from anyone testing. Right. Everyone going from lab scale into field, they confirm the results time and time again. Right. So some of the, some of the projects CP Kim is working on right now, some of these things are. You're quoting, it's almost like you're quoting for a program that launches in six months to a year. Right. People are specking in the right type of lubricant for drill drilling application that launches in six months from now. Right. So working at all different ends of spectrum, we have converted customers that are in the process of drilling today. I mean there are commercial customers buying tribal grab into Nano Slide and using Nano Slide today. And then CP Chem is really focused on some high volume applications that would launch towards the end of this year and into calendar year 2027. Okay. And is the product, is it. Just to clarify, is this an off the shelf type product or it needs to be. Or the formulation needs to be adjusted for individual drilling applications, customers or regions. Off the shelf. Off the shelf. So a lot of the formulation work that two years that we work with them was developing a formulation. So that's done. I mean any work that Nano's done, any work that CP done Chem has done in the lab is all done. It's an off the shelf product. You go buy it today to drop in replacement to the competitive lubricants that are in the marketplace today. Okay. And then in terms of how your supply agreement works, would, would you expect the quarterly contribution to be. It would be like a lumpy quarterly contribution potentially or you would expect something smoother. Hard to answer. I mean right now we have a couple commercial customers and then a lot of other ones trialing at different phases. As more of these customers start to commercialize, that ramp trajectory starts to increase quicker. If you get big, there's a lot of big players in this space which are trialing the product today. One of those hits and convert their fleet quick, then that ramp happens much, much quicker. Right. You know there's four blenders being used today across North America, which means that we can hit geographical regions Quick. There was a process to get these people to, you know, these blenders turned on. So we're ready to ramp and CP Kim is actively marketing. So I think what we could add here is that what we are probably going to see is a stepping aspect over time as some of these bigger customers hit. You get a big jump at that time and then you get stability and then another jump at another point and so on. That's what we think is likely to happen over time. Okay, and this should be accretive to gross margin when the volumes go up. Absolutely. Something to keep in mind always, is that we have a large business that's on the solution side and that represents of a lot large part of our business today, proportionally. So a lot of these Tribograft sales will still be a subset of the whole, but they have significant impact on the benefits of the gross margin. And I've said time and time again, is that as gross margins, excuse me, as Tribograft and other graphene sales pick up, it contributes gross margins in a very strong way. You will see it less likely, less visibly on the revenue line, but it contributes to the EBITDA much more proportionally.

Michael Glenn (Equity Analyst)

Okay, thank you for taking the questions. Thanks.

OPERATOR

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press 11 on your telephone keypad. Dear speakers are under further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.