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Solesence Inc. reported its second-quarter 2025 earnings, showcasing a significant revenue increase and substantial profit growth. The company’s stock experienced a notable drop of 25.6% following the announcement. The market reacted to the earnings per share (EPS) of $0.04, which met the forecast, while revenue slightly exceeded expectations at $20.36 million. According to InvestingPro analysis, the stock currently trades at a P/E ratio of 52.2, suggesting premium valuation levels compared to peers. Despite the positive financial performance, investor sentiment was dampened, possibly due to concerns over future demand and tariffs.
Key Takeaways
- Solesence reported a 56% year-over-year revenue increase.
- Gross profit improved by 55%, with a margin of 29%.
- Stock price dropped by 25.6% post-earnings announcement.
- EPS met expectations at $0.04.
- Concerns over potential demand slowdown and tariffs in 2025.
Company Performance
Solesence’s Q2 2025 performance highlighted a robust growth trajectory, driven by consumer product sales. The company achieved a 56% increase in revenue compared to the same period last year and significantly improved its net income to $2.7 million from $900,000. The growth was supported by federal employee retention credits amounting to $1.2 million. Solesence’s focus on skincare, color cosmetics, and sun care products has positioned it well in both the prestige and mass market segments.
Financial Highlights
- Revenue: $20.4 million (56% YoY increase)
- Earnings per share: $0.04 (met forecast)
- Gross profit: $5.9 million (55% YoY increase)
- Net income: $2.7 million (up from $900,000 YoY)
Market Reaction
Despite meeting EPS expectations and slightly surpassing revenue forecasts, Solesence’s stock price fell by 25.6% immediately following the earnings announcement. The stock closed at $2.775, a significant drop from the pre-announcement price of $3.73. The decline may reflect market concerns over potential demand slowdowns and the impact of tariffs, despite the company’s strong financial results.
Outlook & Guidance
Solesence’s guidance indicates a focus on operational efficiency and margin improvement, with expectations of gross margin expansion in the second half of 2025. The company has shipped and open orders exceeding $60 million and anticipates moderating demand levels. However, management remains confident in achieving a record revenue year.
Executive Commentary
CEO Jess Jankowski emphasized the company’s innovative approach, stating, "We are transforming skincare and beauty products that protect, nourish, and celebrate every skin tone, type, and identity." COO Kevin Curitin highlighted operational improvements, noting, "Our investments in increased scale and automation are starting to achieve the expected payoff."
Risks and Challenges
- Potential demand slowdown due to macroeconomic factors and tariffs.
- Supply chain issues that could impact product availability.
- Increased competition in the skincare and beauty industry.
- Dependency on federal credits which may not recur in future periods.
- Market volatility affecting stock performance.
Q&A
During the earnings call, analyst James Lieberman inquired about profit margin improvements. Management responded by highlighting manufacturing efficiencies and process optimizations, emphasizing their ability to achieve "first time prime" production.
Full transcript - Solesence Inc (SLSN) Q2 2025:
Daniel, Conference Call Moderator: Good day. Thank you for standing by. Welcome to the Solesence Second Quarter twenty twenty five Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session.
To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. Today’s call is being recorded. During this call, management will make statements that include forward looking statements within the meaning of the federal securities laws, which are pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. The conference call may contain statements that reflect the company’s current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those stated on this call.
These important factors include, without limitation, a decision of the customer to cancel purchase order or supplies, agreement, demand for an 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 technology, 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. Except as required by federal securities laws, the company undertakes no obligation to update or revise these forward looking statements to reflect new events, uncertainties or other contingencies. I will now hand the conference over to your speaker, Mr. Jess Jankowski, President and CEO. Please go ahead, sir.
Jess Jankowski, President and CEO, Solesence: Thank you, Daniel. Good afternoon, and thanks to all of you who have joined our call today. Also joining me on today’s call is Kevin Keuraton, our Chief Operating Officer. I’ll begin with a summary of our second quarter results and a business update. Kevin will then discuss our operational initiatives, then we’ll take your questions.
I’m pleased to report we delivered a strong second quarter, both commercially and operationally. It truly was a total team effort that resulted in a sharp increase in revenue sequentially and annually. I’m proud of what we accomplished this quarter and want to use this opportunity to thank our dedicated team. I would like to remind our listeners that the second quarter is typically our seasonally strongest quarter. This is due to the advanced sunscreen orders for summer.
This made it critical that we executed at the highest level to effectively manage the increased volume load. This exceptional performance has not only solidified our customer relationships, but also positioned us as well for repeat orders. Taking a step back, I’d like to highlight some of our key corporate updates that took place during the quarter. At the start of the quarter, we uplisted our common shares on the NASDAQ, a major milestone for Solesence and our valued shareholders. As we discussed on our first quarter call, listing on NASDAQ is important because it can deepen our visibility within the investment community, increase our liquidity and deliver greater value to our shareholders and other stakeholders.
We are excited to be a NASDAQ listed company and look forward to many future investor engagement opportunities. Since we listed on NASDAQ, we were added as a member of the broad market Russell three thousand and small cap Russell two thousand indices. Inclusion on these highly visible indices further enhances our marketability by opening us up to a wider range of institutional investors. These significant achievements underscore our commitment to maximizing shareholder value and expanding our presence within the financial markets. During the quarter, we also amended our existing loan agreements to increase our borrowing capacity to further support our growth initiatives.
As Kevin will discuss in greater detail shortly, we not only enhanced our operational efficiencies during the quarter, but also restructured our debt facilities to ensure that we have the financial strength to invest in our future. Let’s turn to an update on our second quarter financial results in approximate numbers. Revenue for the quarter was $20,400,000 representing an increase of 56% year over year. It was a record quarter for Solesence, driven by the sales of our consumer products to our largest customers, including our new partner and, of course, Color Science. These results reflect the continued strength of our commercial execution and market demand for our products.
We’re also pleased with the improvement in our profitability in the second quarter as we successfully navigated through the onetime production start up costs related to the first quarter launch of a new product line by an exciting new brand partner. Further, as expected, we’ve had no recurring production issues related to this new partner. Second quarter gross profit was up 55% at $5,900,000 compared to $3,800,000 for the same period in 2024. The gross profit margin was 29% for both periods. Notably, gross margins expanded by six percentage points from the 2025.
Net income for the second quarter was $2,700,000 compared to net income of $900,000 for the same period in 2024. Net income in the 2025 benefited from approximately $1,200,000 in net credits plus related interest from the federal government’s employee retention credit program, which we applied for in 2022. This was a nice boost to our cash position. As pioneers in bringing industry leading, award winning protective beauty solutions to leading brands globally, our mission, delivering joy, is embedded in our work culture. We honor this mission through our commitment to continually elevate our product offerings and offer outstanding performance.
In doing so, we are transforming skin care and beauty products that protect, nourish, and celebrate every skin tone, type, and identity. Our product advancements were on full display at the twenty second edition of Cosmoprof North America held in Las Vegas two weeks ago. For those new to our company, Cosmoprof North America is the leading business to business beauty trade show in The Americas and the single most important networking opportunity in The US for all sectors of the global beauty industry. It’s here where we showcase our novel products and unveil new technologies while forging new relationships and partnerships with leading brands globally. We really shine at CosmoProf.
At this year’s event, we were excited to demonstrate a new white label product that was featured in Cosmo Trends, which is a widely circulated report that provides early insight into the most influential product ingredient and consumer behavior trends shaping the global beauty market. Our new product, Color Ninja Correcting Cream SPF 50 plus is developed to cater to those consumers seeking both anti aging and sun care products tailored towards sensitive skin. Infused with our patented ingredient, CLEAR, this color correcting cream promotes skin longevity while offering a perfected skin finish that counteracts redness. Additionally, we exhibited two new skin health technologies that we believe will further support our future growth initiatives. Exhibited As a recognized leader in the beauty industry, we continue to strengthen our foundation for growth and evolve our technology to adapt to a rapidly changing demand environment.
It’s our relentless commitment to scientific excellence and innovation that sets us apart, enabling us to deliver on our mission. We look forward to sharing further technology updates, product developments and new launches in the months ahead. At this time, I’ll turn the call over to Kevin Curitin, our Chief Operating Officer, to share an update of our progress and outlook.
Kevin Curitin, Chief Operating Officer, Solesence: Kevin? Thanks, Jess. And as always, I’d like to begin with thanking our amazing team for their tireless commitment and demonstrating through our results their ability to consistently deliver solid performances for our investors, our brand partners and for ourselves. We are pleased to generate another quarter of record revenues and unit volume shipped. This resulted from our ability to successfully ramp up inventory production earlier in the year in order to meet a higher level of customer orders during our seasonally strongest quarter.
Importantly, we not just grew, but grew profitably as evidenced by our increase in EBITDA, which expanded to $3,500,000 in the second quarter, up from $1,400,000 in the year ago period. Overall, for the quarter, shipment volume increased 102% and production volume increased 127% compared to the year ago period. These increases are a testament to our team’s efforts to successfully work through large order quantities on time and produce high quality solutions for our customers. I’d also like to highlight that we continue to receive new orders from our new brand partner from the first quarter in which we resolved all production issues associated to that account. This shows our unyielding dedication to our work that customers equate to the Solesence brand.
While improving manufacturing execution, we continued efforts in rebalancing our inventory levels. During the quarter, we reduced inventory levels by approximately $2,000,000 or about 9.5% of the inventory level we held at the end of Q1. Our goal remains to reset inventory levels and mix so that they are fully aligned with our growth plans. On our Q3 call, we will share more specifics about our progress here. Our improved manufacturing execution also yielded lower overall labor expenses as these were reduced as a percentage of revenue by four percentage points during the quarter as compared to Q1 twenty twenty five.
Our investments in increased scale and automation are starting to achieve the expected payoff. So over the next few quarters, we expect further cost reductions, which ultimately will raise our overall gross margins to be in line with what a technology driven company like ourselves should achieve. Now, turning to the broader macroeconomic environment. Solesence is a well diversified business with brand partners spanning various skincare, color cosmetics and sun care categories, as well as those operating in the prestige and mass markets. We believe our broad market mitigates many of the effects of microeconomic conditions if they were to weaken.
Having said that, we anticipate demand to slow in the 2025 as tariffs affect global purchasing decisions and consumer buying habits. This will likely have an impact on our revenues, but we are still projecting a record revenue year. On the expense side of the equation, we also expect a muted impact to our packaging component costs. However, as stated on our last call, we do anticipate that we will be able to pass all of the new tariff expenses through without adversely affecting our margins. We will continue to monitor this situation closely.
In addition to our strong commercial and operational execution, as Jess mentioned, we enhanced our financial flexibility to support our future growth initiatives. In May, we amended our loan agreements to increase borrowing capacity from $14,200,000 to $23,000,000 and extended maturities to 04/30/2027. This expanded financial flexibility is crucial for executing our objectives, allowing for favorable raw material procurement, improved lead times for product launches and stronger support of our brand partners. Taking a 30,000 foot view, we are now better positioned to scale operations and broaden the scope and depth of the type of offerings we present to our brand partners, all of which is reflected in the strong confidence of our finance partners. We really appreciate their continued support.
I’ll now turn it back to Jess. Jess?
Jess Jankowski, President and CEO, Solesence: Thanks, Kevin. Looking ahead, we anticipate moderating demand levels based on softer macroeconomic conditions. While we continue to receive reorders and exceed client expectations for our Beauty Care solutions, the combination of typical seasonality, longer brand purchasing decision processes, and an uncertain tariff environment will likely have an impact on our top line for the 2025. Our shipped and open orders are currently in excess of $60,000,000 compared to about $50,000,000 in the 2024 and $45,000,000 when we last reported in May. For those listeners who are new to Solesence, this metric refers to the total value of customer orders that we’ve either already shipped or are still awaiting fulfillment.
It represents a snapshot into our business, which we believe helps investors better understand current demand trends. While we navigate through this expected choppy market in the 2025, I would like to highlight three reasons why we’re confident in our long term prospects. First, leveraging our patented technology, unique performance products, and regulatory expertise, our specialized formulations for skin health, sun care, and color cosmetics position us at the forefront of the beauty market. Our ability to cater to both prestige and mass market brands is further amplified by our diversification across various beauty segments. As the preferred CDMO for top brands, we constantly innovate with new technologies to retain our pole position, giving us an edge over the competition.
Second, we have an impressive roster of loyal leading brand customers which we do not take for granted. These brands such as BASF, Color Science, Tatcha, Credo and others appreciate our differentiated offerings. They know that we’re adding to their customers’ confidence, self expression and well-being. Our high brand retention rates ensure recurring revenue and sustainable growth. Furthermore, we are relentless in meeting the specific demands of our customers.
As we detailed last quarter, we perfected the delivery for a new multi SKU product launch with a new brand partner earlier this year. Despite the startup challenges we shared, this key brand partner has now placed a series of future orders. We mentioned last time that these challenges help to build the relationship with this brand and follow on orders are commercial proof. And third, we have right sized our operations and improved our financial flexibility, giving us added capability to not only invest, but also scale for growth. Much of the work associated with streamlining our operations occurred in late Q2 and early Q3, and as a result, we are well positioned to expand our gross margin and drive stronger EBITDA performance, which will be more evident throughout the second half of the year.
We work with several brands that do a great job in conceptualizing compelling concepts that drive the initial consumer purchase. The challenge and the opportunity are translating that excitement into second and third purchases. This is where Solesence breaks through and makes a difference. By creating loyalty with consumers, our patent protected products live up to their expectations. That’s the part that’s difficult for other brands, those brands not working with Solesence, to replicate.
It reinforces our strong competitive position, drives our long term value creation. With three proprietary technology platforms, we are well positioned to generate continued growth that we anticipate will happen at a multiple of the industry’s current growth rate. Now, before we open the call for your questions, I’d like to share a brief update on our Chief Financial Officer search. We’ve been actively engaged in the process and are very pleased with the caliber of candidates we’ve interviewed. We’re at a point where we expect to make an announcement regarding our new CFO soon.
Now, we’d be happy to take some questions. Afterwards, I’ll offer a few closing comments. Daniel, please open the call for Q and A.
Daniel, Conference Call Moderator: Our first question comes from James Lieberman with America Trust Investment Services. Your line is open.
James Lieberman, Analyst, America Trust Investment Services: Thank you. This is terrific results. I’m really impressed that you were able to have revenues of over $20,000,000 for the quarter. It shows great ability to scale. And I’m sure with that scaling, there are a lot of costs and challenges along the way.
And you gave some indication that the profit margins could be starting to improve going forward as you’ve met certain goals. Can you give a little bit more color to how we might look at that playing out over the year?
Jess Jankowski, President and CEO, Solesence: Hi, Jim. Certainly, I think over the year, what you’ll see is, we were, as you know, or as the group knows that has listened to these calls, we had some turmoil in Q1 in kind of making sure that launch got perfected and we put in a lot of resources to do that. We made absolutely sure that we service that customer and their launch went out without a hitch. We also probably built up more inventory than we would have just to make sure that not only could we service that customer, but that the other customers that we weren’t focused on that heavily were also being taken care of. And what’s happening as a result now, as we make the business more efficient, we’re realizing through all that production and that’s the very high volume production, we got some efficiencies through some of the lines that we’ve put in over the years that we were waiting for the opportunity to have that kind of volume to kind of do almost like a shakedown cruise to make sure that we could do it, we can get it there and that gave us the confidence to kind of change the approach towards some of our manufacturing going forward.
And we think we’ll see more of that becoming evident in the last half. I hand it over to Kevin for a little more color there, given his expertise here.
Kevin Curitin, Chief Operating Officer, Solesence: Thanks Jess. And Jess hit on the nail on the head, the button, something. But now he hit the point there, Jim, and it’s nice to hear from you. The real opportunity for us through what we learned in the first quarter was how we can better optimize the utilization of our lines and therefore the labor that is used on those lines. We actually have been able to improve that in second quarter and we expect that we’ll see even better and more improvements as we get through the rest of this year.
We also through that process was able to do something very important and that was to implement improvements in our processes to achieve first time prime. So that we make things right the first time that in and of itself helps to improve your efficiency and lower your cost. So those couple of items are really at the heart of where we expect to see some nice improvements in our gross profit margins as we go forward over the next few quarters.
Daniel, Conference Call Moderator: Thank you. I’m showing no further questions at this time. I would now like to turn it back to Jeff Jankowski for closing remarks.
Jess Jankowski, President and CEO, Solesence: Thank you, Daniel. Thank you for your question and to all those who took the time to join us today, thank you for your time. We remain confident in our long term prospects, driven by our cutting edge patented technology and specialized formulations that position us at the forefront of the beauty care market. Our ability to serve both prestige and mass market brands, coupled with our relentless innovation and position as a preferred CDMO, gives us a distinct competitive edge. We’re proud of our impressive roster of loyal, leading brand partners, our customers, who value and promote our differentiated offerings, ensuring high retention rates and sustainable growth.
Furthermore, we’ve proactively strengthened our operational foundation and financial flexibility, ensuring we’re well equipped to invest and scale for future growth and guard against potential near term demand headwinds. Our recent NASDAQ uplisting, inclusion in the Russell indices and increased borrowing capacity all underscore our commitment to maximizing shareholder value. I’d like to close by thanking our shareholders for your continued support and look forward to updating you on our progress next quarter. Daniel, you may close the call.
Daniel, Conference Call Moderator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
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