NanoXplore Q2 Earnings Call Highlights

NanoXplore (TSE:GRA) reported a sequential rebound in operating performance in its fiscal second quarter of 2026, citing improvements in revenue, gross margin, and adjusted EBITDA versus the prior quarter. On the company’s earnings call, management emphasized disciplined execution, a shift toward higher-return initiatives, and near-term milestones tied to its dry process graphene platform and contracted composites programs.

Company abandons CSPG investment, refocuses capital

Chief Executive Officer Rocco Marinaccio said NanoXplore has decided not to proceed with a previously contemplated CAD 100 million investment in coated spherical purified graphite (CSPG). Marinaccio described the move as disciplined capital allocation based on risk-adjusted returns, pointing to several factors that influenced the decision:

• Geopolitical uncertainty that could materially affect pricing and market access
• Long qualification and testing timelines from potential off-takers
• An “unstable” environment that included an example where a CSPG manufacturer’s binding agreement was later nullified

In the Q&A, management elaborated that trade and tariff dynamics were a key concern, noting that if tariff conditions changed, competing at targeted price points could become difficult and margins could be pressured.

Dry process graphene installation targeted for early April

Marinaccio said NanoXplore’s first fully commercial dry process graphene module is expected to be operational by early April, with installation described as on schedule. He said dry process graphene is “significantly less costly” to produce than the company’s wet process graphene and could open end markets that are not currently accessible. Management said the new mill is expected to add 500 to 1,000 tons of incremental annual capacity.

During the Q&A, management said the company has been producing lab-scale quantities and sees customers across different markets at different stages of testing. Some customers require larger volumes than NanoXplore could previously supply to advance their evaluation, which the commercial module is expected to enable. Management said timelines for meaningful revenue contributions will depend on customer testing, plant trials, and qualification steps, and it did not provide a specific ramp schedule.

Chief Financial Officer Pedro Azevedo added that the dry process graphene expansion will be executed modularly as demand develops, with each module expected to cost CAD 1.5 million to CAD 2 million, reducing the need for large upfront investments compared with the CSPG plan that was shelved.

Graphene Solutions: Club Car launch and Volvo contract award

Management said market conditions in its graphene solutions business have improved after softness over the prior three quarters, particularly among its two largest customers. Marinaccio said demand has stabilized and OEM forecasts point to a recovery in the second half of the calendar year, with NanoXplore expecting gradual volume improvement beginning mid to late 2026.

One of the quarter’s operational highlights was the launch of a program with Club Car. Management said the launch was executed on time and integrated smoothly into the customer’s manufacturing operations, with shipments accelerating into the peak recreational season.

NanoXplore also disclosed a new “takeover” contract award from Volvo Trucks expected to begin in summer 2027, with annual revenue contributions of approximately $9 million to $10 million. Management said the award is incremental to the $40 million of contracted business previously reported in the graphene solutions business and characterized it as business won from a competitor rather than an internal transfer. In response to analyst questions, management said the program relates to an oil pan component used broadly across North American trucking platforms, and margins are expected to align with the company’s graphene-enhanced solutions business.

Drilling fluids partnership with CPChem expands testing footprint

NanoXplore provided an update on its strategic collaboration with Chemvron Phillips Chemical (CPChem) in drilling fluids. Management said the contract became effective October 1, 2025, with a commercial launch announced by CPChem in mid-November, ahead of what the company described as a seasonally slower drilling period in certain geographies.

During fiscal Q2, NanoXplore shipped GrapheneBlack to CPChem’s early adopters. Marinaccio also said CPChem is field-testing NanoSlide with two major Asian oil and gas producers, shipped product to one of the world’s leading oilfield service companies, and initiated additional testing programs in Latin America.

In Q&A, management described the oilfield service company as one of the “two or three main” global players and said it had completed lab tests and ordered NanoSlide for field testing. Management also noted that “white labeling” is common in the industry, and adoption could occur under the service provider’s label. While management said near-term revenue visibility is difficult for this new product launch, it characterized engagement levels as consistent with expectations and said current capacity is sufficient for the foreseeable future. If incremental capacity is needed, management estimated it could be added in roughly 9 to 12 months.

Financial performance: revenue decline year over year, margins hold

Azevedo reported Q2 revenue of CAD 27.6 million, down 17% from the same quarter last year. The decline was attributed mainly to reduced volume demand from the company’s two largest customers and lower tooling revenue, partially offset by new revenue from the Club Car program and higher powder sales tied to the CPChem contract.

Adjusted gross margin (excluding depreciation) was 21.5%, slightly above 21.3% a year earlier, which management attributed to a richer mix from powder sales and the Club Car program, along with overhead leverage. Adjusted EBITDA was CAD 224,000, down CAD 880,000 year over year. The Advanced Materials, Plastics and Composites Products segment generated adjusted EBITDA of CAD 181,000, while the Battery Cells and Materials segment generated CAD 43,000.

NanoXplore ended the quarter with CAD 30.1 million in cash and cash equivalents and CAD 14.6 million in short- and long-term debt. Total liquidity, including unused revolving credit capacity, was CAD 40.1 million as of December 31. Operating cash flow was negative CAD 6.4 million, largely due to working capital changes and income tax payments. Financing cash flow was positive CAD 30.1 million, reflecting the October 2025 equity financing and equipment financing, offset by repayments. Investing cash flow was negative CAD 3.6 million, mainly capital expenditures.

Capital spending was CAD 3.6 million in Q2. Management expects another CAD 4 million to CAD 5 million in Q3 to complete the graphene-enhanced SMC initiative and the first dry process graphene module, after which CapEx is expected to decline to less than CAD 1 million per quarter (excluding new initiatives). For fiscal 2026, NanoXplore reiterated its view that Q1 represented the revenue trough and guided to full-year revenue of CAD 115 million to CAD 120 million.

About NanoXplore (TSE:GRA)

NanoXplore Inc is a graphene company, manufacturer, and supplier of high-volume graphene powder for use in industrial markets. The company provides graphene-enhanced plastic and composite products to various customers in transportation, packaging, electronics, and other industrial sectors. Geographically, it generates a majority of revenue from the United States.