Good day, and thank you for standing by. Welcome to the Solescence third quarter, 2026 conference call. Today's call is being recorded. On today's call, we have Kevin Cureton, President and Chief Executive Officer of Solescence, and Laura Riffner, Chief Financial Officer of Solescence. 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. This conference call may contain certain 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 a customer to cancel purchase order or supply agreements, Demand for and 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'll now hand the conference over to Kevin Cureton, President and Chief Executive Officer. Please go ahead, sir.

Thank you, Operator. Thank you to all of our investors, business partners, and teammates for joining the call today. In the third quarter, Solescence's progress toward implementing our Transform and Transcend strategy accelerated as we reached a notable milestone regarding our first and foundational pillar. In Q3, we completed the primary investment and implementation phase of our lean management initiatives, which contributed to the strong financial performance we achieved. On today's call, we will discuss the continued convergence of the beauty and wellness industries, the opportunity this creates for Celescence, and how we uniquely serve consumers' needs and enhance our company's growth from this market evolution both now and into the future. But before we do this, we will offer more insight into our strong financial performance on Q3 and our guidance for the rest of 2026. I'll now turn the call over to Laura.

Thank you, Kevin. For the third quarter of 2026, Solescence achieved revenue of $20.2 million, our highest third quarter revenue ever recorded, and a 38% increase compared to $14.6 million in the third quarter of 2025. As Kevin mentioned, we have completed the implementation phase of the first pillar in our Transform and Transcend strategy that introduced lean management principles and resulted in improved operating efficiency. We also had a favorable product mix driven by the growth of our strategic brand partners. As a result, we have seen improved direct margins, improved gross profit margins, and improved free cash flow. Gross margin for the third quarter increased by 1,550 basis points to 39.3%. compared to 23.8% in Q3 of 2025, driven largely by an improvement in our overall equipment effectiveness, commonly referred to as OEE. Across all production lines, OEE increased from 40% at the end of the third quarter of 2025 to 55% at the end of the third quarter of 2026. This improvement reflects meaningful progress in operational execution and strengthens our guidance that 30% remains the floor for gross profit, with the potential to exceed this level as we finish 2026 and move forward into 2027. Solescence also achieved record net income of $3.7 million for the third quarter, compared to a net loss of $1 million in the prior year. This represents the highest quarterly net income achieved by Solescence in our history. As our new operational changes continue to integrate deeper into our culture, we expect to continue to drive greater margin expansion and gross profit as our efficiency increases, manufacturing scales, and operating costs decline as a percentage of revenue. Here are some specific examples we can share. On a year-to-date basis, we markedly improved labor efficiency with total direct labor costs down by over $2 million versus 2025. We also further reduced indirect labor costs by over $400,000. These are signs that performance is improving. We believe that even with these substantial gains, additional opportunities to further improve our labor efficiency remain, and these are expected to boost our gross profit margins as we head into 2027. Turning now to our outlook, looking first towards shipped and on hand orders, we expect to achieve at least $65 million by year end. We can confidently state that we expect 2026 to be a third consecutive year of record revenue growth and profit growth for our company. While we now anticipate full year EBITDA margins to be slightly below our previously communicated double-digit target, primarily due to softer performance in the first half of the year, we are encouraged by the significant improvement in the third quarter. We expect this positive momentum to continue into the fourth quarter with EBITDA margins remaining well above first half levels. Lastly, I would like to mention that we have completed the restatement of our historical financial statements and filed all related amendments. We have also implemented enhanced internal controls and are progressing through the required testing to validate their operating effectiveness.

We are pleased to have completed the restatements and remain committed to strengthening our financial reporting processes.

I'll now turn it back to Kevin.

Thank you, Laura. As we prepare to conclude the first full year of our Transform and Transcend initiative, I'd like to take a moment to discuss progress in our new strategy. On previous calls, we have spoken about how this strategy was born out of necessity as part of a larger evolution of our business. While Transform and Transcend has only been initiated in the last year, our work to elevate our operations began in 2022. Since then, we have worked diligently to evolve our business strategically expanding our executive leadership and operational management teams, as well as our infrastructure, as we grew our manufacturing footprint from less than 80,000 square feet to approximately 300,000 square feet. These decisions not only increased our capability and capacity, but they also increased our fixed costs, growing our indirect COGS at a similar or slightly higher rate than our revenues growth. Through our Transform and Transcend initiative, We have figuratively crossed the chasm, where the level of these expenses will increase at a rate substantially below the growth rate of our top line. The improvement is particularly apparent as our indirect costs on the year-to-date basis are down by a seven-figure amount compared to last year. While there is still substantial opportunity to improve labor efficiency, production yields, and product mix, all areas that transform and transcend will address We are pleased with our progress in this area and excited about our future. Looking forward, we're excited about the changes in our industry, which we believe over time will help drive both the revenue and EBITDA growth of our company. Specifically, we are seeing the line between beauty and wellness blur, as consumers increasingly view beauty as a vital part of a holistic health routine. As a result, consumers across all income levels are increasingly prioritizing their discretionary spend toward their health and wellness over other categories, driving what we believe to be a near-term and sustained increase in our addressable market. This ongoing blend of the two sectors provides a significant opportunity to increase share of Wallet for Celescence, whose very existence is to create products that enhance both the health and the appearance of skin. Effectively, our company was born to participate in the very change that is driving market growth now and into the future. In a related development, this year, the FDA approved Bemotrizinol, or BEMT, a UV filter commonly used in European and Asian beauty products. as the first new active over-the-counter sunscreen ingredient approved in the United States in over two decades. The introduction of this new active has further raised consumers' awareness and excitement around UV protection. This excitement is driving the brand-level investment in new daily-use SPF products, including facial care, complexion products, and makeup. These product categories are the very core of the Celesence innovation engine. and where we have been repeatedly recognized as a leader throughout the industry. As a result, we expect BEMT to provide Celestins with even greater potential to expand our market reach. And because of the unique mix of both proprietary actives and SPF-enhancing technologies we own, our company has unmatched flexibility in creating the innovative compositions and textures of the future. Through this end, we have already developed concept formulas with BEMT and have selectively shared these novel hybrid formulas with key brand partners, pairing BEMT with our active stress defense technology suite and our other proprietary skin health technologies. While we do not have an official release date, consumers could begin to see these new hybrid products in the market in 2027. Together with our other innovative technologies, Whisper, Chromalume, their sister technologies, MiraLume and TerraLume, and of course, our patented award-winning zinc oxide technology, Clear, DEMT provides us with greater capability to address the evolving needs of beauty consumers while actively benefiting their overall skin health. With these powerful market tailwinds, our expanding formulation capabilities and proactive efforts to increase our international reach, We believe that we are exceptionally well positioned to achieve sustainable long-term growth as we head into 2027. We believe this will result in increases in our gross margins, ultimately enabling us to achieve greater than 20% EBITDA and drive higher valuation by realizing the technology company premium we are built to achieve. With that, we will now open the call to questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourselves to one question and one follow-up question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Sergi Mascaro from Eden Discovery.

Hey, guys. Thanks for taking our questions, and congrats on this quarter. We are new to the story here, but the first question we have is on the guidance. Maybe I didn't listen well. Can you repeat what's the guidance and how you compare it versus the previous quarter, please, in terms of margin and top line? Thank you.

Hi, Sergio. Thanks for your question and thanks for joining us today. I think what you were asking about was our guidance for the year, essentially. So that's something that Laura had shared earlier. We still have the same guidance we had provided earlier. On an annual basis, we expect to have a, as we stated, a record performance, the third consecutive record performance, both in revenue and profitability. So we're guiding to that point at this point. We're not guiding to an EBITDA greater than or a double digit EBITDA at this point, but we are guiding to record revenue and profitability.

All right, that's helpful. And seeing this quarter, which seems to be very strong, why you didn't change the guidance? Is it because you expect the next quarter to be weaker than expected, or is it just conservatism?

So, Sergio, just to make sure you're asking, it sounds like you're asking, or at least the question we're going to answer for you is, that why didn't we change our guidance? What we've tried to be is consistent and somewhat conservative in the guidance that we provide. We'll be excited to talk to you about the rest of the year in our fourth quarter call. We, because of the nature of our business, don't really want to guide to quarter to over quarter performance because we're still a growing business in a market that is rapidly changing. And so some of the reorders and new launches and those types of things that happen are happening at different times of years than they used to happen in the past. So that's where we are right now.

And just to reiterate, we are still guiding to a 30% gross profit floor for the year. That guidance hasn't changed. It's the EBITDA guidance that we did. We're no longer guiding towards double-digit growth this year. We think it's going to be a little bit less than that.

Thank you. One moment for our next question. Our next question comes from the line of James Lieberman from American Trust Investment Services.

Thank you. Clearly, you're finally starting to hit your speed and your gears and moving in the right direction. I know you put so much effort into the transition into new manufacturing, into improving the manufacturing efficiency and continuing to expand your product offerings. Can you give us a sense of how many companies you're working with and how many SKUs are out there at this time?

Hi, Jim. Thank you again, as always, for your support. Yeah, it's been a bit of a journey over the last year, and we still have a bit of a way to go. So we'll celebrate for a couple minutes here, and then we'll get back to work. But in terms of the number of brands, as we've guided, I think, in the past, we have over 60 brand partners Give or take that varies from year to year. There's been continued growth in some of our larger brand partners in particular. But yeah, we have somewhere north of 60 brand partners. And as I think in last count, we were north of 300 SKUs. I don't recall the exact number in terms of product SKUs, but It's a pretty substantial number of SKUs that are out there right now.

Again, I wanted to congratulate you on your progress and also to see that you're finding ways to take advantage of the DMT approvals and to see how your products are complementary to that change in helping people. I really appreciate all the work you're doing.

Well, thank you, Jim. Yeah, we're excited about the changes that are occurring in the market. BEMT is one of those changes, and we certainly feel like we're uniquely positioned to take advantage of it with the suite of technologies that we have that we can wrap around that sunscreen active to really enhance the performance of it and bring some beautiful textures to the market that consumers are looking for. So, Thank you very much. Thank you again. Great work.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit yourselves to one question and one follow-up question. Our next question comes from the line of Tony Rubin.

Hi, good afternoon. I'm very pleased that you announced this quarter. I know, Laura, you telegraphed it a little bit in Q2, but the margin was very nice, and I also Commend you, which I don't think you discussed, but it looks like you have held the line on R&D expenses and, in fact, are trending lower year-to-date on SG&A, all of which is very positive. You know, you've talked about Q4 being at least $17 million, which would put you up 36%. So the real question is, as you look out into 2027, is this, you know, quarter... Thank you so much for your question.

I do not think and we do not think that it is a fluke. I think we worked very hard or we have been working very hard this entire year to improve our operations and our operational efficiency. And in the third quarter, we really started to see the culmination of all of those efforts in the improved gross margin. And I think that is something that we are going to be able to build upon and not a fluke for us. We've seen so many improvements and I think there are opportunities for us to continue to improve and we will be able to build on what we've done all throughout the year that really was just highlighted in the third quarter. and build on that going into, you know, throughout the end of this year and really going into 2027. We're pretty excited about that, too.

Yeah, I'll just add quickly, Tony, that we are in a cycle. I think we talked about this a bit at one of the quarters that, you know, we made some changes in our commercial leadership to kind of really reset some of the changes that we need to make in terms of business acquisition. And so we're excited about what that's going to lead to. But with the lead times on that, we expect to grow certainly in 2027. But we think that greater growth is in 2028 than it is in 2027. That's looking far out. That is not official guidance. We won't take it that way at this point. But just to try and give you an answer to your question.

No, that's fair. And my follow-up is, in the past you have, I don't know if promise is the right word, but said you would participate in industry events, basically investor industry events, which would be helpful to get the word out about the company. And given that it sounds like you've turned the corner and have a very positive story to tell and to sell, will you in fact be attending any industry investor conferences either later this year or early in 2027?

Yeah, thank you again for that question too. That's a great question. It is our intent. to first and foremost get the long-awaited investor presentation completed. We have, as you alluded to, Tony, our plan was after we took a look at where we were and understanding what we needed to do through the Transform and Transcend initiative to really make sure that we could feel good about telling a longer-term story before we got out there in the market to promote our company and to let everyone know the quality of investment that we believe Celestence is. That is our plan in 2027, just to now complete that investor deck here shortly and then start to participate in conferences in 2027. Stay tuned for future feedback on what those conferences are as we get closer to in January and that portion of the year.

Thank you. One moment for our next question. Our next question comes from the line of Sergio Mascaro from Eden Discovery. Discovery.

Hey, guys. Thanks for taking our additional question. I wanted to ask about the customer concentration, if you can explain a little bit more how it has changed over the last quarter, the customer concentration. Thank you.

Yeah, we've had some pretty fabulous growth with some of our larger customers, and we are excited about that continuing into the future. I think what some of our initiatives now, as I was alluding to in Tony's call or question, is that our efforts now are to continue to expand our customer base both, as we've talked about in the past, on a domestic basis, but we do see some opportunities on a global basis as well, on a selective global basis as well. And we think that through that growth, we will end up diversifying our customer base. It's never our desire to have our customers not grow. So we want those big customers to continue to grow and grow rapidly. It's just our job to add additional brand partners to allow us to be a little bit more diversified in the business that we have.

That's amazing. And can you maybe also provide some color for those who are new into the seasonality of the business, how it looks, the seasonality for the business?

Yeah, you know, I will say, in full transparency, we've talked about that quite a bit, you know, with our team. You know, generally, recognizing the products that we manufacture are facial skin care and color cosmetics products that are worn by women on a year-round basis. So what we do see, however, is this nature of SPF-infused products having sort of more of a launch period in the second quarter of the year on an on a consistent basis. We do also, though, now, Sergio, see that there have been changes based upon the growth of some of the online shopping that has a different distribution cycle in terms of just how quickly they move from order to sell through. And so that's changing things a bit as well. So that's a long way of saying to you that generally there is some seasonality that we see on a launch basis that happens in late first quarter to early second quarter. That means new product launches. But generally our business is non-seasonal because of the types of products that we manufacture and offer to consumers.

Thank you. At this time, I would now like to turn the conference back over to Kevin Cureton for closing remarks.

Well, thank you again for joining us today. With our record third quarter results, we believe we have turned a meaningful quarter in the execution of our Transform and Transcend strategy, and we're pleased with our position as we reach the final stretch of 2026. Through disciplined execution, We have strengthened our foundation to drive greater efficiency at scale and lower operating expenses, empowering profitable growth over time as we continue to expand our business to meet the demands of our brand partners and consumers. Celestis will finish the year with momentum that we believe will carry forward into 2027 and beyond. Thank you for your continued support of Celestis. and we look forward to updating you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.