Solesence Inc (SLSN) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Nanophase Technologies Corporation first-quarter 2015 financial conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this call is being recorded.

The words expect, anticipates, plans, forecasts and similar expressions are intended to identify forward-looking statements. Statements contained in this news release that are not historical facts are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect the Company's current beliefs and a number of important factors could cause actual results for future periods to differ materially from those expected in this news release. These important factors include, without limitation, a decision of the customer to cancel a purchase order or supply agreement; demand for and acceptance of the Company's nanocrystalline materials; changes in development and distribution relationships; the impact of competitive products and technologies; possible disruption and commercial activities occasioned by terrorist activity and armed conflict; and other risks indicated in the Company's filings with the Securities and Exchange Commission. Nanophase undertakes no obligation to update or revise these forward-looking statements to reflect events or uncertainties.

I would now like to introduce your host, President and CEO, Mr. Jess Jankowski. Sir, please go ahead.

Thank you Valerie. Good morning everybody. We're glad you're able to join us to discuss our outlook for this year beginning with our first-quarter 2015 financial update. Frank Cesario, our CFO, has joined me again today.

During this call, we will be talking about the outlook for our four major growth initiatives as well as updating you on our existing business and of course 2015 first-quarter results. As we discussed two months ago, I see our progress moving Nanophase from doing the heavy lifting behind the scenes that's always required to develop business in our growth areas to a place where we expect to see tangible commercial results. We expect to see these in the form of significant revenue from new sources beginning this year.

2014 results showed slight improvement over 2013 and we expect a bigger improvement during 2015. Topline, bottom-line, cash flow, new business, we expect growth in all of these areas. We continue toward achieving our top goals of first building a sustainable business than an exciting one. Of course, we're still subject to the typically drawn out times to market companies like Nanophase experience in advanced materials applications. Fortunately, we are seeing plenty of positive movement.

As we discussed last time, I also believe the path from sustainable to exciting will be much shorter than the journey from struggling to sustainable has been. I can see the path directly in front of us of significant revenue growth, which I believe offers the potential of increased equity value for Nanophase for all of us. That's when it starts to get good. To get there, we do need to write out some fluctuations in the business, particularly in personal care. That is our top business today and has seen the most fluctuation this year, which certainly impacted our first-quarter financials.

After Frank provides a short overview of our financial results, I will talk about all of our key business development initiatives for 2015 and 2016. These are focused on our four main areas -- personal care technologies, surface finishing technologies, and energy technologies, including energy storage and solar control.

With that, I'll have things over to Frank.

Thanks Jess. Good morning. As this is Frank Cesario.

Before I begin today's overview of our financial results for the first quarter and full-year so far 2015, please remember that all financial results are stated in approximate terms.

Revenue for the first quarter 2015 is $2.3 million with a gross margin of 24% and net loss for the quarter of $0.6 million or $0.02 per share. During the first quarter of 2014, revenue was $2.6 million, gross margin of 27%, net loss for the quarter of $0.4 million, also $0.02 per share. We ended the first quarter 2015 with $1.2 million cash position and no debt. Many of you are aware that we have a $1 million cash covenant related to the exclusive supply relationship with our largest customer that we've disclosed in more detail in our SEC filings.

It remains our intention not to raise permanent capital, opting instead for implementing and utilizing temporary borrowing vehicles on an as needed basis. The credit lines facility that was announced was one example of this strategy. Things could certainly change at any time, and we may conclude it best to seek a small amount of additional capital, but this is the way that our company approached 2015 and it remains so today. Again, should we seek additional capital, we do not expect that it would be a significant amount. Jess?

Thanks Frank. While the financial results were impacted by the fluctuations in our personal care business, we continued to move forward in other areas in Q1. I'd like to key in now on our main business development initiatives. These are our top focus as we continue to build Nanophase to achieve the highest sustainable value possible. Again, these are personal care, surface finishing, energy technologies, which includes energy storage or batteries, and solar control. We expect revenue from these areas to make a meaningful difference beginning this year.

In personal care, which is composed largely of our active ingredients for inorganic sunscreens, we are coming off of another record year in terms of 2014 zinc oxide volume. Notwithstanding quarter-to-quarter fluctuations, we expect this to remain a solid business for us. Dermatologists have long preferred zinc oxide as the full spectrum UV blocker and movement in consumer preferences helped in this area in addition to existing demand, which is primarily based in the US, regulatory changes in the EU or in the pipeline which represent opportunities for growth in new applications there. We expect this market to continue to be a good one for Nanophase. This is clearly the most mature of our current initiatives and while being a strong P&L driver for us, personal care is not what we are relying on to drive the bulk of our 2015 and 2016 growth.

Personal care has also caused us the most difficulty so far this year as forecasts have changed and total shipments during Q1 were down from prior years. The upshot is a reminder of why we need to add new revenue streams to buffer any negative fluctuations in personal care volume, specifically from our largest customer. We also expect to launch new solutions developed by Nanophase in this area that will be taken to the market later during 2015. We will have more on these to come in future discussions.

In terms of the nearest surest near-term growth that remains in the surface finishing market, this area is different from any other market that Nanophase is currently developing. Surface finishing differs in the sense that we are deep in the applications testing prior to our approaching customers, and we've developed the expertise to help those new customers maximize the benefits of using our slurries.

Remember that our buyer here is typically an engineer and the actual end-user of our products. This gives us a greater ability to influence the results. It's a market that includes many medium-sized companies that may each ultimately by low six-figure amounts of our polishing slurries. To reach these customers, we have to do more technical support and we have to continue to develop greater applications data to support the selling process than we do in our other markets, which is why we invested in our polishing lab mid last year. This dynamic makes this a performance driven sale which matches our technology focused culture very well.

We continue to build onto our technical and developmental know-how which we believe is world-class. We also now have the proper metrology and the proper application level of production equipment to allow us to pursue this business aggressively and with credibility.

Our 2014 surface finishing revenue approached double the 2013 volume in the mid-six-figure range. For 2015, we expect our surface finishing volume to more than double 2014 levels with upside potential beyond that, and we already have more orders for this year than for all of 2014. Of the four key areas we are focusing our business development efforts on, we expect this market, surface finishing, to have the greatest impact on 2015 growth beginning later this quarter. Our two new energy technologies have a time-to-market which puts them in the near to midterm commercialization group, a little further out than our surface finishing activities.

We're moving forward in both the energy storage application, which refers to batteries, and in the solar control area, which refers to thermal applications involved with improving energy conservation. For the battery work, during 2014, we saw multiple large battery manufacturers duplicate the results we used to validate our value proposition with entities actually manufacturing their batteries on a small steel production basis with our materials being incorporated to test the value proposition further. Although we originally expected some battery business to materialize in late 2014, we now look for the commercialization phase to begin with more than one customer during 2015 to be followed by more significant revenue volume in 2016.

As I mentioned last time, generally we are further along in the battery application than we are in solar control. Based on test results and market feedback in both areas, we see opportunity for very large profitable volume across our energy portfolio.

Specifically, we have engage some of the largest players in the industry, along with some smaller players, and believe we offer a significant value proposition with both applications in their respective markets. As a matter of fact, we enjoyed our first commercial revenue shipment of energy material during April. While modest in terms of dollars, it's worth noting as it represents a change in business develop and status from developmental to commercial scale up. This shipment was of materials for solar control that represent our first commercial production run. Ultimately, this customer may purchase low to mid-six-figure volumes from Nanophase, but that's dependent upon consumer acceptance and demand of the final product. We'll have more to share about this opportunity next quarter.

Given the proximity of this call to our year-end call, I don't really have much more to cover today. Although most of our investors listen to the webcast or review the transcript after the live call, we'd like to invite those participating in today's call to ask any questions you may have or share your comments. Valerie, would you please begin the Q&A session?

(Operator Instructions). Rand Kaye, RKA.

Hey guys, how are you? I wonder if you could do me a favor and just provide a little bit of color into the situation regarding the healthcare product business. Did the lower volumes primarily come from the fact that there's been a migration to a newer technology that people seem to like, and are we trying to now get into that market, or what specifically do you attribute the lack of volume in the healthcare product?

Sure. You are referring to the personal care market which is --

Yes, the personal care market. Right, yes.

A couple of things need to be considered. One thing is that, frequently, this has to do with truckloads of material moving across time frames. So it's difficult to tell whether anything represents a trend. We saw some changes in the volume relative to last year, which was a record year. 2013 was a record year, then 2014 exceeded it. And now we've got 2015 where we had a first quarter with some shift.

It's not our sense that there's any diminishing of the value of zinc oxide as a UV blocker in the marketplace. The market continues to grow for zinc oxide. It's a question of how much of the market share we capture, which we are not exactly clear on at this moment. I think -- and some of this also has to do with just movement of inventory within the customer, which is not transparent to us.

So I can't give you a great answer because I'm not -- we will be out there at the -- we are always out at the cosmetics show in may, and we will be circling around with not only our largest customer, but also the industry as a whole in a fairly aggressive manner in several weeks. And I should know more this point. I don't think this has to do with any kind of fundamental shift in the market relative to our product. And it gets more on the customer side potentially either moving inventory or trying to -- maybe they built some up, maybe they're trying to slim it down. It's difficult to tell and we don't get a lot of that information on a direct basis. Some of that has to do with our size relative to their size. The United States gets a cold, Brazil is in the hospital kind of thing. It's just hard to know. But we see no indications looking at the market and we do a lot of outreach on our own in this market, including I mentioned we are working on a new application that we developed ourselves. We do a lot of outreach into the market and we are not seeing anything like a subsiding demand for zinc oxide.

Do you see a -- are you cautionarily evaluating lowering the forecast for that particular product line?

Yes, we have to. We're looking at it. It's no secret that customer is over 60% of our volume. So if they go down by 10%, it's going to impact our topline. Our goal year-over-year was to have greater than incremental increases in volume with new business being our highest target, and this basically gives us some headwinds potentially if it plays out. Now, normally in that business, the second quarter, first and second quarter are bigger than the third and fourth quarter, but we've had anomalous years over time and it's still difficult to understand exactly what it's going to be. We're trying to get more color on it. In any event, we will weather the storm, but it's a question of headwinds we surely don't need at this point in the Company's development if that ends up being the case.

Then I mean the question then subsequently goes to -- I don't want to monopolize the time here -- but do you see the other products in your forecast making up the deficit, or is it just too early to say?

This is Frank. Let me take a shot at that. For this year, for 2015, we are talking about a 2/3 of last year's volume customer, it's just too big a nut. Going forward, this is exactly why we are developing the new revenue stream.

It depends on what you're referring to. Frank is talking about we've got a target that we haven't shared with the public that exceeds our last year significantly. So if your question is can we even equal last year's volume if this goes down, I think sure we can, and we can do that with new business filling in the gap.

Essentially, we are looking for growth in our surface finishing area with polishing. We are looking to more than double again this year if we can, and the new energy areas will have some growth. We might even have a little bit of growth in personal care outside of the zinc oxide business. We'll talk more about that in Q2 as things mature.

So, what I can say and I think what Frank was saying, part of it is we have an internal code. We don't share forecasts because, as you all know, this is pretty variable stuff -- is that this isn't something like a torpedo to the Company as much as it's frustrating that we've got some nice tailwinds in our new business development areas. The rest of our business outside of personal care is going along just fine right now.

And the personal care business is a little bit of an unknown. It's not an absolute unknown. All these customers downstream take quite a bit of time to put new products in and to do the validation testing. It takes a number of months, like 18 months, to get it out there. So what we haven't seen is a fundamental shift in the market away from zinc oxide. What we've seen is the global -- both in the US and internationally, the zinc oxide market growing, along with titanium dioxide, growing in organic sunscreens. And we're trying to just at this point understand better what this is going to mean to Nanophase in the near term.

The end-to-end gain that I think I'm alluding to is the fact that if the zinc oxide is still the cash cow for the Company, the burn now seems to be accelerating at a rate where it looked pretty good for you guys to breakeven with existing cash. Another $600,000 quarter, that now becomes clearly an area of concern.

Sure. There is one -- since you brought up cash, let me give a little more detail here. For the last couple of years, the first quarter has always had that whipsaw in working capital. This year was not quite as rough as 2014, but nonetheless we had it.

So if you look at the growth in Accounts Receivable, it went up by $900,000 in the quarter. Well, that's a huge use of cash. Now, granted, we offset a bunch of that with accounts payable, inventory reduction nonetheless. Working capital was a significant consumption of cash, and we planned for that, so we were ready for that to happen.

But your point is well taken, something that we focus on daily. At some point, if we ever think we are not going to hit cash flow with what we've got, we will put in more short-term vehicles to get us there. If we don't think that will do it, then we will take that up and we'll do what we think we have to do to get there. But we are not doing this in a trivial fashion. We are approaching this very deliberately because, frankly, we walked into this year saying we are on the cusp, and I'm telling you now we have a lot of good things going at this company, so we are focused on getting to that success.

I would add that our last choice going forward is any kind of dilution. So we are always more interested in financing or doing whatever we have to bridge the gap than we are to sell stock. I look at our -- the rights offering we did a few years ago, and I don't look at that as anything other than something we had to do. It certainly diluted a lot of people. We didn't like it internally. We know our shareholders didn't like it; our board didn't like it. It was just something that was necessary. I don't know that we will have to do that again, and the goal is to avoid it at all costs just because this is why we are all here, is to build equity value of the Company.

I really do appreciate you guys being as transparent as you are, so that creates some confidence. Thanks. I appreciate the insight.

James Lieberman, Wells Fargo Advisors.

Yes, hello. I wonder if you could give a little bit more color on some of these things you've focused on already, like the new product in personal care. Can you give any idea of what that might be and how that might come to market should it be successful?

I really want to wait on that. We basically -- we've got a few things going on. We've also got some potential IP there, but I expect we will have more to share in Q2. I don't think that it will have a significant impact on 2015 revenue as much as it will build to 2016 revenue. It also will represent a new type of product for Nanophase that we haven't brought to market before. And I think, beyond that, I've got a combination of my own prudence and confidentiality. I've got to keep some of that out of the open discussion. But I will say, Jim, that it's something we haven't done before, it's something new and it's something we think that will build value in the Company relatively quickly not just in terms of revenue but in terms of we think we've got a technology that is going to be something that we can really exploit effectively going forward. I assume you have a question about the energy as well.

It's just that -- I could see why there could be quite a bit of excitement around new product in the personal care area, but I understand you can't say much. However, I like the fact that you are developing and thinking about a lot of things down the road that could happen positively. And yes, I am interested in the energy area. Is there anything you can add to that?

Sure. That's an area where we've been working with several customers. This is the solar control area.

Yes.

We made our first commercial shipments of it this month actually earlier in April, and we are expecting that to be in product and to get rolled out to an extended lease in Q2 or early Q3 now. What's nice about this, the blessing and the curse is going to be I think we will get a fairly quick resolution on trajectory because it's a medium-size company with a lot of great potential in the market. This could be this low to mid six-figure customer. If it is, it will probably be that next year. If it's not, it's not, depending on the demand and the reception in their product.

The other thing about this technology, more so than the battery technology, is that we believe what we are bringing to the table is the enabler, the entire enabler. On the battery side, we've got something that makes the can more efficient that will allow slightly more power to be generated over a longer period of time. It's a good value proposition. It's been validated. On this one, we think there will be people that are able to reach performance that they can't get anywhere else using our materials. That is always a better place to be.

As you know, Jim, you've got the scars to prove it. You've been here with us a long time. We've had many products over the years that are better than what's out there, but they are not better enough to get somebody to make a switch. And where we usually have the strongest impact is where somebody can't achieve what they're trying to achieve without using our materials. And I think that -- I think this is something that solar control value proposition represents more clearly than the battery proposition, although I still have confidence that we have a solution on the battery side that is going to be positive.

That's great. Again, those all sound very much more exciting going forward than I've heard in a long time coming from you. And I wonder also on the surface finishing area as well, can you give a broader range of the types of area? I know there are lenses that could be used for camera lenses and all, but can you give some of the other broad applications for that?

Sure. It ranges from what we would call fine polishing, which would be -- or actually precision polishing, which would be something like a lens for a laser where any sort of an occlusion or anything else on the lens creates big problems. And the customers have what's referred to as a sub- angstrom flaw quality, sub angstrom surface, meaning it has to be less than an angstrom in any size flaw, which really lends itself -- those standards lend themselves well to our smaller materials.

Now, we're also marketing larger materials and we're going into areas that involve optics that involve lenses that are a lot less critical than, say, a laser lens where you are putting so many photons through it, you can't have any issues with a laser lens. Those would be in cameras. Those would be to a lesser extent in military applications, but in a lot of production equipment, things that are making -- you're going to shoot integrated circuits, wafers, things like that, all the way up.

We are also -- I think a way to look at it differently than merely the precision on the polishing relative to a piece of glass, there are a bunch of different materials that people polish that are -- there are a lot of silica-based glasses; there are non-silica-based classes; there things like sapphire and germanium and lots of other materials; and there are some very hard plastics that also go into this area. And what we are trying to do, we spent a lot of time building know-how in this area. And we started way back with the Rohm & Haas business, then we got into some of the fine precision polishing, which led us to believe there was more to do here.

We are using some of the technology we've developed under a broader -- kind of as a platform to go after a broader market. And we're finding that these markets are after certain things. They are after surface quality. They are after removal rate. They are after longevity of the slurry in the system. And we have a bunch of different levers we can pull there which we are now actively pulling as we are getting closer into those markets. So it's going to be -- to say a camera lens, there's just too many variations of that ranging from the satellite that could take a picture of license plate from space to a handheld or a sapphire lens that might be on a cell phone or something else. We're going after a lot of that. Generally, they are not massive applications. A good -- a very big application for a single application there would probably $0.25 million to $0.5 million.

But there are a broad number of those applications.

Yes. The other thing I think that you're sensing and I tried to impart without -- I get accused of being a Pollyanna on these calls all the time because people say, hey, the Company, you're not generating results but you sound like you're pretty confident about what you could do.

I think that we have viewed the Company with a degree of an entrepreneurial spirit that is at an all-time high. And we're going after some of these things. We go after stuff that's hard all the time. We go after things that are a little bit of a stretch all the time. Kevin Cureton has helped enable a lot of that thinking. It's through our R&D group, our engineering group. We've spent probably the last year really knocking down, flattening the organization and involving everybody in business development, which is really accretive to benefit the Company. We've got people throughout the organization pitching in brainpower and ideas, and we've seen some of them translate into marketable technologies for different types of markets, which is a plus. It sounds -- I don't want to expand on it because obviously my results haven't shown yet on the top, which is what we all care about. I will say that this is an entrepreneurial company that's really going after a lot of these markets. Part of that, as Frank mentioned about permanent capital versus the debt capital, part of that is being comfortable knowing that we are running tight. We manage the resources. We leverage them well. We've got, I don't know, we've got 43 employees now, 45 employees and we have an all-time solid pipeline, the best we've had. We've got the focus on some markets that's solid and we are getting good feedback. And I think we are doing all the right things. I think it's a matter of time. Going into the year, I plan for that time to be this year. It's quite possible we have the slip with the personal care and it goes back and forth and the pendulum swings, and we don't quite hit the cash flow or not, but I would note that, analyzing our results, we are really operating efficiently and we continue to do so to the greatest extent we can. We've got a lot of energy.

It definitely sounds like you've got the most prospects ever in front of you, and the various opportunities to accomplish that and meet those goals, so congratulations.

(Operator Instructions). Ron Prater, Private Investor.

Thank you for taking my questions. I have several. Hope I'm not beating too many dead horses here. But the extension of your sunscreen product into a new area, is that a retail initiative, or development of materials for wholesale applications?

It would be the development of materials for more of a wholesale application. And it's materials outside of our normal scope of materials. I can't get into much more than that, but it will not be retail application. And we expect it to be, as we get success there, which we are hoping to have this year, we expect to continue to expand on it. I'm hoping that I am in a position to share more of it in the second-quarter call. Part of that is just I have MDAs with everybody on what we can and can't do, and I'm talking around in a circle, which is always frustrating for you and it's difficult for me. But it's not a retail application.

Okay. And for the personal care products, the reduction of sales in the first quarter, from your earlier comments, the impression I was left with is that it's potentially more than a timing issue of simply sales sliding from the first quarter into the second quarter. Is that true?

It is potentially more than that. We don't know though. What's really more accurate, if you look at the history, I don't have it in front of me, but if you look at the history with that -- and it's really that customer in particular -- the quarter-to-quarter shifts have been pretty big. And we've gone -- in 2009, it was down rapidly, and then it sprung back up 2010, and it's continued to grow since that point. I think part of it is the difficulty coming up with accurate forecasts. Part of it is our customer is not sharing enough information with us, but I also know, in fairness to them, that their customers are not sharing information with them. They just all of a sudden may put off in order or not explain it.

So I don't know what the answer is to that question concretely. I do know that I don't have a reason to believe today that there's going to be a material change in that business. But I also can't say for sure that this is merely moving volume from Q1 to Q2. We are into one month of Q2 right now, and we typically don't have that much visibility. That's something that I would say has changed a little bit; our visibility isn't as good as it was, say, last year because the Q1 movement caused a little bit of (technical difficulty).

Okay. I obviously heard your earlier comments about cash management and the desire to use short-term funding over equity. But can you be more specific about your plans for cash management during the remainder of the year?

Sure. I'll take the first crack at it. It's Frank. It obviously depends on what sales are for the upcoming quarter and collections and what we are spending on. But I'll just say what did we do? We saw the need to have some sort of flexibility in short-term, so we created a $300,000 working capital line with our bank, Wintrust, so that exists. I expect me to be putting in more facilities to deal with short-term needs and use them if we need them for the foreseeable future. If something changes our minds and says, you know what, you really have to go out and get $1 million, so be it. You do that. And then you talk about what the right vehicle is for it.

But as Jess said, it is our intention to best leverage every asset in this company. That's cash; those are production assets; that's IP and knowledge base; it's everything that we have.

So our point to our investors is we are not looking to reload some massive infusion of capital because we have these grandiose idea three years from now. We are looking to increment into making money. That is the mantra of this company, and it's the mantra today. So we'll have the vehicles that we need or at least we will pursue them on an as we need them basis.

To overlay that, we have more aggressively pursued them because of the covenant we have with our largest customer. Part of it -- if you look at the size of this company, and we are at $10 million company, essentially you wouldn't keep that much liquid cash available at all times in addition to whatever else you need to run the business in the working capital sense. We are required to do that. So in some ways, while it makes people nervous, and I've got -- a lot of people would love to have $10 million in the bank and not have to split it. Essentially we are operating at a level and we have been operating at a level where we've had excess cash because of the covenants we have. That is still the reaction that we've had to it and the things that we've put in place and that Frank is working on and we've got some other tentative things that look very solid -- are as much to avoid tripping the switch on the covenant than they are to actually worrying about keeping the Company rolling.

Sure.

We've got a lot more flexibility on that side than we do on the covenant side.

Okay. Can you give us any idea of what the contribution margin is likely to be from the polishing and the energy applications the remainder of this year?

It's hard to say. It will be higher. Those areas typically would have a higher contribution than the personal care products to the largest customer, and that's mainly because we're going through a customer who is selling to downstream customers who are then incorporating material partner basis.

Generally, just about everything we have is over a 50% variable margin. That's what we're shooting for at a minimum. Sometimes we go a little bit under that in order to pick up volume where we can. But the energy applications and the surface finishing applications should be better than that, particularly in the surface finishing, because the energies would be even higher than that depending on where it goes.

As far as specialized, we will sell smaller quantities of materials in those markets at higher prices because the degree of value is higher. Also, the degree of complexity of making these materials becomes higher and higher. In my perfect world, we would sell small quantities of very expensive materials to a broad array of markets. That hasn't happened yet, and it's not prudent to run the business that way right now. But ideally that's where we would like to go because it gives you a lot more control and you become a much more major enabler for all of your customers, which is really where we need to be.

Are you willing to make any total dollar projections of those margins for the remainder of the year?

I'm not. I still think we're going to exceed. We are going to have growth year-over-year. Our new business is going to grow year-over-year. The energy applications we are all expecting to come in later in the year just the way that market is going. And polishing really would be the big driver going forward. They are good businesses, but as we go -- part of it also is as we get bigger customers and bigger chunks of the market, we will have to disclose more information. As we do that, we will. It's disadvantageous to us to a degree to disclose some of these things just because we are out there negotiating over pricing and everything else but our customers on a regular basis. I would rather everybody think we are making $0.01 on everything we sell them, and it's amazing we can exist this way, but that's wishful thinking.

There's one element here that's also relevant to what you brought up, which is, as we said in the prepared remarks, total revenue in both areas will obviously be higher than it has in the past. We have more orders in polishing today, and we are in April, than we did all of last year. We talked about doubling or doing better than that in polishing for this year versus last. Obviously, the energy products are all new, so those are all accretive. So we've certainly described an increase and not a trivial increase in these areas. But that's as far as we can go. Really that's as far as we should go at this point. We are going to keep unfolding with these markets as we go.

Okay. One final question. Do you have in mind what your materiality threshold is for the disclosure of significant new orders or sales agreements?

You sound like an accountant.

No, I'm just trying to get a feel for what kind of dollar level would it cause you to make the necessary disclosure?

My answer, as the accountant over on this side and dealing with reporting issues, is it is in fact some circumstances. And so it depends on the total dollars obviously relevant to our normal run rate. It depends on the expectation of new business. We regularly disclose new contracts. We disclosed one last November and what goes in there but what we don't do is issue a press release because we sold something unless we are in new business or there is something atypically large about it because, frankly, that's not productive. We are dealing with several different areas, quite a few more customers than that, and so we want to make sure that, when we announce something, it's something you really would value and would want to receive.

Okay. Thank you for taking my questions.

Rand Kaye, RKA.

Thank you gentlemen. I have just one follow-up. The current percentage of business for the personal care products is what? 80%, 60%?

Last year in our filings, we disclosed it was about 70%.

Okay. Do you anticipate this to be the year where the other business -- the other combined businesses will exceed percentagewise the personal care business like 5149 type of thing? Is that something that you feel could happen this year, or unlikely?

Long-term -- let me just give you our long-term view. Long-term, what we would like is for personal care to be less than 50% and all of them to be growing. That is the long-term goal of this company. But we don't walk into the year with a particular target saying we hope that this area is here. We don't have segments here. We use the same equipment and business development folks to produce everything that we do. So really that's not a metric that's meaningful for us.

What we focus on is the development of new business, new markets, where that is. And as Jess described, we would actually be a little bit contrary to that with launching new products in the personal care space. So our answer is that's really not something that the Company would focus on.

I understand it may not be something you focus on, but it is a metric that you guys do subscribe to and from a standpoint of just a better understanding --

We subscribe -- essentially anything -- we are required to disclose any customer that is over 10% of our volume. And what we do is we typically take that down just because the fluctuations are so great. And back when we had -- at one point, we had a 60%, a 15%, a 7% and a 5%. And because the 7% and 5% on a quarter-to-quarter basis could be tentatively disclosed those for. That's a metric we use that we are required to use. And it really isn't good for us to use it. That's part of the issue is none of our -- I keep referring to our largest customer. Everybody knows who they are. They've asked us not to use their name gratuitously because they don't want anybody to know what we are doing. That makes this harder.

I think, as a business, when we get to an area where surface finishing is 15%, 20%, some big percentage of our revenue, we will say as a market this is this, this is that. It just so happens with personal care that we have one customer that is 99% of that volume today or some number pretty close to that, 95%, 98%. And so it just translates to the market exactly relative to the customer. As we grow, we will have more of that. And certainly, as Frank said, the goal is not to have that -- not to have -- we don't want to be subject to anybody's variations to the extent we are today. And we learned that in Q1, it was tough. And historically, it's been a solid business that moves around quarter to quarter but year-over-year it's pretty good, and it's been growing.

Okay. Thank you guys.

I'm showing no further questions at this time. I would now like to turn the call back over to Jess Jankowski for further remarks.

Thanks Valerie. Under the direction of the Company, the quality of our pipeline and the potential commercial value of our technology, we are in a good spot. We've been doing a good job of managing our assets to maximize our reach while minimizing our spending and our leverage remains good.

I appreciate all of you being here and those of you that will listen after the call as well. I'm looking forward to achieving and enjoying great returns together. Thanks again for joining us today.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.