Solesence Inc (SLSN) 2025 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Solesence First Quarter 2025 Conference Call. (Operator Instructions). 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.

您好，感謝您的支持。歡迎參加 Solesence 2025 年第一季電話會議。（操作員指令）。今天的通話正在錄音。在本次電話會議中，管理階層將根據 1995 年《私人證券訴訟改革法案》的安全港條款，做出包括聯邦證券法所定義前瞻性的聲明。

This 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 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 activities 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.

本次電話會議可能包含反映公司當前信念的陳述，許多重要因素可能導致未來期間的實際結果與本次電話會議所述的結果有重大差異。這些重要因素包括但不限於客戶取消採購訂單或供貨、協議的決定、對公司個人護理、成分、先進材料和配方產品的需求和接受、開發和分銷關係的變化、競爭產品和技術的影響、公共衛生問題、恐怖活動和武裝衝突可能造成的商業活動中斷以及公司向美國證券交易委員會提交的文件中指出的其他風險。除聯邦證券法要求外，本公司不承擔更新或修改這些前瞻性聲明以反映新事件、不確定性或其他意外情況的義務。現在我將會議交給發言人、總裁兼執行長 Jess Jankowski 先生。

Please go ahead, sir.

先生，請繼續。

Thank you, Carmen. Good afternoon, and thanks to all of you who have joined our call today. With me on today's call is Kevin Cureton, our Chief Operating Officer. I'll begin with a summary of our first quarter results and a business update. Kevin will then discuss our operational initiatives.

謝謝你，卡門。下午好，感謝今天參加我們電話會議的所有人。和我一起參加今天電話會議的是我們的營運長 Kevin Cureton。我將首先總結我們的第一季業績和業務更新。然後 Kevin 將討論我們的營運舉措。

Then we'll take your questions. Last quarter, we hosted our first conference call rebranded as Solesence, a brand that reflects our simple yet profound mission, deliver joy. Today, we're hosting our first conference call as a listed company on Nasdaq. In such a short period of time, we've undergone a remarkable transformation that has us well-positioned at the forefront of the beauty market. This is reinforced by our commitment to scientific excellence and innovation as we pioneer industry-leading, award-winning protective beauty solutions recognized globally.

然後我們會回答您的問題。上個季度，我們召開了第一次電話會議，將品牌更名為 Solesence，這個品牌體現了我們簡單而深刻的使命——傳遞快樂。今天，我們作為納斯達克上市公司召開首次電話會議。在如此短的時間內，我們經歷了顯著的轉變，並佔據了美容市場的前列。我們致力於科學卓越和創新，率先推出業界領先、屢獲殊榮且獲得全球認可的防護性美容解決方案，這進一步鞏固了我們的這項承諾。

As a high-growth contract development and manufacturing organization, or CDMO, we're leveraging our novel technology suite, unique performance consumer products, and regulatory expertise to empower brands to enhance consumers' lives and well-being. Our vertically integrated patent-protected formulations are used in skin health products spanning skin care, sun care, and color cosmetic market segments. What sets us apart from other CDMOs is our proprietary technology, which enables us to build novel products that allow our brand partners to capture preferred positioning in retail environments and typically become the leading choice of the consumers they serve. Our integrated position of being a platform technology innovator, a developer of unique, award-winning formulas, and a cGMP manufacturer further allows our brand partners to reach the market much faster than their competitors. We believe that our patented technology provides us with a strong competitive position, safeguarding our market position and enabling long-term value creation for both Solesence and our brand partners.

作為一家高成長合約開發和製造組織 (CDMO)，我們正在利用我們新穎的技術套件、獨特的性能消費產品和監管專業知識來增強品牌能力，以改善消費者的生活和福祉。我們的垂直整​​合專利保護配方用於涵蓋皮膚護理、防曬和彩妝市場領域的皮膚保健產品。我們與其他 CDMO 的不同之處在於我們擁有專有技術，這使我們能夠打造新穎的產品，使我們的品牌合作夥伴能夠在零售環境中佔據優先地位，並通常成為他們所服務消費者的首選。我們作為平台技術創新者、獨特、屢獲殊榮的配方開發商和 cGMP 製造商的綜合地位進一步使我們的品牌合作夥伴能夠比競爭對手更快地進入市場。我們相信，我們的專利技術為我們提供了強大的競爭地位，維護了我們的市場地位，並為 Solesence 和我們的品牌合作夥伴創造了長期價值。

Importantly, because of our position as an innovator who can rapidly bring new products to market, we have long-term relationships with private equity-backed beauty brands. These brands tend to be high-growth organizations who look to us for upstream support that few can match. The combination of these key factors is what attracts top-tier brands to us from the $570 billion-plus global beauty market. All of this was on display in our first quarter 2025 performance, where we achieved record revenues of $14.6 million, representing an increase of nearly 50% year over year. Revenue in the quarter was primarily driven by sales to our largest brand partners, including our new launch partner, and Colorescience for our consumer products, and of course, sales of our active pharmaceutical ingredients to BASF.

重要的是，由於我們作為能夠迅速將新產品推向市場的創新者的地位，我們與私募股權支持的美容品牌建立了長期的合作關係。這些品牌往往是高成長組織，他們希望我們提供很少人能比擬的上游支援。這些關鍵因素的結合正是吸引頂級品牌從價值 5700 多億美元的全球美容市場來到我們這裡的因素。所有這些都體現在我們 2025 年第一季的業績中，我們實現了創紀錄的 1,460 萬美元的收入，年增近 50%。本季的收入主要來自於對我們最大品牌合作夥伴的銷售，包括我們的新發布合作夥伴和 Colorescience 的消費產品銷售，當然還有對巴斯夫的活性藥物成分銷售。

These results reflect the continued strength of our commercial execution and demand for our products. While we were pleased with the strong performance, our margins were impacted by one-time production start-up costs relating to the launch of a new product line by a new key brand partner. Kevin will provide more details here shortly, but I'd like to note that our relentless efforts to resolve this issue successfully kept this critical product launch on schedule. As a result of these start-up hurdles in the first quarter, gross profit was $3.3 million or 23% of revenue compared to $3.6 million or 36% of revenue for the same period in 2024. Excluding the one-time start-up costs, our gross margin would have been similar to last year's margin.

這些結果反映了我們商業執行力的持續強勁以及對我們產品的需求。雖然我們對強勁的業績感到滿意，但我們的利潤率受到了與新的關鍵品牌合作夥伴推出新產品線相關的一次性生產啟動成本的影響。Kevin 很快就會在這裡提供更多詳細信息，但我想指出的是，我們為解決這一問題所做的不懈努力成功地確保了這一關鍵產品的按時發布。由於第一季的這些啟動障礙，毛利為 330 萬美元，佔營收的 23%，而 2024 年同期的毛利為 360 萬美元，佔營收的 36%。除去一次性啟動成本，我們的毛利率與去年的毛利率相似。

Net income for the first quarter was at breakeven compared to net income of $0.9 million for the same period in 2024. We anticipate a rebound in our margin starting in the second quarter as we ship more product to this new brand partner, as well as our many other growing brand partners. It's our expectation that there will be minimal impact in the second quarter from these start-up costs, as we believe we completely resolved these issues during the month of April. Turning to our recent uplisting to Nasdaq. On April 8, we started trading on Nasdaq under the new ticker SLSN.

第一季淨收入達到收支平衡，而 2024 年同期淨收入為 90 萬美元。隨著我們向這個新的品牌合作夥伴以及許多其他不斷發展的品牌合作夥伴運送更多的產品，我們預計我們的利潤率將從第二季開始反彈。我們預計這些啟動成本對第二季的影響將很小，因為我們相信我們已經在四月徹底解決了這些問題。談到我們最近在納斯達克上市的情況。4 月 8 日，我們開始在納斯達克以新股票代碼 SLSN 進行交易。

This uplisting marks a new chapter for Solesence, and I'd like to highlight 3 important reasons why. First, we believe that trading on Nasdaq will increase awareness of Solesence within the financial community. Listing on a major exchange like Nasdaq can enhance our visibility and credibility, making it easier to attract diverse long-term institutional investors. Second, it will increase our marketability, liquidity, and access to the capital markets, all of which we expect to be critical to our growth initiatives down the line. And third, we believe that it will deliver greater value to our shareholders and other stakeholders.

這次升級標誌著 Solesence 的新篇章，我想強調 3 個重要原因。首先，我們相信在納斯達克交易將提高金融界對 Solesence 的認識。在納斯達克這樣的大型交易所上市可以提高我們的知名度和信譽度，更容易吸引多元化的長期機構投資者。其次，它將提高我們的行銷能力、流動性和進入資本市場的機會，我們預計所有這些都對我們未來的成長計劃至關重要。第三，我們相信它將為我們的股東和其他利害關係人帶來更大的價值。

We're excited to have achieved this major milestone last month and look forward to building upon our success moving forward. At this time, I'll turn the call over to Kevin Cureton, our Chief Operating Officer, to share an update of our progress and outlook. Kevin?

我們很高興上個月取得了這一重要里程碑，並期待在未來的成功基礎上再接再厲。現在，我將把電話轉給我們的營運長 Kevin Cureton，分享我們的最新進展和前景。凱文？

Thanks, Jess. As I always like to begin, I would like to thank our amazing team for their tireless effort and commitment, demonstrating through our results their ability to consistently deliver solid performances for our investors, our brand partners, and for ourselves. As Jess noted earlier, we achieved a record first quarter, both in terms of our revenues and unit volumes, reflecting the strong demand for our consumer products. Operationally, as Jess mentioned, we encountered start-up challenges related to a new product launch for a key new brand partner. But we are pleased to report that these issues related to this launch were resolved, and we have strengthened this customer relationship through our steadfast collaboration.

謝謝，傑西。正如我總是喜歡首先說的那樣，我要感謝我們出色的團隊的不懈努力和承諾，透過我們的業績證明了他們有能力為我們的投資者、我們的品牌合作夥伴以及我們自己持續提供穩健的業績。正如傑西之前指出的，我們第一季的收入和銷售都創下了紀錄，這反映出我們消費產品的強勁需求。在營運方面，正如 Jess 所提到的，我們遇到了與為一個重要的新品牌合作夥伴推出新產品相關的啟動挑戰。但我們很高興地報告，與此次發布相關的這些問題已經解決，並且我們透過堅定的合作加強了與客戶的關係。

A few points about this launch. First, the production was part of a multi-SKU launch in line with bringing our novel technology to a broader audience. This launch is our single largest product launch to date. Second, prior to the launch, we worked closely with our brand partner to ensure the products were developed to meet the highest standards of quality, including conducting multiple production trials. Third, as a result of the successful resolution, we established what we believe will be a long-term relationship with this leading brand, underscoring our commitment to be a strategic and responsive partner that can help fuel the brand's future growth.

關於這次發布的幾點。首先，該產品是多 SKU 發布的一部分，旨在將我們的新技術推向更廣泛的受眾。此次發布是我們迄今為止最大的單次產品發布。其次，在發布之前，我們與品牌合作夥伴密切合作，確保產品開發符合最高品質標準，包括進行多次生產試驗。第三，由於成功的解決方案，我們相信我們與這個領先品牌建立了長期的合作關係，強調了我們致力於成為一個策略性和響應性的合作夥伴，以幫助推動品牌的未來成長。

I'm pleased to say that we have successfully delivered launch orders in the first quarter. We will ramp up order deliveries in the second quarter and have already received reorders for shipment in the third quarter, all related to this launch. The preservation of this important relationship did come at a cost. To resolve the start-up issues related to packaging, additional labor costs were incurred to meet the demand and ensure that this key product launch would remain on schedule. However, the additional labor costs had an adverse impact on our gross profit during the first quarter.

我很高興地說，我們在第一季成功交付了發射訂單。我們將在第二季加大訂單交付力度，並且已經收到了第三季發貨的重新訂單，這些都與此次發布有關。維護這一重要關係確實是有代價的。為了解決與包裝相關的啟動問題，我們產生了額外的勞動力成本以滿足需求並確保此關鍵產品的發布能夠按計劃進行。然而，額外的勞動成本對我們第一季的毛利產生了不利影響。

As part of our commitment to continuous improvement, we raised the bar on how we will approach future inbound packaging components. In this situation, as we have in others, every time our dedicated team executes a new product launch, we learn something new that lowers the potential risk inherent with all new product launches. As a result, we are now in a much better position to reduce both the risk and the costs associated with launching new products than we were just 2 short years ago. Turning to our technology. During the first quarter, we further strengthened our competitive position with 3 new patents for our Kleair technology, our plant-based antioxidant technology, and our skin healing technology.

作為我們持續改進承諾的一部分，我們提高了未來入站包裝組件的處理標準。在這種情況下，就像我們在其他情況下一樣，每次我們的專門團隊執行新產品發佈時，我們都會學到一些新的東西，從而降低所有新產品發布所固有的潛在風險。因此，與短短兩年前相比，我們現在能夠更好地降低推出新產品的風險和成本。轉向我們的技術。在第一季度，我們透過 Kleair 技術、植物抗氧化技術和皮膚修復技術的三項新專利進一步加強了我們的競爭地位。

These include an allowance for our Kleair technology in Japan, an allowance for our new plant-based antioxidant technology in South Korea, and an additional allowance in Mexico for our new skin healing technology that leverages allantoin, commonly used to ameliorate scarring. All of these patents increased our ability to create sustainable competitive advantages for our brand partners and for ourselves, now giving us 3 technology platforms with global IP protection. I would like to briefly touch on tariffs. As a domestic manufacturer, we anticipate tariffs having a modest impact on our top line as of today. Solesence has brand partners diversified across skin care, color cosmetics, and sun care categories as well as those operating in prestige and mass markets.

這些補貼包括我們在日本的 Kleair 技術補貼、我們在韓國的新型植物抗氧化技術的補貼，以及我們在墨西哥的利用尿囊素（通常用於改善疤痕）的新型皮膚癒合技術的額外補貼。所有這些專利都增強了我們為品牌合作夥伴和我們自己創造永續競爭優勢的能力，現在我們擁有 3 個具有全球智慧財產權保護的技術平台。我想簡單談談關稅問題。作為國內製造商，我們預期關稅將對我們的收入產生適度影響。Solesence 的品牌合作夥伴涵蓋護膚品、彩妝和防曬品類，以及高端和大眾市場。

While we won't be immune to market pressures, we believe we are well-positioned should macroeconomic conditions cause demand to soften across certain product categories and segments. Regarding the impact on costs related to tariffs, although we participate in the global supply chain and source raw materials outside of the U.S., the impact will likely be muted on our cost position in the second quarter, and we will likely not see a significant effect from tariffs at least through most of the third quarter. However, on packaging components, we do expect tariffs to impact us, and we are confident that we will be able to pass all of the new tariff expenses through without adversely affecting our margins. We continue to monitor the situation closely, particularly as we begin to look beyond the U.S. for further growth.

雖然我們無法免受市場壓力的影響，但我們相信，如果宏觀經濟條件導致某些產品類別和領域的需求減弱，我們將處於有利地位。關於關稅對成本的影響，儘管我們參與全球供應鏈並在美國境外採購原材料，但其對第二季度成本狀況的影響可能不大，而且至少在第三季度的大部分時間內，我們可能不會看到關稅的顯著影響。然而，對於包裝零件，我們確實預期關稅會對我們產生影響，並且我們有信心能夠轉嫁所有新的關稅費用，而不會對我們的利潤率產生不利影響。我們將繼續密切關注局勢，特別是當我們開始將目光投向美國以外以尋求進一步增長時。

Finally, before turning the call back to Jess, I would like to reiterate that we achieved yet another record unit volume quarter. With many of our production issues behind us, we anticipate our gross margins to increase moving forward. As previously planned, we expect that the increasing product volumes will drive more efficient absorption of our fixed manufacturing costs, which should lead to increased margins. We are also focused on reducing controllable variable production manufacturing costs. This will enable us to grow more profitably and ultimately create more value for our shareholders.

最後，在將電話轉回傑西之前，我想重申一下，我們又一次實現了季度單位銷售創紀錄。隨著許多生產問題的解決，我們預計未來毛利率將會上升。正如先前計劃的那樣，我們預計產品數量的增加將推動我們更有效地吸收固定製造成本，從而提高利潤率。我們也致力於降低可控變數的生產製造成本。這將使我們獲得更高的利潤，並最終為我們的股東創造更多的價值。

I'll now turn the call back to Jess. Jess?

我現在將電話轉回給傑西。傑西？

Thanks, Kevin. We're pleased to have achieved another record-breaking revenue quarter driven by robust demand for our consumer products marketed through the leading brands that we believe represent the future of beauty. These brands include a long-term exclusive relationship with BASF for our APIs as well as brand partners, Coloresience, a leading dermatologist-recommended brand, Tatcha, a Japanese-inspired prestige brand; and Credo, a leading clean beauty retailer. We added to that impressive list with a multi-SKU product launch with a key new brand earlier this year, as we have discussed. Although we encountered one-time start-up issues that impacted our profitability in Q1, we proactively addressed them and are now well-positioned to scale for future gross margin expansion to drive stronger EBITDA performance.

謝謝，凱文。我們很高興能夠再次創下創紀錄的季度收入，這得益於我們透過代表美麗未來的領先品牌銷售的消費產品的強勁需求。這些品牌包括與巴斯夫就我們的 API 建立的長期獨家合作關係，以及品牌合作夥伴，包括領先的皮膚科醫生推薦品牌 Coloresience、受日本啟發的高端品牌 Tatcha 和領先的清潔美容零售商 Credo。正如我們所討論的，今年早些時候，我們與一個重要的新品牌合作推出了多 SKU 產品，進一步豐富了這個令人印象深刻的產品清單。儘管我們在第一季度遇到了影響獲利能力的一次性啟動問題，但我們積極解決了這些問題，並且現在已做好充分準備，可以擴大未來的毛利率，從而推動更強勁的 EBITDA 業績。

Turning to our book of business. For purposes of comparison, our shipped and open orders are currently in excess of $45 million compared to about $40 million in the first quarter of 2024 and $38 million when we last reported in late March. It is important to note that when comparing our shipped and open orders to the year-ago period that our current orders extend into the third quarter of this year, whereas last year's number included volumes through the end of the year. Because our brand partners are becoming more comfortable with our agility, they are shortening their order horizons to better address near-term demand. We anticipate continued top-line growth with record revenues for the second quarter of 2025, and we expect more orders coming in relating to reorder quantities and launches for the second half of 2025.

轉向我們的商業書籍。為了進行比較，我們目前的已發貨和未結訂單超過 4500 萬美元，而 2024 年第一季約為 4000 萬美元，3 月底我們上次報告時為 3800 萬美元。值得注意的是，當我們的已發貨和未結訂單與去年同期進行比較時，我們目前的訂單延續到今年第三季度，而去年的數字包括截至年底的數量。由於我們的品牌合作夥伴對我們的敏捷性越來越滿意，他們正在縮短訂單期限以更好地滿足近期需求。我們預計 2025 年第二季的營收將繼續成長並創下紀錄，我們預計 2025 年下半年將收到更多與重新訂購數量和發布相關的訂單。

As consumer preferences rapidly evolve, Solesence remains at the forefront of addressing the needs of consumers. Two of our core strengths are diversification across various beauty segments and our ability to cater to both prestige and mass market brands. These differentiators expand our potential for market reach and increased volumes. It is why we believe our high brand retention rates will lead to recurring revenue and sustainable growth. At this time, I'd like to share a brief update on our Chief Financial Officer search.

隨著消費者偏好的快速變化，Solesence 始終站在滿足消費者需求的前端。我們的兩個核心優勢是跨多個美容領域的多元化以及同時滿足高端品牌和大眾市場品牌的能力。這些差異化因素擴大了我們的市場覆蓋範圍和銷售成長潛力。這就是為什麼我們相信我們較高的品牌保留率將帶來經常性收入和永續成長。現在，我想簡要分享我們財務長搜尋的最新進展。

In connection with our top-line growth, combined with our rebranding and the successful up-listing to Nasdaq, we made the decision to strengthen our leadership team with the appointment of a dedicated CFO. We have initiated an aggressive search and hope to announce this key appointment in the coming months. Now we would be happy to take some questions. Afterwards, I'll offer a few closing comments. Carmen, please open the call for Q&A.

考慮到我們的營收成長、品牌重塑以及在納斯達克成功上市，我們決定任命一位專職的財務長來加強我們的領導團隊。我們已開始積極尋找，並希望在未來幾個月內宣布這項重要任命。現在我們很樂意回答一些問題。之後，我將發表一些結束語。卡門，請開始問答環節。

(Operator Instructions) And it's from the line of Mr. Reuben.

（操作員指示）這是魯本先生寄來的。

I sound a little bit like a broken record, but congratulations on truly outstanding sales growth, open order growth, and expansion of the breadth of your product line. However, the operational failures also are a bit like a broken record. I don't know if these numbers are right, but Jess mentioned in the absence of your one-time start-up snafu, your margin would have been similar to last year. And doing quick math, that's close to $2 million. Is that the true impact of those one-time costs that you mentioned?

我聽起來有點像在重複，但還是要祝賀你們取得了真正出色的銷售成長、未結訂單成長以及產品線廣度的擴大。然而，操作失敗也有點像破唱片。我不知道這些數字是否正確，但傑西提到，如果沒有一次性的啟動失誤，你的利潤率將與去年相似。簡單算一下，這個數字接近 200 萬美元。這就是您提到的一次性成本的真正影響嗎？

And again, it sounds like a broken record. If so, we've had tremendous success on the sales side, but we've had tremendous disappointments on the operating side. And Kevin, you constantly commend your -- which is a nice thing to do, but the group has let the collective down from a margin perspective. So just to get some color, was it a $2 million one-time issue, and I'm glad you salvaged the customer, et cetera. And how can we be assured that these things won't happen because in the absence of that, if you had the same gross margins even in last year, your earnings per share, even with a higher share count would have been 80% higher.

這聽起來又像是老生常談了。如果是這樣，我們在銷售方面取得了巨大的成功，但在營運方面卻遭遇了巨大的失望。凱文，你不斷地表揚你的——這是一件好事，但從利潤的角度來看，這個團隊讓集體失望了。所以只是為了弄清楚情況，這是否是一次性 200 萬美元的問題，我很高興你挽救了客戶，等等。我們如何確保這些事情不會發生，因為如果沒有這些，即使去年你的毛利率相同，即使股票數量更多，你的每股盈餘也會高出 80%。

This is -- it's frustrating.

這真是令人沮喪。

Tony, it's Jess Jankowski. It probably wasn't a full $2 million, but it was up in the range of, we just saw some inefficiencies that were kind of across the manufacturing organization, and it lasted longer than we expected. And that's really where the issue came. Definitely, none of us are happy about it, obviously. However, part of the magnitude of it was higher is just we're getting to the point where we're getting a lot bigger initial orders and having a lot more volume pumping through quickly.

東尼，我是傑西揚科夫斯基。這可能不是整整 200 萬美元，但在這個範圍內，我們只是看到整個製造組織都存在一些效率低下的問題，而且持續時間比我們預期的要長。問題就出在這裡。顯然，我們對此都不高興。然而，其幅度之所以更高，部分原因在於我們正處於一個階段，即我們獲得了更大的初始訂單，並且快速獲得了更多的訂單量。

I think -- I don't think it will be repeated. I do think that the magnitude of it has a lot to do with the magnitude of the orders, which are just higher than we've ever seen, which is part of the issue. A little mistake becomes a big mistake when you turn up the volume. Kevin may want to comment somewhere on that as well, but I see it as a learning experience, and I don't see it as something that I expect to be happening again.

我認為——我不認為這種情況會重演。我確實認為，問題的嚴重性與訂單的數量有很大關係，訂單的數量比我們所見過的要高，這是問題的一部分。當你提高音量時，小錯誤就會變成大錯誤。凱文可能也想對此發表評論，但我認為這是一次學習經歷，我不希望這種事情再次發生。

Yes, as Jess mentioned, as you said, the frustration is pretty significant. There are things that we are changing relative to addressing this issue. How this issue came about, I briefly mentioned was really related to some issues we had relative to the packaging that came in. and it was a variance from what we had originally done with the setups and with the testing that we did on the trials. That said, we should have seen this faster.

是的，正如傑西所提到的，正如你所說，挫敗感相當強烈。為了解決這個問題，我們正在做出一些改變。我簡要地提到了這個問題是如何產生的，這實際上與我們遇到的一些與包裝相關的問題有關。這與我們最初在試驗中進行的設定和測試有所不同。話雖如此，我們應該更快地看到這一點。

And so we are making some changes, which don't really want to go into the details of what those are, but they are to make sure that this type of issue does not occur to the extent that it occurred. Just being fully transparent here, one of the challenges that happens with any new launch is particularly in the space that we operate, where we're trying to get these things to market pretty quickly as part of the point of difference that we offer in the marketplace. There are usually some unknowns that come about that can affect the performance. The difference here is that, as Jess said, it was large, but also that it didn't get noticed until relatively late in the initial start-up phase of the process. And that's really where we're emphasizing making sure that these types of things don't go that far, that there are proper screening checks, evaluation of the performance of the line, and performance relative to meeting the specifications of the product, much earlier in the production process.

因此，我們正在做出一些改變，我們不想深入探討這些改變的細節，但這些改變是為了確保這類問題不會再次發生。坦白說，任何新產品發布都會遇到的挑戰之一尤其在於我們運營的領域，我們試圖將這些東西快速推向市場，這是我們在市場上提供的差異點的一部分。通常會出現一些未知因素，影響性能。這裡的區別在於，正如傑西所說，它很大，但直到過程的初始啟動階段相對較晚時才引起人們的注意。這就是我們真正要強調的，確保這些事情不會發展到那一步，在生產過程的早期就進行適當的篩選檢查、生產線性能評估以及相對於滿足產品規格的性能評估。

So definitely frustrating after really expecting a much better result given the scale of the revenue that we did have.

考慮到我們確實擁有的收入規模，我們原本期待會有一個更好的結果，但結果卻令人沮喪。

Would you venture an estimate as to full-year gross margins, assuming this is a one-time thing as you mentioned?

假設這是您提到的一次性事件，您能否估算全年的毛利率？

We expect them to be certainly above 30%. But again, it's hard without knowing we're not going to give guidance relative to the full year just based on the fact that there's a lot up in the air. But we are perfectly capable of generating margins in the 30s, with our goal of exceeding that. And I don't expect them to be significantly lower for the year than that. I do think this is going to be an anomalous quarter with the worst margin that we would have seen for the year.

我們預計這一比例肯定會超過30%。但同樣，如果不知道的話，我們很難給出有關全年的指導，因為還有很多不確定因素。但我們完全有能力實現 30% 左右的利潤，我們的目標是超越這個目標。我預計今年的銷售額不會比這低很多。我確實認為這將是一個異常的季度，利潤率將是今年以來最糟糕的。

(Operator Instructions) One moment for our next question that comes from Wayne (inaudible).

（操作員指示）請稍等片刻，下一個問題來自 Wayne（聽不清楚）。

Yes, Jess, I appreciate your dedication, both of you, Kevin, for your hard work. But should we have been able to anticipate some of this? Are we in a position to correct this before it happens, because this was kind of disappointing that the end of last year wasn't so hot, and now this year. And are we going to get better at anticipating these problems before they make such a significant impact on our margins?

是的，傑西，我很欣賞你們的奉獻精神，凱文，感謝你們的辛勤工作。但我們是否應該能夠預見其中的一些情況呢？我們是否有能力在這種情況發生之前糾正它，因為去年年底的情況不太好，而今年的情況又不太好，這有點令人失望。在這些問題對我們的利潤產生如此重大的影響之前，我們能否更好地預測這些問題？

Wayne, yes, we are already better than we were. I think it's not it's not a super complicated business, but there's a lot of moving parts. And I think this area was one that exposed something that we didn't have enough coverage on in terms of catching something like that in advance. That said, we have put precedence in place to avoid that from happening again. And as Kevin mentioned, part of it was just the magnitude there was a big rush to get this thing out the door.

韋恩，是的，我們已經比以前更好了。我認為這不是一項非常複雜的業務，但其中涉及很多活動部分。我認為這個區域暴露了一些問題，而我們之前沒有對其進行足夠的報道，因此無法提前發現這些問題。儘管如此，我們還是採取了先例來避免此類事件再次發生。正如凱文所提到的，部分原因在於人們急於把這個東西推出去。

And as usual, nobody wants to fail. So we did an incredible amount of it and realized too late that we needed to do some rework. So I think we're better positioned to not have that happen again. I always expect there are going to be errors. You don't have a perfect fill rate.

和往常一樣，沒有人願意失敗。因此，我們做了很多工作，但當我們意識到需要重新做事時，已經太晚了。所以我認為我們能夠更好地避免這種情況再次發生。我總是預料到會出現錯誤。您沒有完美的填充率。

You always have some issues. The question is, to your point, do you have a strong enough quality system that you catch the error after you make 100 of them instead of 1 million of them, and that's really where we're focusing and dialing in on how we're managing the organization. So in a nutshell, I think we do have a better visibility now of this potential issue. I'm sure there's another one that we may not notice, but I think even saying that we are looking at our procedures completely to make sure that during the trial phase, we're continuing to investigate all these potentials. And if there is a last-minute change, which in this case, there were some changes later in the game, we need to address it at that time, and I think we will.

你總是會遇到一些問題。問題是，正如您所說，您是否擁有足夠強大的品質體系，以便在犯下 100 個錯誤而不是 100 萬個錯誤後就能發現錯誤，而這正是我們在管理組織時真正關注和關注的地方。簡而言之，我認為我們現在對這個潛在問題有了更好的了解。我確信還有另一個我們可能沒有註意到的，但我認為即使說我們正在全面審查我們的程序，以確保在試驗階段，我們將繼續調查所有這些潛力。如果最後一刻發生了變化，在這種情況下，遊戲後期發生了一些變化，我們需要當時解決這個問題，我認為我們會的。

Yes. Just to follow up with that question, Wayne, just there are a couple of things that we should mention. First is the quality issue really was on just a portion of the total production that is related to this launch, but it was a significant early portion of the production, but significantly less than half of the total production. So that meant for us to first be able to correct it, which meant we had to go into a pretty heavy rework process, which is heavily manual process. That's why the costs were so high.

是的。韋恩，為了繼續回答這個問題，我們應該提幾件事。首先，品質問題實際上只影響了與此發布相關的總產量的一部分，但這是產量的很大一部分，而且遠遠不到總產量的一半。所以這意味著我們首先要能夠修正它，這意味著我們必須進入一個相當繁重的返工過程，這是一個高度手動的過程。這就是成本如此高的原因。

And then we also had to put in place the proper changes to the production process where we are making prime or first production on additional goods. And during that, we were able to double down relative to ensuring that we were making the product right the first time through doing some additional quality checks at the front end and at the back end in order to make sure that the changes that we had made on process and in the machining or in the filling process specifically, we're actually working. So that's, again, going a little inside baseball on the issue, but given the magnitude of it and given the concern that this is something that could linger on, wanted to ensure you that there is know-how within the organization on how to make sure this doesn't happen again to first and foremost look for these issues prior to starting production, which are basically variances against the specification on the package or variances in the way that the equipment was set up and making sure that we're going to do things right the first time when we start the production. So all of that is a pretty heavy emphasis for us, not just this coming quarter, but on a going-forward basis.

然後，我們還必須對生產流程進行適當的改變，對額外商品進行主要或首次生產。在此期間，我們能夠加倍努力，透過在前端和後端進行一些額外的品質檢查來確保我們第一次就生產出正確的產品，以確保我們在流程、機械加工或具體到填充過程中所做的改變確實有效。因此，再次，我對這個問題進行了一點內部討論，但考慮到問題的嚴重性以及對這個問題可能持續下去的擔憂，我想向你保證，組織內部有專門知識，知道如何確保這種情況不會再次發生，首先是在開始生產之前尋找這些問題，這些問題基本上是與包裝規格的差異或設備設置方式的差異，並確保我們在開始生產時第一次生產時就把事情做好。因此，所有這些對我們來說都是非常重要的，不僅是在下個季度，而且是在未來。

One moment for our next question. It comes from the line of [Rand Kay].

請稍等片刻，回答我們的下一個問題。它來自[蘭德·凱]。

A couple of questions regarding to the tariff situation. A while ago, in the 10-K, you guys stated that China was single source for some key raw materials. I guess it was zinc, and that you were looking for other sources, okay? Have we second-sourced to your satisfaction this issue, especially with China?

關於關稅情況的幾個問題。不久前，在10-K報告中，你們表示中國是一些關鍵原料的唯一來源。我猜是鋅，而你正在尋找其他來源，好嗎？我們對這個問題的第二個來源，特別是與中國的聯繫，是否讓您滿意？

Yes, Rand, First of all, China is not a source for our zinc metal or any single source of any key raw material. It's always been for us a second source actually, if we source from China at all. So just to make sure it's clear, we do not source zinc metal for our processes from China, and we are very comfortable with our sourcing within the scope of the tariff situation as well, as it's actually European or domestic where we typically get the zinc metal.

是的，蘭德，首先，中國不是我們的鋅金屬來源地，也不是任何關鍵原料的單一來源。事實上，如果我們從中國採購的話，它一直是我們的第二個來源。因此，為了確保清楚起見，我們不會從中國採購用於我們工藝的鋅金屬，而且我們對在關稅範圍內的採購也非常放心，因為實際上我們通常是從歐洲或國內採購鋅金屬。

Well, what is the one issue that we single-sourced from China if it wasn't zinc?

那麼，如果不是鋅，我們從中國單一採購的商品是什麼呢？

You might be thinking -- I don't know if it's in the most current 10-K, the prior ones, we used to get all of our cerium oxide from China for the polishing business. And that's something that we don't have much of a business or any of a business in anymore. So that's not an issue. But that would be the poster child for a tough thing to be dependent on China, that falls into the rare earth category, which we're happy about. We don't have any of that right now that we have to deal with.

您可能會想——我不知道這是否在最新的 10-K 中，在之前的版本中，我們過去所有的氧化鈰都是從中國購買的，用於拋光業務。而這方面我們已經沒有太多業務了，甚至不再有任何業務了。所以這不是問題。但這將是依賴中國的一個艱難決定的典型例子，它屬於稀土類別，我們對此感到高興。我們現在還不需要處理任何此類事情。

And from a cost perspective, do tariffs affect more raw materials or packaging materials?

從成本角度來看，關稅對原料的影響更大還是對包裝材料的影響更大？

Yes. For us, it's more packaging materials. And really, for the beauty industry, that's the lead is that packaging materials are broadly sourced from China. And so that's where you would see the most impact.

是的。對我們來說，更多的是包裝材料。事實上，對於美容產業來說，主要原因是包裝材料主要來自中國。這就是你會看到最大影響的地方。

As 2 of the previous callers mentioned, gentlemen, again, I don't want to beat a dead horse, but I'm very disappointed that we keep having these trial-and-error situations where we'll get it this time. And the thing that I'm a bit concerned with is that in Jess's discussion, we're pretty sure this isn't going to happen again, or we hope this doesn't happen again. I just wonder if there is a mindset that drills down a little more hard line throughout the organization that says, this cannot happen again, and will not happen again. And I guess my question is, specifically, did this mistake come because we did not have somebody in the position of quality, either first article or whatever, or prototyping? And if not, is there now -- is it an issue that the mechanism wasn't in place?

正如之前兩位來電者提到的，先生們，我不想再重複老話，但我很失望我們一直在經歷這種反覆試驗的情況，這次我們只能成功了。我有點擔心的是，在傑西的討論中，我們非常確定這種事情不會再發生，或者我們希望這種事情不會再發生。我只是想知道，整個組織中是否存在著一種更強硬的心態，即這種事情不能再發生，也不會再發生。我的問題是，具體來說，這個錯誤是不是因為我們沒有人負責質量，無論是第一篇文章還是其他什麼，或者原型設計？如果沒有，那麼現在是否存在──這是機制不到位的問題嗎？

Or was it a mechanism where whoever was in place wasn't doing their job properly?

或者這是一種機制，無論誰在位，都沒有正確履行職責？

Yes. Rand, there were a couple of different questions there. But I think the gist of what you're getting at is, do we understand how it happened? And do we have the wherewithal, both in terms of our knowledge and the organizational, we'll call it, hutzspah to make sure it doesn't happen again. We do understand what happened.

是的。蘭德，這裡有幾個不同的問題。但我認為你要表達的重點是，我們是否了解事情是如何發生的？我們是否有足夠的知識和組織能力，我們稱之為勇氣，以確保這種事情不會再次發生。我們確實明白發生了什麼事。

We understand what the cause of the error was, and we do have, as I mentioned earlier, corrective actions put in place. We do also have our organization tuned into what this cost us as a company, and that on both sides, there was an opportunity to win bigger with success, but there's also a consequence for failure for all of us. And so I think everyone is tuned into that in the appropriate level of concern that they should have or we should have as an organization to make sure that we do not have these types of issues again. I just want to make sure it's clear, though, that it's more -- with this issue should have been not a significant seven-figure issue. It should have been maybe a few thousand to $10,000 type of issue for us, not the scale.

我們了解錯誤的原因，正如我之前提到的，我們已經採取了糾正措施。我們的組織也確實意識到了這件事給我們公司帶來的損失，對雙方來說，成功都意味著更大的勝利，但失敗也會為我們所有人帶來後果。因此，我認為每個人都應該以適當的關注程度來關注這個問題，或者我們作為一個組織應該以適當的關注程度來確保我們不會再次遇到此類問題。我只是想確保清楚，這個問題不應該是一個重大的七位數問題。對我們來說，這應該是幾千到一萬美元的問題，而不是規模的問題。

And so -- and those types of issues will happen in launches of this magnitude. But they should be stopped earlier, and that's really the emphasis is to make sure that we know if we've set up to do it right the first time, we should do it right the first time. But if there is some mistake that's being made, that it's caught early and it doesn't manifest itself in the manner that it did this time -- this past quarter.

所以——這類問題會在這種規模的發射中發生。但它們應該儘早制止，而這才是真正的重點，是為了確保我們知道，如果我們準備好第一次就把事情做好，我們就應該第一次就把事情做好。但如果出現了一些錯誤，並且能夠及早發現，就不會像這次——也就是上個季度——那樣表現出來。

All right. I got to say, from a standpoint of being disappointed, I'm extremely disappointed because I really thought this was done. I really thought these, oops! We didn't take into account. And here it is again.

好的。我必須說，從失望的角度來看，我非常失望，因為我真的以為這已經完成了。我真的以為這些，哎呀！我們沒有考慮到。現在它又出現了。

And I am really concerned a little bit, gentlemen, with both of you that, well, we hope it doesn't happen again, but it could. And I think that fundamentally, I don't know. I just have been in my experience, consequences like this need to be dealt with effectively, and if people need to be cut loose as a result, that's how it goes. And I'm just wondering if the mindset is steely enough and tough enough to send a message throughout the organization. Yes, we want to reward our people with praise and so on and so forth.

先生們，我確實有點擔心你們兩位，我們希望這種事情不會再發生，但它可能會再次發生。我認為從根本上來說，我不知道。我只是根據我的經驗，像這樣的後果需要有效處理，如果因此需要解僱員工，那就這樣做。我只是想知道這種心態是否夠堅定、夠強硬，能夠向整個組織傳達訊息。是的，我們想用讚美等等來獎勵我們的人民。

But this should not be a situation where the ramifications of which, well, it happened, big deal.

但這種情況不應該發生，因為它發生了，所以影響不大。

You do want to make sure that you -- you should praise in public and criticize in private. I know that probably gets old listening to it on the other end.

你確實想確保你——你應該在公開場合表揚，並在私下場合批評。我知道，從另一端聽來，可能已經覺得無聊了。

Well, it -- it does, Jess. And it does specifically because of these kinds of situations.

嗯，確實如此，傑西。正是由於這些情況，它才如此。

In terms of your interpretation of my comment -- my comment is that these issues are going to happen. The magnitude of it should never happen. That was the problem. I always think there's going to be -- everybody has -- there's a failure rate in the business, and it should be a few percent tops, and you should winnow that down to nothing or as low as you can, which is something that we obviously want to be. This is at the highest level of the company.

關於您對我的評論的解讀——我的評論是這些問題將會發生。這種規模的事件絕對不應該發生。這就是問題所在。我一直認為——每個人都認為——企業存在失敗率，最多也就是百分之幾，而你應該將失敗率降至零或盡可能低，這顯然是我們想要的。這是公司的最高等級。

We're talking about it. We're talking about it with the Board. This isn't something that anybody is taking lightly.

我們正在談論它。我們正在與董事會討論此事。這不是任何人都可以輕視的事情。

One moment for our next question, please. And it comes from the line of Mr. [Ron Richards].

請稍等片刻，回答我們的下一個問題。它源自於先生的路線。[羅恩·理查茲]。

On your balance sheet, there's a big new liability for accounts receivable, and there's a bigger liability for inventory line of credit. What are those all about? And why were they necessary?

在您的資產負債表上，應收帳款有一筆較大的新負債，庫存信用額度也有一筆較大的負債。這些到底是什麼？為什麼它們是必要的？

Well, accounts receivable is relating to just the increased volume. And as we said, that was the launch that we were supporting and are supporting is probably the biggest one we ever have. So a lot of it ballooned based on volume. We're not in a -- from that perspective, naturally, it's hard on cash, but it's something that just happens. In terms of the accounts receivable related to the line of credit, that's just -- that's -- we use that to support working capital.

嗯，應收帳款僅與增加的數量有關。正如我們所說，這是我們所支持的一次發布會，而且很可能是我們迄今為止最大的一次發布會。因此，很多東西都是根據數量膨脹的。我們並沒有——從這個角度來看，這自然會對現金造成影響，但這是自然而然發生的事情。就與信用額度相關的應收帳款而言，這只是——我們用它來支持營運資金。

And the other line that you didn't mention, which is something that we are focused on is we have a high degree of inventory, even though it didn't change a lot quarter over 12/31, year over year, it has, which is, as you know, is a drain on working capital, which supports some of that borrowing. When it was at 0 at 12/31, that was anomalous, and that also related to the fact we had done the financing last year, and we also had in the fourth quarter, we didn't have that rapidity of growth that we had in Q1. So it kind of all came together. I think that comparison, if you compare it to the average of last year, the average of this year, it will be higher this year because sales are higher. But I expect us always to have something there.

您沒有提到的另一點是我們關注的重點，那就是我們的庫存量很高，儘管與去年同期相比，本季度的庫存量沒有太大變化，但正如您所知，這會消耗營運資金，而營運資金支持了部分借款。當 12 月 31 日為 0 時，這是異常的，這也與我們去年進行融資有關，而且我們在第四季度也沒有像第一季那樣快速成長。所以一切都湊在一起了。我認為，如果與去年的平均水平、今年的平均水平進行比較，今年的銷售額會更高，因為銷售額更高。但我希望我們總是能在那裡有所收穫。

Well, how soon will these be extinguished? I mean your accounts receivable is a lot higher.

那麼，這些多久才會被消滅呢？我的意思是你的應收帳款要高得多。

Sure. Well, the days outstanding are not that high on accounts receivable. Again, it's just that we have a lot of them. We had a lot of shipments. So it's -- I don't expect it to be materially older than any other receivables that we've had from that perspective.

當然。嗯，應收帳款的未償付天數並沒有那麼高。再說一遍，我們只是有很多這樣的人。我們有很多貨物。所以 — — 從這個角度來看，我並不認為它的帳齡會比我們收到的任何其他應收帳款長得多。

Internally, we're working to cut into our inventory and part of that, one of the things that we've done because of the tariffs coming on, because of the length of time it takes for things to get across the water, we do have a larger inventory than we would like if we could do just in time, which is really not possible at this point at least and maybe never in this industry. So those things are a drain on cash. We also if you look at -- when we get together a cash flow statement, we're also in the process, we are continuing to invest some capital in the business, not so much in Q1, but last year, we did quite a bit. And this year, we'll probably be less than last year or similar. But that comes out of operating cash.

在內部，我們正在努力減少庫存，其中之一就是由於即將上調的關稅，由於貨物運輸需要很長時間，如果我們能夠及時完成，我們的庫存量確實比我們希望的要大，但這至少在目前是不可能的，在這個行業中可能永遠都不可能。所以這些事情會消耗現金。如果你看一下——當我們匯總現金流量表時，我們也在繼續向業務投資一些資本，雖然第一季投資不多，但去年我們做了相當多的資金。今年我們的收入可能會比去年少或差不多。但這些資金都來自營運現金。

We're not at the point -- we're trying to avoid financing all of that to the extent we can while not being hamstrung to operate the business.

我們還沒有到這個地步——我們正試圖在不影響業務運營的情況下，盡可能地避免為所有這些項目提供融資。

And this concludes our Q&A session. I will turn it back to management for any final comments.

我們的問答環節到此結束。我將把它交還給管理層，徵求他們的最終意見。

Thank you, Carmen. Thank you to all of those who took the time to join us today. Solesence's ability to deliver innovative, regulatory-compliant and market-ready products, coupled with our strategic partnership approach, positions us as the preferred CDMO for brands seeking to achieve sustainable growth, market leadership, and unparalleled products spanning skin care, sun care, and color cosmetic market segments to consumers worldwide. In closing, we owe our continued success and our expectation of yet another record-breaking year to the dedication of our team and the ongoing support of our brand partners and shareholders. We thank them and look forward to updating you on all of our progress in the next call.

謝謝你，卡門。感謝今天抽出時間來參加我們的活動的所有人。Solesence 能夠提供創新、符合法規要求且市場就緒的產品，再加上我們的戰略合作夥伴關係，使我們成為尋求實現可持續增長、市場領導地位以及為全球消費者提供涵蓋護膚、防曬和彩妝市場領域的無與倫比的產品的品牌的首選 CDMO。最後，我們能夠持續取得成功，並期待再創佳績，這要歸功於我們團隊的奉獻精神以及我們品牌合作夥伴和股東的持續支持。我們向他們表示感謝，並期待在下次電話會議中向您通報我們的所有進展。

Carmen, you may close the call.

卡門，你可以結束通話了。

Thank you, everyone, for participating in today's conference. You may now disconnect.

謝謝大家參加今天的會議。您現在可以斷開連線。