NNXPF (NNXPF) Q4 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the Q4 2026 NanoXplore Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Liam Turner. Please go ahead.

[Foreign Language] Good afternoon, everyone, and thank you for joining the discussion of NanoXplore's financial and operating results for the fourth quarter of fiscal 2026. The press release reporting these results was published after market close today and can also be found on our website along with our financial statements and MD&A. These documents are also available on SEDAR+. Before we begin, I'd like to remind you that today's remarks, including management's outlook and answers to questions, contain forward-looking statements. These forward-looking statements represent our expectations as of today, September 15, 2026, and accordingly, are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially, and listeners are cautioned not to place undue reliance on these forward-looking statements. A description of the risk factors that may affect future results is contained in NanoXplore's annual information form available on our corporate website and in our filings with the Canadian Securities Administrators on SEDAR+. On the call with me today, we have Rocco Marinaccio, our Chief Executive Officer; and Pedro Azevedo, our Chief Financial Officer. After remarks from Rocco and Pedro, we'll open the call to questions from financial analysts. Let me now turn the call over to Rocco.

Thank you, Liam, and good afternoon, everyone. I'm Rocco Marinaccio, President and CEO of NanoXplore, and I'm pleased to have you with us today to discuss our fourth quarter 2026 results. Reflecting on fiscal 2026, our company made some tremendous breakthroughs and advancements, and I can say with confidence that NanoXplore is in the strongest position we have ever been in as a company. We have a solid cash position, a robust $35 million pipeline of graphene-enhanced solutions business launching over the next 18 months and a set of exceptional high-margin graphene opportunities developing across multiple end markets. We started the year slower as volumes in our solutions business were recovering from their lows, but the momentum we built from there was significant. We launched our state-of-the-art facility in Statesville, North Carolina, supplying exclusively for Club Car. We formalized our partnership with Chevron Phillips Chemical, or CP Chem, and are actively promoting and are driving commercial TriboGraf revenues. Most importantly, we advanced our proprietary dry process or D-Series graphene technology from development into commercial production, engineering and commissioning a dedicated production line entirely in-house. This capability has already resulted in the launch of new D-Series products, opening new markets for the company. We also successfully completed a CEO leadership transition while strengthening our team through the promotions of Nima Moghimian to Chief Technology Officer and Ilia Chliapnikov to Chief Operating Officer. None of these advancements happen without our people. Our team members across every facility are the foundation of everything we've accomplished this year, and I want to recognize their dedication and hard work. I'm also proud to say that we achieved our best safety record in company history this year, reducing our total recordable injury frequency from 9.99 to 3.10. And that commitment to a safe workplace goes hand-in-hand with the operational discipline that's driving our results. NanoXplore is the global leader in graphene. With up to 5,000 tons of annual capacity, there is no other company that can produce commercial scale graphene while maintaining quality and consistency. We hold over 100 patents and patent applications, protecting our IP, product and process knowledge, and we are one of very few companies legally permitted to produce and sell graphene in Canada, the United States and Europe. Holding Environment and Climate Change of Canada, Health Canada, EPA and REACH certifications, NanoXplore's regulatory position in this industry is unmatched. When we built our initial 4,000-ton capacity facility in 2020, we designed it for scale. As we engage with a broader range of end markets, it became clear that different applications demand different graphene characteristics, and that insight has shaped our platform strategy. Our traditional graphene grades or X-Series have a high aspect ratio. Put simply, these are thin long sheets of graphene that offer attributes such as lubricity, thermal conductivity and barrier properties. Our newly launched D-Series grades have high surface area, offering attributes such as electrical conductivity, EMI shielding and UV protection. In either case, we can produce purity levels up to 99.8% when our customers require it. Our platform allows us to tailor grades to specific customer needs, so we're not overprocessing material, which allows us to price our products appropriately and in line with market expectations. Let me bring this platform strategy to life with an example. Concrete and cement are multibillion-dollar global industries. Back in 2018, a widely cited study highlighted the performance improvements graphene can bring to cement. We work with multiple companies at the time, achieved excellent lab results, but ultimately cannot translate that into commercial traction with our X-Series graphene. Our D-Series grade has revived that opportunity, and we're now working with one of the top 5 cement producers globally to bring graphene into mainstream cement applications. We'll provide more details as this partnership advances, but I caution that it will take several months. We're still in the early stages, and our product is being validated. Before I walk through our individual growth opportunities, I want to take a moment to explain the strategy behind NanoXplore's acquisitions over the years, because I think it's important context for how you should think about our margin profile going forward. We've acquired several operating companies, and we've done so for 2 reasons. First, to generate a profit. Developing and commercializing a new material from the ground up is time-consuming and expensive, and these operating businesses provide a source of revenue and cash flow along the way. Second, and more importantly, to demonstrate the value and real-world importance of graphene in actual applications. NanoXplore has successfully integrated graphene into most of the products we produce and sell today. And that track record is a big part of why customers trust us to deliver at commercial scale. The graphene benefits recognized by our customers are the reason we have a large pipeline of business launching over the next 18 months, a pipeline that we expect will build on our EBITDA positive foundation and move NanoXplore towards sustained free cash flow generation. That said, I want to be clear about how this mix shows up in our margins today. Many of the products sold through our existing operating companies carry a lower overall margin profile because graphene represents a relatively small portion of the finished product, typically under 5% loading. As our newer graphene opportunities begin to scale, we expect that mix to change meaningfully. These applications generally involve higher graphene content, and therefore, carry substantially stronger margins. TriboGraf is a good example. It is sold as 100% powder without the same raw material pass-throughs or transformation costs that dilute margins in some of our finished product businesses. Masterbatches also sit higher on the value curve, combining plastic with meaningfully higher graphene loading levels than we see across most of our existing operating company products. As these newer, higher loading and higher-margin applications convert into revenue over the coming years, we expect them to become a major driver of margin expansion for NanoXplore as a whole. With that context in mind, I want to walk you through 5 specific opportunities we're seeing this platform strategy translate into real commercial momentum. Starting with drilling fluids and our TriboGraf technology, I want to be candid with you because we know this is an area where investors have been watching closely. As a reminder, on September 18, 2025, we announced a multiyear supply agreement with CP Chem for the sale of TriboGraf, our proprietary carbon-based formulation additive for drilling fluids. That agreement was a product of more than 18 months of close collaboration between our 2 teams, spanning extensive lab testing and field well trials. The results were exceptional. TriboGraf delivered meaningful cost reductions for operators, and CP Chem has taken the product to market under their own brand, NanoSlide. I want to be transparent with you on where things stand. CP Chem's initial activity forecast reflected the strength of those well trial results. Since then, CP Chem informed us that they lost a major prospective customer. And based on what they have shared with us, that loss was related to commercial issues on the customer side rather than NanoSlide's performance. So where are we today? CP Chem has shipped NanoSlide samples to several potential customers who are currently at various stages of evaluation. And critically, every customer that has completed lab testing to date has validated that the product performs as intended. What we're seeing now is the natural sales cycle in this industry where validated lab performance needs time to translate into field well trials and ultimately adoption at scale. So while the pace of rollout has been slower than our early expectations, we think it's important to separate pace from conviction. Both CP Chem and NanoXplore remain firmly convinced that NanoSlide is a high-performance, cost-effective solution as demonstrated continuously by the test results from every customer who has conducted lab testing, and we believe it will start to capture substantial market share as customers move through testing and adoption. We're focused on supporting CP Chem as they convert that proven lab performance into well trials and long-term volume. We ask investors to view this the way we do; as a high conviction opportunity where the fundamentals, a proven performance, a strong multiyear partner in CP Chem and a real cost advantage for operators remain firmly intact. We genuinely don't have visibility into exactly when customers will move from validated lab results to well trials and adoption. What we know is that it will take longer than we originally expected, but nothing we have seen changes our confidence in the commercial potential of the opportunity. I want to spend some time on a very exciting new growth vector for NanoXplore in insulating foams. Several years ago, we began collaborating with a Fortune 500 producer of insulating foam to incorporate graphene into the formulations to enhance insulation performance. That work has matured and their formulation is now being optimized ahead of final plant trials targeted for 2027. What's particularly exciting is that the knowledge we've gained through that application has translated directly into broader market traction. We now have active development programs underway with major producers representing roughly 80% of North American market share in this category, a testament to how differentiated our graphene technology is in this application. We're encouraged that several of these programs are on track to commercialize during fiscal 2027. One major customer in particular, is moving to replace their current additive with our graphene products outright and is in the final stages of approvals to begin purchasing volumes for what we expect to be an immediate conversion. Based on the demand signals we're seeing from that customer, we anticipate 1,000 tons of masterbatch at 30% graphene loading levels in the first full year of production with room to expand from there as the relationship matures. We expect to start supplying graphene-enhanced masterbatch later this year. Beyond that lead customer, several others are in advanced plant trials and the results we're seeing so far are very encouraging for further commercialization over the next year. We're also pleased to share that NanoXplore recently signed a letter of intent with a leading global producer in the field of graphene-enhanced polyurethane foams or PU foams. Under this arrangement, this partner would purchase graphene powder from us and produce shelf-stable liquid dispersions in polyol to precursor for PU foam production. This partner brings an extensive customer base across both the U.S. and Europe, and importantly, they've helped us identify a compelling value proposition in the European foam market. Graphene's potential to functionally replace a widely used halogenated flame retardant that's facing increasing regulatory pressure and is expected to gradually phase out over the coming years. This positions us well to ride a genuine regulatory tailwind in a market that's actively searching for alternatives. Taken together, we believe insulating foams represent a substantial multipronged growth opportunity for NanoXplore, spanning masterbatch, powder and now dispersion applications, and we're excited about the momentum we're building across the value chain. I'll now turn to what we believe could be one of our most transformative opportunities, industrial and consumer plastic films. On June 15, 2026, we announced a technical innovation alongside Techmer PM, our long-standing partner in graphene-enhanced plastics. To put the addressable market in context, industrial films include landscape liners, protective films, pallet wraps and heavy-duty industrial bags, while consumer films include various types of plastic bags, trash bags and a wide range of nonfood consumer packaging. This is a massive everyday use category. The results speak for themselves. Our graphene enhancement has demonstrated more than a 70% improvement in mechanical strength, and we believe it may enable film producers to reduce thickness by up to 20%, generating real material cost savings while fully maintaining tensile, tear and structural performance. We've also seen the potential to significantly increase the amount of recycled content that can be incorporated into film formulations without sacrificing performance, a critical advancement for packaging manufacturers navigating tightening sustainability mandates and circular economy targets. This breakthrough is driven specifically by our D-Series graphene, which has unlocked performance that our X-Series graphene simply cannot achieve in this application. We see this as a real point of differentiation for NanoXplore. Techmer brings a broad and well-established customer base that already supplies extensively into this industry, giving us an efficient path to market. Since our June 2026 announcement, we've seen strong engagement. Multiple customers have already requested and received samples for testing. We expect that testing to conclude over the coming months, and we're targeting the start of graphene order flow in the second half of fiscal 2027. The scale of the opportunity here is significant. The trash bag industry alone represents a multibillion-dollar global market, and our ambition is to demonstrate graphene's value proposition to the industry's most iconic brands, companies like Hefty, Glad and others who set the standard in this space. I'd like to emphasize that while the graphene addition rate in these film applications is low, usually under 1%, the selling price per kilogram is significantly higher than our other graphene products. That combination points toward meaningfully higher product margins as this business scales, making thin films not just a large opportunity, but a highly attractive one from a profitability standpoint. Let me also highlight our progress in the conductive graphene space. On May 5, 2026, we announced the launch of xGnP 500-HP, a high-purity graphene powder engineered for highly conductive applications, including energy storage, conductive composites and advanced electronics. This launch is a further demonstration of our ability to develop tailored graphene materials that meet the precise needs of specific end uses rather than offering a one-size-fits-all product. We currently sell conductive graphene to a customer in Asia, and we're actively working with several additional customers on commercial opportunities that we expect to materialize over the coming fiscal year. Products in this space carry a wide range of selling prices depending on material specifications, and they consistently carry higher margins than our traditional graphene products. Another example of our platform strategy translating into high-value commercial opportunities. I also want to speak on an additional opportunity we're excited about, graphene-enhanced recycled plastics for industrial applications. The process of recycling plastic inherently degrades the mechanical performance of the polymer. Graphene restores those lost properties, and that capability is opening up a significant opportunity for us. From the very beginning of our conversations with Club Car, our intent went beyond simply supplying parts. The vision was always to eventually convert their products to graphene-enhanced recycled polymers. We're currently working closely with Clubcard on formulations to ensure performance and quality meet or exceed their current standards, and we expect that conversion to take place in early 2027 with our graphene and recycled polymers supplied by our Canuck subsidiary, a good example of how our integrated platform creates value that a stand-alone graphene producer could not offer on its own. Finally, I want to update you on VoltaXplore. VoltaXplore is a 100% owned subsidiary of Nano and currently operates a 1 megawatt per hour cylindrical battery production facility in Montreal, producing high-performance cells in the 21700 format for highly demanding applications. Since my appointment as CEO, we've conducted a strategic review of VoltaXplore and refocused it on validated, near-term opportunities in drone and defense applications. Consistent with our capital protection discipline, we've restructured VoltaXplore as a specialty operating model targeting selected markets. This repositioning shifts Volta away from its earlier electric vehicle focus and toward defense and dual-use platforms, including UAVs, UGVs and portable electronics, particularly for Canadian and U.S. defense customers. This is supported by growing demand for domestically produced battery cells driven by trade and geopolitical developments as well as by procurement preferences for Canadian-made products. VoltaXplore's existing production capability has already allowed it to begin supplying cells to interested parties for testing and qualification, and its technology development continues to be supported by active federal programs, including Natural Resources Canada's Energy Innovation Program and the National Research Council's Industrial Research Assistance Program. Before I hand things over, I want to leave you with how we think about NanoXplore's story right now. Our graphene enhanced solutions business, together with the $35 million of new business launching over the next 18 months is what gives this company its stability. We expect this to make NanoXplore free cash flow positive. That's our foundation. The real value in NanoXplore lies in the high-margin opportunities we expect to begin commercializing in fiscal 2027; drilling fluids, thin films, insulating films, conductive applications, recycled plastics and our repositioned Volta platform. These are the businesses we believe will meaningfully shift our revenue and margin profile over time and where we see the greatest long-term upside for shareholders. Some, like insulating foams and thin films, we expect to convert to revenue within the coming year. Others like drilling fluid and cement depend on customer drilling timelines we don't fully control and can't predict with precision, and we'd ask for your continued patience as those relationships mature. We're not dependent on any single one of these to succeed for our platform strategy to work. And that combination, a stable, cash-generating core business alongside a genuine portfolio of high-margin growth opportunities is exactly what gives us confidence in NanoXplore's trajectory heading into fiscal 2027. With that, I'll turn things over to Pedro to walk through our financial results in more detail.

[Foreign Language] Good afternoon, everyone. Today, I will begin with a review of our Q4 and full year financial results, followed by an update on near-term CapEx spending and conclude with some commentary on the upcoming financial year and provide preliminary guidance. Before starting the review of our Q4 performance, I wanted to point out that in the comparable quarter last year, we had unusually high tooling revenues at higher margins. This was due to the closeout of the Paccar capacity expansion in Q4 last year, which masks the improvements made during the past quarter on product sales and margins. As such, I will present my review both including and excluding tooling revenues. Tooling revenues in Q4 was 7% higher than Q4 last year at $33.9 million. Excluding tooling revenues, our revenues increased by $4.5 million, representing a 17% growth year-over-year due to new programs and volume recovery on Paccar and Volvo programs. Adjusted gross margin on revenues from customers as a percentage of sales was 22.5%, a decrease of 220 basis points versus 24.7% last year. However, excluding tooling margins, product gross margins increased from 20.6% last year to 23% this year. While this is a significant improvement, we expected higher margins, but the U.S.-Iran conflict caused increases in raw material prices, which were only partially mitigated with increased prices to our customers during the quarter due to a lag effect. Adjusted EBITDA was $1.9 million, a decrease of $565,000 versus last year. Excluding tooling, the recent quarter was $1.3 million higher than last year. Looking at the segments. Adjusted EBITDA was $2 million in the Advanced Materials, Plastics & Composite Products segment, a decrease of $650,000 versus last year, directly related to tooling revenues and a loss of $140,000 in the Battery Cells and Materials segment, an improvement of $80,000 versus last year. Looking at our full year, while sales were significantly lower in the first quarter, the start of the Club Car business, a volume recovery in the Paccar and Volvo business and the start of shipments to CP Chem under our supply agreement during the second quarter led to 3 quarters of continued sales and EBITDA expansion. Sales for the year at $117.3 million is below last year's $129 million, but this difference is directly due to our first quarter and current year's more normalized tooling revenues. Adjusted EBITDA of $1.93 million this year was also lower versus $6.1 million last year due to the same reasons. Regarding our balance sheet and cash flows, we ended the quarter with $25 million in cash and cash equivalents and $11.5 million in short-term and long-term debt. As part of the recent renewal of our RBC credit facility, we reduced our revolving credit line from $10 million to $5 million and increased our term loan facility by the same amount. We determined $5 million was sufficient for our needs, and we are paying standby fees unnecessarily. This can be reversed by amendment as it may be needed in the future. As such, our cash, along with the unused space in our revolving credit lines, resulted in total liquidity of $30 million as of June 30. Overall cash flow during Q4 was positive $650,000 and was the first quarter we generated positive cash flow, excluding quarters with financings or high tooling repayments. Operating cash flows were positive $3.6 million, mainly resulting from strong EBITDA and a reduction in working capital. Notwithstanding this improvement, working capital remains higher than normal due to tooling invoices in our receivables and tooling receivables not yet billable, negatively impacting our working capital by $8 million. We expect these amounts to be collected during fiscal year 2027. Cash flows from financing activities were positive $230,000, resulting from equipment financing, partially offset by debt and lease repayments. Cash flows from investing activities were negative $3.1 million due to capital expenditures as we work on completing our strategic plan investments. Lastly, as mentioned during the May analyst call, the U.S. Supreme Court decision in February on IEEPA tariffs enabled us to file a claim for IEEPA tariff refunds on tariffs paid on imported equipment. In June 2026, we received approval for USD 720,000 refund, which was recorded as an accrued receivable and reduction of the carrying cost of the equipment and plant, properties and equipment on our balance sheet. This amount was collected in July 2026. Turning now to our near-term CapEx spending and commentary on fiscal year 2027 expectations. As previously mentioned, the majority of our large strategic investments are behind us, and we expect CapEx to greatly reduce beginning in Q1 2027 and represent less than $1 million per quarter as a run rate. New initiatives such as the capacity expansion may come up during the year, and we will provide an update at that time. Regarding our fiscal year 2027, we expect Q1 revenues to range between $30.5 million and $31 million, which represents an increase of 32% versus last year. As a reminder, Q1 is usually the slowest quarter of the year. For the year, in addition to full year impacts from Club Car business and continued volume recovery in the solutions business, as Rocco described, we expect commercialization on several graphene sales initiatives to begin and expand. While these will benefit revenue, they will have a bigger impact on margins since most of these incremental sales of graphene powders and masterbatches contribute high margins. However, the launch of 2 new Volvo programs planned to start in our second half of 2027 have been delayed to our fiscal year 2028 due to industry regulatory changes coming from the Trump administration. Notwithstanding this delay, we are optimistic for fiscal year 2027 and anticipate full year revenue growth between 11% and 20% with revenues between $130 million and $140 million, and we expect to deliver positive free cash flow. Delivering this revenue and free cash flow performance would be record highs for NanoXplore. Finally, looking further ahead, our internal expectations for fiscal year 2028 indicate revenues between $160 million and $170 million, resulting from growth in both graphene sales and our solutions business, barring any unforeseen circumstances. Lastly, regarding the trade war between Canada and the United States, as of today, the majority of the materials we source into Canada are not subject to Canadian tariffs and all the products we sell into the United States are not subject to U.S. tariffs. NanoXplore is well positioned to face this situation by having production facilities in both countries and can work with customers to mitigate product -- future potential impact.

Thank you, Pedro. Operator, we can now open the call for questions.

[Operator Instructions] Our first question will be coming from the line of Baltej Sidhu of National Bank of Canada.

Just a few questions on my end here. First, just on TriboGraf. Now that you have more operating data on the product, are you continuing to see consistent results from the lab to field trials just across different regions and geology? And does the 20% reduction in drilling time still remain representative of your initial findings?

Yes. So all the technical data from NanoSlide has been performed and validated. So the technical data sheets that are out there posted on CP Chem's website all hold true. Every customer that has validated or trialed and performed their testing has all validated the results. So the reduction in drill time is true in different regions across the world wherever it's been tested and the value props are still intact.

Great. And just given the initial opportunity with the customer didn't proceed just given customer-specific commercial considerations, is there a risk to similar customer considerations that could continue to delay broader commercialization? Or would you -- to the knowledge that you have, is that more of a one-off?

Yes. I would say it was a learning curve, not speaking on behalf of CP Chem, but I would say it's a one-off. I'm not going to speak as to what the commercial issues were from them and their customer, but I'll put it as a one-off.

Great. And just on the dry-processed graphene side, knowing that you have one line installed right now, and then it seems like there's more incremental visibility with some customers. With what you have right now, could you suggest that we could see another line being added sometime through fiscal '27?

Hard to answer that question right now. The D-Series product, depending on the grade of product we made, our capacity ranges from hundreds of tons up to 1,000, right? So some of the opportunities that we just talked about, D-series have been revived, cement application being one of them, which is a massive, massive opportunity. You've got thin film applications, right, which in the percentage number that we talked about is under 1%, right? So hard to talk about whether there's additional capacity. I will say what we're seeing is the 1,000 tons when we talk about insulation films, the capacity constraints that we see going forward is basically on our masterbatch equipment more than the graphene side right now.

Very good. And just one last one for me, switching gears to VoltaXplore. Just given the renewed emphasis on defense and now you're targeting UAVs and drones and the like. are the customer conversations that you're having, are they mainly you coming to reach out with customers? Or is it more inbounds from customers? And just leveraging that, are those frequency of engagements higher than or what you had -- initially had in mind when you did the strategic review?

So the answer is yes to all of those. So customers, I will say, Nano itself, we haven't talked about Volta much in the public market over the past few years. Volta's technology, I would say, from a Canadian standpoint is second to none. I don't know if there's anyone else that can produce 21700 cylindrical cells and the technology that we maintain. To answer your question on the customer side, I would say both. We've engaged customers and we've had great customer interaction, people reaching out directly to us on that side. So we talk about federal grants and stuff that we've applied for. And as we progress, we'll provide more insight to you and the market.

Our next question is coming from the line of James McGarragle of RBC Capital Markets.

I just had a question on the top line guidance, the $130 million to $140 million for fiscal '27. So if I just look at your Q4 revenue number and just times it by 4 kind of implies you kind of already coming in the middle of the range. I know there's some seasonality in the numbers, but the bottom end seems to assume that nothing at all improves and it's totally status quo. o can you just kind of talk us through the revenue drivers that are underpinning the range? And what gets you to the higher end of the range? And would any of these other opportunities that you talked about, if they came to fruition in this next fiscal year, could they potentially point to upside above the top end of the range?

James, it's Pedro. So to answer your question is that, yes, there's the seasonality. And as I explained, we're looking at around 30.5% to 31% for Q1. So that already puts us closer to that $120 million-something to start and then it builds from there. The continuity of the Club Car, the full year impact of the Club Car business that we only had about 3 quarters of real business last year, the fourth quarter will add to that revenue number. So that's going to be incremental to what you see. We expected the Volvo and the Paccar business to start this year. So we're actually thinking that it was going to go into beyond $140 million. But because it's been delayed to the fiscal year 2028, we've removed that from our expectations right now. So the $130 million to $140 million will really come from the continuity of Club Car. It will come from the expansion of these graphene enhanced products, masterbatches and powder forms that Rocco mentioned. And just, you have to think about is that even 500 kilograms -- 500 tons of product will only contribute $5 million. It's not going to be -- it's not going to grow by $10 million or $20 million just coming from the expansion of these products. So that's going to be a slower impact. But in terms of margins, it will be a bigger impact. So that's why the $130 million to $140 million is really going to be coming from Club Car, the expansion of Volvo and Paccar and the rollout of graphene and masterbatches.

And then just a similar question for the step-up into fiscal '28. Just trying to get a sense of what type of confidence you have in being able to achieve that. Is that primarily Volvo ramping up? And then would all the other opportunities represent potential upside? Just trying to get -- see the walk between the fiscal '27 to fiscal '28 guide.

James, you read it exactly right. We're putting out there numbers for 2028 basically because we know that these programs for Volvo are launching. We have a stable business, barring any issues with Paccar or the trucking industry that might cause us again to come down. But right now, we know that this business is starting. We know it's incremental to our current business and the growth that we're going to get from graphene and masterbatches in these 5 initiatives that Rocco talked about. So we actually think that $160 million to $170 million, I don't want to say is safe. You never can say safe, but I think that it's a good place for us to start and possibly overachieve in 2 years.

Appreciate that. And then just one more from me on the margin side. So it seems like there's some opportunity for margins, obviously, to improve as some of these higher-margin opportunities potentially starts to ramp up. But in terms of what you have visibility into for fiscal '27, can you just give us some color on how you expect Q1 margins to evolve? And any targets that you can share for the full year fiscal '27?

Yes, sure. So Q1, while graphene provides strong margins, revenue provides coverage of overheads and fixed overhead. So the Q1, we're probably going to be a little bit softer than we had in Q4, probably by about 50 basis points just because of the impact of the revenue reduction, let's say. But then as the year continues and progresses and the revenues become stronger, we expect 150 basis points of growth from Q1 forward to possibly get to 200 basis points by the end of the year, by Q4. So that means an increase of about 200 basis points throughout the year to land at the end of Q4 with that kind of level. Now the average, it will probably average out to 100-something, 150 over the whole year impact year-over-year. But by the end of Q4, we expect to be about 200 basis points better than we were at this Q4.

Our next question will be coming from the line of Marvin Wolff of Paradigm Capital.

Congratulations on a good quarter, guys, and a very good conference call here. I had a question on the cement side. And it's more of a science/technical question. Could you give us more color on how your D-Series graphene is different in behavior in the cement application than the X-Series?

So the X-Series graphene that I talked about, we have long sheets, right? We have -- the D-Series product is consistent, right? So when -- 6 years ago, when we did work in cement, we could get very consistent lab results. The problem was translating that into commercial traction, right? So D-Series, it will help us with dispersion and very consistent product in the field.

Because some of your competitors found that when they added their graphene, which is also X-Series equivalent to the various cement mixes, it performed better during curing. But once it had cured, say, so out 6 weeks or 8 weeks or so, fully cured, there really wasn't much of an advantage from the graphene. But what you're saying is you're finding that the D-Series does provide that enhanced performance after curing, so better flexibility, things like that?

Look, the -- I don't know what customer data or competitor data you're referring to, Mark. We had consistent data or we had very good data with X-Series when we did everything in the lab. The problem wasn't getting 1-day, 7-day, 28-day compression strength data. The problem was the consistency going out into the field in a commercial environment. That's the challenge that we face. and most likely everyone else in terms of how it's not commercial today. The other main factor here in terms of commercializing cement or into concrete is cost. We are by far the lowest cost producer from a commercial scale of graphene, and that is one massive upside for Nano versus anyone else.

No, It's good to see that D-Series could crack that market because that's a huge market.

We agree.

And our next question will be coming from the line of Michael Glen of Raymond James.

Just to start with, Pedro, when you're thinking about the revenue guidance for the next fiscal year, the fiscal '28, just to be clear, like that -- for you to hit that revenue wouldn't require any additional graphene capacity or graphene production capacity?

No, that's exactly right. Right now, with the capacity that we have, we see that it meets the immediate visible needs, and that should produce those kinds of revenue numbers. If there is more growth than we expect today, then it will require more capital, and that will be obviously an upside to the $160 million, $170 million. And we've talked about this as well is that the 4,000 ton capacity on the X-Series, we still have capacity right now for enough growth. So we're not too concerned about that for now. The D-Series is less costly. It is the one that is more likely to run out of capacity sooner, and that requires about $2 million of investment. And one of the things that we've kind of said is that as the capacity fills on the D-Series product line, there's enough profit that's being thrown from that activity to actually pay for a new line almost in itself. So that capacity could be expanded and would be upside to the $160 million, $170 million.

Okay. And are you able to indicate with the current capacity across both lines that you have in place, like what level of -- would that be supportive up to, say, $200 million in revenue? Are you able to frame it in that manner?

I can't frame it because it's highly dependent on the mix. As Rocco explained, just on the D-Series, if you are producing very high quality, very high level of product, our capacity drops from 1,000 tons to 200 whatever. So the capacity changes a lot. So it's not a question of how many dollars we can produce with what we have today or how much dollars we could produce at a later time with 1 more line or 2 more lines. It really is dependent on where we are seeing that growth coming from. If it's a $10 per kg or $20 per kg or $90 per kg, it really depends on where that revenue is coming from.

Okay. And just to circle into some of these end markets that you're talking about, like the insulating foams and the industrial consumer films. Are any of these customers considering or contemplating that the end product would be officially marketed as a graphene-enhanced consumer-facing product?

Rephrase your question. Not sure I got...

With a large market as graphene...

Oh, would they market? Okay. Well, what we know in the insulated foam, we're working with a number of customers, right? They're at different stages. Some are very close to commercializing. I can't speak on how their marketing efforts are. To our knowledge, they're not marketing it as a graphene enhancer. They're going to use it as a process improvement, right? I mean what graphene is doing is, it's increasing R-value of insulation rate in foams in North America and in Europe, replacing a banned halogenated substance.

Okay. So I'm just trying to understand, like is there an advantage or a market share gain that can be made by marketing something as graphene enhanced?

Well, I mean, look, if you're introducing new technology, I mean, people think it's going to cost you more, right? The reality is, if we can't add any value to a product or to a customer, we're not going to sell anything, right? So we've identified where graphene adds the most value into insulating film or into thin films, thin films meaning garbage bags. And that value prop needs to be translated into something, a massive performance improvement, a cost reduction for a customer or for the consumer, right? And these are the areas that we focused on where we're providing tremendous value or graphene is providing tremendous value to the end product.

Okay. And can you just give some -- on the conductive graphene application, can you provide some -- like some actual examples of what those products are?

Energy storage. So I mean the one customer we talked about in Asia is for energy storage for the battery cells. We're selling -- that's a commercial customer that's buying and then we're working with plenty of others, right? VoltaXplore, for example, could use conductive graphene from us as they don't have to in every cell, but they could. So that's the easiest example to understand.

Thank you. And that does conclude today's Q&A session as well as conclude today's programming. Thank you all for joining, and you may now disconnect.