Nanalysis Scientific Corp.'s (NSCI:TSX.V; NSCIF:OTC; 1N1:FSE) Q3/25 financial results were soft for the second consecutive quarter, reported Dr. Douglas Loe, managing director and analyst at Leede Financial Inc., in a Nov. 25 research note. Accordingly, Leede reduced its target price on the Canadian analytical instrumentation developer and service provider by 44%.
"We will maintain our Speculative Buy for now based on management commentary that initiatives are in place to improve [Security] Services' gross margin and visibility on benchtop nuclear magnetic resonance (NMR) system sales in Q4/25 is favorable, but we are revising our price target from CA$0.90 to CA$0.50 to reflect our revised expectations on timelines to achieving sustainable profitability on both EBITDA and cash flow," Loe wrote.
178% Return Implied
At the time of Loe's report, Nanalysis' share price was about CA$0.18 per share (CA$0.18/share). From that price, the return to Leede's new CA$0.50/share target price on the company is 178%.
Leede believes Nanalysis can achieve this return imminently, Loe wrote. To do so, the company must, one, re-establish NMR capital sales momentum and two, more importantly, boost its Security Services' gross margin to levels at about or higher than those generated by the Capital Equipment divsion.
Nanalysis has 114.8 million shares outstanding. Its market cap is CA$20.7 million (CA$20.7M). Its 52-week range is CA$0.17–0.38/share.
Review of Q3/25 Financials
Loe presented and discussed Nanalysis' Q3/25 financial results, highlighting that EBITDA and consolidated revenue both showed "measurable softness." As for EBITDA, it was negative in Q3/25 and in Q2/25, at (CA$0.2M) and (CA$0.5M), respectively. In comparison, Q3/24 EBITDA was positive at CA$0.3M, and the company maintained EBITDA momentum through Q4/24E.
The analyst added that the company's financial risk in these three mentioned quarters was "essentially similar" because EBITDA at any of these levels is not enough to fund fixed financial costs the firm incurs in the service of its long-term debt that was CA$15.3M last year and CA$17M at the end of the trailing quarter.
As for Nanalysis' Q3/25 consolidated revenue, it was CA$9.3M. This was lower than Q2/25 and Q3/24 revenue of CA$9.6M and CA$10.6M, respectively.
By geography, revenue from Canada was CA$7M, from the U.S. CA$1.7M and from Europe CA$0.3M, in Q3/25. Sales in Europe were a big contributor to Nanalysis' overall Q3/25 softness. In Q3/24, revenue from Europe was much higher, at CA$2.2M, in comparison.
Nanalysis' Q3/25 operating cash flow was negative at (CA$0.4M), well below its peak of CA$1.8M in Q4/24. Because the company historically has generated strong Q4 cash flow, Leede expects EBITDA and cash flow to improve during the current quarter, Q4/25.
NMR Sales Down
The segment that contributed most to Q3/25 softness, Loe noted, was benchtop low-field NMR sales, revenue from which amounted to CA$2.7M. This was lower than Q2/25 sales revenue of CA$2.9M, also soft, and less than half of the historical high of CA$5.5M achieved in Q4/23 and Q4/24.
"We anticipate sequential improvement on year-end NMR capital sales once reported," Loe wrote.
Some evidence from Nanalysis' NMR peers indicates that the analytical equipment purchasing environment is soft in ways that inevitably impact NMR system sales. For instance, Oxford Instruments Plc (OXIG:LSE) reported a 22.9% decline in operating income in H1/25. Its operating margin fell to 13.3% in H1/25 from 17.3% in H1/24. Oxford cited order disruption as the main reason for margin softness in its Imaging and Analysis division.
"Oxford's financial performance in our view reflects on rationale for why Nanalysis' recent quarterly financial data is correspondingly soft," Loe wrote.
Security Services Margin Low
Security Services performed well by historic standards and recorded the highest quarterly revenue of CA$6.6M, as compared to CA$5.6M in Q2/25 and CA$5.4M in Q3/24. Further, the division's Q3/25 gross margin was up sequentially to 12.5% from 9.8% in Q2/25, but it was down from 14.6% in Q3/24. These figures are not good enough, however, Loe wrote.
"Regardless, all of these gross margin levels are well below the 30–40% level that a services operation should be able to achieve to justify its existence within a capital equipment manufacturing/marketing framework," Loe wrote. "Our investment thesis assumes that focused cost containment can lift service gross margin to that level before conclusion of our forecast period."
Favorable Outlook
Despite Nanalysis' Q3/25 financial results, Leede believes benchtop NMR platforms can and will grow market share in the global analytical equipment universe, like other chromatographic and spectroscopic tools have done, Loe wrote.
Also, Leede believes that if Nanalysis aggressively contains costs and pursues logistical efficiencies in its Securities Services operations, primarily its contract with the Canadian Air Transport Security Authority, or CATSA, the scientific equipment company can lift this division's gross margin to more than 30%, and EBITDA accretion should follow.
"We do expect NSCI shares to trade sideways until clear evidence of sustainable gross margin/EBITDA growth transpires, but our investment thesis projects that this trend can begin as early as the present quarter (Q4/25)."
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