5N Plus TSE: VNP reported higher second-quarter revenue and earnings as demand remained strong across its renewable energy, space solar power and bismuth-based product markets, though higher input costs and temporary operating inefficiencies pressured margins.
Revenue rose 28% year over year to $122.4 million in the second quarter of 2026. First-half revenue increased 30% to $240.3 million. Adjusted EBITDA grew 10% in the quarter to $26.6 million and totaled $55.8 million through the first six months of the year, up 24% from the prior-year period.
Net earnings were $19.7 million, or $0.22 per share, compared with $15.2 million, or $0.17 per share, a year earlier.
Margins Reflect Costs and Equipment Downtime
Adjusted gross margin increased in dollar terms to $37 million, but fell to 30.3% of sales from 34.6% a year earlier. CFO Alban Fournier attributed the percentage decline to higher metal input costs, temporary inefficiencies during production ramp-ups and increased chemical costs.
Management said unplanned maintenance in both the terrestrial renewable energy and space power businesses had an approximately equal effect on gross margin as rising metal costs during the quarter. CEO Richard Perron said the operating issues were tied to the installation of equipment with new designs and operating parameters, the addition of employees and running equipment near capacity while expanding production capabilities.
Perron said most equipment-related issues have been resolved, while remaining matters are being addressed through additional staffing, preventive maintenance measures, spare parts and external support. The company does not anticipate the issues will affect customer deliveries in the second half of 2026.
5N Plus expects higher metal and chemical costs to continue pressuring margins in the near term. Fournier said metal-cost recoveries generally are expected to take at least two quarters and will be partial, depending on product, customer and contractual terms. Management said second-half gross margin is currently expected to be broadly around the second-quarter level, within roughly one percentage point.
Specialty Semiconductors Posts Volume Growth
Specialty Semiconductors revenue rose 25% to $89.2 million, led primarily by higher renewable-energy volumes. The segment’s adjusted gross margin declined to 30.2% from 32.7%, reflecting metal costs and reduced operating efficiency, while adjusted EBITDA increased 16% to $22.1 million.
Perron said terrestrial renewable energy posted record quarterly revenue as a key customer continued expanding. Commercial activity in space solar power also remained strong, with the company receiving significant contract awards during the first half and participating in a record dollar value of bids during the quarter.
The Specialty Semiconductors backlog remained at the company’s maximum reported level of 365 days of annualized revenue, with its effective backlog extending beyond 12 months. Perron said 2026 and 2027 are sold out for AZUR SPACE, while the company is assessing capacity scenarios for 2028 through 2030.
Management said it is not yet seeing meaningful commercial volume for perovskite materials outside China, estimating that substantial adoption could still be one to two years away. The company’s current strategy is focused on supplying the individual elements used in perovskite materials rather than encapsulation technology.
Performance Materials Revenue Rises as Margins Normalize
Performance Materials revenue increased 38% to $33.2 million, driven by higher volumes of bismuth-based products. Adjusted gross margin fell to 30.9% from 41.1% in the prior-year quarter, as expected normalization from elevated historical levels was compounded by higher metal and chemical costs. Adjusted EBITDA rose 7% to $8.5 million.
Perron said the second quarter represented a particularly low margin period for the segment. Based on expected customer and product mix, he said the year-to-date gross-margin level could be used as an assumption for the second half, while noting that chemical costs—including nitric acid and caustic soda—remain an uncertainty.
The Performance Materials backlog represented 99 days of annualized revenue, reflecting contract-renewal timing and execution of longer-term contracts. Management also noted that the segment has historically recorded stronger volumes in the first half of the year, as certain customers reduce inventories toward year-end.
Balance Sheet Strengthens; Guidance Reaffirmed
Cash used in operating activities was $1.9 million in the second quarter, compared with cash generated from operations of $22.3 million a year earlier, as working capital grew alongside revenue and cost of goods sold. Management expects net working capital to broadly track revenue growth, subject to potential investments in safety or strategic inventory.
Year-to-date capital expenditures totaled $16.6 million. Perron said expected full-year net cash capital spending remains consistent with prior expectations of roughly $20 million to $21 million, considering government support for certain U.S. equipment investments. The company accelerated some equipment additions to prepare for anticipated 2027 volume requirements.
Net debt declined to $23.7 million at the end of June from $50.3 million at the end of 2025, and the net debt-to-adjusted EBITDA ratio improved to 0.21 times. Management said organic investment and inventory to support contracted demand remain capital-allocation priorities, while it continues to evaluate potential acquisitions.
5N Plus reaffirmed its full-year 2026 adjusted EBITDA guidance of $100 million to $105 million. Management said the outlook reflects confidence in continued revenue growth and higher gross-margin dollars in the second half, while maintaining a prudent view of inflation, metal costs, chemical costs and operating conditions.
About 5N Plus (TSE:VNP)
5N+ is a leading global producer of specialty semiconductors and performance materials. The Company's ultra-pure materials often form the core element of its customers' products. These customers rely on 5N+'s products to enable performance and sustainability in their own products. 5N+ deploys a range of proprietary and proven technologies to develop and manufacture its products. The Company's products enable various applications in several key industries, including renewable energy, security, space, pharmaceutical, medical imaging and industrial.
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