Cleanspace's Turnaround Keeps Bumping Into Regulatory Delays

Fund managers stay patient through repeated guidance downgrades as new product approvals and US demand remain the key swing factors

31 May 2026 · 5 min read

A series of downward guidance revisions has tested one of Cleanspace Holdings's longest-standing shareholders. Merewether Capital reported in May 2026 that the powered air purifying respirator maker downgraded its revenue guidance again, this time from around 15 per cent to low single-digit growth, driven by softening demand in key markets, particularly the US, as well as delays in certifying new loose-fitting respirators that do not require fit testing and can be worn with facial hair. The manager said costs had nonetheless been well managed, with only a small EBITDA loss forecast for FY26 and a cash balance holding largely flat at around $10 million, and that while disappointing in the short term, it viewed the underlying thesis as intact and had held its position.

While disappointing in the short term, the underlying thesis remains intact for CSX and we have held our position.

— Merewether Capital, Monthly Report, May 2026

A regulatory bottleneck that kept resetting expectations

That May downgrade was the latest in a pattern stretching back several months. Merewether Capital's February 2026 update described a weaker than expected result, with revenue up 10 per cent to $10.1 million and full-year growth expectations already reset from 25 per cent to 15 per cent, attributing the shortfall partly to regulatory issues, particularly US government shutdowns that delayed product approvals from NIOSH, the national safety regulatory body. Jencay Capital, reporting on the same half in March 2026, said first-half revenue growth of 10 per cent was held back by the US government shutdown's impact on sales as well as the temporary closure of an Indonesian mine, one of the company's biggest customers, and described Cleanspace as one of the biggest detractors in its portfolio for the quarter.

Growth should reaccelerate when two exciting products in development receive regulatory clearance.

— Jencay Capital, Quarterly Report, March 2026

A turnaround story that had been working

The current disappointment stands in contrast to the trajectory Merewether Capital described as recently as July 2025, when the company confirmed 26 per cent first-half revenue growth had been maintained into the second half, with an emerging US segment growing 45 per cent off a low base. The manager said that if margins held steady, it expected the second half to be profit breakeven, an impressive turnaround for a business that had been burning more than $7 million per half only three years earlier. Jencay Capital's September 2025 quarterly confirmed the company had indeed produced positive EBITDA and free cash flow alongside 25 per cent revenue growth for FY25, with an R&D pipeline of exciting product additions awaiting regulatory clearance.

What managers are watching next

With Jencay Capital calculating a three-year sales compound annual growth rate of 14 per cent against an EV/Sales multiple of 1.5 times, and a projected three-year sales CAGR to 2028 of 19 per cent implying an EV/F28e EBITDA multiple of 5.8 times, the key question for managers is whether the two new products awaiting regulatory clearance, including the loose-fitting respirator design, finally reaccelerate growth once approved, and whether US demand recovers from the government shutdown disruption that has weighed on results across the past several quarters.