NovaBay Pharmaceuticals, Inc.

Hello, and welcome to the Nova Bay Pharmaceuticals first quarter 2021 financial results conference call. All participants will be in a listen-only mode. Should you need assistance from an operator, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Jody Kane. Please go ahead.

This is Jody Kane with LHA. Thank you for participating in today's call. Joining me from Nova Bay Pharmaceuticals are Justin Hall, President and Chief Executive Officer, and Andy Jones, the company's Chief Financial Officer. I would like to remind listeners the comment made during this call by management will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results. In particular, there is significant uncertainty about the duration and potential impact of the COVID-19 pandemic. This means that results could change at any time, and the contemplated impact of COVID-19 on Nova Bay's operations, its financial results, and its outlook is best estimate based on the information available for today's discussion. For a list and description of risks and uncertainties, please review NOVA-based filings with the Securities and Exchange Commission at sec.gov. Furthermore, the content of this conference call contains information that is accurate only as of the date of the live broadcast, May 6, 2021. NovaBay undertakes no obligation to revise or update any statements to reflect events or circumstances except as required by law. And now I'd like to turn the call over to Justin Hall. Justin?

Thank you, Jody. Good afternoon, everyone, and thank you for joining us. NovaBay is off to a strong start in 2021 with continued momentum with the over-the-counter sales of Avanova. Revenue from this channel exceeded $1 million for the first time ever on record high unit sales. This increase in over-the-counter Avanova was driven by year-over-year growth from both Amazon.com and Avanova.com. We also benefited from revenue generated by Walmart.com, which began offering Avanova in the third quarter of 2020, and from a first-time revenue contribution from CVS, one of the nation's largest retail chains. The OTC channel accounted for 79% of total Avanova revenue for the quarter. That's up from 66% in Q4 2020. We are making excellent progress in building upon our momentum in the OTC channel. Avanova is now available on the shelves of CVS stores nationwide, and it's exciting to have them as our first brick and mortar partner. The market opportunity for Avanova is large, as chronic dry eye afflicts approximately 30 million Americans, with ocular bacteria accounting for about 85% of these cases. Driving continued growth in the OTC channel is our top priority. We plan to further capitalize on the significant market opportunity by accelerating Avanova sales through digital advertising campaigns, with online advertising now being one of our core competencies. Our new digital advertising campaigns are focused on growing our customer base with newly developed creative messaging and a heightened level of sophistication combined with data-driven marketing programs. This approach targets specific customer segments with messages that will resonate with them. Our digital marketing will be monitored through real-time performance metrics such as click-through and conversion rates and customer acquisition costs. as we direct our campaign across multiple advertising platforms while maximizing our return on ad spend. While expanding our customer base is our main focus, we do not take for granted that Avanova users are quite devoted to our product. This loyalty is evidenced by numerous favorable product reviews on Amazon.com and the growing number of repeat customers signing up for the subscribe and save feature offered on both Amazon.com and Avanova.com. Building and nurturing this loyal customer base provides for reoccurring revenue and provides visibility on future sales. We plan to leverage this loyal customer following and growing brand recognition with a full suite of dry eye products. We've already launched our Warm Eye Compress and will be launching two new products in the coming months. The Warm Eye Compress is a mask that, when used with Avanova, helps clear oil glands, and allows natural oils to flow back onto the eye to relieve dry eye discomfort. Our warm eye compress is washable and reusable and can be used for a host of conditions from blepharitis, seasonal allergies, headaches, and puffy, itchy eyes. Furthermore, it's easy to use by simply heating it in the microwave and placing it over your eyes for 15 to 20 minutes. It's also quite soothing and effective even when not heated. We're offering the Warm Eye Compress to consumers as a standalone product or in a therapeutic combination of our spray and wipes. We believe our strong following is directly linked to our product's many unique characteristics. Avanova is formulated with Novabase proprietary pure pharmaceutical-grade hypochlorous acid with no bleach impurities or other impurities that could sting or irritate the eye, making our product completely safe for regular use. In addition, customers can be assured that Avanova is the only lid and lash antimicrobial spray to be clinically proven to reduce the bacterial load on ocular skin surfaces. Avanova addresses the underlying cause of bacterial dry eye rather than just the symptoms. Avanova also provides the consumer with the added confidence of knowing that our product is manufactured here in the United States. Our focus for the balance of the year includes growing consumer sales of Celerex Clinical Reset, which is the unique pharmaceutical product we launched into the beauty market earlier this year. We are working with our new media partner to bring the same sophistication to the digital marketing campaigns for Clinical Reset as we did with Avanova. Clinical Reset is a gentle, calming, soothing daily facial spray that fights against irritated, inflamed, and compromised skin. by removing barriers to cell regeneration through gentle cleansing and biofilm disruption without stripping the skin. Clinical Reset reduces the traumas and disruptors to skin, thereby leading to healthier and less inflamed complexions. Our product is highly complementary to a daily beauty regimen and can be used with any combination of skin care products. Like Avanova, Cellarex is formulated with Novavay's pharmaceutical-grade pure hypochlorous acid to eliminate harmful microorganisms and to provide for clearer, healthier skin. In surveying existing Cellarex users, our media partner is discovering that Clinical Reset has already developed a loyal following. We look forward to our full media launch program, which we expect to occur in the third quarter of this year. Our other key initiative for 2021, we have stepped up our efforts to further grow through strategic acquisition of existing products or organizations in the large ophthalmic and skincare markets in order to grow revenues. We are positioned to capitalize on these opportunities by leveraging sales channels and our marketing expertise. We've engaged the services of a quality advisory firm to support this endeavor. We believe Nova Bay is extremely well positioned to execute on our growth strategy, including our new media programs with sufficient capital to fund operations well into 2022. Lastly, although we are only one month into the second quarter, based on current trends, we expect Avanova revenue and unit sales to increase over the second quarter of 2020. We will, however, not have any comparable revenue from PPE this year as we did last year during the height of the pandemic. That said, we expect a favorable revenue uptick from our core Avanova business. Now I'll turn the call over to Andy to review our financial performance in more detail.