NovaBay Pharmaceuticals, Inc.

Welcome to the Nova Bay Pharmaceuticals 2022 fourth quarter and full year financial results conference call. At this time, all participants are in listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ask a question at that time, please press the star key followed by the number one on your touchtone phone. If anyone has difficulty hearing the conference, please press star zero for operator assistance. As a reminder, this conference 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 are Justin Hall, Chief Executive Officer and General Counsel, and Tommy Law, Interim Chief Financial Officer. I'd like to remind listeners the comments 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's uncertainty about circumstances beyond the company's control that could impact the broader economy such as the COVID-19 pandemic and the conflict between Russia and Ukraine. This means that results could change at any time, and the contemplated impact of COVID-19 and circumstances that impact the broader economy on NOVA-based operations, its financial results, and its outlook is the 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, March 30th, 2023. Nova Bay undertakes no obligation to revise or update any circumstances 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, Jodi. Good afternoon, everybody, and thank you for joining us. Today, we are reporting that product sales for the 2022 year increased 41% year over year as we benefited from our strategy to diversify revenue streams. For the quarter, product sales grew 15% over the prior year quarter. A highlight of the fourth quarter was that Avanova online unit sales continued to grow with increases in both our new and existing customer base. We also saw notable contributions from Avanova Companion products and our Phase 1 and NutraPhase branded wound care products. While Q4 revenue increased 15%, our ability to optimize digital marketing led to a 10% decrease in sales and marketing spend when compared to Q4 of 2021. For the full 2022 fiscal year, we reduced sales and marketing expenses by 4% while increasing revenue by 41%. Now I'd like to share updates on each of our three verticals, eye care, skin care, and wound care, beginning with Avanova in our eye care franchise. Eye care has long been our core business, and we continue to see good prospects for its growth in this market. Our eyes are under more stress than ever with increased screen time, air pollution, indoor heating and cooling, all of which can lead to dry eye and eye fatigue. In fact, up to 49 million Americans suffer from dry eyes, and the global market for dry eye is expected to reach nearly $9 billion by 2030. We know that dry eye is a multifaceted and complex condition that may require more than one approach to gain relief and sustain that relief. We identified dry eye as an opportunity to establish NovaBay at the forefront of innovation in the OTC eye care market. We have a solid base of reoccurring revenue with our Avanova antimicrobial spray, as it is the number one doctor-recommended lid and lash spray on the market today. Over the past several years, we've gained traction in the dry eye market and capitalized on the well-known Avanova brand by commercializing evidence-led, differentiated, superior quality, and highly effective Avanova companion products. These include the Nova Wipes, which are soft hypoallergenic wipes specially designed to absorb our Avanova spray, the Avanova Warm Eye Compress to soothe sore eyes, our Avanova Lubricating Eye Drops for instant relief, and the Eye Check to monitor physical eyelid health. Sales of these companion products have grown steadily over the past year and have become a more meaningful contributor to our business with each passing quarter. Earlier this month, we expanded our portfolio in the OTC eye care market with the addition of two more innovative, high-quality products, both of which address the multifactorial and complex condition of dry eye. The first is our Avanova Eye Health Support Supplement. This oral supplement helps relieve symptoms of dry eye and is aimed at promoting overall eye health from a systemic perspective. It is uniquely formulated with a combination of high-quality concentrated omega-3 oils and Mackey Brite, a nutrient-rich antioxidant extracted from the Mackey Berry, which is three times the antioxidant level of blueberries and is found only in the forests of Patagonia. The clinical effects of the Mackey Berry are impressive. Participants in a four-week, randomized, double-blind, placebo-controlled study of the effects of Mackey Brite showed an increase of 89% in tear production and reported a 57% improvement in dry eye discomfort, with results from the study being published in a peer-reviewed journal. The second product is EyeGanics Organic Tears. This product is the only eye drop certified by the USDA as 100% organic and preservative-free, and it's also the first non-Avanova-branded eye care product that we've added to our portfolio. These organic tiers have only three ingredients, glycerin, salt, and water. There are no additives or artificial chemicals. This product was formulated especially for those who have sensitivity to some chemicals that may be found in other lubricating eye drops. This product is offered in a 10-milliliter bottle that incorporates new technology that dispenses one drop at a time, thereby offering a cost and convenience advantage over other preservative-free artificial tiers found in single-use vials. Our partnership with Iganix is the first of what we hope will be other highly effective ophthalmic products added to our distribution channels. With the strategic additions of an oral supplement and an organic eye drop, we now offer a best-in-class product for each step of the standard dry eye regimen. Further, with the addition of these high-quality new products, we have reinforced NovaBay as a one-stop destination for customers seeking relief from the symptoms of dry eye and other ophthalmic-related eye conditions through our online and physician-dispensed channels. We plan to further expand our eye care portfolio with additional innovative, effective products for both dry eye and other ophthalmic-related conditions. We are also pursuing a strategy to grow sales through our physician-dispensed channel in which our products are available to our customers directly through their eye care specialist. In an effort to deepen our relationships with eye care professionals, We are partnering with educational organizations that are CE accredited to help optometrists and ophthalmologists meet their continuing education requirements. We also have advisory boards consisting of optometrists and ophthalmologists that we use to discuss the efficacy and marketing of our eye care products. Moving on to Dermadoctor and our collection of skin care products. Innovation is key to our strategy, and we recently introduced a new product to our KP Duty collection. Our new peel pads offer a high-potency complex of hydroxy acids and other exfoliants, effectively lifting away dry, dull, dead skin cells to re-texturize skin. Fatty acids help maintain the skin's moisture to support a strong protective skin barrier, while antioxidant-rich botanicals calm and soothe. The KP Duty Peel Pads Advanced Clinical Exfoliation leaves the skin feeling brighter, smoother, healthier, and more youthful in a single step. KP Duty Peel Pads are available at dermadoctor.com and also on Amazon. Derma Doctor customers are extremely loyal, so attracting new customers who will become repeat users is among our top priorities. To further this initiative, we just completed a spring break promotion with 20% off of all Derma Doctor products ordered through the Derma Doctor website to welcome new customers to the brand. Now, turning to wound care. Like our Avanova spray, our wound care products are formulated with Novavay's FDA-cleared proprietary and antimicrobial form of hypochlorous acid. These products are distributed under the Phase I brand in the U.S. and under the Nutrafaze brand in China. These products are used for cleansing and irrigating post-surgical wounds, minor burns, and superficial abrasions. Among the advantages of hypochlorous acid is its ability to penetrate and kill biofilm, which represents a significant barrier to wound healing. Our formulation exhibits broad spectrum activity against a range of gram-positive and gram-negative bacteria, making it highly effective. We have an advantage in this market as our product is made without the toxic chemicals found in many other wound care products. Ours is gentle, non-irritating, and non-sensitizing to skin and new tissue. Like our Avanova companion products, our wound care products have been making a more notable contribution to our total revenue. We've been working with Phase I Health on their strategy to leverage their recent commercial success and expand beyond surgical applications. We also expect to ship a significant near-term order for our NutraPhase product. Now I'd like to turn the call over to our Interim Chief Financial Officer, Tommy Law, to review our Q4 and full financial year results. Tommy has been with us for a number of years and just recently stepped into the Interim CFO role on February 15th. Tommy?