NexGel, Inc

Good afternoon. I will be your conference operator today. At this time, I'd like to welcome everyone to NextGel's second quarter 2024 earnings conference call. I would now like to turn the call over to Walter Pinto, Managing Director of KCSA, Strategic Communications for Introductions. Please go ahead.

Thank you, operator. Good afternoon and welcome everyone to NextGel's second quarter 2024 earnings conference call. I'm joined today by Adam Levy, Chief Executive Officer, and Adam Drapsik, Chief Financial Officer. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this evening and filed with the SEC on Form 8K, as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. With that, it's my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead.

Thank you, Walter, and thank you, everyone, for joining us today to discuss our second quarter 2024 financial and operating results. The second quarter of 2024 was a record revenue quarter for the company, totaling $1.44 million, an increase of 23.4% year-over-year and 13.8% sequentially. Branded consumer products revenue was a key growth driver, totaling $968,000 as compared to $259,000 in June of 2023. Included in the year-over-year branded customer product revenue comparison is our Kinkoderm product line, which we acquired in December of 2023, and about half a quarter of contribution from our new acquisition of Silly George. Silly George offers its loyal customer base a full product line of eye and eyelash products, including hassle-free alternatives for eyelashes and eyelash care, such as lash extensions, lash serum, and various accessories. Tilly George is predominantly sold direct to consumer, not only in the United States, but internationally as well. Tilly George has built a large social media following and consumer database, which includes 88,000 Facebook and 83,000 Instagram followers, as well as over 250,000 unique customer emails. When we acquired the brand, its revenue rate was approximately 2 million. Since then, we have launched new products, such as a new line of pop-on lashes, leveraging new gelash technology to create non-toxic, long-wear eyelash extensions that are easy to apply and remove and can last for 5 to 10 days. We also implemented new marketing strategies. We acquired Silly George in May for $600,000 in cash, common stock, plus a future earn-out. In short order, and as a result of new products and marketing, as we announced in July, I am pleased to confirm Silly George continues to perform well. and that July sales alone were over 380,000 on Shopify only. While consumer product sales can fluctuate, we continue to be excited with our acquisition. Additionally, we are only just now releasing our pop-on lashes on Amazon. In the contract manufacturing side of our business, we completed the expansion of our capacity in Texas to support the new client relationships that we have. We doubled our square footage and invested in state-of-the-art automated machinery and related clean room facilities. During the quarter, we had some remaining capital expenditures related to this expansion in the amount of $209,000 and expect that number to be minimal in the back half of the year now that we have completed the expansion. Due to our expansion in the quarter, revenue was impacted as we shut down the facility for a period of time to move equipment and validate it prior to restarting operations. We expect revenue to be more normalized going forward in Q3 and Q4. Our relationship with Stata continues to progress well. We recently announced our first product, Histosolve, which is sold as Deicin in Europe. This is Europe's number one selling diamine oxidase enzyme supplement, generating well over 20 million in annualized revenues to treat histamine food intolerance, which can cause migraines, headache, gut issues, and skin conditions. We have just launched His Dissolve on Amazon and our marketing campaign starting this month. Subsequent to the quarter, we announced a supply agreement with Cintas Corporation, a leading provider of corporate identity uniforms, first aid, and safety products and services to over 1 million businesses across North America to distribute our flagship product, Silver Seal. Cintas will distribute Silver Seal to its customers in many sectors such as hospitality and public service. As a hospital grade hydrogel dressing for wounds and burns, the employees of Syntas' customers are the ideal target audience for this product. This partnership is significant to us not only for the associated revenue, but also for Silver Seal's brand awareness. We expect the first order of Silver Seal to be delivered during the fourth quarter of 2024. We recently issued revenue guidance for the third quarter of $2.2 million, an increase of 83% year-over-year, and for the fourth quarter of $2.6 million, an increase of over 140% year-over-year. Our revenue guidance still does not incorporate any revenue from our partnership with AbbVie as the exclusive supplier of gel pads for their Rhizonic Rapid Acoustic Pulse device for reduced cellulite appearance. We still expect revenues to start in Q1 of 2025, and we continue to work closely with their team on the launch. At this higher expected quarterly revenue level in Q3 and Q4, we are getting very close to achieving our goal of generating positive cash flow from operations. Lastly, earlier this week, we completed a financing led by insiders for gross proceeds of $1.11 million at attractive terms. This financing will replenish our balance sheet with the investment dollars we spent for Silly George and also provide us with working capital to buy inventory and increase the marketing spend for the brand. With that, I would like to turn the call over to our CFO, Adam Drapsik. Adam?