NexGel, Inc

Good afternoon, ladies and gentlemen. Welcome to NextGel's third quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your telephone. And just a reminder, today's call is being recorded. And if you should need any operator assistance during the call, please press star 0. Now, at this time, I'll turn things over to Maria Holcutt, Account Director of KCSA. Strategic Communications for Introductions. Maria, please go ahead.

Thank you, Operator. Good afternoon and welcome everyone to NextGel's third quarter 2024 earnings conference call. I'm joined today by Adam Levy, Chief Executive Officer, and Adam Dropsik, 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 8-K, as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revive any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliation of the non-GAAP financial measures and certain additional information are also included in today's press release. With that, it's my pleasure to turn the call over to Mr. Adam Levy. Adam, please go ahead.

Thank you, Maria, and thank you everyone for joining us today to discuss our third quarter 2024 financial and operating results. The third quarter of 2024 was yet another record quarter for the company across all of our key financial metrics. Revenue for the third quarter totaled $2.94 million, an increase of 141% year-over-year and 104% sequentially. Gross profit margins for the quarter were 43.6% as compared to 28.2% for the same period last year and 28.5% in the previous second quarter. Branded consumer revenue increased 99% sequentially, while contract manufacturing revenue also increased approximately 103% sequentially, contributing to the margin expansion year over year and sequentially. Adjusted EBITDA, which is a non-GAAP financial measure, narrowed from a loss of $788,000 last quarter in Q2, 24, to $347,000 in Q3, 2024. Becoming cash flow positive has been a priority of ours. With the growth we experienced in Q3, growth which we expect to continue into Q4, we are very close to achieving this goal. In branded consumer products, The third quarter was the first full quarter of revenue contribution from our Silly George brand, a beauty and cosmetics company focused on eyeliner, fake eyelashes, lash growth serum, and mascara. As a reminder, when we acquired the brand six months ago in May, Silly George was on a revenue run rate of approximately $2 million. Since then, we have launched new products, introduced them on Amazon, and optimized our marketing. the result of which is that we are now on a $5 million run rate heading into the holidays. We also continue to see year-over-year growth from both our Kenco Derm and Medi-Gel brands. In contract manufacturing, Q2 saw the completion of the expansion of our Texas facility in order to support the new client relationships we have and the resulting increases in demand. We doubled our square footage and invested in state-of-the-art automated machinery and related clean room facilities. Due to our expansion during the second quarter, revenue was impacted by the shutting down of the facility to move equipment and validate it prior to restarting operations. Contract manufacturing in Q3 normalized, increasing from 425,000 in Q2 to 864,000 in Q3, an increase of approximately 103%. Our relationship with Stata continues to progress well. We recently announced the release of our first product, Histosolve, which is sold as Deocin 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 and headaches, gut issues, and skin conditions. In Q2, 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 manufacturing, hospitality, and public service.