NexGel, Inc

Good afternoon. I will be your conference operator today. At this time, I'd like to welcome everyone to NextGel's fourth quarter and full year 2024 earnings conference call. I will now 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 fourth quarter and full year 2024 financial results conference call. I'm joined today by Adam Levy, Chief Executive Officer, and Joe McGuire, 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 coming 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. Also, during the course of today's call, we'll refer to certain non-GAAP financial measures. Reconciliation of non-GAAP to 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, Walter. And thank you, everyone, for joining us today to discuss our fourth quarter and full year 2024 financial and operating results. 2024 was a watershed year for NextGel. Our fourth quarter and full year 2024 were yet again record periods across all financial measures. Notably, we successfully grew full year and fourth quarter 2024 revenue over 100% for the third consecutive year. Gross margins for the fourth quarter were 37% as compared to 43.6% in the third quarter. The gross profit margin in Q4 was negatively affected by a reclassification of Amazon sales commissions from selling costs to COGS. Since Amazon commissions are directly linked to sales, and given the DTC sales have an overly large positive impact on gross margins, management feels this will provide a more stable number for investors going forward. Amazon charges a commission of approximately 15% on all of our sales. EBITDA and adjusted EBITDA loss was $726,621 for the fourth quarter. Of note, our fourth quarter net loss includes two inventory write-offs totaling $243,000 that are one time in nature. One write-off of $197,000 related to high minimum order quantity purchase in 2022 silver seal and turf card high moqs were a significant challenge to launching new products back then and were one of the motivating factors for our q1 2023 joint venture with cg converting and packaging since march of 2023 we have been in complete control of the manufacturing process and as a result we do not expect any future write-offs of this type the second write-off is for 46 000 for additional excess and obsolete inventory Again, this is inventory purchase back in 2022, is one time in nature, and we do not expect to have any other extraordinary write-offs in the foreseeable future. Without this one-time write-off, our net loss EBITDA and adjusted EBITDA performance would have been improved by $243,000. Year-over-year growth was driven by consistent performance each quarter in both branded consumer products and contract manufacturing. Contract manufacturing played a pivotal role in our growth in 2024, led by increased demand from existing customers and a successful onboarding of several new global corporations, such as Cintas and Owens & Miner. During the second quarter of 2024, we announced a supply agreement with Cintas, a leading provider of corporate identity uniforms, first aid, and safety products. and services to over 1 million businesses across North America to include our flagship hospital-grade hydrogel dressing for wounds and burns, SilverSeal, in their first aid kits and cabinets. During the fourth quarter, we began shipping SilverSeal to Cintas. Cintas customers utilize SilverSeal to treat minor burns and injuries. We are pleased with initial sales in Q4 and have already received additional orders that will ship in Q1 and Q2. This partnership is not only great for our revenue growth, but we expect it to also result in increased brand awareness for SilverSeal. Looking ahead, we have a healthy pipeline of potential new customers for 2025. In July, we announced the launch of an institutional review board study conducted in accordance with the FDA guidelines funded by Innovative Optics. This 30-patient human trial conducted at the Florida Clinical Research Center studies the efficacy of hydrogel applied to patients prior to laser hair removal treatments. The primary outcome measure is the reduction of harmful carcinogenic plume generated by laser hair removal into the air during these procedures. Our high water content hydrogel may potentially offer a long needed industry-wide solution for absorbing and capturing this plume during laser hair removal. when applied to the surface of the skin before the procedure begins. In addition, the application of hydrogel may also allow for more effective laser hair removal and or reduce the amount of pain experienced by the patient during treatment. These additional benefits add to the potential practical solution for regulatory compliance and safety. We anticipate data publication from the study shortly, and if we meet the endpoint, we can launch commercially with a very strong value proposition into the large and growing laser hair removal market. Well over a dozen states have enacted legislation mandating the use of plume evacuation systems in order to mitigate the hazards and risks of exposure to this plume. Potential partners are frequently presenting other applicable uses for hydrogels to us, which we will continue to pursue. We expect contract manufacturing and white label to continue being a major driver of our expansion and success going forward. And this segment represents some of the largest opportunities that we have in our pipeline. Turning our attention now to consumer products. Our entire portfolio saw strong expansion in 2024, driven by the continued success of our brands, Medi-Gel, Cancoderm, and Silly George, each having several growth levers for 2025. This year, Medi-Gel will expand its product line with the anticipated launch of several new offerings, including a silver seal burn and wound kit, and our moist burn pads. Similarly, Kenco Derm will double the size of its product portfolio in the third quarter of 2025 with the launch of new products. Kenco Derm is an established brand that provides its customer with high-quality skin care products to relieve the symptoms of psoriasis. The new products will expand into skin care products for eczema relief, another large market opportunity for the brand. Kankoderm will be leveraging its strong reputation as a leader in solutions for sensitive skin. After acquiring Silly George in May of 2024, we quickly integrated the brand into our platform. As a result, we saw growth from its initial $2 million annual revenue run rate to over $5 million, and we continue to build this brand. We have several exciting new Silly George products we'll be launching in 2025. We will have new lashes, as expected, but we will also be launching complementary beauty products, such as five shades of lip gloss, a hydrating lip mask, and under eye patches that utilize our own hydrogel technology. We are making the transition from a, quote, lash brand to a true beauty product company with multiple offerings and solutions for our loyal customers. Lastly, our partnership with Stata is progressing extraordinarily well. Our first product, Histosolve, is exceeding projections and showed continued revenue growth in each month of Q4. We recently signed an amendment to our contract with Stata to expand our relationship beyond Histosolve. We expect to launch another product in Q4 of 2025, and several more are planned for 2026, starting in Q1. There are many other applications for our high-water content hydrogels and our aspirational medical device products, which provide our shareholders with significant upside potential. With that being said, R&D exploration into each of these opportunities will be done thoughtfully and strategically, managing cash appropriately and not overextending our resources, pursuing paths that will not yield high ROI or be core to our vision of the company future. As we look into the first quarter of 2025, which is seasonally our weakest quarter of the year, we expect revenue to be at least 2.75 million. In 2025, we expect to generate at least 13 million in revenue, continuing our strong growth, and to achieve positive EBITDA during the year. As we continue to drive innovation and growth across our key business segments, our focus remains firmly on delivering long-term value for our shareholders. 2024 was a great year for us. but with a strong foundation and significant opportunities on the horizon, we believe that 2025 will be an even greater landmark year. We sincerely thank our shareholders for their trust and confidence, which are crucial to our continued success and growth as we work towards realizing our shared vision. I would now like to turn the call over to Joe McGuire, our Chief Financial Officer. Joe? Thank you, Adam.