NexGel, Inc

Good afternoon. I will be your conference operator today. At this time, I would like to welcome everyone to NextGel's first quarter 2025 financial results 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 first quarter 2025 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 the 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. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliation of the 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 first quarter of 2025 financial and operating results. Revenue for the first quarter came in slightly higher than our previously issued guidance, totaling $2.81 million, an increase of 121% year-over-year compared to the same quarter in 2024. Although Q1 is our seasonally weakest quarter of the year, contract manufacturing revenues still increased 58% year over year, and consumer branded products increased 189% year over year, led by the addition of Silly George. Gross margins for the first quarter normalized to 42.4%, aligning with our historical range in the low to mid 40s. This compares to 37% in the fourth quarter of 2024, and 43.6% in the third quarter of 2024. As I mentioned during our Q4 call, we reclassified Amazon sales commissions into our cost of goods sold, which will provide us with a more stable gross margin going forward. There were also one-time write-offs in Q4 that lowered our gross margins for that period only. EBITDA and adjusted EBITDA loss narrowed to negative 0.54 million and negative 0.47 million respectively, compared to negative 0.84 million and negative 0.73 million for the same period last year. Once again, both contract manufacturing and consumer products grew substantially. Starting with contract manufacturing, this segment of our business has played a pivotal role in our growth, led by increased demand from existing customers as well as the successful onboarding of several new global corporations, such as Cintas and Owens & Miner. We began shipping initial orders to Cintas in Q4, and this continued into Q1. We have already received our first reorder for deliveries in Q2. As I have mentioned before, this partnership is not only great for our revenue growth, but we expect it to also result in increased brand awareness for SilverSeal. Regarding AbbVie, the official launch of their Rezonic machine has been pushed again due to delays in their manufacturing process unrelated to NextGel. We remain their exclusive supplier of gel pads for the Rezonic machine, and we have been kept up to date frequently on their progress. The timing of their launch has nothing to do with our product or readiness from our team. Unfortunately, we are beholden to their timelines. While frustrating, we feel confident the product will launch and be a substantial opportunity for us. Fortunately, aside from the opportunity with AbbVie, we have multiple other shots on goal, and we expect our business to continue to expand and grow. We have a robust pipeline of new and potential 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. The study is now complete and we are only awaiting publication. We are confident that our high water level hydrogel will offer a long needed industry-wide solution for absorbing and capturing plume during the 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 reduce the amount of pain experienced during treatment. These added benefits make this an attractive practical solution for regulatory compliance, safety, and customer satisfaction. We have received some initial orders from Innovative Optics as they prepare to go to market. They're also serving as a strategic marketing partner with strong connections to all the major laser hair companies in the space, making this a particularly exciting opportunity with significant growth potential. We are constantly seeing new applications for our hydrogels. These are often brought to us by potential partners exploring innovative use cases. As we continue to pursue these opportunities, we expect contract manufacturing and white label to continue being a major driver of our expansion and success moving forward. And this segment represents some of the largest opportunities that we have in our pipeline. Turning our attention to consumer products. Our entire portfolio saw a strong expansion in 2024, driven by the continued success of our brands, Medi-Gel, Cancoderm, and Silly George, each also having several growth factors in 2025. This year, Medi-Gel will expand its product line with the anticipated launch of several new offerings, including the Silver Seal Wound and Burn Kit and its Moist Burn Pads. We have also just received approval from Health Canada to sell Silver Seal in that territory. 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 customers with high quality skincare products to relieve the symptoms of psoriasis. The new product line will expand into solutions for eczema, tapping into an even larger market opportunity for the brand that is leveraging its strong reputation as a leader in sensitive skincare. Silly George will also have several exciting new products in 2025. While continuing to expand our popular lash offerings, we are also launching complimentary beauty products including five shades of lip gloss, a hydrating lip mask, and under eye patches that feature our own proprietary hydrogel technology. We are making the transition from a, quote, lash brand into a true beauty company with a more complete suite of 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 Q1. 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, beginning 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 in each of these opportunities will be done thoughtfully and strategically, managing cash appropriately and not overextending our resources, while pursuing paths that will lead to high ROI and be core to our vision for the company in the future. Before I turn the call over to Joe to review our first quarter financial results, I would like to touch upon tariffs. It is a bit of a double-edged sword for us. On the one hand, we do supply some Silly George products from China. As we all know, this is a fluid situation, although yesterday's news was certainly most welcome. At a 34% rate, the impact is minimal for us because our cost of goods is generally quite low, making the overall effect small and manageable, and we can absorb it. However, a jump to 145% might be a different story. But at this stage, the implications remain uncertain. We are monitoring this closely and will make adjustments as needed. For example, we are exploring the possibility to use our brand new clean room in Texas to assemble here if the tariffs return to being abnormally high. The good news is we are well positioned with plenty of silly George inventory, having bought in a significant amount ahead of tariff changes. This gives us valuable time to wait and see how the dust settles and continue to monitor how things will unfold, and then we can create a strategy that will preserve our margins. On the other side of the coin, we are seeing a substantial increase in interest in our U.S.-made gels. To date, for some applications, mostly cheaper and short-term usage products, sourcing of gels has come from China, where they cross-link the water and polymer using UV light and chemical activators. These gels do not compete with us in our main markets, such as medical device, cosmetics, or dermatology, where biocompatibility is a prerequisite and they simply don't qualify. As of recently, we are seeing expanded interest in our gels. With tariffs even at 35% in play, we may find that our hydrogels are no longer materially more expensive than those produced abroad while being far superior. So far, that's a great advantage for us being a U.S. manufacturer, and our pipeline and interest has grown significantly. So far, we have seen no weakness in our consumer product sales and so we do not see a need to change our guidance of $13 million in revenue and achieving cash flow positivity in 2025. 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. With a strong foundation and significant opportunities on the horizon, we believe that 2025 will be another 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'd now like to turn the call over to Joe McGuire, our Chief Financial Officer.