NEXGEL Q4 2024 Earnings Report

NEXGEL EPS Results

• Actual EPS: -$0.08
• Consensus EPS: -$0.10
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

NEXGEL Revenue Results

• Actual Revenue: $3.04 million
• Expected Revenue: $2.99 million
• Beat/Miss: Beat by +$48.00 thousand
• YoY Revenue Growth: N/A

NEXGEL Announcement Details

• Quarter: Q4 2024
• Date: 3/24/2025
• Time: After Market Closes
• Conference Call Date: Monday, March 24, 2025
• Conference Call Time: 4:30PM ET

NEXGEL (NASDAQ:NXGL) manufactures high water content, electron beam cross-linked, and aqueous polymer hydrogels and gels. Its products are used for wound care, medical diagnostics, transdermal drug delivery, and cosmetics. The company was formerly known as AquaMed Technologies, Inc. and changed its name to NEXGEL, Inc. in November 2019. The company was incorporated in 2009 and is based in Langhorne, Pennsylvania.

NEXGEL Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good afternoon. I will be your conference operator today. At this time, I'd like to welcome everyone to Nextel's Fourth Quarter and Full Year twenty twenty four Earnings Conference Call.

[Operator]

I will now turn the call over to Walter Pinto, Managing Director of KCSA Strategic Communications for introductions. Please go ahead.

[Valter Pinto, Managing Director at KCSA Strategic Communications]

Thank you, operator. Good afternoon and welcome everyone to Nextel's fourth quarter and full year twenty twenty four financial results conference call. I'm joined today by Adam Levy, Chief Executive Officer and Joe Maguire, 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 eight K as well as the company's reports filed periodically with the SEC.

[Valter Pinto, Managing Director at KCSA Strategic Communications]

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'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.

[Valter Pinto, Managing Director at KCSA Strategic Communications]

Adam, please go ahead.

[Adam Levy, CEO, President & Director at NEXGEL]

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 Nextel. 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 twenty twenty four 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.

[Adam Levy, CEO, President & Director at NEXGEL]

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 $726,000 and $621,000 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.

[Adam Levy, CEO, President & Director at NEXGEL]

One write off of $197,000 related to high minimum order quantity purchase in 2022 for Silverseal 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 twenty twenty three joint venture with CG Converting and Packaging. Since March of twenty twenty three, 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.

[Adam Levy, CEO, President & Director at NEXGEL]

Again, this is inventory purchased 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 the successful onboarding of several new global corporations such as Cintas and Owens and Minor. During the second quarter of twenty twenty four, we announced a supply agreement with Cintas, a leading provider of corporate identity uniforms, first aid and safety products and services to over 1,000,000 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.

[Adam Levy, CEO, President & Director at NEXGEL]

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.

[Adam Levy, CEO, President & Director at NEXGEL]

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.

[Adam Levy, CEO, President & Director at NEXGEL]

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 our 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.

[Adam Levy, CEO, President & Director at NEXGEL]

Turning our attention now to consumer products. Our entire portfolio saw strong expansion in 2024, driven by the continued success of our brands Metagel, Canco Derm and Silly George, each having several growth levers for 2025. This year, Metagel will expand its product line with the anticipated launch of several new offerings, including a SilverSeal burn and wound kit and our moist burn pads. Similarly, KencoDerm will double the size of its product portfolio in the third quarter of twenty twenty five with the launch of new products. KencoDerm is an established brand that provides its customer with high quality skincare products to relieve the symptoms of psoriasis.

[Adam Levy, CEO, President & Director at NEXGEL]

The new products will expand into skincare products for eczema relief, another large market opportunity for the brand. Cancoderm will be leveraging its strong reputation as a leader in solutions for sensitive skin. After acquiring Silly George in May of twenty twenty four, we quickly integrated the brand into our platform. As a result, we saw growth from its initial $2,000,000 annual revenue run rate to over $5,000,000 and we continue to build this brand. We have several exciting new Silly George products we'll be launching in 2025.

[Adam Levy, CEO, President & Director at NEXGEL]

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 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, Histosolv, 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 Histosolv.

[Adam Levy, CEO, President & Director at NEXGEL]

We expect to launch another product in Q4 of twenty twenty five and several more 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 and D exploration to 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 twenty twenty five, which is seasonally our weakest quarter of the year, we expect revenue to be at least $2,750,000 In 2025, we expect to generate at least $13,000,000 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.

[Adam Levy, CEO, President & Director at NEXGEL]

Twenty twenty four 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 Maguire, our Chief Financial Officer. Joe?

[Joseph F. McGuire, CFO at NEXGEL]

Thank you, Adam. Today, I'll review financial highlights of our fourth quarter and full year 2024 results. For the fourth quarter of twenty twenty four, revenue totaled $3,040,000 an increase of 181% as compared to $1,080,000 for the fourth quarter of twenty twenty three. Revenue for the full year 2024 totaled $8,690,000 an increase of 112% as compared to $4,090,000 in 2023. The increase year over year in overall revenue during both periods was primarily due to the sales growth in branded consumer products and contract manufacturing.

[Joseph F. McGuire, CFO at NEXGEL]

Cost of revenues totaled $1,910,000 in the fourth quarter twenty twenty four as compared to $990,000 for the fourth quarter twenty twenty three. Cost of revenues in 2024 totaled $5,940,000 as compared to $3,720,000 in 2023. The increase in cost of revenues is primarily aligned with sales of branded consumer products as both Silly George and Canco derm were acquired after the comparable 2023 period. Gross profit totaled $1,130,000 for the fourth quarter of twenty twenty four as compared to gross profit of $90,000 for the fourth quarter of twenty twenty three. Gross profit margin for the fourth quarter twenty twenty four was 37,200,000 as compared to $8,700,000 for the fourth quarter twenty twenty three.

[Joseph F. McGuire, CFO at NEXGEL]

Gross profit for 2024 totaled $2,750,000 as compared to $370,000 in 2023. Gross profit margin for 2024 was 31.6% as compared to 9.2% in 2023. The increase of $2,380,000 in 2024 was primarily due to an increase in branded consumer products. Selling, general and administrative expenses totaled 1,970,000 for the fourth quarter twenty twenty four as compared to $1,300,000 for the fourth quarter twenty twenty three. Selling, general and administrative expenses totaled $6,200,000 for 2024 as compared to $3,750,000 in 2023.

[Joseph F. McGuire, CFO at NEXGEL]

The increase year over year was attributable to increases in compensation and benefits, share based compensation, advertising, marketing, Amazon fees, professional and consulting fees and other expenses, which were offset by decreases in investor and shareholder services, franchise taxes and corporate insurance. EBITDA, a non GAAP financial measure, totaled a negative $730,000 for the fourth quarter of twenty twenty four as compared to a negative $970,000 in fourth quarter of twenty twenty three. EBITDA for 2024 totaled a negative $2,760,000 as compared to a negative $2,920,000 in 2023. Adjusted EBITDA, a non GAAP financial measure, totaled a negative $620,000 for the fourth quarter twenty twenty four as compared to a negative $880,000 for the fourth quarter of twenty twenty three. Adjusted EBITDA for 2024 totaled a negative $2,430,000 as compared to a negative $2,800,000 for 2023.

[Joseph F. McGuire, CFO at NEXGEL]

Net loss for the fourth quarter of twenty twenty four was 850,000 as compared to a net loss of $1,100,000 for the fourth quarter of twenty twenty three. Net loss for 2024 totaled $3,280,000 as compared to a net loss of $3,160,000 in 2023. Of note, as Mr. Levy previously mentioned, our fourth quarter net loss includes two inventory write offs totaling $243,000 that are one time in nature. One of the write offs, 197,000 related to the high minimum order quantity inventory purchases in 2022 for Silverseal and TurfGuard two by three.

[Joseph F. McGuire, CFO at NEXGEL]

High minimum order quantities were a significant challenge for launching new products and one of the motivating factors for our Q1 twenty twenty three joint venture with CG Converting and Packaging, which now allows us to control the manufacturing process and as a result, we do not expect any future write offs of this nature. The second inventory write off is 46,000 for additional excess and obsolete inventory. As of December 31, the company had a cash balance of 1,810,000 and as of today, 03/24/2025, Nextel had 7,654,038 shares of common stock outstanding. I'd like to thank Volter today for hosting us and, I'd like to open it up for questions. Operator?

[Operator]

Thank you. Perfect. While the queue builds, we'll take our first question from Nasr Rahman with Maxim. Please go ahead.

[Naz Rahman, Analyst at Maxim Group]

Hi, everyone. Congrats on the progress and thanks for taking my questions. I have a few, if you don't mind. The first one is just on the guidance, but really just your adjusted EBITDA comment. So obviously, you're seeing growing sales.

[Naz Rahman, Analyst at Maxim Group]

I mean, I'm guessing you're expecting sales to grow quarterly. But I guess, what do you expect in terms of the cadence to get to positive adjusted EBITDA? I guess at this point based on all the contracts you have and what you're sort of seeing in the market, at which point do you sort of expect to reach breakeven or cash flow positive?

[Adam Levy, CEO, President & Director at NEXGEL]

So on an adjusted EBITDA basis, which is the measure of actual cash going out the door, we're going to get there pretty quickly. I was we had that $240,000 1 time event in Q4, but we see nothing but growth. Q1 is traditionally our weakest quarter and even that is going to be pretty good. We think we're going to improve on our adjusted EBITDA in Q1 over Q4 and Q3. And then Q2 is where we should really start to see that the new customers coming in and really kind of ramping us up to get there.

[Naz Rahman, Analyst at Maxim Group]

Got it. That was helpful. And I guess on that point too, you mentioned that you have a pipeline of new customers. Could you provide more context and color on, I guess how large is that pipeline and also the breadth of that pipeline in terms of what industry your applications you could be or I guess they could be potentially looking at for your products or technology?

[Adam Levy, CEO, President & Director at NEXGEL]

Sure. So we're usually working on and this is the only negative of having one accelerator and there are only being two in the world. We're usually working on four or five large opportunities at a given time. Currently, I think we'd say I'd say we have four that seem to be progressing really nicely. As we've talked about in previous calls, that's a long onboarding process, right?

[Adam Levy, CEO, President & Director at NEXGEL]

There's lots of iterations, lots of design adjustments, lots of testing, then we do validation runs. So some of these have been in the pipeline for a year or so. Some are relatively new in three or four months. Some, for example, like the innovative optics can get to market very quickly because once you have the data to sell, the device itself is very simple. Others are more complicated.

[Adam Levy, CEO, President & Director at NEXGEL]

Some of them are used in diagnostics and the consistency and the performance of the gel and exactly the conductivity, the outline content, all of those things they're constantly experimenting with to optimize whatever performance that particular company is trying to achieve. So those take longer to develop. And then those of course are five, ten, which take time to get cleared, but it's a process, but we have a pretty good pipeline.

[Naz Rahman, Analyst at Maxim Group]

That was very helpful. And also on that point, Innovative Optics, could you provide more context to how big that market opportunity is for laser removal? And also if the data is positive, what is your promotional strategy here? Do you plan on like onboarding like a sales force or like and what do you plan on selling product or how do you plan on selling products?

[Adam Levy, CEO, President & Director at NEXGEL]

So we're actually partnering with Innovative Optics who have relationships with all of the very large laser hair removal companies around the country, as well as accessibility to key opinion leaders. I've met with several dermatologists and I want to say laser cosmetic practitioners, and they seem to be very excited about this product and additional products that we might be able to sell through that sort of a channel, including something as simple, which I'm surprised by how good the response has been as a simple cooling mask for post procedure. So if you do micro needling or you do some of these laser procedures, your face is in a lot of pain and on fire for a few days. So a product mask that's very cooling, sterile, gentle to the skin, high water content that you could take home with you could be something that doctors could sell in their offices as well as something the practitioners will use post procedure.

[Naz Rahman, Analyst at Maxim Group]

Got it. When do you I mean, if they deposit, when do you expect to start selling products?

[Adam Levy, CEO, President & Director at NEXGEL]

So we think we're going to start selling product on that, right around mid year. This is not a heavy regulatory lift. So as long as we have a good value proposition to go out, we expect to see this be accretive for us definitely in 2025.

[Naz Rahman, Analyst at Maxim Group]

And one last question, if I may. Could you provide some updates on the AbbVie resounding device and how that launch is going? Do you have any potential metrics you could provide us? And how do you sort of see that?

[Adam Levy, CEO, President & Director at NEXGEL]

Yes. So AbbVie is pretty much on the schedule that we've always talked about. We'll be shipping them product in Q2 on their initial orders. That is the anticipated plan. We got we're receiving orders in Q1.

[Adam Levy, CEO, President & Director at NEXGEL]

That is part of the plan. How their actual launch is going, it hasn't started yet. I believe they have a good plan, but again, they don't bring me into every one of their meetings for how they're going to market the product. We just have to be ready to supply them with product according to their schedule.

[Naz Rahman, Analyst at Maxim Group]

Got it. That was very helpful. Thanks for taking my questions.

[Adam Levy, CEO, President & Director at NEXGEL]

Sure. Thanks,

[Operator]

And at this time, we have no further questions. I'd like to turn the call back over to Adam Levy for any closing or additional remarks.

[Adam Levy, CEO, President & Director at NEXGEL]

Thank you, operator. And just we have a very bright future in front of us. Thank you so much to all of our shareholders for supporting the company. And I look forward to seeing you with hopefully more great results in the next quarter. Thank you.

[Operator]

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.

Participants

Executives

• Adam Levy, CEO, President & Director
• Joseph F. McGuire, CFO

Analysts

• Valter Pinto, Managing Director at KCSA Strategic Communications
• Naz Rahman, Analyst at Maxim Group