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) (NASDAQ: NXGL) is a development-stage materials science company focused on the research and commercialization of advanced polymer formulations tailored for additive manufacturing and 3D printing applications. Leveraging proprietary expertise in polymer chemistry, NexGel develops high-performance materials designed to meet rigorous mechanical, thermal, and chemical resistance requirements across diverse end markets.

The company’s product pipeline includes custom-engineered resins, powders and elastomeric systems optimized for a range of additive manufacturing processes, including selective laser sintering (SLS), stereolithography (SLA) and fused deposition modeling (FDM). NexGel’s materials aim to enhance part durability, surface finish and functional performance, enabling manufacturers and designers to accelerate prototyping and scale the production of complex components.

Headquartered in the United States, NexGel has pursued strategic partnerships with contract manufacturers, original equipment manufacturers (OEMs) and research institutions to drive material adoption into existing industrial workflows. The company continues to expand its geographic reach and technical capabilities as it works toward broader commercial deployment of its proprietary polymer solutions.

NexGel Q4 2024 Earnings Call Transcript

Key Takeaways

• Nextel delivered record revenue growth for Q4 and full year 2024, with Q4 revenue up 181% YoY to $3.0 M and full year revenue of $8.7 M, marking over 100% growth for the third consecutive year.
• Fourth quarter gross margin declined to 37% from 43.6% in Q3 due to the reclassification of Amazon sales commissions (~15%) into COGS, a change management believes will provide more stable margins going forward.
• Nextel reported a Q4 EBITDA loss of $726 K and an adjusted EBITDA loss of $621 K, which included $243 K in one-time inventory write-offs, though no similar write-offs are expected after assuming manufacturing control via a joint venture.
• A new supply agreement with Cintas began Q4 shipments of SilverSeal wound dressings, driving initial orders and expected to boost both revenue growth and brand awareness with follow-on orders in Q1 and Q2.
• Nextel projects 2025 revenue of at least $13 M with positive EBITDA, backed by a robust pipeline including potential new contracts, an ongoing FDA-aligned trial for laser hair removal hydrogel, and expanded product launches across its consumer brands.

Presentation

[Operator]

Good afternoon. I will be your conference operator today. At this time, I'd like to welcome everyone to NEXGEL's fourth quarter and full year 2024 earnings conference call. I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications, for introductions. Please go ahead.

[Valter Pinto, Managing Director at KCSA Strategic Communications at NEXGEL]

Thank you, Operator. Good afternoon and welcome, everyone, to NEXGEL'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. 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.

[Valter Pinto, Managing Director at KCSA Strategic Communications at NEXGEL]

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. Adam, please go ahead.

[Adam Levy, CEO at NEXGEL]

Thank you, Valter. 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 NEXGEL. 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.

[Adam Levy, CEO at NEXGEL]

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 for SilverSeal and TurfGuard. 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 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.

[Adam Levy, CEO at NEXGEL]

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 & Minor. 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 one 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.

[Adam Levy, CEO at NEXGEL]

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.

[Adam Levy, CEO at NEXGEL]

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.

[Adam Levy, CEO at NEXGEL]

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. Turning our attention now to consumer products, our entire portfolio saw strong expansion in 2024, driven by the continued success of our brands, MedaGel, Kenkoderm, and Silly George, each having several growth levers for 2025. This year, MedaGel 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, Kenkoderm will double the size of its product portfolio in the third quarter of 2025 with the launch of new products.

[Adam Levy, CEO at NEXGEL]

Kenkoderm is an established brand that provides its customer with high-quality skincare products to relieve the symptoms of psoriasis. The new products will expand into skincare products for eczema relief, another large market opportunity for the brand. Kenkoderm 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 will 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.

[Adam Levy, CEO at NEXGEL]

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 STADA is progressing extraordinarily well. Our first product, Histasolv, is exceeding projections and showed continued revenue growth in each month of Q4. We recently signed an amendment to our contract with STADA to expand our relationship beyond Histasolv. 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.

[Adam Levy, CEO at NEXGEL]

With that being said, R&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 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.

[Adam Levy, CEO at NEXGEL]

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?

[Joe 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 2024, revenue totaled $3.04 million, an increase of 181% as compared to $1.08 million for the fourth quarter of 2023. Revenue for the full year 2024 totaled $8.69 million, an increase of 112% as compared to $4.09 million 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. Cost of revenues totaled $1.91 million in the fourth quarter of 2024 as compared to $0.99 million for the fourth quarter 2023. Cost of revenues in 2024 totaled $5.94 million as compared to $3.72 million in 2023.

[Joe McGuire, CFO at NEXGEL]

The increase in cost of revenues is primarily aligned with sales of branded consumer products as both Silly George and Kenkoderm were acquired after the comparable 2023 period. Gross profit totaled $1.13 million for the fourth quarter of 2024 as compared to a gross profit of $0.09 million for the fourth quarter of 2023. Gross profit margin for the fourth quarter of 2024 was 37.2% as compared to 8.7% for the fourth quarter of 2023. Gross profit for 2024 totaled $2.75 million as compared to $0.37 million in 2023. Gross profit margin for 2024 was 31.6% as compared to 9.2% in 2023. The increase of $2.38 million in 2024 was primarily due to an increase in branded consumer products. Selling, general and administrative expenses totaled $1.97 million for the fourth quarter 2024 as compared to $1.3 million for the fourth quarter 2023.

[Joe McGuire, CFO at NEXGEL]

Selling general and administrative expenses totaled $6.2 million for 2024 as compared to $3.75 million in 2023. 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 $0.73 million for the fourth quarter of 2024 as compared to a negative $0.97 million in the fourth quarter of 2023. EBITDA for 2024 totaled a negative $2.76 million as compared to a negative $2.92 million in 2023. Adjusted EBITDA, a non-GAAP financial measure, totaled a negative $0.62 million for the fourth quarter 2024 as compared to a negative $0.88 million for the fourth quarter of 2023.

[Joe McGuire, CFO at NEXGEL]

Adjusted EBITDA for 2024 totaled a negative $2.43 million as compared to a negative $2.8 million for 2023. Net loss for the fourth quarter of 2024 was $0.85 million as compared to a net loss of $1.1 million for the fourth quarter of 2023. Net loss for 2024 totaled $3.28 million as compared to a net loss of $3.16 million 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 2x3.

[Joe McGuire, CFO at NEXGEL]

High minimum order quantities were a significant challenge to launching new products and one of the motivating factors for our Q1 2023 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 $1.81 million, and as of today, March 24, 2025, NEXGEL had 7,654,038 shares of common stock outstanding. I'd like to thank Valter today for hosting us, and I'd like to open it up for questions. Operator?

[Operator]

Thank you. Perfect. At this time, if you'd like to ask a question, please press the star one on your telephone keypad. You may remove yourself from the queue at any time by pressing the star two key. Once again, that is star one to ask a question. While the queue builds, we'll take our first question from Naz Rahman with Maxim. Please go ahead.

[Naz Rahman, Analyst at Maxim]

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. Obviously, you're seeing growing sales, and I'm guessing you're expecting sales to grow quarterly. I guess, what do you expect in terms of cadence to get to positive adjusted EBITDA? 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 a break-even or cash flow positive?

[Adam Levy, CEO at NEXGEL]

On an adjusted EBITDA basis, which is the measure of actual cash going out the door, we're going to get there pretty quickly. We had that $240,000 one-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. Q2 is where we should really start to see the new customers coming in and really kind of ramping us up to get there.

[Naz Rahman, Analyst at Maxim]

Got it. That was helpful. 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 that pipeline and also the breadth of that pipeline in terms of what industry or applications you could be, or I guess they could be potentially looking at for your products or technology?

[Adam Levy, CEO at NEXGEL]

Sure. We're usually working on, and this is the only negative of having one accelerator and there only being two in the world. We're usually working on four or five large opportunities at a given time. Currently, I think 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? There's lots of iterations, lots of design adjustments, lots of testing. We do validation runs. 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 at NEXGEL]

Some of them are used in diagnostics, and the consistency and the performance of the gel and exactly the conductivity, the alkaline content, all of those things, they're constantly experimenting with to optimize whatever performance that particular company is trying to achieve. Those take longer to develop, and then those, of course, are 510(k)s, which take time to get cleared. It is a process. We have a pretty good pipeline.

[Naz Rahman, Analyst at Maxim]

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

[Adam Levy, CEO at NEXGEL]

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. If you do microneedling or you do some of these laser procedures, your face is in a lot of pain and on fire for a few days.

[Adam Levy, CEO at NEXGEL]

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 that practitioners will use post-procedure.

[Naz Rahman, Analyst at Maxim]

Got it. I mean, if data is positive, when do you expect to start selling product?

[Adam Levy, CEO at NEXGEL]

We think we're going to start selling product on that right around mid-year. This is not a heavy regulatory lift. 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]

One last question, if I may. Could you provide some updates on the AbbVie Resonic device and how that launch is going? Do you have any potential metrics you can provide us? How do you sort of see that? Sorry.

[Adam Levy, CEO at NEXGEL]

Yeah. 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're receiving orders in Q1. 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]

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

[Adam Levy, CEO at NEXGEL]

Sure. Thanks, Nas.

[Operator]

Thank you. As a reminder, ladies and gentlemen, that is star one for a question. We'll pause for a moment. 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 at NEXGEL]

Thank you, Operator. 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. This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Participants

Analysts

• Naz Rahman, Analyst at Maxim
• Joe McGuire, CFO at NEXGEL
• Valter Pinto, Managing Director at KCSA Strategic Communications at NEXGEL
• Adam Levy, CEO at NEXGEL