NEXGEL, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Branded Consumer Products: First full quarter of Silly George revenue, now at $5 million run rate; Kenkoderm and Medigel show year-over-year growth.
• Contract Manufacturing: Texas facility expansion completed, Q3 revenue normalized to $864,000 from $425,000 in Q2. Partnership with STADA resulted in release of Histasolv, a $20M+ annualized revenue product. Partnership with Cintas to distribute SilverSeal, with first orders in Q4 2024.
• Medical Device Applications: Laser hair removal study funded by Vanalay, expecting top-line data in Q4 2024; appointed Kip Crecca to Scientific Advisory Board for medical device applications.
• Financing: Completed a $2 million financing with insiders participating, providing working capital for inventory and marketing.

Segment Performance

• Branded Consumer Products: Third quarter was the first full quarter of revenue contribution from Silly George brand, which was acquired in May 2024 with a $2 million run rate and is now on a $5 million run rate heading into holidays. Kenkoderm and Medigel also saw year-over-year growth. Silly George's revenue contribution is a key driver with its increased run rate.
• Contract Manufacturing: Q3 revenue was $864,000, up from $425,000 in Q2. The Texas facility expansion supported new client relationships, and normalization of operations contributed to the increase. Contract manufacturing revenue increased by approximately 103% sequentially.

Guidance

• Expect continued growth in Q4 2024, with revenue exceeding $3 million and operating cash flow approaching positive.
• Revenue from AbbVie partnership expected to start in Q1 2025.

Risks

• No specific risks detailed beyond general forward-looking statement disclaimers.

Question and Answer

Q: Strategically, what happens when cash flow positive?

A: Can consider acquisitions, expansion, and continuing to develop products with large customers.

Q: Laser hair removal study regulatory steps?

A: Study is to show plume suppression; no immediate regulatory filing needed, focus on commercialization post-data release.

Q: Holiday season revenue expectation for Silly George?

A: Expecting a big and successful holiday season, with Silly George historically seeing a bump in November.

Q: Retail and Europe distribution progress?

A: European deals expected in H1 2025; SilverSeal in U.S. retail in 2025; close to Canada approval.

Q: Gross margin outlook for 2025, especially contract manufacturing?

A: Contract manufacturing margins range from 35%-45% for Texas facility and 40%-50% for Langhorne plant; Q4 and Q1 will see improvement with Cintas and AbbVie.