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.

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 Security Litigation Reform Act of 1995. The 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. 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.

Thank you, Valter. 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 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 that 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. 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 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. Without this one-time…

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 revenue totaled $1.91 million in the fourth quarter of 2024, as compared to $0.99 million for the fourth quarter of 2023. Cost of revenues in 2024 totaled $5.94 million as compared to $3.72 million in 2023. 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 2024 was 37.2%, as compared to 8.7% for the fourth quarter 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 for the fourth quarter 2024, as compared to $1.30 for the fourth quarter 2023. Selling, general and administrative expenses totaled $6.22 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 and Amazon fees, professional and consulting fees,…

Thank you. Perfect. [Operator Instructions] While the queue builds, we'll take our first question from Naz Rahman with Maxim. Please go ahead.

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

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. 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. And then Q2 is where we should really start to see the new customers coming in and really ramping us up to get there.

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 how large that pipeline and also the breadth of that pipeline in terms of what industry your applications could be or I guess they could be essentially looking at for your products or technology?

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. 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. 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. So those take longer to develop and then those of course are 510(K)s which take time to get cleared, but it's a process. But we have a pretty good pipeline.

That was very helpful. And also on that point, Innovative Optics, could you provide more context as 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 products or how do you plan on selling products?

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 that practitioners will use post procedure.

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

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.

And one last question if I may, could you provide some updates on the AbbVie Acoustic device and how that launch is going? Do you have any potential metrics you can provide us? And how do you foresee that?

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'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.

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

Sure. Thanks, Naz.

Thank you. [Operator Instructions] 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.

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.

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