NovaBay Pharmaceuticals Reports First Quarter 2024 Financial Results

Rhea-AI Summary

NovaBay Pharmaceuticals, Inc. (NYSE American: NBY) reported a 13% increase in net product sales driven by higher Avenova®-branded product sales through online channels and branded wound care products. Sales and marketing expenses decreased by 15%, with record sales for Avenova products on Amazon.com. The company remains focused on the eyecare market with efficient digital marketing programs aimed at expanding its customer base.

Financially, product sales for Q1 2024 were $2.6 million, a 13% increase from the prior year, driven by online sales. Gross margin remained stable at 68%. Sales and marketing expenses decreased by 15%, while G&A expenses and R&D expenses saw increases. The company reported a net loss attributable to common stockholders of $3.6 million for Q1 2024.

Positive

• 13% increase in net product sales driven by higher sales of Avenova®-branded products through online channels and branded wound care products.

• Record sales for Avenova products on Amazon.com with new all-time highs in March and April.

• Efficient digital marketing programs leading to a 15% decrease in sales and marketing expenses.

• Focused business model on the eyecare market to resonate with online customers and expand the customer base.

• Gross margin on net product revenue remained consistent at 68%.

Negative

• Increase in general and administrative expenses (G&A) due to higher legal costs related to non-recurring strategic initiatives.

• Increase in research & development (R&D) expenses for Q1 2024 compared to the prior year.

• Non-cash loss of $865 thousand related to the DERMAdoctor divestiture in Q1 2024.

• Net loss attributable to common stockholders for Q1 2024 was $3.6 million compared to $1.7 million in Q1 2023.

• Reduction in cash and cash equivalents from $2.9 million as of December 31, 2023, to $1.8 million as of March 31, 2024.

Insights

Financial Analyst

NovaBay Pharmaceuticals' financial performance in the first quarter of 2024 indicates a growth in net product sales by 13%, which is significant for investors analyzing the company's revenue-generating capabilities. The increase in sales, particularly through online channels and for wound care products, suggests that the company's pivot towards digital marketing and e-commerce strategies is bearing fruit. This strategic shift, coupled with a decrease in sales and marketing expenses by 15%, reflects operational efficiency and could lead to improved profitability over time. However, an area of concern is the rise in General and Administrative (G&A) expenses, attributed to non-recurring legal costs. While these are one-time expenses, they did contribute to the widening of the net loss to $3.6 million from $1.7 million year-over-year. This could potentially pressure the share price in the short term. The company's cash position decreased to $1.8 million as of March 31, 2024, from $2.9 million at the end of 2023, which raises questions about its capital sufficiency. Additionally, the issuance of warrants and convertible notes highlights capital-raising activities that could lead to future dilution of shareholder equity. Hence, while there are positive sales growth signals, liquidity and expense management remain areas to watch closely.

Market Research Analyst

Examining NovaBay Pharmaceuticals from a market dynamics perspective, the growth in sales for Avenova®-branded products on Amazon signifies a robust online consumer demand. This is important in today's market where e-commerce is a key driver of growth for many retail and pharmaceutical companies. The company's ability to set new sales records on Amazon indicates effective digital marketing strategies and a strong brand presence online. The eyecare market, which NovaBay is targeting, is indeed large and growing and their products' performance on major e-commerce platforms can serve as a forward-looking indicator of market share capture and customer loyalty. However, the increase in net sales should be weighed against the declining cash reserves and increased G&A expenses. The long-term sustainability of sales growth could be compromised if the company does not address its cash burn rate and doesn't control expenses. Investors should consider the competitive landscape and the robustness of NovaBay's digital strategy in the face of potential market saturation or shifts in consumer behavior.

• Net product sales increased 13% over the prior year driven by higher sales of Avenova^®-branded products through OTC channels and branded wound care products
• Sales and marketing expenses declined 15% reflecting continued digital marketing optimization
• Ordered product sales for Avenova-branded products on Amazon.com reached new all-time records in March and April

Conference call begins at 4:30 p.m. Eastern time today

EMERYVILLE, Calif.--(BUSINESS WIRE)-- NovaBay^® Pharmaceuticals, Inc. (NYSE American: NBY) reports financial results for the three months ended March 31, 2024 and provides a business update.

“Net product sales growth of 13% versus the prior year was driven by higher sales of Avenova-branded products through online channels and by sales of branded wound care products,” said Justin Hall, CEO of NovaBay. “During the quarter, ordered sales for Avenova products on Amazon.com, our most important sales channel, hit new all-time records in March and again in April. We achieved these records by further optimizing our highly efficient digital marketing programs while reducing our sales and marketing spend, which declined by 15% versus the prior year.

“NovaBay is operating under a streamlined business model primarily focused on the large and growing eyecare market, with creative marketing programs that are resonating well with online customers,” he added. “We are working to build upon this growth by introducing new and enhanced digital media programs to cost-efficiently support our loyal customer base and reach new prospective customers.”

First Quarter Financial Results

Financial results for the first quarters of 2024 and 2023 do not include results from DERMAdoctor, which was divested on March 25, 2024 and is accounted for in discontinued operations. Financial information about discontinued operations is available under “Divestiture and Discontinued Operations” in the Company’s Form 10-Q, which is to be filed with the SEC later today.

Product sales, net for the first quarter of 2024 were $2.6 million, an increase of 13% from $2.3 million for the prior-year period, with the increase due primarily to higher Avenova-branded products sold through online channels and an increase in PhaseOne^®-branded wound care products.

Gross margin on net product revenue for the first quarters of 2024 and 2023 remained consistent at 68%.

Sales and marketing expenses for the first quarter of 2024 were $1.1 million, a 15% decrease from $1.2 million for the prior-year period, reflecting continued lower digital advertising and related consulting costs. General and administrative (G&A) expenses for the first quarter of 2024 were $2.3 million, compared with $1.7 million for the prior-year period, with the increase due mainly to higher legal costs primarily related to non-recurring strategic initiatives. Research & development (R&D) expenses for the first quarter of 2024 were $19 thousand, versus $10 thousand for the prior-year period. The Company recorded a non-cash loss of $865 thousand for the first quarter of 2024 related to the DERMAdoctor divestiture, with no comparable item in the prior-year period.

For the first quarter of 2024, non-cash items included a gain on changes in fair value of warrant liabilities of $0.2 million, a gain on change in fair value of embedded derivative liability of $65 thousand and accretion of interest and amortization of discounts on convertible notes of $0.4 million. There were no comparable items for the first quarter of 2023.

Other expense, net for the first quarter of 2024 was $0.5 million, primarily due to the issuance of the March 2024 warrant and the unsecured convertible notes issued in March 2024, with no comparable item in the first quarter of 2023.

Net loss attributable to common stockholders for the first quarter of 2024 was $3.6 million, or $0.15 per share, compared with a net loss attributable to common stockholders for the first quarter of 2023 of $1.7 million, or $0.85 per share.

NovaBay had cash and cash equivalents of $1.8 million as of March 31, 2024, compared with $2.9 million as of December 31, 2023.

Conference Call

NovaBay management will host an investment community conference call today beginning at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company’s financial and operational results and answer questions. Participants can pre-register for the conference call here. Callers who pre-register will be emailed conference details and a unique Registration ID to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.

Stockholders and other interested parties may also participate in the conference call by dialing 888-500-3691 from within the U.S. or 646-307-1951 from outside the U.S., and requesting conference ID# 85516.

A live webcast of the call will be available here and will be archived for 90 days. A replay of the call will be available beginning three hours after the call ends through June 9, 2024 by dialing 877-660-6853 from within the U.S. or 201-612-7415 from outside the U.S., and entering the conference ID #13746453.

About NovaBay Pharmaceuticals, Inc.:

NovaBay’s leading product Avenova^® Antimicrobial Lid & Lash Solution is often prescribed by eyecare professionals for blepharitis and dry-eye disease and is available directly to consumers through online distribution channels such as Amazon.com. It is clinically proven to kill a broad spectrum of bacteria to help relieve the symptoms of bacterial dry eye, yet is non-irritating and completely safe for regular use. NovaBay offers a full portfolio of scientifically developed products for each step of the standard dry eye treatment regimen, including the Avenova Eye Health Support antioxidant-rich oral supplement, Avenova Lubricating Eye Drops for instant relief, Avenova Warm Eye Compress to soothe the eyes and the i-Chek by Avenova to monitor physical eyelid health. The Avenova Allograft, an amniotic tissue prescription-only product, is available through eyecare professionals in the United States.

Forward-Looking Statements

This release contains information about management's view of the Company's future expectations, plans and prospects that constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historic or current facts. Such forward-looking statements are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our business strategies, commercial progress, current and potential future product offerings, expanded access to our products through new and existing sales channels, and any future revenue, and the timing of such revenue, that may result from selling these products, as well as generally the Company’s expected future financial results. These statements involve risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to the size of the potential market for our products, the Company’s products not being able to penetrate one or more targeted markets and the Company’s ability to continue as a going concern and revenues (or the execution on capital raise opportunities) not being sufficient to meet the Company’s cash needs. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay’s latest Form 10-K/Q filings with the Securities and Exchange Commission, especially under the heading “Risk Factors.” The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

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Avenova Purchasing Information
For NovaBay Avenova purchasing information:
Please call 800-890-0329 or email sales@avenova.com
Avenova.com

Financial tables follow

NOVABAY PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value amounts)
		March 31,				December 31,
		2024				2023
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	1,823			$	2,924
Accounts receivable, net of allowance for credit losses ($3 at March 31, 2024 and December 31, 2023)			734				680
Inventory, net of allowance for excess and obsolete inventory and lower of cost or estimated net realizable value adjustments ($229 and $264 at March 31, 2024 and December 31, 2023, respectively)			663				564
Prepaid expenses and other current assets			371				256
Current assets, discontinued operations			—				2,730
Total current assets			3,591				7,154
Operating lease right-of-use assets			1,212				1,296
Property and equipment, net			77				87
Other assets			477				478
Other assets, discontinued operations			—				19
TOTAL ASSETS		$	5,357			$	9,034
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable		$	1,117			$	906
Accrued liabilities			1,266				1,169
Secured Convertible Notes, net of discounts			973				1,137
Unsecured Convertible Notes, net of discounts			34				—
Embedded derivative liability			159				—
Operating lease liabilities			375				368
Current liabilities, discontinued operations			—				698
Total current liabilities			3,924				4,278
Warrant liabilities			232				334
Operating lease liabilities-non-current			1,041				1,108
Total liabilities			5,197				5,720
Commitments & contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized;
Series B Preferred Stock; 1 and 6 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively			44				275
Series C Preferred Stock; 1 shares issued and outstanding at March 31, 2024 and December 31, 2023			1,441				1,675
Common stock, $0.01 par value; 150,000 shares authorized, 32,025 and 11,230 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively			320				112
Additional paid-in capital			176,798				176,101
Accumulated deficit			(178,443	)			(174,849	)
Total stockholders’ equity			160				3,314
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	5,357			$	9,034

NOVABAY PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
		Three Months Ended
		March 31,
		2024				2023
Sales:
Product revenue, net		$	2,624			$	2,332
Other revenue, net			7				7
Total sales, net			2,631				2,339
Cost of goods sold			837				739
Gross profit			1,794				1,600
Operating expenses
Research and development			19				10
Sales and marketing			1,055				1,236
General and administrative			2,291				1,699
Loss on divestiture of subsidiary			865				—
Total operating expenses			4,230				2,945
Operating loss			(2,436	)			(1,345	)
Non-cash gain on changes in fair value of warrant liabilities			194				—
Non-cash gain on change in fair value of embedded derivative liability			65				—
Accretion of interest and amortization of discounts on convertible notes			(433	)			—
Other expense, net			(480	)			—
Net loss from continuing operations			(3,090	)			(1,345	)
Loss from discontinued operations			(124	)			(394	)
Net loss			(3,214	)			(1,739	)
Less: Increase to accumulated deficit due to adjustment to Preferred Stock conversion price			380				—
Net loss attributable to common stockholders		$	(3,594	)		$	(1,739	)
Basic and diluted net loss per share
Loss from continuing operations		$	(0.14	)		$	(0.66	)
Loss from discontinued operations			(0.01	)			(0.19	)
Net loss per share attributable to common stockholders (basic and diluted)		$	(0.15	)		$	(0.85	)
Weighted-average shares of common stock outstanding used in computing net loss per share of common stock (basic and diluted)			24,672				2,035

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240509593442/en/

NovaBay Contact

Justin Hall

Chief Executive Officer and General Counsel

510-899-8800

jhall@novabay.com

Investor Contact

LHA Investor Relations

Jody Cain

310-691-7100

jcain@lhai.com

Source: NovaBay Pharmaceuticals, Inc.

FAQ

What drove the 13% increase in net product sales for NovaBay Pharmaceuticals?

The increase in net product sales was driven by higher sales of Avenova®-branded products through online channels and branded wound care products.

What caused the decrease in sales and marketing expenses for NovaBay Pharmaceuticals?

Sales and marketing expenses decreased by 15% due to continued lower digital advertising and related consulting costs.

What was the net loss attributable to common stockholders for NovaBay Pharmaceuticals in Q1 2024?

The net loss attributable to common stockholders for Q1 2024 was $3.6 million compared to $1.7 million in Q1 2023.

What was the gross margin on net product revenue for NovaBay Pharmaceuticals in Q1 2024?

The gross margin on net product revenue remained consistent at 68% for Q1 2024.

What was the financial impact of the DERMAdoctor divestiture on NovaBay Pharmaceuticals in Q1 2024?

There was a non-cash loss of $865 thousand related to the DERMAdoctor divestiture in Q1 2024.