Q4 2020 NovaBay Pharmaceuticals Inc Earnings Call
Thursday Thursday, Thursday Thursday
Welcome to the novabay Pharmaceuticals fourth quarter 2020 Financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero after today's presentation. There will be an opportunity to ask questions. You ask a question. You may press * then one on your telephone keypad to withdraw your question, please press * then two, please note this event is being recorded. I would now like to turn the conference over to AJ TK, please go ahead. This is Jody. Thank you for participating in today's call joining me from November Pharmaceuticals are Justin Hall president and chief executive officer and Andy Jones. The company's Chief Financial Officer. I'd like to remind listeners that comments made during this call by management will include forward-looking Steinberg.
Within the meaning of federal Securities lot these forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results in particular there is significant uncertainty about the duration and potential impact of the COVID-19 pandemic. This means that results could change at any time and the contemplated impact of COVID-19. Know who base operations is financial results, and it's Outlets is a best estimate based on Information Form available for the dead discussion for a list and description of risks and uncertainties. Please review Nova base filings with the Securities and Exchange Commission at sec.gov further down the content of this conference call contains information that is accurate only as of the date of the live broadcast, March 25th. 2021. Novabay undertakes, no obligation. Yep.
Or update any statements to reflect events or circumstances except as required by law and now I'd like to turn the call over to Justin Hall Justin.
Thank you, Jodi. Good afternoon, everyone and thank you for joining us.
2020 was a transformative year for novabay during a tumultuous year. We increased product Revenue by an impressive 50% over the prior-year we transformed our marketing and deploying more sophisticated strategies that more than tripled our online sales of avanova. We transformed our sales efforts by reducing our field sales force and focusing more on telephonic out by our internal sales team. We pivoted quickly when PPE was in short supply and added to our top-line revenue and lastly we transformed our balance sheet by raising cash and eliminating a major debt instruments.
Over-the-counter avenova continues to be our number one priority and where we see the most potential for continued growth more than 50% of our Revenue in 2020 and more than 60% of our Revenue in Q4 came through our online sales Channel additionally Ivanova is becoming available at a growing number of CVS stores nationwide there by greatly expanding consumer choice and marketing our entry into brick-and-mortar retail stores. Ivanova is also available for purchase at cvs.com more people than ever are using avenova due in large part to the ease of access to these multiple channels, but also due to the continued strong support from Physicians.
Doctors and patients love avenova. We continue to grow our customer base and increase the number of repeat users as a reminder chronic dry eye disease of flakes approximately Thirty million Americans with ocular bacteria accounting for about 85% of these cases Ivanova is the only commercial hypochlorous acid lid and lash product clinically proven to reduce the bacterial lojja ocular skin Services, that's effectively addressing the underlying causes of bacterial dry eye.
We Believe Ivanova is a product of choice for consumers in Eye Care Specialists alike due to its unique formulation of pharmaceutical-grade hypochlorous acid making it the purest liquid Solution on the market unlike many of our competitors avenova provides a consumer with the added comfort of knowing it's manufactured in the United States. I'm police report that Avenue of life for twenty twenty reached an all-time record high of 50% over the prior-year. We experienced a negative impact on Avenue Unit sales during the second quarter of 2020 due to widespread COVID-19 disruptions, but sales rebounded in the second half of the year.
As we are reporting today Avenue Unit sales reached a new quarterly record in the fourth quarter breaking the previous record set in the third quarter.
Online sales Avenue. If I continued to be our fastest growing Channel last year with unit sales up over 200% over the prior-year just under two years ago. We expanded accessibility to Chef offering the full prescription strength product for sale directly to Consumers online without a prescription.
It's no.
Surprised that this direct-to-consumer channel proved critically important during twenty-twenty allowing consumers to order avenova without leaving their homes and without a trip to the doctor during the pandemic.
Among our actions last year to support Avenue in September we were able to add the Subscribe and save feature on amazon.com and this feature provides a discount to customers who automate reoccurring orders and has the positive benefit to Nova Bay of increasing repeat customers increasing reoccurring revenue and improving visibility of future sales rep large number of customers who have signed up for this provides a strong indication of a very loyal following for avanova wage.
Last year, we expanded consumer access by making Ivanova available through walmart.com another one of our nation's largest online retailers.
In our physician dispense Channel, we benefited from a 17% year-over-year growth in unit sales of the total unit sales from this Channel 20 20, approximately two-thirds came back in the second half of the year as Physician Offices began to reopen and operate under Limited hours.
This position dispense channel is important not only for its Revenue but also for the halo effect, it creates around the Avenue of a brand.
With a record number of units being sold directly from doctors avanova is clearly the premier doctor recommended brand with approximately 40,000 license I Care Professionals in the United States. We still have plenty of opportunity to expand in the sales Channel and plan to do so by utilizing our cost-effective in-house sales team this year in addition to Growing our physician dispense. General is our supercharging our online sales Channel with new digital data-driven marketing programs. These programs are comprehensive and combined customize storytelling with a cohesive consistent creative strategy approach ensures that we're using the right message for the right customer segments, the effectiveness of our new programs will be tracked to real-time analytics reporting and optimization to ensure that these programs truly delivers results.
Turning now. Do you sell racks clinical reset? We introduced this unique pharmaceutical product into the beauty Market in late 2020 clinical reset is a gentle, a soothing facial spray that disrupts the layer of bacteria that settles and grows on the face. It keeps the Skin's natural barrier intact, which is important because when the barrier is out of balance acne rosacea a section can set in during the pandemic we have all learned the importance of personal care and that skin care is an essential part of that routine using clinical research is highly complimentary daily Beauty regimen and can be used by both men and women this product formulated with our pure hypochlorous acid provides consumers with access to an entirely new level of clinical research and rigor that often missing from the traditional beauty industry.
We will be launching digital media.
Are campaigns this year for clinical reset the beauty Market is crowded and the success of clinical reset will be linked to our ability to develop branding that sets it apart as a distinct new category wage product with a product that penetrates the skins biofilm and empowers all other beauty products to work their best as an initial step. Our media partner is researching consumer insights that can be used to drive back and messaging our objective is to build a strategic targeting effort that aligns a compelling Brand Story and advertising to secure new and repeat customers. We look forward not finding updates on this branding during future calls.
Lastly are other key corporate priority for 20 21 is to pursue opportunities that will expand our commercial product portfolio in the large economic and Skin Care markets now, I'll turn the call over Monday to review our financial performance in more detail. Thank you Justin. Good afternoon everyone. Let's start with Q for top-line results total net product revenue for the fourth quarter of 2012 of 1.9 million dollars. That's up 10% from one point seven million dollars for the prior-year quarter.
The 2020 quarter included approximately $350,000 from sales of neutral phase are fda-cleared skin and wound cleanser avenova product of money for the fourth quarter of 2020 was one point five million dollars, which is down from one point seven million dollars for the fourth quarter of 2019.
The 2020 quarter was impacted by a $400,000 increase in our reserve for potential future product returns after we experienced an increase in actual expired prescription product returns in the latter months of twenty-twenty the adjustment to the reserve also impacted our gross margin for the fourth quarter of 2020, which was 57% down from 65% for the fourth quarter of 2019. Although there is always uncertainty about potential returns even with the increase that we experienced in our actual return rate last year. We expect the potential number of exposure units in the prescription channel to decline over time and the related Reserve to decrease
Total operating expenses in the fourth quarter of 2020 were two point eight million dollars. This is down from 3.3 million dollars for the prior-year. This result includes G&A expenses for Q4 2020 which were up slightly to one point three million dollars from 1.2 million dollars for Q4 2019 sales and marketing expenses. However, we're down to one point five million dollars compared with 2.2 million dollars for Q4 2019. This decrease in spend was primarily the result of a reduction in field sales head count as we began our transformation towards a more cost-effective telephonic Outreach by our in-house sales team as described by Justin.
this decrease was partially offset by
Increase in marketing expenses as we introduce clinical reset during the 2020 quarter and continued our increase in investment and online digital marketing programs for avenova for these digital programs. We're working closely with reputable outside ad placement agencies. And as Justin mentioned, we are carefully monitoring real-time campaign performance metrics such as click through and conversion rates and customer acquisition costs to direct spend across multiple advertising platforms while maximizing our row ads or return on a dead-end.
The net result of our increase in product revenue and decrease in sales and marketing expenses was an operating loss for the fourth quarter of 2020 that narrowed 21.8 million dollars from a 2.2 million dollar of operating loss for the fourth quarter of 2019. We are also pleased to report that we had no notable results below operating loss in the 2020 Q4. This one a result of our twenty-twenty initiatives which successfully improved our capital structure in simplified our balance sheet during the prior 2019. We recorded a $187,000 net loss on changes in the fair value of a warrant liabilities and other expense of $259,000 primarily related to interest expense on a convertible note the warrants and convertible, New Jersey which drove these results were eliminated or amended favorably to the company prior to the fourth quarter of 2020 our net loss attributable to Common stockholders for the 2020 fourth-quarter wage.
One point eight million dollars or four cents per share a notable improvement over the net loss attributable to Common stockholders for the prior fourth quarter of three point five million dollars or Thirteen Cents per share wage for our full-year financial results net product revenue for 2020 increased 51% to nine point nine million dollars from 6.6 million dollars for the 2019 or the 2020 result includes a decline and unit sales from our prescription Avenue Pharmacy channels, which was offset by the dramatic increase in unit sales of non-prescription avenova that wage Justin described.
As he also mentioned we added to top-line revenue from sales of of personal protective equipment that totaled 3.1 million dollars in 2020.
Russell margin on product revenue for 2020 with 60% compared with 74% for 2019 the lower overall margin reflects the lower unit margin from the sales of the personal protective equipment. We do not anticipate notable sales from personal protective equipment in future periods, operating expenses for twenty twenty or twelve point four million dollars box down from 14.3 million dollars for 2019 operating expenses for 2020 included sales and marketing expenses a 6.2 million dollars G&A expenses of 5.9 million dollars and R&D expenses of $285,000 as with our fourth-quarter results are full year twenty-twenty operating loss narrowed as compared to the 2019. I could do to both increases in revenue and decreases in expenses improving by 32% to 6.4 million dollars.
the net loss attributable
To Common stockholders for 2020 was $11 or $0.31 per share this Compares with a net loss attributable to Common stockholders for 2019 of ten point five million dollars or $0.58 per share the net loss for twenty twenty reflects a five point two million non-cash net loss on the change in the fair value of a warrant liabilities which as previously known know well not have an impact on our operating results in future periods, as of December 31st, 2020. We had cash and cash equivalents of twelve million dollars this Compares with a 3.9 million dollars at the end of 2019 during 2020. We were pleased to raise net cash proceeds of over twelve million dollars from an at-the-market offering and the exercise of Warrensburg. We believe our current year-end funds are sufficient to support operations into twenty twenty-two including a continued increase in investment in our sales and marketing programs for both Avenue Pub.
And seller x with that I'll turn it back to Justin Cindy before we open the call to your questions. Let me summarize our near-term plants. We continue to focus on driving Avenue of a consumer sales with our entry into a CVS brick-and-mortar stores and accessibility online through cvs.com. We're excited about building on our Avenue business particularly with the momentum generated in the second half of 2020.
In April, we plan to launch our new digital media campaigns that feature customize storytelling and data analytics to attract new avenova customers in encourage repeat usage, and we are developing new branding for clinical reset to properly situate this breakthrough product in the beauty Marketplace in addition to organic growth. We are evaluating opportunities to support profitable growth acquisition or licensing of ophthalmic and skin care products are experienced commercial organization improved balance sheet and established industry relationships gives us confidence that now is the opportune time to leverage these assets to generate new sources of revenue and increase shareholder value with that. I thank you for your attention operator. We're now ready to take questions.
Thank you. We will now begin the question-and-answer session to ask a question. You may press * then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys.
Withdraw your question, please, press * then two at this time. We will pause momentarily to assemble our roster.
What we're waiting for the first question the first question, I want to mention that we're launching some complementary products to avanova on our website check out the warm icon. Press. When used with phone number helps clear oil glands and allows natural oils to flow back on to the I to relieve dry eye discomfort. We're also doing some online promotions and giveaways for World Optometry week check out avenova Eyecare on social media for details.
All right operator. We are ready for the
first question
Our first question comes from Jeffrey Cohen with Lautenberg, please go ahead.
Hi, Justin and Andy. How are you? Great. Hey Jeff. So first see what we're curious about is some of the marketing strategies and key performance indicators. Has there been much change at all over the past quarter and could you also kind of tie that into the situation with CVS both bricks-and-mortar as well as I'm under?
Yeah, sure. So, you know, we're we are excited about CVS, but I think we're more excited about some of the new marketing initiatives that we have Fourth Avenue and seller EXO as I tried to convey on the call. We are really kind of supercharging and upgrading our entire online marketing x2020 really taught us the importance of you know online marketing and that's I think especially good for us because that is truly need our greatest opportunity for growth is so you know while we continue to nurture, you know, the physician relationships and you know, like I said, we we really do love that support from doctors by you know, our future Revenue growth is really going to come from the online Channel. And so we we have done, you know a couple things in late Thursday.
And during q1 to really transform the way that we look at our online marketing we brought on some new partners and really done. I think I won't be you know get too much into the detail cuz we're going to really start rolling it out in Q2. But yeah, we we are sort of Full Speed Ahead on the page on the online sales here in and I think you know, we're we're pretty excited about our new approach to it.
Okay, got it. And then could you talk about any notable changes with your demographics as far as the the rebranding forever Nova and then discuss with us a little bit more about the search engine optimization and search engine marketing and where you're seeing the most traction whether it be 105 or the other or both channels. Yeah, so this is going to sound like a lot of Buzz words, but we are you know, we spent really the last three months creating a a brand story around avenova. And that's why I think we're going to see roll out. So it's less about search engine optimization. You know, we did that last year, you know, we did that sort of early 2020 and definitely reaped the benefits of that but our our demographics wage.
I think
One of the most beautiful things about avanova is that it has many use cases and many Target demographics and I think we have done a really good job of targeting what I call the wage like the medical use of avanova not blepharitis and dry eye and doctors prescribe it for that and people love it. But really what we haven't done yet is moved into the beauty market and you know the makeup market so, you know, there's a lot of women who you use a lot of make-up everyday like on their eyes and they got you know, I infections or not. They're not infections that really require medical attention or a trip to you know, the doctor's office. But what they will do is they'll go online and say hey like, you know, my my eyes are kind of irritating but you know, I have a stye or you know, too lazy on my I you know, what what can I order online and have directly sent to my home to try and I have no that is a very good and effect wage.
Product for that and now it's really sort of the onus is on us to make sure that you know, when they're they're online searching for you know, a product to help them, you know in the icon a space that we pop up and we educate them on the effectiveness of avanova. And so, you know that you know, although we we do have a very strong demographic that we have targeted, you know on life for the past, you know year-and-half. There's lots of different use cases that I think we're going to start targeting very effectively now.
Okay. And then lastly for us on the neutral phase and the fourth quarter was that one time the nature do you expect recurring throughout 2021 and onward that periodic?
Well, so neutral phase is the wound care products that are very staunch supporter and distributor and China buys from us. So we took in manufacturing China neutraface for many many years. And so that you know while it's small incremental Revenue, you know, we we have had it sort of choice article e over the years, you know, when when demand over there has um, you know, either increased or decreased and you know for the rest of this year, we should see a few months orders.
Okay. Got it that does your for us. Thanks for taking the questions.
Pleasure as always Jeff.
Our next question comes from Edwin and Sunday and Capitol, please go ahead. Yeah, sounds great. I am glad that you guys were able to you know, get this no revenue from neutral phase discourse. And what about some of your other products? I know you guys are matching, you know, you mentioned a couple of other new products. Will it be material to you know, your Revenue this year?
Well, so we will I think continue to manufacture neutraface. Like I just said I think we will have a few orders for phase one which is for the US wound care market. So we will have some orders for both Nutra FaZe and phase one this fiscal year off, you know, and we are rolling out a few ancillary products. Like I mentioned, you know, like the the warm icon press but the the other products that are sort of a complimentary to avenova are really meant to augment sales of avanova and sort of create more of a of an eye care brand around avenova. But those I think are not going to be in a large Revenue drivers.
and also your party
Will be a lot of capital for you guys to invest as well, right?
It's very little very little so it's it's almost like no no capital investment. In other than you know buying the inventory. So, you know, and I you know, I say that they won't be big Revenue drivers, but you know, we can always be surprised so, you know Bruder has made an incredible business out of selling these masks and so we would love to infringe upon them and you know their dominance in the eye care. I mean in the IMAX Market by creating an iMac that's better than Bruder.
Right. Well, thank you for answering my questions and good luck. Thank you. All right. Thanks. Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Justin Justin hall for any closing remarks.
Thank you. Once again for joining us today, and for your interest in Nova babe. We look forward to updating you during our next call in May when we'll discuss the 2021 first-quarter Financial results in progress in the meantime a good day. Thank you very much.
The conference is South concluded. Thank you for attending today's presentation. You may now disconnect.