Q1 2022 NovaBay Pharmaceuticals Inc Earnings Call

Good afternoon and welcome to Nova Bay Pharmaceuticals first quarter 2022 financial results conference call. All participants will be in a listen only.

Good afternoon, and welcome to Novabay Pharmaceuticals, first quarter 2022 financial results Conference call. All participants will be in a listen only mode should you need assistance. Please signal our conference specialist by pressing the skirt Starkey followed by zero.

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I would now like to turn the conference over to Jody Kane. Please go ahead.

I would now like to turn the conference over to Jody Cain. Please go ahead ma'am.

This is Jody Cain with L. E. K. Thank you for participating in today's call joining me from Novabay, Our Jetson Hall, Chief Executive Officer, and General Counsel and Andy Zhang The Companys Chief Financial Officer.

This is Jodi King with LHA. Thank you for participating in today's call. Joining me from Nova Bay are Justin Hall, Chief Executive Officer in General Counsel, 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 statements within the meeting of the federal securities law.

Like to remind listeners that comments made during this call by management will include forward looking statements within the meaning of the federal Securities laws. These forward looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated baseball empathy.

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 uncertainty about the integration of the derma doctor into NOFA-based operations and circumstances beyond the company's control that could impact the bar, could impact

In particular there.

Certainty about the integration of determine the doctor into Gopher based operations and circumstances beyond the company's control that could impact the part.

Impact.

The broader economies, such as COVID-19, pandemic and the conflict between Russia and Ukraine. This means that results could change at any time and the contemplated impact of the German the Doctor acquisition, COVID-19, and circumstances does impact the broader economy, and therefore base operation.

the broader economy, such as COVID-19 pandemic and the conflict between Russia and Ukraine. This means that results could change at any time, and the contemplated impact of the Dermadopter Acquisition, COVID-19, and circumstances that impact the broader economy on NOVA-BASE operations is its financial results and its outlook, is the best estimate based on the information available for today's discussion.

Its financial result in this outlook is the best estimate based on the information available for todays discussion for a list and description of risks and uncertainties. Please with you know the base filings with the Securities and Exchange Commission at SEC Gov.

For a list and description of risks and uncertainties, please review NOVA-based violence with the Securities and Exchange Commission at SEC.gov.

Furthermore, the content of this conference call contains information that is accurate only as of the date of the live broadcast, May 12, 2022. NOVA Bay undertakes no obligation to revise 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?

Furthermore, the content of this conference call contains information that is accurate only as of the data for the live broadcast may.

May 12 2022.

<unk> undertakes no obligation to revise 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 Hauke Justin.

Thank you, Jody. Good afternoon, everyone, and thank you for joining us.

Thank you Jody good afternoon, everyone and thank you for joining us.

I'm pleased to begin by reporting another quarter of record high Avenova spray unit sales through our Over the Counter channel, which increased by 16% year-over-year and by 7% from Q4.

I'm pleased to begin by reporting another quarter of record high Avenova spray unit sales through our over the counter channel, which increased by 16% year over year and by 7% from Q4.

We are also reporting progress in integrating the other day and Jeremy Doctor operations and I'd like to welcome to the Derma Doctor team to today's call.

We are also reporting progress in integrating Nova Bay and Dermadopter operations, and I'd like to welcome the Dermadopter team to today's call.

Importantly, we are aggressively executing on various initiatives to drive further top line gains as we build on our presence in the large and growing eye care and skin care market.

Importantly, we are aggressively executing our various initiatives to drive further top line gains as we build on our presence in the large and growing eye care and skin care markets.

A key component of our strategy is expanding our Avenova and DermaDoctor portfolios with highly effective problem-solving products for common conditions.

A key component of our strategy is expanding our avenova in derma doctor portfolios with highly effective problem solving products for common conditions.

Earlier this week, we announced the launch of new next-generation cutting-edge anti-aging products within two of our most popular dermatologist collections.

Earlier this week, we announced the launch of new next generation cutting edge anti aging products within two of our most popular derma Doctor collections. Our newest products were created by our Chief product Officer, Audrey Kunin, who is a board certified dermatologist and founder of Derma Doctor.

Our newest products were created by our Chief Product Officer, Audrey Cunin, who is a Board Certified Dermatologist and Founder of Dermadoc.

Using her extensive knowledge of skincare, she devised these unique and clinically proven formulas to help reduce the appearance of wrinkles, fine lines, pores, and discoloration for a brighter, more useful appearance.

Using her extensive knowledge of skincare. She device these unique and clinically proven formulas to help reduce the parents of wrinkles fine lines pores and discoloration.

A brighter more youthful appearance.

Joining our top selling <unk> product family is cat could do see with retinal.

Joining our top selling Cacaducee product family is Cacaducee with Retinol.

This new product combines high potency retinol to resurface and exfoliate skin with vitamin C, ferulic acid, and vitamin E.

This new product combines high potency retinol to resurface and exfoliate skin with vitamin C farooq acid and vitamin E.

The combination of these particular ingredients creates a highly effective hydrating emulsion to fight free radical damage caused by environmental toxins or ultraviolet light.

The combination of these particular ingredients creates a highly effective hydrating emotion to fight free radical damage caused by environmental toxins or ultra Violet light.

You may know that the cacodoo plum, which is harvested in a remote Australian territory, contains on average 55 times more vitamin C than Florida orange.

You may know that the CAC or do plum, which is harvested in a remote Australian territory contains on average 55 times more vitamin C them, Florida oranges.

Our new Comcolon-corrected Bacutial Retinol Alternative Serum is specifically created for those with sensitive skin, rosacea, or eczema prone

Our new com colon corrected, but cuccio retinol alternative serum is specifically created for those with sensitive skin rosacea or eczema prone skin and marks the third expansion. This year of our calm cool uncorrected collection.

and marks the third expansion this year of our comical and corrected collection.

This new product features high performance, but couture, which is a natural plant based alternative to retinal that generally increases cellular turnover and collagen production.

If new product features high-performance buckutial, which is a natural plant-based alternative to retinol, that gently increases cellular turnover and collagen production.

This ingredient is combined with a moisturizer and gentle natural exfoliant into a luxe serum with skin soothing and calming benefits.

This ingredient is combined with a moisturizer and gentle natural exfoliant into a lux serum with skin soothing and calming benefits.

Also, since our last call in late March, we launched Comcolon Corrected Hydrating Cleansing Oil. That's a soap-free and pH-balanced product designed to moisturize skin and remove makeup while keeping the skin hydrated.

Also since our last call in late March we launched Hong Kong corrected hydrating cleansing oil that's a soap free and ph balanced product designed to moisturise skin and remove makeup while keeping the skin hydrated.

All told, so far in 2022, we have introduced five new products and have several more that are under development or are being prepared for commercial launch.

All told so far in 2022, we have introduced five new products and have several more that are under development or are being prepared for commercial launch.

All of our new offerings complement our corporate vision and purpose of offering proprietary OTC products that are effective, scientifically developed, and clinically proven, yet gentle, and importantly, address common yet underserved conditions.

All of our new offerings complement our corporate vision and purpose of offering proprietary OTC products that are effective scientifically developed and clinically proven yet gentle and importantly address common yet underserved conditions.

All of our products are conveniently available through Amazon.com. However, they are, of course, available through our own websites, Avenova.com and Dermadoc.

All of our products are conveniently available through Amazon Dot com. However.

However, they are of course available through our own websites Avenova dotcom and Derma Doctor Dotcom.

All launches are being executed under our low-cost model, which allows us to test market acceptance before committing to a larger investment associated with a broader commercial launch.

All launches are being executed under our low cost model, which allows us to test market acceptance before committing to a larger investment associated with a broader commercial launch.

Beyond our product pipeline, we are pursuing growth by tapping into the complementary skill sets of our Novabay and Germany Doctor teams to expand marketing and distribution of our existing products. This includes leveraging our collective expertise in developing robust social media programs and our strong marketing presence across all digital channels.

Beyond our product pipeline, we're pursuing growth by tapping into the complementary skill sets of our Novabay and Dermadopter teams to expand marketing and distribution of our

This includes leveraging our collective expertise in developing robust social media programs in our strong marketing presence across all digital channels to create programs that allow consumers to engage with our brand through social media and influencer campaigns.

Degree programs that allow consumers to engage with our brand through social media and Influencer campaigns.

Among these we are building upon <unk> position as a skincare thought leader through interviews with popular online consumer publications just in the past month Audrey has been quoted in articles appearing in women's wear daily good and well and Oprah daily.

Among these, we are building upon Audrey's position as a skincare thought leader through interviews with popular online consumer publications. Just in the past month, Audrey has been quoted in articles appearing in Woman's Wear Daily, Good and Well, and Oprah Daily.

Audrey also made her second appearance this year as a guest on the QVC network featuring Dermadoctor, Comquel, and Corrected XMobile.

<unk> also made her second appearance this year as a guest on the QVC network, featuring Derma Doctor Com, calling corrected eczema bomb.

This time, on the program entitled Get Ready, Gorgeous with Allie, we expect Audrey to make additional QVC appearances later this year.

At this time on the program entitled get ready Gorgeous with Ali we expect Audrey to make additional QVC appearances later this year.

Expanding marketing activities to international markets is a key priority.

Expanding marketing activities to international markets is a key priority.

To this end, our new partner in China is now managing DermaDoctor's flagship store on Tmall.com, which is the leading business-to-consumer online retailer in China.

To this end our new partner in China is now managing Derma doctors flagship store on Tmall Dot com, which is a leading business to consumer online retailer in China.

Social media platforms like TikTok are effective ways to attract new customers in China and our marketing partner brings an extensive network of bloggers and influencers along with strong social media brand building capabilities.

Social media platforms like Tictoc, our effective ways to attract new customers in China, and our marketing partner brings an extensive network of bloggers and Influencers, along with strong social media brand building capabilities.

We continue to evaluate ways to leverage our network of international distributors and retailers to drive sales of our products throughout the world.

We continue to evaluate ways to leverage our network of international distributors and retailers to drive sales of our products throughout the world.

And lastly, we are now offering avenova spray bottles, three avenova spray bottles as a kitted bundle on Amazon, which is particularly appealing to those who tell us that they simply can't live without our product.

And lastly, we are now offering Avenova spray bottles, three Avenova spray bottles as a kitted bundle on Amazon, which is particularly appealing to those who tell us that they simply can't live without our product.

We have more loyal customers now than ever before.

We have more loyal customers now than ever before the bundle is sold at a slight discount providing savings to our most loyal customers were taking advantage of this bundled sale to include a derma doctor product sample to encourage cross selling opportunities are Kitty bundle is a high margin sale that allows us to capitalize on.

The bundle is sold at a slight discount, providing savings to our most loyal customers. We're taking advantage of this bundled sale to include a DermaDoctor product sample to encourage cross-selling opportunities.

Our Kitted Bundle is a high-margin sale that allows us to capitalize on the operational synergy with Dermand Doctor of consolidating our warehouse operation.

On the operational synergy with Derma Doctor of consolidating our warehouse operations all orders placed through our Avenova website are now being fulfilled by Derma doctors facility in Kansas City.

All orders placed through our Avenova website are now being fulfilled by DermaDoctor's facility in Kansas City.

By combining warehouse operations, we gain greater control over product fulfillment in our supply chain. This is especially critical during a time when many companies have been struggling with supply chain issues and the related effect on fulfillment, inflation, and margin.

By combining warehouse operations, we gain greater control over product fulfillment and our supply chain.

This is especially critical during a time when many companies have been struggling with supply chain issues and the related effect on fulfillment inflation and margins now.

Now I'd like to turn the call over to Andy Jones to review our Q1 financial performance.

Now I'd like to turn the call over to Andy Jones to review, our Q1 financial performance Eddie.

Thank you Justin and good afternoon, everybody as a reminder, we closed the derma Doctor acquisition in November 2021, So our financial results for the first quarter of 2020 to reflect a full quarter of combined Novabay and Derma Doctor result.

Thank you, Justin. And good afternoon, everybody. As a reminder, we close the DermaDoctor acquisition in November 2021, so our financial results for the first quarter of 2022 reflect a full quarter of combined NOVA Bay and DermaDoctor results.

Product revenue in Q1 2022 was $2.6 million. That's up 46% from $1.8 million for the prior year period and includes $0.9 million of DermaDoctor product sales.

Product revenue in Q1, 2022 was $2 $6 million.

It's up 46% from $1 $8 million for the prior year period and included zero point $9 million of German Doctor product sales.

Avanova spray sales for the first quarter of 2022 were $1.4 million versus $1.6 million for the first quarter of 2021.

Avenova spray sales for the first quarter of 2022, with one 4 million versus $1 6 million for the first quarter of 2021.

The decrease reflects an unanticipated increase in the rate of return of expired Avanova spray units which were purchased by retail pharmacy distributors during our period of prescription sales decline in 2019 and 2020 when we launched our OTC Avanova spray product and the impact of the COVID-19 pandemic to cold.

The decrease reflects an unanticipated increase in the rate of return expired Avenova spray units, which were purchased by retail pharmacy distributors. During our period of prescription sales decline in 2019 and 2020, when we launched our OTC avenova spray product and the impact.

The COVID-19 pandemic took hold we derive our estimated accrual for future product returns from historical data and therefore have increased our accrual accordingly for this actual increase.

We derive our estimated accrual for future product returns from historical data and therefore have increased our accrual accordingly for this actual increase.

There is always a risk that the actual rate of return and or our accrual for future returns can increase again in the future.

There is always a risk that the actual rate of return and or our accrual for future returns can increase again in the future.

That said, our overall exposure to returns is declining over time as higher volumes of inventory purchased in the past become no longer subject to return.

That said our overall exposure to returns is declining over time as higher volumes of inventory purchased in the past become no longer subject to return.

The decrease in Avanova spray revenue for the 2022 quarter was partially offset by an increase in the number of units sold through the OTC and Physician Dispense Channel, although at an average net selling price that is lower than units sold through the farm.

The decrease in Avenova spray revenue for the 2022 quarter was partially offset by an increase in the number of units sold for the OTC and physician defense channel. Although at an average net selling price that is lower than units sold through the pharmacy channel.

Gross margin for the 2022 first quarter was 58% down from 75% for the 2021 quarter. This decrease was a result of the increase in prescription product returns as well as the addition of sales from Germany, Dr products and neutral face sales in the 2022 period with no comparable.

Gross margin for the 2022 first quarter was 58% down from 75% for the 2021 quarter. This decrease was a result of the increase in prescription product returns as well as the addition of sales from dermatology products and neutrophase sales in the 2022 period with no comparable revenue in the prior year quarter.

Revenue in the prior year quarter.

Total operating expenses for Q1 2021 were $3.9 million compared with $2.9 million in the prior year quarter.

Total operating expenses for Q1, 2021 were $3 $9 million compared with $2 $9 million in the prior year quarter.

Sales and marketing expenses were unchanged at $1.7 million, with $0.4 million in dermatopter sales and marketing costs in the current year quarter, offset by a decrease in Novabay sales headcount, which took place in early 2021, as well as non-recurring marketing costs incurred in 2021.

Sales and marketing expenses were unchanged at $1 $7 million.

Zero point $4 million in Derma Doctor sales and marketing costs in the current year quarter offset by a decrease in Novabay sales head count, which took place in early 2021, as well as nonrecurring marketing costs incurred in 2021.

G&A expenses were $2.2 million in Q1 of 2022. This comparison was $1.2 million a year ago. The 2022 period, of course, included Dermadopter G&A costs, as well as one-time costs associated with our special meeting of stockholders and higher personnel costs.

G&A expenses were $2 2 million in Q1 of 2022. This compares with $1 $2 million a year ago.

2022 period of course included Jeremy Dr. G&A costs as well as one time costs associated with our special meeting of stockholders and higher personnel costs.

Additionally, GN expenses for the prior year period were impacted by a reduction or an offset for the receipt of an insurance reimbursement.

Additionally, G&A expenses for the prior year period were impacted by a reduction or an offset for the receipt of an insurance reimbursement.

With the majority of derma doctor integration and financing costs behind us, we do anticipate that our ongoing G&A expenses will decrease from current level.

With the majority of Derma Doctor integration and financing costs behind us, we do anticipate that our ongoing G&A expenses will decrease from current levels.

R&D expenses for the first quarter of 2022 were $28,000. This compares with $5,000 for the prior year period. And this is reflective of the fact that we can create, develop, and release new products without incurring significant R&D costs.

R&D expenses for the first quarter of 2022 or $28000. This compares with $5000 for the prior year period and this is reflective of the fact that we can create developed and released new products without incurring significant R&D costs.

Our operating loss for the first quarter of 2022 was $2.4 million. This compares with an operating loss for the prior year quarter of $1.5 million.

Our operating loss for the first quarter of 2022 was two 4 million. This compares with an operating loss for the prior year quarter of $1 5 million.

We recorded a non-cash gain on changes in fair value of warrant liability in the 2022 first quarter of $2.1 million. This liability was reclassified to equity during the quarter and will no longer require fair value adjustments in the future, which could impact our statement of operation.

We recorded a noncash gain on changes in fair value of warrant liability in the 2020 to the first quarter of $2 $1 million. This liability was reclassified to equity during the quarter and will no longer require fair value adjustments in the future, which could impact our statement of operations.

The net loss attributable to common stockholders for Q1 of 2022 was $111,000 or 0 cents per share. This includes the impact of the non-cash gain on changes in fair value of warrant liability.

The net loss attributable to common stockholders for Q1 of 2022 was $111000 or zero cents per share. This includes the impact of the noncash gain on changes in fair value of warrant liability.

The prior year quarter net loss attributable to common stockholders was $1.5 million or $0.04 per share.

The prior year quarter net loss attributable to common stockholders was $1 5 million or four cents per share.

As of the end of the first quarter of 2022, we had cash and cash equivalents of $5.6 million. I'm pleased to report that we believe our current cash is sufficient to fund operations throughout the coming year, including the cost-effective development and launch of new products under both the Avenova and Dermadopter brand names. And with that, I'll turn the call back over

As of the end of the first quarter of 2022, we had cash and cash equivalents of $5 $6 million I'm pleased to report that we believe our current cash is sufficient to fund operations throughout the coming year, including the cost effective development and launch new products under both the Avenova in Derma Doctor brand names.

And with that I'll turn the call back over to Justin.

Thanks, Andy.

I'm enthusiastic about NovaBase's future. We are executing on a focused strategy that's aimed at creating a stronger company with a broad and expanded product mix and faster top line growth.

I'm enthusiastic about <unk> future, we are executing on a focused strategy at aiming that's aimed at creating a stronger company with a broad and expanded product mix and faster topline growth.

With Avenova and DermaDoctor, we have two established high-margin brands in the large and growing skin care and eye care market.

With Avenova and Derma Doctor, we have two established high margin brands in the large and growing skin care in eyecare markets.

Both brands offer predictably and predictable large reoccurring revenue from customers who are extremely loyal to our high quality product.

Both brands offer predictably.

Addictive large reoccurring revenue from customers, who are extremely loyal to our high quality products.

We are generating organic sales by expanding digital marketing campaigns to reach new customers and widen our customer demographics and are building out our Avenova and Durma Doctor brands with new, innovative, scientifically developed OTC products with launches planned throughout the year.

We are generating organic sales by expanding digital marketing campaigns to reach new customers and widen our customer demographics and are building out our avenova in derma Doctor brands with new innovative scientifically developed OTC products with launches planned throughout the year.

We are already executing on our strategy and we have much more to accomplish as we progress through the year. Giving the timing of our initiatives, we expect the majority of our growth in 2022 will come in the second half of the year. We are just getting started.

We are already executing on our strategy and we have much more to accomplish as we progress through the year.

Given the timing of our initiatives, we expect the majority of our growth in 2022 will come in the second half of the year. We are just getting started.

With that, I'll thank you for your attention. Operator, we're now ready to take questions.

With that I'll. Thank you for your attention operator, we're now ready to take questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

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At this time, we will pause momentarily to assemble our roster.

Before we take questions, I'd like to thank our stockholders for their support in passing all proposals as put forth in our 2022 proxy. We are pleased to announce that the results of voting at our annual meeting of stockholders, which was held yesterday, everything passed. So with that operator, we're ready for questions.

Before we take questions I'd like to thank our stockholders for their support and passing all proposals as put forth in our 2022 proxy.

We are pleased to announce that the results of voting at our annual meeting of stockholders, which was held yesterday everything past so with that operator, we're ready for questions.

Our first question will come from Jeffrey Cohen with Laydenberg-Sallman. Please go ahead.

Our first question will come from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

Hi, Justin and Andy. This is actually Destiny on for Jeff. Thank you for taking our questions. Andy, maybe first we can just circle back to the margins for modeling purposes. How should we be thinking about those throughout the remainder of 2022, given your commentary around some of the additional potential returns you could see throughout the year?

Hi, Justin and Andy This is actually destiny on for Jeff. Thank you for taking our question Andy maybe first we can just circle back to the margins for modeling purposes, how should we be thinking about those throughout the remainder of 2022, given your commentary around some of the additional potential returns you could see throughout the year.

I guess, hey, I've got to talk to you yeah.

Hi, Destiny. Good to talk to you. Yeah, so we feel comfortable with where we are at in terms of our accrual at the end of the first quarter for returns. You know, as I mentioned, there's always a risk of injury.

Feel comfortable with where we're at in terms of our accrual at the end of the first quarter for returns.

As I mentioned, there is always a risk of increase but.

But we believe that risk and the pool of potential returns is declining over time. So, you know, at this time, we don't anticipate any impacts from the return. As you know, our product mix has an impact on our margin.

But we believe that RASK and the pool of potential returns. It is declining over time. So you know at this time, we don't anticipate any impact on the returns as you know our product mix has an impact on our margins.

Derma doctors traditionally been right around 60% and we've been right around 70. So we'll land somewhere in between those two depending on the mix of products this year.

Jeremy Doctor has traditionally been a right around 60%.

We've been right around 70.

Land somewhere in between those two depending on the mix of products this year.

Yeah.

Okay, got it. And then I know you had some commentary around the synergies from consolidating the warehouse. I'm just wondering if you could talk a bit more about any supply chain disruptions you're noticing and have you had to take pricing at all to kind of offset the current inflationary pressure?

Okay got it and then I know you had some commentary around the synergies from consolidating the warehouse I'm. Just wondering if you could talk a bit more about any supply chain disruptions are noticing and have you had to take pricing at all to kind of offset the current inflationary pressures.

Yeah.

Yeah, so we are, as we said, you know, grateful for the timing and the fact that we can put inventory and components into the DermaDoctor warehouse and have greater control over our logistics and supply chain. So.

Yeah. So we are as we said.

Grateful for the timing and the fact that we can put inventory and components into the derma Doctor warehouse and have greater control over our logistics and supply chain. So.

You know, thankfully, and I'll knock on wood here, we haven't seen a material impact to our business.

Thankfully and I'll knock on wood here.

We haven't seen a material impact to our business from the supply chain. There is of course always a marginal increase but I wouldnt say one that has.

from the supply chain. There is, of course, always a marginal increase, but I wouldn't say one that has

materially affected our business and I think with our manufacturing, we have prices locked in at least, you know, through the rest of the year. So that pressure on our supply chain shouldn't be too great.

Materially affected our business and.

And I think with our manufacturing we have prices locked in at least you know through the rest of the year.

So that that pressure on our supply chain shouldnt be too great.

And as far as the price increase, we are considering it, but we also want to be conscious about our consumers and not raise prices and sort of defer, you know, any purchases or ability to obtain new customers. So I think that is, you know, to be fair, I'll say that we're considering it, but haven't implemented it yet.

And as far as the price increase we are considering it but we also want to be conscious about our consumers and not raise prices and sort of differ.

Any purchases or ability to obtain new customers. So I think that is.

To be fair I will say that we're considering it.

But haven't implemented it yet.

Got it okay, that's very encouraging.

Got it. Okay. That's very encouraging. And then I heard you mentioned

And then.

I heard you mention.

some additional sales to the physician dispensed channels. Is there anything to call out here in terms of trends or do you think additional sales here were more just from the reopening after the surge of COVID in January or how is that looking? And how do you think about that? Yeah, uh, so,

Some additional sales to the physician dispensed channels is there anything to call out here in terms of trend or do you think additional sales here are more just from the reopening after the surge of Covid in January or how is that looking and how do you think about that.

Yeah, So I'll say that is.

Q1 of 2021 was still impacted by COVID and I would say Q1 of 2022 was less so so you know nationwide we really didn't see a shutdown doctors were back in their offices

Q1 of 2021 was still impacted by Covid and I would say Q1 of 2022 was less so so nationwide, we really didn't see a shutdown doctors were back in their offices.

reselling Avenova and also writing prescriptions. So I think a lot of it is due to environmental factors there. Although I will say that we are sort of ramping up our digital marketing within the Physician Dispense channel, but, you know, we'll

Reselling Avenova and also writing prescriptions. So I think a lot of it is due to environmental factors.

There, although I will say that we are sort of ramping up our digital marketing within the physician dispensing channel.

But well.

that the Q1 difference is mostly just environmental.

The Q1.

Difference is mostly just environmental.

Okay got it and then maybe sticking with the topic of marketing could you discuss customer acquisition cost currently compare to your initial launch throughout your digital platforms and then what is anticipated to be going forward.

Okay, got it. And then maybe sticking with the topic of marketing. Could you discuss customer acquisition costs currently compared to your initial launch throughout your digital platforms, and then what it's anticipated to be going forward?

Yeah, so our customer acquisition cost, when we originally launched the OTC version,

Yes, so are our customer acquisition costs. When we originally launched the OTC version.

of Avenova in June 2019, say our customer acquisition cost was absurdly small, because we had a certain loyal following and this pent-up demand

Of Avenova in June 2019, so our customer acquisition cost was.

Absurdly small [laughter] because.

We had a certain loyal following and this pent up demand.

and sort of this problem where people love the product but couldn't get their hands on it. So initially we took advantage a lot of that

And sort of this this problem where people love the product, but couldn't get their hands on it so.

Initially we took advantage of lot of that sort.

brand awareness within the clinical and medical arena.

Sort of brand awareness within the clinical and medical.

Arena, but.

As we move more into the consumer arena, our customer acquisition cost is getting higher. And so I've talked about in the past how we think that Avenova is a really great

As we move more into.

The consumer arena, our customer acquisition cost is getting higher and so I've talked about in the past how we think that avenova is a really great.

product for people with lash extensions and false eyelashes and expanding into that market, the customer acquisition cost will be higher than what we have seen in the past. But one of our, you know, big initiatives to break into new markets is through corporate partnerships, brands that have

Product for people with lash extensions and false eyelashes.

And expanding into that market the customer acquisition costs will be higher.

Then what we have seen in the past, but one of our <unk>.

Big initiatives to break into new markets is through corporate partnerships.

<unk> that have istar.

establish themselves in that market and have a customer base of their own and would like to co-market or co-brand Avanoba with us. So I think there are definitely cost-effective ways for us to acquire entirely new customers in entirely new segments.

Establish themselves in the market and have a <unk>.

Customer base of their own and we'd like to co market or co brand Avenova with us. So I think there are definitely.

Cost effective ways for us to acquire entirely new customers an entirely new segment.

Got it you answered my next question about the last expansion markets. So thats, great maybe I'll just circle back to my last couple of questions to Derma Doctor could you talk about the pipeline currently not too much detail, obviously for competitive reasons, but maybe how many products you anticipate to launch in total to our 2022.

Two.

Yes.

We really can't say not only for competitive purposes, but we're evaluating all of those so sorry destiny.

You'll have to keep.

We'll have to keep your eye on us too.

To know.

Okay, fair enough. And then lastly for us, you mentioned bundling with the Abenova products. I'm curious. Are you also doing that with some of your Dermadopter products? And then if you could just just touch additionally on some of the feedback and maybe sales trends after Dr. Audrey's last appearance on QVC.

Okay Fair enough and then lastly for US you mentioned bundling with the Avenova products. I'm curious are you also doing that with some of the air Derma Doctor products and then if you could just touch. Additionally on some of the feedback and maybe sales trends after Dr. Rajiv last appearance on QBC.

Yeah, so I love these Kitted Bundles. They are a new addition and sort of not surprisingly, they really took off and I wish that we had done it sooner. But the Kitted Bundles for both Avenova and DermaDoctor, customers just really love them. And as far as Audrey on QVC, you know,

Yes, So I love these kitted bundles.

They are a new edition and.

Sort of not surprisingly they really took off.

I wish that we had done it sooner, but the kitted bundles for both Avenova in Derma Doctor customers, just really loved them.

And as far as Audrey on QVC.

Both of her appearances this year have gone over really, really well. Not only have we gotten good feedback from QVC itself, but we've gotten really good feedback from

Both of her appearances this year have gone over really really well.

Not only have we gotten good feedback from QVC itself, but we've gotten really good feedback from.

customers. And it's one of those things, you know, when you just are out there in the world promoting your products and you have good products and a very relatable person selling them, you know, a rising tide lifts all boats. So, you know, we saw an increase in dermatologist sales.

Customers and it's one of those things.

When you just are out there in the world promoting your products and you have good products and a very relatable person selling them.

A rising tide lifts all boats. So we saw an increase in derma doctor sales.

on our own website and then also through Amazon after her QVC appearances. So, I would say they were a big success. That's great.

On our own website and then also through Amazon after her QVC appearances, so I would say they were.

A big success.

That's great. Thank you again for taking our questions.

Thank you destiny.

Thank you.

Our next question comes from Rafi Khalid with Ascendant Capital Markets. Please go ahead.

Our next question comes from Rafi can lead with <unk> capital markets. Please go ahead.

Hi, this is Rafay for Agua de Ruba, the Athenian capital. Thanks for taking my call. Quick question. Any changes on the competitive side of that?

Hi, This is <unk> for Edward Woo.

Capital.

Thanks for taking my call quick question any changes in that competitive environment.

Well, you know, the skin care market is very crowded and competitive, but it has been for a very long time. You know, and both German doctor and Avenova have been, you know, solid brands for, you know, many years. So I do not see any changes in the recent environment that, you know, haven't been around for years before.

Well you know the skincare market is very crowded and competitive but it has been for a very long time.

And both German Doctor and Avenova have been.

The solid brands for.

Many years so.

I do not see any changes in the recent environment that.

Haven't been around for years before.

Okay, great. And are you seeing any macroeconomic slowdown?

Okay, Great and are you seeing any macroeconomic slowdowns.

We have not, not yet. We are keeping our eye on that and always keeping an eye on consumer confidence because that plays a big part in our success and ability to sell. But we have not so far seen any of that affect our business.

We have not not not yet.

We are keeping our eye on that.

And always.

Keeping an eye on consumer confidence.

Cause that.

It plays a big part in our success and ability to sell but we have not so far seen.

Any of that affect our business.

Great. Thank you very much.

Thank you.

This concludes our question and answer session. I would like to turn the conference back over to the Chief Executive Officer, Justin Hall, for any closing remarks.

This concludes our question and answer session I would like to turn the conference back over to the Chief Executive Officer, Justin Hall for any closing remarks.

Thank you once again for joining us and your interest in Novabay. We are extremely excited about our progress and the very bright future we embark on.

Thank you once again for joining us and your interest in Novabay. We are extremely excited about our progress and the very bright future. We envision we look forward to reporting progress during our Q2 2022 investor call in August in the meantime have a good day.

We look forward to reporting progress during our Q2 2022 investor call in August . In the meantime, have a good day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.