NovaBay Pharmaceuticals, Inc.

Q2 2024 net sales were $2.4 million versus $3.5 million in Q2 2023. Eyecare sales increased 8% year over year in the quarter, while gross margin on net product revenue rose to 66% from 49%. Sales and marketing expense was $1 million, down 13% year over year, and G&A was $1.6 million, flat year over year. Net loss attributable to common stockholders was $1.6 million, or $1.37 per share, versus a net loss of $4 million, or $44.43 per share, in Q2 2023. For the first half, net sales were $5 million, eyecare sales were $4.8 million, gross margin was 67% versus 57%, and net loss attributable to common stockholders was $5.2 million, or $5.57 per share, versus $5.8 million, or $77.42 per share, a year ago. Cash and cash equivalents were $0.8 million at June 30, 2024, and the company raised approximately $3.9 million in gross proceeds in a late-July public offering. Management reiterated confidence in reaching approximately $10 million of eyecare revenue for the year. It also said it expects some wound care orders later in 2024 and into 2025, but not as large as in 2023, and it expects Q3 to show incremental growth with a stronger Q4.

Justin Hall framed the quarter as another period of eyecare growth driven by Avenova online and subscription sales. He emphasized a strategic shift away from expensive top-of-funnel spending toward Subscribe & Save customers, saying the goal is to build predictable recurring revenue and improve efficiency. He also highlighted Prime Day strength, product bundling, and the importance of physician-dispensed channels for bringing in low-cost, sticky customers. His tone was constructive and forward-looking, with a clear emphasis on partnerships and a possible transaction that could fundamentally change the business.

Tommy Law focused on the mix shift toward higher-margin eyecare products and the benefits of lower-margin wound care orders not repeating at the same level. He noted Q2 gross margin of 66%, first-half gross margin of 67%, sales and marketing expense of $1 million in Q2, G&A of $1.6 million, and first-half DERMAdoctor divestiture-related expense of $0.9 million. He also highlighted cash and cash equivalents of $0.8 million at quarter-end and the roughly $3.9 million gross capital raise completed after quarter end. On dilution, he noted the outstanding share count is now about 4.9 million shares after investors exercised all prefund awards from the offering.

Analysts focused on wound care revenue lumps, marketing efficiency, subscription economics, seasonality, physician-dispensed channels, and partnership strategy. Management said remaining wound care orders should come later in the year and into 2025, but not at the same scale as 2023, and said the marketing strategy now centers on subscription conversion and retention rather than heavy customer acquisition. Justin Hall added that Q4 is usually stronger because of physician-dispensed and back-to-school pushes, and said the company does not plan to expand internationally on its own because it lacks the footprint and relationships, preferring partnerships. On Amazon advertising, he said costs have remained fairly consistent even as industry-wide ad prices rise, with close monitoring of Google and Meta spend.