• Q4 net sales from the eyecare and wound care segment grew 10% over the prior year with higher sales from the Avenova^® physician dispensed and OTC channels, and from branded wound care products
• Sales and marketing expenses for the quarter declined 27% reflecting digital marketing optimization
• Divestiture of skincare segment expected to bolster cash position and reduce operating expenses
• Continued execution on eyecare growth strategy including recent co-marketing partnership

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

NovaBay^® Pharmaceuticals, Inc. (NYSE American: NBY) reports financial results for the three and 12 months ended December 31, 2023 and provides a business update.

“Quarterly revenue from our eyecare and wound care segment increased 10% versus the prior year, driven by higher Avenova sales through our physician dispensed and OTC channels, and by higher sales of our branded wound care products,” said Justin Hall, CEO of NovaBay. “Last year we expanded our loyal customer base for Avenova with a 64% year-over-year increase in online subscription-based unit sales on Amazon.com and Avenova.com, our two most important OTC sales channels. We achieved this while reducing our sales and marketing spend by 17% for the year, including a 27% reduction for the quarter, by further leveraging our digital marketing expertise."

“Further, the declining sales from skincare products prompted the recent divestiture of DERMAdoctor^®, which reduces our operating expenses and better positions us to pursue strategic initiatives that have a greater potential for growth,” he added.

“We recently announced a co-promotion agreement with Eyenovia that capitalizes on our established relationships with eyecare professionals and are seeking additional strategic growth opportunities in the eyecare market,” said Mr. Hall.

Fourth Quarter Financial Results

Total sales, net for the fourth quarter of 2023 were $3.7 million, an increase of 2% from $3.6 million for the prior-year period, with the increase due to higher Avenova and wound care product sales. Net product revenue for the fourth quarter of 2023 included $2.8 million from the eyecare and wound care segment, and $0.9 million from the skincare segment.

Gross margin on net product revenue for the fourth quarter of 2023 was 49%, compared with 48% for the fourth quarter of 2022.

Sales and marketing expenses for the fourth quarter of 2023 were $1.4 million, a 27% decrease from $1.9 million for the prior-year period, reflecting lower digital advertising costs and lower expenses for outside professional services. General and administrative (G&A) expenses for the fourth quarter of 2023 were $1.2 million, a 51% decrease from $2.4 million for the prior-year period, with the decrease due primarily to a decrease in both headcount and the use of outside professional services. Research & development (R&D) expenses also decreased for the fourth quarter of 2023 to $4 thousand, versus $66 thousand for the prior-year period.

The Company recorded goodwill, intangible and other asset impairment charges for the fourth quarters of 2023 and 2022 of $2.6 million and $6.7 million, respectively, related to the impairment of the DERMAdoctor business.

Non-cash gain on changes in fair value of warrant liability for the fourth quarters of 2023 and 2022 were $56 thousand and $976 thousand, respectively. Non-cash gain on changes in fair value of contingent liability for the fourth quarter of 2022 was $342 thousand and was related to the operations of DERMAdoctor, which was recently sold.

Other expense, net for the fourth quarter of 2023 was $766 thousand, consisting primarily of interest expense and the amortization of discounts on convertible notes issued in May 2023. This compared with other expense, net for the fourth quarter of 2022 of $98 thousand.

Net loss attributable to common stockholders for the fourth quarter of 2023 was $9.2 million, or $1.33 per share, which included a non-cash adjustment of $5.1 million due to the reset of preferred stock conversion prices. This compared with a net loss attributable to common stockholders for the fourth quarter of 2022 of $8.2 million, or $4.33 per share.

Full Year Financial Results

Total sales, net for 2023 were $14.7 million, an increase of 2% from $14.4 million for 2022, and included $11.2 million from the eyecare and wound care segment, and $3.6 million from the skincare segment.

Gross margin on net product revenue remained relatively unchanged for 2023 and 2022 at 54%.

For 2023, sales and marketing expenses decreased by 17% and G&A expenses decreased by 15%, both compared with 2022. R&D expenses for 2023 were $68 thousand, versus $174 thousand for the prior year.

The Company recorded goodwill, intangible and other asset impairment charges for 2023 and 2022 of $2.6 million and $6.7 million, respectively, related to the impairment of the DERMAdoctor business. Goodwill, indefinite-lived intangible assets and long-live assets related to the DERMAdoctor business were fully impaired through December 31, 2023.

Non-cash loss on modification of common stock warrants for 2023 and 2022 was $0.3 million and $1.9 million, respectively, and related to private placement and warrant reprice transactions. Non-cash gain on changes in fair value of warrant liability for 2023 and 2022 were $0.3 million and $5.4 million, respectively. Non-cash gain on changes in fair value of contingent liability for 2022 was $0.6 million with no comparable item in 2023.

Other expense, net for 2023 was $2.1 million, versus other expense, net of $0.3 million for 2022, with the increase primarily due to the amortization of discount and issuance costs related to the convertible notes issued in May 2023.

Net loss attributable to common stockholders for 2023 was $16.7 million, or $3.96 per share, which included a non-cash increase to accumulated deficit due to adjustment to preferred stock conversion prices of $7.1 million. This compared with a net loss attributable to common stockholders for 2022 of $16.3 million, or $10.10 per share, which included a non-cash increase to accumulated deficit due to adjustment to preferred stock conversion prices of $5.7 million.

NovaBay had cash and cash equivalents of $3.1 million as of December 31, 2023, compared with $5.4 million as of December 31, 2022.

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 given a conference passcode and unique PIN 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 833-816-1121 from within the U.S. or 412-317-1862 from outside the U.S., and requesting the NovaBay Pharmaceuticals call.

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 two hours after the call ends through April 15, 2024 by dialing 877-344-7529 from within the U.S., 855-669-9658 from Canada or 412-317-0088 from outside the U.S. and Canada, and entering the conference identification number 1489846.

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

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