NovaBay Pharmaceuticals, Inc. (NYSE:NBY) Q1 2023 Earnings Conference Call May 11, 2023 4:30 PM ET Company Participants Jody Cain - LHA, IR Justin Hall - Chief Executive Officer and General Counsel Tommy Law - Interim Chief Financial Officer Conference Call Participants Anderson Schock - Ladenburg Thalmann Operator Welcome to the NovaBay Pharmaceuticals First Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. Following management’s prepared remarks, we wil ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33678 NOVABAY PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 68-0454536 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33678 NOVABAY PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdic ...

Financial Data and Key Metrics Changes - The net product revenue for the fourth quarter of 2022 increased 15% year-over-year to $3.6 million, including $2.1 million from Avenova, $1 million from DERMAdoctor, and $0.4 million from wound care products [47] - For the full year 2022, product revenue was $14.4 million, a 41% increase over 2021, reflecting a full year of DERMAdoctor product sales [21] - The net loss attributable to common stockholders for Q4 2022 was $8.2 million or $0.433 per share, which included a large non-cash impairment charge of $6.7 million [48] Business Line Data and Key Metrics Changes - Avenova continues to be the highest revenue driver and highest gross margin product, with sales of companion products growing steadily [17] - The introduction of Eyeganics Organic Tears, a USDA certified organic eye drop, adds to the eye care portfolio [3] - DERMAdoctor's new KP Duty peel pads were introduced, focusing on customer loyalty and attracting new users [4] Market Data and Key Metrics Changes - The global market for dry eye is expected to reach nearly $9 billion by 2030, with 49 million Americans suffering from dry eyes [2] - The company is focusing on international growth opportunities, particularly in China and the EU for DERMAdoctor products [29] Company Strategy and Development Direction - The company aims to leverage relationships with eye care professionals to enhance the Avenova brand and expand its customer base [27] - A shift in strategy for 2023 focuses on selling existing products more effectively rather than launching new ones [38] - The company plans to expand its eye care portfolio with additional innovative products for dry eye and other ophthalmic conditions [45] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the impact of external factors like the COVID-19 pandemic and geopolitical tensions on operations and financial results [1] - The company expects continued growth in the wound care sector and aims to optimize digital marketing efforts [25][31] Other Important Information - The company completed the acquisition of DERMAdoctor in November 2021, and the financial results reflect operations post-acquisition [5] - R&D expenses for 2022 were $174,000, significantly higher than $44,000 in the prior year, indicating increased investment in product development [6] Q&A Session Summary Question: Can you discuss Q4 margins and expectations for 2023? - Management noted that lower margins in Q4 were due to higher sales of lower-margin products, but Avenova's margins remain strong. Future margins will depend on product mix [25] Question: What is the company's approach to M&A? - The company is committed to pursuing M&A opportunities, particularly in the eye care vertical, and aims to leverage existing relationships with eye care professionals [54] Question: What are the expectations for international growth? - The company sees significant growth opportunities in China and the EU for DERMAdoctor products and plans to align distributors to support this growth [29]

Financial Data and Key Metrics Changes - Product revenue for Q3 2022 was $3.8 million, a 69% increase from the prior year period, driven by the acquisition of DERMAdoctor and diversified revenue streams [5][26] - Gross margin for Q3 2022 was 62%, down from 69% in Q3 2021, primarily due to the addition of DERMAdoctor and wound care product sales [27] - Net loss attributable to common stockholders for Q3 2022 was $5.8 million or $0.10 per share, compared to a net loss of $2.3 million or $0.05 per share in Q3 2021 [31] Business Line Data and Key Metrics Changes - Avenova spray sales for Q3 2022 were $1.9 million, down from $2.1 million a year ago, attributed to a shift to a more efficient online sales channel [26] - DERMAdoctor product sales reached $1.3 million in Q3 2022, marking the highest sales quarter since the acquisition [26] - Sales and marketing expenses decreased by 11% to $1.8 million, despite the addition of DERMAdoctor sales and marketing costs [28] Market Data and Key Metrics Changes - The company reported that more than two-thirds of Avenova unit sales were generated online, indicating a successful shift to digital marketing [7][8] - The skincare eCommerce market in the US is projected to reach $18 billion in 2022, with significant growth expected in the coming years [11] - The company is expanding its presence in international markets, particularly in China and Europe, with a focus on increasing brand awareness [15][16] Company Strategy and Development Direction - The company aims to capitalize on established brands in eye care, skin care, and wound care, with plans to introduce new products and expand digital marketing efforts [34] - Increasing DERMAdoctor's presence in international markets is a key priority, leveraging strong local partnerships for market penetration [14][15] - The company is focused on optimizing marketing tactics and expanding target demographics to drive sales growth [40][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth, particularly in online sales and international markets [5][34] - The company acknowledged potential risks from external factors such as the COVID-19 pandemic and geopolitical tensions [4] - Management highlighted the importance of adapting marketing strategies to reach new demographics, particularly younger consumers for Avenova [42] Other Important Information - The company held a special meeting of stockholders, approving a one-for-thirty-five reverse stock split to regain compliance with NYSE listing requirements [20][21] - The company reported cash and cash equivalents of $3.9 million as of September 30, 2022, including proceeds from a warrant reprice transaction [33] Q&A Session Summary Question: Inquiry about marketing expense reduction - Management confirmed that the 11% decrease in sales and marketing expenses was due to improved digital marketing tactics, cross-selling, and upselling opportunities [39][40] Question: Expansion of demographic targeting - Management indicated that Avenova is targeting a younger demographic due to the prevalence of dry eye issues among younger consumers, while DERMAdoctor is expanding into new geographic territories [42][43] Question: Commercialization process in Europe - Management stated that they are onboarding a partner to serve as the main distributor for the European Union, with potential revenue expected in early 2023 [45][46] Question: Impact of lower margins - Management explained that lower margins were primarily due to the addition of DERMAdoctor products and increased wound care sales, which generally have lower margins [47][49]

Financial Data and Key Metrics Changes - Net product revenue for Q2 2022 was $3 million, a 43% increase from $2.1 million in the prior year period [23] - Gross margin for Q2 2022 was 51%, down from 71% in Q2 2021, primarily due to the addition of DERMAdoctor product sales [24] - Year-to-date product revenue for the first half of 2022 was $5.7 million, a 44% increase over the prior year period [27] - The net loss for the first half of 2022 was $2.2 million or $0.04 per share, compared to a net loss of $3.4 million or $0.08 per share in the same period of 2021 [29] Business Line Data and Key Metrics Changes - Avenova branded product sales for Q2 2022 were $1.8 million, with significant growth attributed to online sales channels [23] - DERMAdoctor product sales contributed $0.6 million in Q2 2022, reflecting the impact of the acquisition completed in November 2021 [22][23] - Sales of NeutroPhase and Phase 1 branded wound care products were $0.6 million, with expectations for additional fulfillment in the second half of the year [24] Market Data and Key Metrics Changes - Online sales of Avenova Spray increased year-over-year, with a notable 27% increase during Amazon's Prime Day compared to 2021 [7] - The majority of Avenova unit sales were generated through Amazon, highlighting the effectiveness of this sales channel [8][41] Company Strategy and Development Direction - The company is focused on diversifying and expanding its product portfolio, with a strategy to enhance digital marketing and broaden demographic targets [9] - Expansion into the beauty market with Avenova is a key initiative, targeting women using eyelash extensions [10] - International expansion, particularly in China and the EU, is a priority, with partnerships established to enhance market presence [15][49] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth in the second half of 2022, anticipating that the majority of growth will come from ongoing initiatives [18][32] - There is caution regarding potential macroeconomic slowdowns, but current consumer sentiment is not expected to materially impact the business [47] - The company is confident in its ability to capture growth opportunities in both domestic and international markets [48][49] Other Important Information - The company launched seven new products since the beginning of 2022, maintaining relevance in a rapidly changing industry [15] - The new VP of Commercial, Kim Shartsis, brings over 20 years of experience in consumer brand management to support growth initiatives [19] Q&A Session Summary Question: What is the expected operating expense for the back half of the year? - Management indicated that operating expenses might be closer to $4 million rather than $5 million, with a slight uptick in sales and marketing expenses expected [36] Question: Can you provide details on the retailer order for DERMAdoctor? - The retailer has committed to orders for the Kakadu C serum, expected to be fulfilled in Q3 and Q4 [38][39] Question: What trends are observed in online versus brick-and-mortar sales? - The company noted that online sales, particularly through Amazon, are more efficient for customer acquisition compared to traditional retail [40][41] Question: What are the expectations for gross margins in the second half of the year? - Management anticipates gross margins to improve in the second half, with Avenova products traditionally having higher margins than DERMAdoctor products [42][43] Question: Are there any expected macroeconomic slowdowns? - While skin care and beauty products are often considered recession-proof, management acknowledged the potential for future impacts from macroeconomic conditions [46][47] Question: How is the international expansion progressing? - The company is actively pursuing growth opportunities in China and the EU, with strong connections and plans for market development [48][49]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33678 NOVABAY PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 68-0454536 ...

NovaBay Pharmaceuticals, Inc. (NYSE:NBY) Q1 2022 Earnings Conference Call May 12, 2022 4:30 PM ET Company Participants Jody Cain - LHA Investor Relations Justin Hall - Chief Executive Officer and General Counsel Andy Jones - Chief Financial Officer Conference Call Participants Destiny Hance - Ladenburg Thalmann Edward Woo - Ascendiant Capital Markets Operator Good afternoon and welcome to NovaBay Pharmaceuticals First Quarter 2022 Financial Results Conference Call. All participants will be in listen-only m ...

Financial Performance - The company incurred a net loss of $111 thousand for the three months ended March 31, 2022, compared to a net loss of $1.5 million for the same period in 2021 [171]. - As of March 31, 2022, the company had an accumulated deficit of $142 million and current assets totaling $12.5 million [171]. - Product revenue increased by $0.8 million, or 46%, to $2.6 million for the three months ended March 31, 2022, compared to $1.8 million for the same period in 2021 [207]. - Gross profit increased by 12%, reaching $1.5 million for the three months ended March 31, 2022, compared to $1.4 million for the same period in 2021 [213]. - Non-cash gain on changes in fair value of warrant liability was $2.1 million for the three months ended March 31, 2022, following the reclassification of the warrant liability to equity [218]. - Net cash used in operating activities was $2.1 million for the three months ended March 31, 2022, primarily due to a net loss of $111 thousand [221]. - As of March 31, 2022, cash and cash equivalents were $5.6 million, down from $7.5 million as of December 31, 2021 [220]. Acquisition and Product Development - The company acquired DERMAdoctor, LLC for approximately $12.0 million, with an additional $3.0 million contingent consideration based on achieving specific contribution margin targets [168]. - The acquisition of DERMAdoctor contributed $0.9 million in product revenue for the three months ended March 31, 2022, with no comparable revenue in 2021 [211]. - The company expanded its Avenova product offerings, adding Avenova Moist Heating Eye Compress and i-Chek, and partnered with ImprimisRx to promote Avenova Spray [170]. Sales and Marketing Strategy - The company expects to grow commercial sales of Avenova and DERMAdoctor branded products through domestic and international market expansion, particularly focusing on online channels [172]. - The company anticipates focusing sales and marketing resources on the DERMAdoctor brand moving forward [214]. - Revenue from Avenova Spray decreased by $0.2 million to $1.4 million for the three months ended March 31, 2022, due to increased returns from retail pharmacies [210]. - DERMAdoctor products experience higher sales in summer for sunscreen and antiperspirants, and in fall/winter for moisturizers, with a notable uptick during the fourth quarter holidays, especially in the U.S. and China [232]. Expenses and Inventory Management - General and administrative expenses increased by $1.0 million, or 84%, to $2.2 million for the three months ended March 31, 2022, from $1.2 million for the same period in 2021 [215]. - Cost of goods sold rose by 145%, to $1.1 million for the three months ended March 31, 2022, from $0.5 million for the same period in 2021, primarily due to $0.5 million in costs from DERMAdoctor products [212]. - Advertising expenses were $0.6 million for the three months ended March 31, 2022, down from $0.7 million in the same period in 2021 [197]. - The company recorded an allowance for excess and obsolete inventory adjustments of $522 thousand as of March 31, 2022 [177]. Financial Obligations and Risk Management - As of March 31, 2022, total contractual obligations amounted to $2.68 million, with facility leases accounting for $2.67 million and equipment leases for $9 thousand [233]. - The total commitment for facility leases increased from $0.5 million as of December 31, 2021, to $2.7 million as of March 31, 2022 [234]. - The company has limited exposure to market risk, primarily interest rate risk on cash and cash equivalents, with a 10% change in interest rates having an immaterial effect on the investment portfolio [237]. - The investment policy focuses on high-quality investments, capital preservation, liquidity assurance, and minimizing capital taxation, with no use of derivative financial instruments [237]. - The company maintains cash and cash equivalents in short-term marketable securities to mitigate interest rate risk [237]. - There has been no material exposure to foreign currency rate fluctuations due to the focus on the domestic U.S. market [238].

Financial Data and Key Metrics Changes - Product sales for Q4 2021 increased by 40% compared to the prior year period, with Avenova sales increasing by 15% and unit sales rising by 31% [5][15] - Total net sales for 2021 were reported at $8.4 million, which includes $6.8 million in Avenova spray sales, up 15% from 2020 [21][23] - Gross margin for Q4 2021 was 54%, down from 57% in Q4 2020, primarily due to a reduction in revenue from higher margin pharmacy channels [16] - Net loss attributable to common stockholders for Q4 2021 was approximately $900,000 or $0.02 per share, a significant decrease from a net loss of $1.8 million or $0.04 per share in the prior year [20] Business Line Data and Key Metrics Changes - Avenova spray sales in Q4 2021 were $1.6 million, up 11% from the prior year quarter, with total Avenova unit sales increasing by 13% [15] - DERMAdoctor product sales contributed approximately $600,000 in Q4 2021 [15] - The company launched two new products in 2022, including lubricating eye drops and a hyaluronic acid moisture recovery serum [7][9] Market Data and Key Metrics Changes - The global lash extension market is projected to grow at a rate of 7.6% through 2031, reaching $2.4 billion in sales [27] - The company is expanding its marketing activities outside the United States, particularly in China, by engaging a leading marketing firm to drive consumer sales of DERMAdoctor products [12] Company Strategy and Development Direction - The acquisition of DERMAdoctor in November 2021 marked a significant transition for the company, diversifying its product portfolio and expanding its presence in the eye care and skincare markets [6] - The company plans to introduce innovative over-the-counter products under both Avenova and DERMAdoctor brands, with a focus on expanding the addressable market into the beauty industry [26] - The strategy includes leveraging social media and influencer campaigns to enhance brand engagement and awareness [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth potential in 2022, anticipating that most growth will occur in the second half of the year [30] - The company has no debt instruments, positioning it favorably against rising interest rates and providing a clear path to profitability [30] Other Important Information - As of December 31, 2021, the company had cash and cash equivalents of $7.5 million, which is deemed sufficient to fund operations through the coming year [24] - The company has increased its board size from 6 to 8 directors, adding significant expertise to reflect its transformed business [29] Q&A Session Summary Question: What are some of the other segments you are looking into and which product lines are you looking to extend further in 2022? - Management indicated that while they are developing new products, they prefer not to disclose the entire product pipeline for competitive reasons [37] Question: Are you noticing that a larger portion of repeat customers are buying another product and opting in on their second purchase? - Management noted that repeat purchases often occur after the first purchase, with many customers opting for subscribe and save or multipacks after trying the product [39] Question: Can you discuss some of the buying trends associated with QVC? - Management observed that QVC appearances lead to immediate sales and a subsequent spike in sales across other channels, particularly Amazon [41] Question: What are some of the near-term campaigns or initiatives in China? - Management emphasized the importance of local partnerships and influencer marketing in China, while maintaining consistent branding and messaging [43] Question: Do you have any issues or impacts from supply chains? - Management confirmed that while they have faced challenges, they have successfully managed supply chain issues without significant interruptions [46]