NexGel's Q3 2025 Earnings Call: Contradictions Emerge on AbbVie Partnership, EBITDA Outlook, Manufacturing Capacity, and Tariff Strategy

Date of Call: November 11, 2025

Financials Results

• Revenue: $2.9 million, flat year-over-year and slightly higher sequentially
• Gross Margin: 42.4%, compared to 39.3% in the prior year

Guidance:

• Q4 expected to increase sequentially and to be a record quarter for the company.
• Full-year 2025 revenue expected to be $12.0M–$12.5M.
• Adjusted EBITDA expected to narrow further in Q4 to very near breakeven.
• Q4 strength anticipated from contract-manufacturing reorders (including anticipated iRhythm orders) and holiday consumer-product sales; consumer demand is the primary wildcard.

Business Commentary:

* Revenue Stability and Growth Expectations: - NEXGEL reported $2.9 million in revenue for Q3 2025, flat year-over-year and slightly higher sequentially. - While revenue remained steady, the company expects a strong Q4 and a full-year 2025 revenue range of $12 million to $12.5 million, driven by contract manufacturing growth and potential consumer product success during the holiday season.

• Contract Manufacturing Performance:
• Contract manufacturing revenue totaled $907,000 for Q3 2025, with a slight increase year-over-year and sequentially.
• Growth was led by increased demand from existing customers, particularly Cintas, and new global corporation onboarding.

• Consumer Products Logistical Challenges:
• Consumer products revenue was stable year-over-year and sequentially but faced unforeseen logistical delays impacting product launches.

• Delays, worth around $100,000 to $200,000, were due to customs issues and new regulations, affecting the launch timing of new products like lip gloss.

• Path to Profitability and Cost Management:

• NEXGEL narrowed its adjusted EBITDA loss to $354,000 in Q3 2025, with expectations for further narrowing in Q4.

• This improvement was driven by consistent operational efficiencies and strategic cost management, contributing to the path towards profitability.

• Strong Cash Position and Inventory Expansion:

• The company held a cash balance of approximately $938,000 and a restricted cash balance of $920,000 as of September 30, 2025.
• This was bolstered by inventory expansion on both the consumer product and raw material sides for contract manufacturing, positioning the company for a strong Q4.

Sentiment Analysis:

Overall Tone: Positive

• Revenue was $2.9M (flat YoY); gross margin improved to 42.4% vs 39.3% prior year; adjusted EBITDA loss narrowed sequentially to -$354k (Q3) from -$419k (Q2) and -$500k (Q1). Management expects a record Q4 and full-year revenue of $12.0M–$12.5M with adjusted EBITDA near breakeven.

Q&A:

• Question from Nazibur Rahman (Maxim Group LLC, Research Division): I just want to start on the logistical delays you mentioned. Could you elaborate a little bit more on that? Like, how many days' worth of sales did it impact? And I guess, how much could those sales have been worth? I guess I'm trying to get a sense of what the underlying demand could have been or the impact.
  Response: Customs and regulation-related hold-ups delayed several launches (notably lip gloss to Sept 27), reducing potential sales by roughly $100k–$200k; overall impact described as frustrating but not devastating.

• Question from Nazibur Rahman (Maxim Group LLC, Research Division): I think on the call, you said you expect - you revised guidance of 12% to 12.5% for the full year. Obviously, the last couple of quarters have been flat. I guess what kind of gives you confidence in that number now, especially like the top end of that number? Are you seeing any tailwinds or any data points that would suggest that you could get there? Or is it more just the seasonality you expect?
  Response: Confidence comes from expected large Q4 contract-manufacturing shipments (reorders replacing one-time large initial orders and new iRhythm orders) and continued growth across other customers; consumer holiday demand remains the key uncertainty.

• Question from Nazibur Rahman (Maxim Group LLC, Research Division): I know previously, you talked about AbbVie and the RESONIC device. I know AbbVie took a large impairment charge exercise device recently. Do you know if they're still planning on launching the product and just what's kind of going on with that?
  Response: Management is uncertain and concerned—AbbVie indicated an RFQ then appears to have taken an impairment/charge; the company does not know AbbVie's final plans.

• Question from Kirtan Patel (Private Investor): So, what is the current order book like from the contract manufacturing side?
  Response: Order book is strong with ongoing orders from existing customers, a robust pipeline, and visibility for growth and onboarding over the next 2–3 quarters.

• Question from Kirtan Patel (Private Investor): Got it. And do you still have a strong cash position to be able to fulfill that orders?
  Response: Yes—management reports adequate cash and inventory built in Q3 to fulfill Q4 demand; as of Sept 30 cash ~$938k plus restricted cash ~$920k, with expected cash conversion as shipments and direct-to-consumer sales are collected.

• Question from Kirtan Patel (Private Investor): And from your last quarter, are you still expecting to achieve positive EBITDA during the -- by end of the year? Or has that changed?
  Response: Management expects adjusted EBITDA to reach very near breakeven by year-end, contingent on a strong consumer-products Q4; achieving positive EBITDA is possible but not guaranteed.

Contradiction Point 1

AbbVie and RESONIC Device Partnership Status

It involves the status of a key partnership with AbbVie, which impacts expectations about revenue and product development timelines.

Regarding AbbVie's RESONIC device, given their recent large impairment charge, are they still planning to launch the product, and what is the current status? - Nazibur Rahman (Maxim Group LLC, Research Division)

2025Q3: It's puzzling and frustrating. AbbVie said they were going to issue a PO soon, but then an impairment charge was taken. It's unclear what AbbVie's current status is regarding the RESONIC device. - Adam Levy(CEO)

What is the current status of the AbbVie partnership, and are there any updates? - Unidentified Analyst

2025Q2: AbbVie experienced delays with a different vendor, but the project is back on track. A 2026 start is expected, with a possibility of small orders before then. - Adam Levy(CEO)

Contradiction Point 2

Consumer Product Sales and Revenue Expectations

It involves expectations about consumer product sales and revenue, which are crucial for financial forecasting and investor expectations.

Are you still expecting to achieve positive EBITDA by the end of the year, or has that changed? - Kirtan Patel, private investor

2025Q3: Yes, we think we might achieve positive EBITDA by year-end. It depends on the performance of consumer products in Q4. - Adam Levy(CEO)

What is the revenue opportunity with the iRhythm partnership? - Nazibur Rahman (Maxim Group LLC)

2025Q2: We are optimistic about achieving positive EBITDA this year. - Adam Levy(CEO)

Contradiction Point 3

Contract Manufacturing Capacity and Order Book

It involves the capacity and order book for contract manufacturing, which impact production capabilities and revenue projections.

How is the current order book in contract manufacturing? - Kirtan Patel, private investor

2025Q3: The order book is strong, with existing customers continuing to order and growth along the CAGRs of their medical devices. There's a robust pipeline of potential new customers. We're very bullish on contract manufacturing growth over the next 2 to 3 quarters, with visibility that far out. - Adam Levy(CEO)

Could you provide details on your current manufacturing capacity for supplying additional partners and the available capacity? - Nazibur Rahman (Maxim Group LLC)

2025Q2: Manufacturing capacity is low but sufficient for current needs. Key focus is onboarding more customers, with several in the pipeline. - Adam Levy(CEO)

Contradiction Point 4

Tariffs and Manufacturing Strategy

It involves changes in the company's strategic response to tariff fluctuations, which can affect operations and costs.

What is the current order book status for contract manufacturing? - Kirtan Patel (Private Investor)

2025Q3: We have room to transition manufacturing to Texas, but with current tariffs, it's manageable. We have inventory to cover potential changes. If tariffs escalate significantly, we would consider moving manufacturing to Texas, but it's not an ideal situation. - Adam Levy(CEO)

What is the impact of tariffs on manufacturing if they return to abnormally high levels? - Nazibur Rahman (Maxim Group)

2025Q1: We have room to transition manufacturing to Texas, but with current tariffs, it's manageable. We have inventory to cover potential changes. If tariffs escalate significantly, we would consider moving manufacturing to Texas, but it's not an ideal situation. - Adam Levy(CEO)

Contradiction Point 5

EBITDA Projections and Achievability

It involves changes in financial forecasts, specifically regarding profitability expectations, which are critical indicators for investors.

Are you still expecting to achieve positive EBITDA by year-end, or has that changed? - Kirtan Patel (Private Investor)

2025Q3: Yes, we think we might achieve positive EBITDA by year-end. It depends on the performance of consumer products in Q4. The strong Q4 expected in contract manufacturing, along with a good consumer products quarter, could help achieve this. - Adam Levy(CEO)

Are equity and debt your primary financing sources? What is AbbVie's baseline revenue run rate? - Eric Ramos (Titan Capital Management)

2025Q1: We will not achieve positive EBITDA this year and next year. - Adam Levy(CEO)