Execution RiskThe focus in 2H24 shifts to execution, in our view. We expect revenue to continue to increase and expenses to now decline as initiatives come to fruition, ultimately putting NexGel on a path to positive cash flow and eventually profitability.
Profitability ChallengesNexGel’s gross margin improved to 28%, from 22% in 1Q24, but we note that is due to the Silly George contribution which is associated with more marketing costs unlike NexGel’s contract manufacturing.
Revenue DependencyThe 3Q24 revenue numbers do not include the impact of the Cintas Corporation supply agreement, which can further accelerate sales in 4Q24 and 2025.