Greetings and welcome to the Biofrontera, Inc. Fourth quarter 2022 Financial Results Call. At this time, all participants are in a listen-only mode and a question-and-answer session will follow the form of presentation. I will now turn the conference over to your host, Mr. Toni [ph]. You may begin.

Thank you. Good afternoon and welcome to Biofrontera, Inc.'s conference call to discuss our fourth quarter and full year 2022 financial results. I'm joined today by Biofrontera Chief Executive Officer Erica Monaco and Chief Financial Officer, Fred Leffler. Before turning the call over to Erica, I would like to remind everyone that on the call today we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are based on bio Biofrontera's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's earnings release and our filings with the US Securities and Exchange Commission. Biofrontera undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. I would also note that during this call, management will refer to certain non-GAAP financial measures such as adjusted EBITDA. Management believes that these measures provide meaningful information for investors and reflect the way they view the operating performance of the company. You can find a reconciliation of our GAAP to non-GAAP measures at the end of the earnings release. With that, I'd like to turn the call over to Erica Monaco. Erica?

Thank you, Tony, and thank you to everyone tuning into our call today. We appreciate your interest in Biofrontera. 2022 was Biofrontera's first full year as a public company. It was an eventful year and I am proud of our team's many accomplishments. We achieved record annual revenues in 2022, up 19% over 2021 and 12% higher than our previous record, which was the pre-COVID year 2019. Coming off of this landmark here, I want to pause for a moment and recognize today, March 08 as International Women's Day. This year's theme is to embrace equity. As a female business leader, I am proud to support an organization that values and embraces inclusion of all. Biofrontera is 58% female and proud to be contributing to a more inclusive world. Today, I would like to celebrate the amazing employees and industry partners we have, the challenge of the status quo, make an impact and drive for change. On the business front, we are making a measurable impact in the AK marketplace in terms of both awareness and market share, and we completed much of the necessary investment to build out our commercial infrastructure. Revenues for Q4 2022 were slightly lower than planned, yet this does not reflect lower customer demand or any loss of market share. While the pace of Ameluz's PDT treatments was pretty much as we expected, shipments and revenue were impacted by a combination of weather-related delays as well as specific territory vacancies that prevented order processing. Now, before I move into the deeper business discussion, I will hand it over to Fred to share our Q4 and full year results.

Thank you, Erica. It's great to be holding this call and discussing a strong year for Biofrontera. I'll start with a review of our financial highlights for the fourth quarter of 2022. Revenues in the quarter were $10.1 million, up 11% over fourth quarter 2021. This increase was driven by continued growth in sales of Ameluz, partially offset by some shipping delays and challenges in a few of our sales territory at the end of the quarter. Erica will elaborate on this in her remarks. We incorporate our cost of revenue as an operating expense and not as cost of goods sold. So within total operating expenses in the fourth quarter, the cost of revenue was $5.3 million, up about 10% year-over-year, which is in line with our revenue growth for the quarter. Selling, general and administrative expenses were $10.2 million in the fourth quarter of 2022, up 10% versus the fourth quarter 2021 roughly in line with the growth in revenues. We made investments in our G&A functions, particularly those that underpin revenue to support our growth plans and the ramp up here is mostly complete. We do not expect significant increases between now and the point we become cash flow positive. While we continue to invest in our commercial team, we expect that the selling expense growth should be generally in line with revenue growth in the short term. Longer term, we expect SG&A leverage as these expenses will grow slower than revenues as we reach our target commercial structure. Adjusted EBITDA was negative $4.4 million for the quarter compared with negative $3.2 last year. Now turning to our full year financial results, total revenues were $28.7 million versus $24.1 million in 2021, representing an increase of $4.6 million or 19%. These were record annual revenues for Biofrontera…

Thank you, Fred. Moving into 2023, we have seen strong order and shipping volumes in January and February, which is a good indicator of ongoing customer demand. We've also been addressing the sales territory challenges, which I will discuss in a moment. Looking forward, Biofrontera is well positioned for success and we are optimistic as we kick off 2023 for five primary reasons. One, much of our commercial infrastructure is now in place forming a strong foundation upon which we will grow our business. This includes the rollout of our advisory council, comprised of five KOLs across various industry platforms, the addition of an inside sales function, stronger data and analytic tools and resources, and a strategic plan for developing larger corporate accounts. Two, cryotherapy has been historically broadly utilized by dermatologists due to convenience and past reimbursement levels. However, recent shifts in reimbursement and treatment guidelines favor field directed therapy as opposed to single legion therapy, and this should further support sales of PDT treatment. Three; following a year of accomplishments and recognition of our strengthened medical affairs and marketing efforts, our customers are becoming increasingly better educated about the use and benefits of our PDT therapy, which should help drive demand. Four, as we continue our education initiatives in 2023, our focus on the patient continuum of care will encourage physicians to incorporate field treatment with Ameluz's PDT into their AK treatment plans. This will support real world treatment paths while also providing a more comprehensive approach to disease management. And five, as Fred mentioned, we are investing in our key growth lever, our sales force. In fact, this year we plan to expand the sales force by adding another regional team comprised of eight new sales reps and a regional manager. Taking all of these factors into…

Thanks, Erica. Ali, can we open up the lines for questions please?

Thank you. At this time, we will be conducting a question-and-answer session. [Operator instructions] Our first question is coming from Jonathan Aschoff with ROTH MKM. Please go ahead.

Thank you. Good afternoon, and congrats on the progress. I was wondering how many docs of all the docs that are using Ameluz are using three tubes with the Excel lamp or are they still spreading one tube more thinly to cover a vastly greater area than the label says to use it for? And I guess what percentage of the docs that use Ameluz even have the Excel lamp?

Oh, hi Jonathan. Thank you for the questions. Let me try to break that one down in terms of, first, let me address the Excel. So we've not launched the Excel lamp yet in the United States. There are some supply chain challenges that we are working through, and I will update everybody when we're able to better predict when we will be launching that. So everybody that's in the US using our lamp is using our current traditional BF-RhodoLED model, in terms of multiple tubes in a treatment, it is not in line with the label, and so typically you would expect insurance companies to not reimburse for that, and in some situations they may be still using the competitive product if they want to treat multiple areas in one therapy. So, it's not something you can tell necessarily from the market data, but based on reimbursement, it is unlikely that they are using multiple tubes right now.

Okay. And everybody who wants the smaller land can get one. There's no supply issue there, is that correct?

Correct.

So what would you say are some of the biggest the biggest headwind or some of the biggest headwinds to either, hiring or maintaining salespeople? What's the hiring headwind, attrition rate influences?

Sure. I think that we probably echo the same sentiment that a lot of people in the industry are feeling in terms of turnover. What we've been seeing is somewhere between 25% to 30% turnover, which is actually fair is better than the industry average right now pre or post-COVID. So I think we're comfortable with that attrition rate. However, we are trying to make this an attractive place to work and setting reasonable goals and targets and focusing on low cost, no cost initiatives that help boost morale and really focus on our people. It is our greatest line item. It's our largest operating expense, and so of course, asset it's our greatest asset, greatest expense, and we need to be mindful of all of those factors. And so we take that into consideration when planning the expansion and planning how to continue to motivate and retain. So going forward in terms of expansion headwinds, I don't necessarily foresee any. I think we've -- as you can see from some of the posts online, we've already been posting positions as part of this expansion, and we've had really great success in terms of interviewing and meeting and getting to know these people, and we're looking forward to bringing them all on board formally and being able to announce that to the public soon.

Okay. Thank you Erica. Just two more short ones. What was the magnitude of that late shipping amount in the fourth quarter that, presumably will be first quarter revenue instead?

I don't know that you can precisely quantify, specific orders. I think what we saw in early January was certainly an uptick from what we anticipated which is clearly tied to orders that weren't able to ship in those last few days and during some of the unfortunate weather events that took place across the country. But, I think it will be more evident as we result on Q1, how that performance looked.

Okay. And then lastly would you care to share a share account? There's no share account in the press release.

Oh, got it. There are approximately 26.7 million shares outstanding right now.

Thanks a lot. Thank you, guys.

Thank you. Our next question is coming from Bruce Jackson with The Benchmark Company. Please go ahead.

Hi, good afternoon, and thank you for taking my questions. So Fred, not to belabor the share count question, but what was the share count at the end of fourth quarter, and then what was the average for the year?

Hi, Bruce. I do not have those numbers at my fingertips right now, but I'm happy to get back to you on that.

Okay, no problem. So good news. The hiring of the additional reps and the targeting of 50 people to 55 people, where did you exit 2022.

With salesforce?

With the salesforce? Right.

We had ba we had 32 territories slated for the year, but the average or the closing of the year, we had about 29 sales reps on staff.

Okay. And then in terms of the hiring cadence, you already have the new territory hired and you're going to bring them in and train them, beyond that what are the plans in terms of getting up to the, the 50 to 55?

So I think we need to evaluate how the implementation or the integration of this new territory goes before we build out the Phase II step. I think, it's important to remember that we have no white space across the country. So what we're doing is bringing people into somewhat of existing territories and reorganizing the sales accounts. So there's efficiencies to be gained for each of the existing reps and the customers they support and the lifts might be quite fast in a sense of you're coming into existing territories, but, we need to evaluate how that plays out over the next couple of months. And of course, we need to be mindful of the cash balance and how we handle our liquidity and other operating expenses. But of course, this is such a key lever. The sooner that we could do Phase II, I think obviously the sooner that we could get to those numbers that we've mentioned in terms of profitability. So it really will come down to how effectively we are able to integrate in Phase I and how quickly we can deploy the necessary tools and assets to be ready for Phase II.

Okay. And then obviously you've gotten very good at training sales reps in improving the productivity. What do you anticipate in terms of the time it's going to take to get the new reps seasoned in up to the productivity levels of the existing reps?

The productivity of the existing reps, like to get you on par with the average? It'll probably take a full year for that goal. We do have meaningful revenue contribution from each of these reps slated in the first year. Most notably, we would expect them to have their contributions start gaining momentum in Q4, so they'll come on and train over the slower PDT period, then they'll be ready to go for our largest volume quarter.

Okay. Okay. Last question for me. The accident trial seems to be enrolling very quickly. So should we continue to expect this, this enrollment cadence going forward for the rest of the year?

Did you say the acne trial?

Yes.

so I think we -- where we were seeing that slower in the earlier phases, it was because we were still working back and forth with the FDA on the protocol and we did go through an amendment not too long ago. So now you are looking at what I would think is reasonable cadence for enrollment and treatment.

All right. Great. That's it for me. Thank you for taking my questions.

Thank you. As we have no further questions in the queue at this time, I'll hand it back to Erica Monaco for any closing comments.

Thank you and thank you all for the questions and thank you again everyone for your time today. In closing, we remain laser focused on our business, commercial and financial goals. We are off to a great start in 2023 and look forward to a year filled with growth and momentum. Fred and I will be participating in the 35th Annual Roth Conference next week from March 12th to the 14th. We look forward to meeting with investors and will be onsite and available for one-on-one meetings. Please contact your Roth MKM representative to arrange a meeting. At the conference, we will also be participating in a fireside chat and we'll share a link to view this webcast on Biofrontera's IR website when it becomes available. Biofrontera will also be hosting a booth at the 2023 AAD Annual Meeting in New Orleans from March 17 to March 21. Myself and our commercial leadership will be meeting with customers, physicians and industry colleagues throughout the conference. So please stop by the booth and say hello if you are there. If we don't see you at these two events or you're unable to tune in our -- tune into our Roth conference webcast, we look forward to speaking with you again when we report our 2023 first quarter results in May. In the meantime, thank you again for joining us today.

Thank you everyone. This does conclude today's call. You may disconnect your lines at this time and have a wonderful day and we thank you for your participation.