Nephros, Inc. Q2 FY2024 earnings call

• Began breaking out programmatic and emergency response business for clarity.
• Achieved highest number of active customer sites ever in H1 2024 with 15% y-o-y increase, adding over 300 customers in 12 months.
• Q2 had highest retention rate in past 6 quarters.
• Expanded digital tools like filter tracking app, though implementation speed didn't meet expectations.
• Advancing capabilities to address nano and micro plastics using unique small pore size.
• Strategically positioning for growth in sectors beyond hospitals such as dental practices, scale processing, etc.

In Q2 2024, total revenue declined 8% year-over-year. Non-emergency response business was up 8% compared to Q2 last year, but emergency response business declined 92% year-over-year. For the 6-month period ending June 30, 2024, sales declined 6% year-over-year excluding emergency response, which saw a 10% increase. Gross margin in Q2 was 59%, flat year-over-year, and improved to 61% in the first half of 2024. Net loss improved 28% year-over-year in Q2 and 38% in the first half of 2024. The balance sheet remained strong with $3.1 million cash as of June 30, 2024, operating debt-free.

• Focus on maintaining financial discipline, optimizing product pricing, improving operational efficiencies, and exploring strategic expansion opportunities.
• Aim to capitalize on growth opportunities in new sectors beyond hospitals.

• Reduced stringency of waterborne risk response in certain territories negatively impacting emergency response business.
• Emergency response business is affected by non-controllable factors.
• Implementation challenges with digital tools like the filter tracking app.

Q: Could you elaborate on the reduced stringency of waterborne risk response in certain territories and provide an update on ASHRAE 514 standard and its impact on reorder rates?

A: On reduced stringency, Ohio's Department of Health changed stance due to system overload, and Ohio Administrative Code Rule 3701-20-07 requiring membrane testing for hospital licenses starts Oct 1. ASHRAE guidelines also require testing, which may change the situation. Regarding reorder rates, emergency response is not relied on for forecasting.

Q: Could you provide an update on the filter tracker app rollout and reorder rates?

A: Filter tracker app had offline functionality issues but progress made in fixing. The tool has potential to improve reorder rates by better monitoring filter replacements.

Q: What was the total number of active accounts as of the end of the second quarter?

A: The total number of active sites at the end of Q2 was 1,384.