Nephros, Inc. Q3 FY2024 earnings call

• Achieved first profitable quarter since inception. - Driven by cost management and operational improvements. - Gross margin improved to 61% due to better terms with largest supplier. - Adjusted EBITDA improved to $295,000. - SG&A expenses reduced due to lower stock compensation and bonus accruals. - Ramping up digital support tools for filter installation to improve customer compliance and drive recurring revenues. - Focus on expanding into new markets like sterile processing, laboratories, dental practices, and exploring partnerships for nano/microplastic contaminations.

For the third quarter ended September 30, 2024, net revenue was $3.5 million, an 8% increase over Q2 2024 but a 6% decline compared to Q3 2023. Net income was $0.2 million, turning from a net loss of $0.2 million in Q3 2023. Gross margin was 61% in Q3 2024, up from 59% in Q3 2023. Adjusted EBITDA for Q3 2024 was $295,000, a significant improvement from $11,000 in Q3 2023. SG&A expenses decreased to $1.7 million from $2.1 million in Q3 2023 due to lower stock compensation and bonus accruals. Quarterly revenue increased 8% over Q2 following a rebound in emergency response ER orders.

• Focus on maintaining financial discipline while investing in growth initiatives. - Optimizing product pricing, improving operational efficiencies, and exploring strategic expansion. - Aiming to roll out digital filter tracker in Q1 2025. - Expecting programmatic business to continue growing with service and digitization efforts.

• Factors affecting results include ability to market and sell products, rate of adoption by healthcare providers, commercialization success, regulatory requirements, and economic/competitive factors. - Challenges in specific regions with programmatic reorders. - Emergency response revenue not meeting expectations.

Q: Jeremy Pearlman asked about strategies to strengthen customer engagement and rollout timeline of digital filter tracker, and about HydroGuard UltraFilter.

A: Robert Banks discussed using online tools for automated reminders, beta testing a new version of the digital filter tracker aiming for Q1 2025, and the HydroGuard UltraFilter is complementary, opening new markets.

Q: Ankur Sagar asked about programmatic business decline and initiatives to stop it, and about service arm for programmatic business.

A: Robert Banks explained programmatic sales decline but steady trajectory, initiatives like service teams to install and track filters, and digitization efforts.

Q: Ralph Weil asked about ASHRAE regulations, new initiatives, and commercial beverage business status.

A: Robert Banks talked about ASHRAE regulations creating opportunities, new initiatives with press releases and R&D pipeline, and the commercial beverage business still ongoing with partners but not meeting accelerated growth expectations.