Nephros, Inc. Q4 FY2025 earnings call

Robert Banks mentioned 2025 was a great year with team accomplishments. The company's strategy is anchored around three core pillars: products, services, and education. Products are a differentiated portfolio with advanced filtration technologies, recent product launches expanding addressable market. Services expand installation and replacement capabilities, enabling complete lifecycle solutions and recurring revenue. Education pillar includes the Nefros Water Institute, which has touched over 1,000 people through webinar series and site-based training sessions, establishing the company as a trusted authority in water safety. In 2025, 33% revenue growth was achieved, reaching $18.8 million total revenue, with net income of approximately $1.2 million, second consecutive year of profitability. Active customer sites grew to over 1,680 as of end of 2025.

Fourth quarter 2025 net revenue was $4.7 million, a 22% increase over the corresponding period in 2024. Full year 2025 net revenue grew 33% to $18.8 million from $14.2 million. Gross margin was 62% for both years ending December 31st, 2025 and 2024. Fourth quarter 2025 gross margin was 58% compared with 64% in the fourth quarter of 2024. Research and development expenses for the years ended December 31st, 2025 and 2024 were $1.3 million and $0.9 million respectively. Selling general and administrative expenses for the year ended 2025 were $9 million compared with $7.7 million in 2024. Net income for the year ended December 31, 2025 was $1.2 million compared with $0.1 million in 2024. Net income for the fourth quarter of 2025 was $0.1 million compared with $0.3 million in the same period in 2024. Adjusted EBITDA in the fourth quarter was a positive $131,000 compared to positive $481,000 in the same period in 2024. For the full year of 2025, adjusted EBITDA was a positive $1.6 million versus positive $548,000 in 2024. Net cash provided by operating activities was $1.6 million for the year ended December 31st, 2025. Cash balance on December 31, 2025 was $5.4 million and the company remained debt-free.

Management believes NECROS is positioned at the intersection of trends like increased awareness of waterborne pathogens, rising regulatory expectations, aging infrastructure, and growing need for reliable filtration solutions. The integrated strategy of products, services, and education allows addressing these challenges simultaneously. Outlook on programmatic sales and growth in non-patient care markets as education and services expand.

Factors that may affect the company's results include Nefros' ability to successfully, timely, and cost-effectively market and sell its products and service offerings, the rate of adoption of its products and services by hospitals and other healthcare providers, the success of its commercialization efforts, and the effect of existing and new regulatory requirements on Nefros' business and other economic and competitive factors. U.S. tariff policy remains unpredictable, creating uncertainty around potential future margin impacts.

Q: One is on the programmatic sales, what percent of revenues for the fourth quarter and the full year were programmatic sales? And do you have an outlook on how you expect that to evolve in 2026? And then your active customer sites, do you have a count on that number as of 12-31-25?

A: Programmatic sales just under 1,700, so that was 1,681 sites. The fourth quarter, programmatic was certainly 90% plus of our business, which is similar for the year.

Q: Can you talk a little bit about that pipeline potential and how you see that sort of evolving either in 26 or over the next couple of years?

A: When you think about the core business of nephros, getting it started in dialysis and then really focusing on the hospital market, patient care, those are areas that are highly regulated. We've got different rules and joint commissions and inspections. All of these drive action. Testing occurs and there are results and problems that need to be solved. Once you step outside of the patient care world, you don't have those same regulatory environments that are driving the growth. And that's why this that I introduced recently, the education is so important. We've got to let different people in different markets know why it's important, why it matters, the impact to their facilities, and really the return on investment for investing in enough filtration as a medical device in a non-medical application. So, I see that growth happening as the education improves, as we get more and more people that we touch via outreach. And that's the main barrier if you're selling against doing nothing. The second barrier that we have to overcome is the, what may be perceived complexity around installation. It's not just as simple as when you walk up to your refrigerator or filter on your sink, we had to twist it off and put a new one on. There's some cleaning and sanitation involved. So, that's why our services group and portfolio is so important. We start to remove the barriers for why someone might be interested in a solution because they may not be interested in going through some of the, I guess, work required in order to get an effective result from the filtration system. So, as we grow and build those markets, we create an ecosystem of people that understand that there is a solution. They don't have to handle and deal with microplastics or other problems they might be dealing with, and we have the answers for those. Building that whole solution from just you've got a problem, here's your problem, here's how you can solve it to let us implement that solution for you and take care of it going forward is how we're growing that business. If you remember, it took a while, even after some of the regulations in the hospital market, for us to really capitalize on that and grow that hospital business. And I anticipated it would take the same as we're going into the non-patient care market as we work to build those markets up.

Q: Can you elaborate a little more on some of the successes that you may have had so far in the newer markets?

A: From the community referring to the education successes or just in anything in general? Yes, we're in the newer markets. I mean, hospitals have been your big market and medical facilities. In the newer markets that you've entered, can you comment just a little more on where you may have seen successes on which you're basing your optimism going forward and i really i really didn't press the button but uh it since it was a butt call i understand that um so i can try to address that if you think about where where we've been focusing we're in hospital in patient care so non-patient care applications where we've found some successes We were looking at areas where there's large populations of people. We've got a party that's interested in keeping the mass of people under them healthy. If you think of correctional facilities where if someone gets sick or ill, they can spread and contaminate to other places. Schools and universities where there are groups of people in one room or one area, not to say that a school is going to a jail. where you've got large groups of people who might be susceptible to different pathogens spreading. We've also seen in some aviation facilities where government are concerned about what might be passed through water there. And I'm really surprised at the number of just drinking water fountain applications where people have fountains that may have been shut down since COVID, where they're facing the situation where they either rip them off the wall, which is very expensive, or try to get them running again. We're able to go in, clean them up, and reopen fountains that have been shut down for quite some while. So, wherever you see large numbers of bottle fillers and drinking fountains, those are also good targets. I think some of the newer non-patient has also been cell processing, facilities that have instruments and probes and other stuff that go, that have come in contact with humans. By rinsing them with water that's free of viruses, endotoxins, and other potential contaminants, we are finding a good amount of success there. Some of the newer areas which are starting to gain traction are eyewash stations, shower, emergency showers, those types of applications that are found outside of patient care as well. And we've had water settings stagnant where bacteria have a chance to grow. So, it's very numerous. It's not one area. It's lots of pockets here and there, which is why the education part of what we're doing is so important, really getting the word out and letting people know where and how what we're doing can help with what they are trying to do and the mission that they're trying to accomplish. hundreds, over 1,000 people attending these seminars that we're hosting. And I encourage anyone who is interested to listen and find out. You'll see an interaction and a level of transparency and information sharing that you don't get from any of the other related types of talks. So, it really does showcase Netflix as being experts in the field and willing to talk agnostically about how to solve some of these problems, which people really appreciate. They come back. They trust us, whether it's a property management company, or others who have just people under their responsibility that they don't want to get in a situation where they're contaminated. So it's really exciting. It's been really refreshing and fun. It's been us learning how to speak something other than hospital language. And I think the team has really risen to the occasion and been doing a fantastic job of making that education in roads and penetrating other areas.