Nephros, Inc. Q1 FY2026 earnings call

• Robert Banks mentioned Q1 2026 was a milestone quarter with $5.2 million revenue, new all-time high. Growth driven by ~23% year-over-year programmatic performance. - Gross margin decline due to tariffs, currency pressure, and product mix. Tariffs created over $200,000 incremental costs, currency pressure from strengthening euro, and expansion into commercial applications with lower margins. - Strategic expansion into commercial applications like ice machines, drinking fountains, etc. - Strong traction across broader strategy: installation and replacement programs driving recurring revenue and customer relationships; service capabilities expanding to full solution partner; education initiatives like Nephros Water Institute positioning earlier in customer decision cycle. - Judy Krandel provided financial details: net revenue $5.2 million vs $4.9 million prior year, 7% increase. Cost of goods sold increased due to growth and higher product costs. Research and development expenses increased 17% due to higher headcount. Selling, general and administrative expenses increased 12% due to increased headcount and professional fees. Net income declined 75% and adjusted EBITDA declined 69%. Cash balance was ~$4 million as of March 31, 2026.

Q1 2026 was a milestone quarter for Nephros with $5.2 million in revenue, a new all-time high. Programmatic performance increased approximately 23% year-over-year. Emergency response revenue declined compared to prior year's first quarter. Gross margin for the first quarter was 57% compared to 65% in the prior year, driven by tariffs, currency pressure, and product mix. Product revenue related to programmatic business grew strongly while emergency response revenue declined. Programmatic business contributed significantly to the revenue growth, and emergency response revenue had a lower contribution compared to previous periods.

• Expect continued growth driven by expansion in key markets such as New York and Puerto Rico, increasing contribution from programmatic installations and replacements, and continued adoption of broader products, services and education platform. - Near-term margin variability driven by tariffs, currency, product mix does not change the long-term growth trajectory.

• Nephros' ability to successfully, timely and cost effectively market and sell its products and service offerings. - Rate of adoption of its products and services by hospitals and other healthcare providers. - Success of its commercialization efforts. - Effect of existing and new regulatory requirements on Nephros' business and other economic and competitive factors.

Q: About the certification for the water management program development as a service, how are you charging, expecting more employees to receive that certification or to hire people that may already have that certification?

A: The certification falls under Nephros Education arm. Not currently charging for services yet. Training and getting partners up to speed. Have employees capable of creating water safety management plans. This is new service evolving, formalizing offering, lots of interest.

Q: Hiring of the sales leader and focus in the New York market, what's the opportunity in New York City area?

A: New York City has high density of hospitals and others with infection control needs. Past sales force structure not focusing on New York City. Brought in someone knowing 5 boroughs well and healthcare space. Still early in the game, looking forward to revenue growth.

Q: What was the number of active customer sites at the end of the quarter?

A: Active customer sites is 1,676, growing steadily, earning more per customer with services and commercial filter sales.

Q: What portion of the revenue came from programmatic and what was emergency response?

A: Emergency response can average 10% - 15% of sales in prior, Q1 significantly less. Focus on core programmatic business.

Q: Growing beyond healthcare vertical, what subverticals have been able to penetrate?

A: Originally in healthcare, sweet spot. Expanding into aviation, hospitality, government, municipal buildings, retail, real estate management, large properties, schools, universities. More competitive, less sticky, but large TAM. Education arm important for creating market.

Q: EPA new push on PFAS and microplastics, do you expect those regulations to help, hearing from customers?

A: Yes, regulations are drivers. Activity and churn seen. Need to educate on long-term benefit.

Q: Pricing pressures from competitors in programmatic business, progress in PFAS area, potential in home market?

A: Price pressures exist, focus on value. PFAS is opportunistic, not eclipsing infection control product line sales. Home market is huge, exploring, rely on educated customers and partners, hope for meaningful movement in future without sacrificing healthcare product lines.