Nuwellis, Inc. Q2 FY2025 earnings call

• Focused on strengthening business fundamentals, operational discipline, commercial execution, and strategic investments. - Experienced a temporary back order of ~$400,000 in revenue due to an industry-wide sterilization vendor issue, which was resolved in the first week of July. - Planning an orderly transition from manufacturing to KDI Precision Manufacturing with go-live planned for October. - Terminated the REVERSE-HF clinical trial to reallocate ~$4 million to higher impact growth areas. - Growth strategy centered on cardiac surgery, pediatrics, and outpatient heart failure; Aquadex is valued in these areas for fluid management solutions.

Total revenue for the second quarter was $1.7 million, a year-over-year decline of 21% from $2.2 million in Q2 2024. By customer category, Pediatric revenues increased 23% compared to Q2 2024. Heart Failure and Critical Care revenue declined 53% and 35%, respectively, due to a temporary product back order. Gross margin for the quarter was 55.5% compared to 67.2% in Q2 2024, impacted by under-absorption of fixed overhead from lower production volumes.

• Prioritize progressing towards cash flow positive. - Deliver on commercial targets in pediatrics and cardiac surgery. - Deepen outpatient engagement with heart failure programs. - Complete manufacturing transition to KDI Precision Manufacturing. - Drive increased clinical awareness of Aquadex's role in fluid management.

• Industry-wide sterilization vendor issue that caused a back order. - Challenges in scaling, staffing, and space related to expanding outpatient heart failure opportunities.

Q: You mentioned the issue with the vendor regarding sterilization and believe that accounts for around $400,000 in revenue. It sounds like that was resolved. If so, when was it resolved? And will there be any impact in the current third quarter that we're in?

A: It was resolved in the first week of July, and we've not been in back order. The impact was primarily in heart failure and cardiac surgery as inventory was allocated to pediatrics.

Q: As you see the business evolve, where do you see the largest opportunity? Is it pediatrics? Is it critical care, heart failure? And which one specifically do you see the most opportunity?

A: I think it is all 3. Pediatrics is growing with children's hospitals adopting Aquadex for small babies with kidney issues. Cardiac surgery is growing as physicians see opportunity for fluid management post-open heart surgery. The faster-growing area is likely outpatient heart failure due to expanded reimbursement and clinical need.