Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nephros Inc (NEPH, Financial) achieved the highest number of active customer sites ever, with a 15% increase over the previous year, adding over 300 customers in the past 12 months.
- The company reported an 8% increase in non-emergency response business compared to Q2 of the previous year.
- Nephros Inc (NEPH) improved its net loss by 28% year-over-year, focusing on cash flow generation and overall profitability.
- The company is expanding its digital tools, including a filter tracking app, to enhance customer engagement and ensure consistent filter replacements.
- Nephros Inc (NEPH) is strategically positioning itself to capitalize on growth opportunities in various sectors beyond hospitals, such as dental practices and endoscopy processing.
Negative Points
- Overall Q2 total revenue declined by 8% due to a 92% year-over-year decline in the emergency response business.
- Gross margin slightly decreased from 62% in the first quarter of 2024 to 59% in Q2, due to increased shipping expenses and additional reserves for slow-moving commercial products.
- The rollout of the filter tracking app has been slower than expected, with implementation challenges affecting the timeline.
- The company's cash balance decreased from $4.3 million at the end of 2023 to $3.1 million as of June 30, 2024, mainly due to increased inventory and accounts receivable.
- Nephros Inc (NEPH) continues to face challenges in the emergency response business due to reduced stringency of waterborne risk response in certain territories.
Q & A Highlights
Q: Can you elaborate on the reduced stringency for waterborne risk response in certain territories and provide an update on ASHRAE 514 standards?
A: Robert Banks, President and CEO, explained that in Ohio, the Department of Health was overwhelmed with cases, leading to a change in stance to avoid overwhelming the system. They stopped excessive testing, allowing individual entities to handle situations. However, upcoming regulations like Ohio Administrative Code Rule #3701-20-07, effective October 1, will require testing for hospital licensing, potentially increasing emergency responses. Similar legislation is seen in New Jersey. ASHRAE guidelines also require testing, which could influence future responses. Despite this, emergency response is not relied upon for forecasts due to its unpredictability.
Q: What is the status of the filter tracker app rollout, and have you seen changes in reorder rates from clients using it?
A: Robert Banks noted that the filter tracker app faced issues, particularly with offline functionality in areas with poor reception. These issues have been recently resolved. The app is used in full-service accounts with regular filter changes, but aims to address low reorder rates due to various reasons. The app is expected to rectify this issue once fully implemented, with a timeline extending to the end of Q1 2025.
Q: Can you provide the total number of active accounts as of the end of Q2?
A: Robert Banks confirmed that Nephros had 1,384 active accounts at the end of Q2 2024.
Q: How has the emergency response business impacted overall revenue, and what are the future expectations?
A: Robert Banks stated that the emergency response business saw a 92% year-over-year decline, impacting overall revenue with an 8% decline in Q2. However, the non-emergency response business grew by 8%. Future expectations do not heavily rely on emergency response due to its unpredictability, focusing instead on programmatic business growth.
Q: What are the financial highlights for Q2 2024, and how is Nephros positioned for future growth?
A: Judy Krandel, CFO, reported Q2 2024 net revenue of $3.25 million, an 8% decline from Q2 2023, primarily due to low emergency response revenue. Gross margin remained strong at 59%. Net loss improved by 33% to $289,000, with adjusted EBITDA improving to a loss of $133,000. Nephros remains debt-free with a cash balance of $3.1 million. The company focuses on financial discipline and strategic investments for long-term growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
