Q4 2023 Nephros Inc Earnings Call

Good day and welcome to the Metro Inc. Fourth quarter 2023 financial results Conference call.

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I would now like to turn the conference over to Karen Smith. Please go ahead.

Good afternoon, everyone. This is Karen Smith with PCT advisory. Thank you all for participating in <unk> fourth quarter and fiscal year 2023 conference call.

Before we begin I would like to caution that comments made during this conference call by management will contain forward looking statements regarding the operations and future results of efforts.

I encourage you to review <unk> filings with the Securities and Exchange Commission, including without limitation, the Companys forms 10-K and 10-Q.

Densify specific factors that may cause actual results to differ.

Materially from those described in the forward looking statements factors that may affect the Companys results include but are not limited to the impact of the COVID-19, pandemic that person's 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.

Other health care providers success of its commercialization efforts and the effect of existing and new regulatory requirements on <unk> business and other economic and competitive factors.

The contents of this conference call contains timely time sensitive information that is accurate only as of the date of the live call today March seven 2024.

Company undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call, except as required by law.

I would now like to turn the call over to <unk>, President and Chief Executive Officer, Robert Thanks, Robert Please go ahead.

Thank you Karen and good afternoon, everyone.

I'm very pleased to welcome into the call.

Today, we reported fourth quarter and full year results for 2023.

It was an amazing year and efforts. So we're all very proud of the results.

We welcomed a new executive leadership at the CEO and CFO levels, we were cash flow positive for the full year 2023, and we finished with very impressive revenue growth of 43% year over year.

Nevertheless, it's always worked hard to consistently serve our customers with quality products and deliver on time to eat emergency eat and of course that in.

Any day of the week.

Through a series of deliberate.

Transformative operational improvements supply chain partnership development and the expansion of our sales force. We are now utilizing a new level of growth potential.

I would like to thank the <unk> team for their commitment and hard work to drive these great results.

Let me share some of the highlights from our performance.

First.

We capitalized on the execution of new distributor agreements to more strategically to develop relationships with only our strongest partners.

In turn sell.

All of them saw record quote levels in 2023 as they utilized their respective infrastructures to deliver our leading technology throughout the variety of customer markets.

Of particular note are the partners, who water related services provides quite gateway.

Sales.

Their strong relationships with key decision makers had offered us new opportunities to penetrate large segments of the market very quickly.

Second.

Growth is good.

But growing profitably is great we looked at several areas within our operations.

<unk> resolved issues, which contributed to losses.

One such area targeted for improvement wasn't any fishing offsite storage footprint.

This challenge was made more acute by our significant growth, which resulted in exceeding the limitations of our product inventory space.

In response, we opened a new facility with a much larger warehouses in Q4.

This new states allowed us to consolidate sites, while expanding our overall footage.

I would like to commend the team and the huge step towards operational excellence.

As we accomplish the move while simultaneously achieving solid growth numbers.

Although it wasn't easy demonstrated the commitment and strength inherent in the D N a.

The weak small team.

The third point I would like to highlight is the publication of the new hatchery 514 standard in August of last year.

This new guidance addressed the microbial hazards multiple pathogens, along with the physical and chemical hazards.

The release of this information is already spurred greater demand for <unk> solutions as these more stringent guidelines regarding water borne pathogen litigation require technology that is not widely available.

This is the b to.

To be a great opportunity for <unk>, given the F. D. A five 10-K clearance of our infection control filters as class II medical devices.

Satisfies the exact recommendation.

Sales in the guidance.

Okay.

The growth in our infection control product line is truly the result of high performance throughout the year and our sales engineering.

Quality operations and marketing departments.

We finished the fourth quarter with sales up 27% over the same period in the prior year with $3.3 million in revenue.

This growth capped a year, where necklace reached an impressive $14 2 million in total revenue.

43% growth over 2022 revenue.

As we accomplish this with an impressive improvement in EBITDA.

Which my CFO, Judy Crandall will cover next.

Financials section of this call.

Judy Please go ahead.

Thanks, Robert and very pleased to have joined <unk>.

Look forward to help build a terrific company and fast growing business.

I will now provide a closer look at net first its financial performance in the fourth quarter.

We reported fourth quarter net revenue of $3.3 million.

97% increase over the corresponding period in 2022.

And for the full year 2023, net revenue was up 43% to $14 $2 million.

At this customer sites with 1285 as of December 31st 2023, as compared to 1234 as of September 30th 2023, and 1172 as of December 31st 2022.

Net loss from continuing operations for the quarter increased to $654000 compared to $719000 in the same period last year.

For the full year 2023, net loss from continuing operations improved to one 6 million versus a loss of $423 million for 2022.

Adjusted EBITDA from continuing operations in the quarter was a loss of $51000 compared to a loss of $460000. During the same period in 2022.

For the full year 2023 adjusted EBITDA from continuing operations, Mark a huge improvement with a loss of 76000 versus a loss of $2.4 million in 2022.

Gross margins in the quarter also increased to 62% compared with 59% in the fourth quarter of 2022.

An improvement of three percentage points.

For the full year 2023, gross margins increased significantly to 59% versus 47% for 2022 a 12 percentage point improvement from the prior year.

Research and development expenses in the quarter were $208000 compared to 359000 for the same quarter in 2022.

The full year 2023 research and development expenses were 873000 versus $1 3 million in the prior year R&D.

R&D expenses were lower due to the wind down in 2023 of our SRP business. Consequently, a reduction in S. R. P related research and development expense.

Sales general and administrative expenses in the quarter were $2 $4 million compared to $1 8 million for the corresponding period in 2022.

The full year of 2023 sales general and administrative expenses were $8 $9 million versus $7 6 million in the prior year.

The increases were primarily due to expenses from the ongoing expansion of our sales force and other revenue generating activities.

Net cash used in operating activities was $234000 in the fourth quarter 2023, and net cash provided by operations for the full year 2023 with $827000.

This is compared to net cash used in operating activities of $193000 in the fourth quarter 2022 and a $3 $2 million used in the full year 2022.

An increase of 41000 for the quarter, an improvement of $4 1 million for the full year respectively.

Our cash balance on December 31, 2023, with $4 $3 million compared to $4 6 million as of September 30th 2023, and $3 6 million as of December 31st 2022.

We continue to be debt free.

Please refer to today's press release for more details about the calculation of adjusted EBITDA and its reconciliation to GAAP net income or loss.

Additional information about our results can be found in our filings on Form 10-K, which we will file in the coming days.

I will now turn the call back to Robert for some closing remarks. Please.

Please go ahead.

Thank you Judy and thanks, everyone for joining and your continued support of <unk>.

I'd like to specifically, thank the Netflix employees, our partners and our customers who have remained with US on this journey attributed to these wonderful results.

This concludes our formal presentation remarks, we will now take questions from the audience. Operator, Please open the call for questions questions.

We will now begin the question and answer session.

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At this time, we will pause momentarily to assemble our roster.

Yeah.

Yeah.

The first question today comes from Nick Sherwood with Maxim Group. Please go ahead.

Hi, Good evening. My first question is have you seen an increase in deal pipeline with Ashray or can you quantify any changes in your deal pipeline with the new regulations.

Yeah, Mike it's a great.

Great question, Great comment and I'd love to comment on that.

So when we talk about the deal pipeline in just pure number of opportunities coming in through to net flows and the sales team.

We definitely see a difference, especially around the mid August timeframe when the Ashford five poor guidance was released maybe.

Mainly to this day, it's been a lot of education people trying to understand what it means how to comply.

And what will it take to kind of give themselves the best chance of mitigating against the microbial pathogens that I discussed earlier.

So in that regard that pros has been really stepping up and being that educator and letting them know about various consultants and how they can protect their facilities as.

As a result, usually when we can teach the customer how to do better.

That often results in some inquiries from the perspective of quotes and I will also expect that to translate into visits so I've been quite pleased with the activity, that's driven and what we expect it to continue to drive as the industry.

It works to comply with.

Does that answer the question.

Yeah that was a perfect answer thank you and then one more question.

Have you seen any.

Significant trends in either order size, our customer penetration in the fourth quarter or the first half or I guess the first two thirds of this first quarter of the year.

Can you give a little more flavor.

Sleep about what you're looking for from a deal size or number of transactions, where or I guess.

The specific would be average order size from your customers are you seeing any increases in that.

I haven't seen too much differences as far as the quarter size. This business does tend to be a little lumpy. So in periods. When there's a lot of emergency responses they tend to be larger immediate.

Responses things shipped right away.

Other than that there's been a fairly consistent pattern peaks and troughs based on how long the filters last and when they need to be replaced.

What I haven't seen a significant change in order size.

So, yes, I think that answers the question.

Awesome. Thank you and then just my last question can you provide us any update on your agreement with Onstar and how that.

Went over the fourth quarter.

So the agreement with onstar with multi year wasn't.

No changes expected or made at this point in time.

The commercial market space in general it does take some time to penetrate many of the customers have existing inventory so changing over to you and that does take some time.

Just execute a new facility move, which we now have everything needed on the shelf ready to go.

Dennis starts ramping up has a number of really great opportunities and I look forward to them continuing to drive change.

It's like I mentioned before it does take a lot to move some of the big corporations as they wait for filters to expire before swapping out to a new company. So.

Good momentum there I look forward to seeing that accelerate in the future.

Nothing too exciting to report about that at this time, just chugging along as I would expect the commercial market to do so.

Awesome. Thank you so much for all that detail I'll get back in the queue.

You're very welcome.

Yes.

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Thank you.

Okay.

Yeah.

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