Q2 2024 Rockwell Medical Inc Earnings Call

August 8, 2024

Heather Hunter: Good morning and welcome to Rockwell Medical's second quarter 2024 results conference call and webcast. Please note, this event is being recorded. At this time, I would like to turn the conference call over to Heather Hunter, Senior Vice President, Chief Corporate Affairs Officer at Rockwell Medical. Heather, please go ahead.

Colts Conference Call and Webcast. Please note this event is being recorded.

Heather Hunter: At this time, I would like to turn the conference call over to Heather Hunter, Senior Vice President, Chief Corporate Affairs Officer at Rockwell Medical. Heather, please go ahead. Good morning, and thank you for joining us for this update on Rockwell Medical.

Heather Hunter: Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer, and Jesse Neri, Rockwell Medical Senior Vice President of Finance. Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the Federal Security Laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the SEC. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today.

Heather Hunter: Good morning and thank you for joining us for this update on Rockwell Medical. Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer, and Jesse Neri, Rockwell Medical's Senior Vice President of Finance.

Operator: Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the SEC. Factors that could cause actual results or outcomes to differ materially from those expressed in, or implied by, such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC.

Operator: Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the SEC. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today.

Operator: Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in, or implied by, such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC. Rockwell Medical's quarterly report on Form 10-Q for the three months ended June 30, 2024, was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter 2024 results.

Speaker Change: Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal security laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the SEC.

Speaker Change: These statements are subject to risks and uncertainties that could cause actual results to differ.

Speaker Change: Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events.

Heather Hunter: Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Doctors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC.

Speaker Change: Factors that could cause actual results or outcomes to differ materially from those expressed in, or implied by, such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC.

Heather Hunter: Rockwell Medical's quarterly report on Form 10-Q for the three months ended June 30, 2024, was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter, 2024 results. The reconciliation on non-GAAP measures we discussed on today's call can also be found in today's press release.

Speaker Change: Rockwell Medical's quarterly report on Form 10-Q for the three months ended June 30, 2024 was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter 2024 results.

Speaker Change: The reconciliation on non- GAAP measures we discussed on today's call can also be found in today's press release.

Heather Hunter: Our Form 10-Q and other reports filed with the SEC, along with today's press release, our investor presentation, and a replay of today's conference call and webcast, can be found on Rockwell Medical's website under the investor's section.

Speaker Change: Our Form 10-Q and other reports filed with the SEC, along with today's press release, our investor presentation, and a replay of today's conference call and webcast, can be found on Rockwell Medical's website under the Investors section.

Mark Strobeck: Now I would like to turn the conference call over to Rockwell Medical's President and CEO, Dr. Mark Strobek. Thank you, Heather. Good morning, and thank you for joining us today for Rockwell Medical's second quarter 2024 results conference call and webcast. I'd like to start off this morning by reflecting on the last two years since I joined Rockwell and since we assembled the team we have now who are leading our organization through significant and transformative growth and change. When we presented our second quarter results to shareholders back in 2022, we laid out what we believed were lawfully but attainable goals for Rockwell.

Operator: The reconciliation on non-GAAP measures we discussed on today's call can also be found in today's press release. Our Form 10-Q and other reports filed with the SEC, along with today's press release, our investor presentation, and a replay of today's conference call and webcast can be found on Rockwell Medical's website under the Investors section. Now, I would like to turn the conference call over to Rockwell Medical's President and CEO, Dr. Mark Strobeck.

Speaker Change: Now I would like to turn the conference call over to Rockwell Medical's President and CEO , Dr. Mark Strobeck.

Operator: Rockwell Medical's quarterly report on Form 10-Q for the three months ended June 30, 2024 was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter 2024 results. The reconciliation on non-GAAP measures we discussed on today's call can also be found in today's press release. Our Form 10-Q and other reports filed with the SEC, along with today's press release, our investor presentation, and a replay of today's conference call and webcast, can be found on Rockwell Medical's website under the Investors section.

Mark Strobeck: Good morning, and thank you for joining us today for Rockwell Medical's second quarter 2024 results conference call and webcast. I'd like to start off this morning by reflecting on the last two years since I joined Rockwell and since we assembled the team we have now who are leading our organization through significant and transformative growth and change. When we presented our second quarter results to shareholders back in 2022, we laid out what we believed were lofty but attainable goals for Rockwell.

Mark Strobeck: Thank you, Heather. Good morning and thank you for joining us today for Rockwell Medical's second quarter 2024 results conference call and webcast.

Mark Strobeck: When we presented our second quarter results to shareholders back in 2022, we laid out what we believed were lofty but attainable goals for Rockwell. For the first time in the company's history, we set out to put Rockwell Medical on a steady path to consistently grow revenue, drive the company to $100 million in annual sales, and go from a gross loss on this business to an increasing gross profit. We must increase our gross margin from a negative number to a consistently greater positive number, attain sustained profitability, and significantly lower our debt burden.

Mark Strobeck: When we presented our second quarter results to shareholders back in 2022, we laid out what we believed were lofty but attainable goals for Rockwell.

Mark Strobeck: For the first time in the company's history, we set out to put Rockwell Medical on a steady path to consistently grow revenue, drive the company to 100 million in annual sales, go from a gross loss on this business to an increasing gross profit, increase our gross margin from a negative number to a consistently greater positive number, attain sustained profitability and significantly lower our debt burden. At the time, it was clear that shareholders were apprehensive, doubtful even, that we could and would achieve these objectives. Often times, we would get asked, "So how are you guys different?"

Mark Strobeck: Additionally, we continue to achieve consecutive quarters of improved gross profit and gross margin, having reported $4.6 million in gross profit and 18% gross margin for the second quarter of 2024. This quarter's results exceeded the gross margin guidance we projected for the full year of 2024 and are starting to approach the gross margin we expect to achieve in 2025. We believe gross margin will continue to improve and trend upward as we continue to streamline production, improve our processes, enhance our distribution capabilities, and further modernize our infrastructure.

Mark Strobeck: For the first time in the company's history, we set out to put Rockwell Medical on a steady path to consistently grow revenue, drive the company to $100 million in annual sales, go from a gross loss on this business to an increasing gross profit, increase our gross margin from a negative number to a consistently greater positive number, attain sustained profitability, and significantly lower our debt burden. At the time, it was clear the shareholders were apprehensive, doubtful even, that we could and would achieve these objectives. Oftentimes, we would get asked, "So how are you guys different?"

Mark Strobeck: For the first time in the company's history, we set out to put Rockwell Medical on a steady path to consistently grow revenue, drive the company to a hundred million in annual sales.

Mark Strobeck: go from a gross loss on this business to an increasing gross profit, increase our gross margin from a negative number to a consistently greater positive number, attain sustained profitability, and significantly lower our debt burden.

Mark Strobeck: At the time it was clear that shareholders were apprehensive, doubtful even, that we could and would achieve these objectives.

Mark Strobeck: Why should we believe you? It was understandable. Over the years, Rockwell had a lot of turnover. The company's financial results were not supporting growth or financial stability, and those circumstances damaged Rockwell's credibility with shareholders, and stock performance suffered. I am proud and excited to share that we have delivered and continue to deliver on our promises. For the first time in recent memory, we achieved profitability on a cash flow and adjusted EBITDA basis for the second quarter of 2024.

Mark Strobeck: Why should we believe you? It was understandable. Over the years, Rockwell has had a lot of turnover. The company's financial results were not supporting growth or financial stability, and those circumstances damaged Rockwell's credibility with shareholders, and stock performance suffered.

Mark Strobeck: Oftentimes we would get asked, so how are you guys different?

Mark Strobeck: Why should we believe you? It was understandable. Over the years, Rockwell has had a lot of turnover. The company's financial results were not supporting growth or financial stability and those circumstances damaged Rockwell's credibility with shareholders and stock performance suffered.

Mark Strobeck: I am proud and excited to share that we have delivered and continue to deliver on our promises. For the first time in recent memory, we achieved profitability on a cash flow and adjusted EBITDA basis for the second quarter of 2024. We believe that this is a critical turning point for Rockwell, and we expect to build upon this momentum in the coming quarters. Let me walk you through some of the numbers that get us to this cash flow positive outcome for Rockwell. Net sales for the second quarter of 2024 were once again the highest quarterly concentrated product sales generated to date for Rockwell.

Mark Strobeck: I am proud and excited to share that we have delivered and continue to deliver on our promises.

Mark Strobeck: For the first time in recent memory, we achieved profitability on a cash flow and adjusted EBITDA basis for the second quarter 2024.

Mark Strobeck: We believe that this is a critical turning point for Rockwell, and we expect to build upon this momentum in the coming quarters. Let me walk you through some of the numbers that get us to this cash flow positive outcome for Rockwell. Net sales for the second quarter 2024 were once again the highest quarterly concentrate product sales generated to date for Rockwell.

Mark Strobeck: We believe that this is a critical turning point for Rockwell, and we expect to build upon this momentum in the coming quarters.

Mark Strobeck: Let me walk you through some of the numbers that get us to this cash flow positive outcome for Rockwell.

Mark Strobeck: Net sales for the second quarter 2024 were once again the highest quarterly concentrate product sales generated to date for Rockwell.

Mark Strobeck: In the second quarter of 2024, we generated net sales of $25.8 million, which was largely driven by our improved value-based pricing and increasing volumes. Annualizing our second quarter of 2024 net sales would put us north of $100 million in revenue, a goal that we set out to achieve two years ago. Additionally, we continue to achieve consecutive quarters of improved gross profit and gross margin. Having reported $4.6 million in gross profit and 18% gross margin for the second quarter 2024, this quarter's results exceeded the gross margin guidance we projected for the full year of 2024 and is starting to approach the gross margin we expect to achieve in 2025.

Mark Strobeck: In the second quarter of 2024, we generated net sales of $25.8 million, which was largely driven by our improved value-based pricing and increasing volume. Annualizing our second quarter 2024 net sales would put us north of $100 million in revenue, a goal that we set out to achieve two years ago. Additionally, we continue to achieve consecutive quarters of improved gross profit and gross margin, having reported $4.6 million in gross profit and 18% gross margin for the second quarter of 2024.

Mark Strobeck: In the second quarter 2024, we generated net sales of $25.8 million which was largely driven by our improved value-based pricing and increasing volumes.

Mark Strobeck: Annualizing our second quarter 2024 net sales would put us north of $100 million in revenue, a goal that we set out to achieve two years ago.

Mark Strobeck: Additionally, we continue to achieve consecutive quarters of improved gross profit and gross margin.

Mark Strobeck: having reported $4.6 million in gross profit and 18% gross margin for the second quarter 2024. This quarter's results exceeded the gross margin guidance we projected for the full year of 2024 and is starting to approach the gross margin we expect to achieve in 2025.

Mark Strobeck: This quarter's results exceeded the gross margin guidance we projected for the full year of 2024 and is starting to approach the gross margin we expect to achieve in 2025. We believe gross margin will continue to improve and trend upward as we continue to streamline production, improve our processes, enhance our distribution capabilities, and further modernize our infrastructure. The combination of increased sales and greater gross margin has led to cash flow from operations of $1.4 million for the second quarter and, as a consequence, an increase in our cash balance.

Mark Strobeck: We believe gross margin will continue to improve and trend upward as we continue to streamline production, improve our processes, enhance our distribution capabilities, and further modernize our infrastructure. The combination of increased sales in greater gross margin has led to cash flow from operations of $1.4 million for the second quarter, and as a consequence, an increase in our cash balance. Our cash balance has gone from $8.6 million at the end of the first quarter to $10.2 million around the time we reported our first quarter earnings to $11.9 million at the end of the second quarter. We expect that our cash balance will continue to increase as we continue to be profitable.

Mark Strobeck: The combination of increased sales and greater gross margin has led to cash flow from operations of $1.4 million for the second quarter and, as a consequence, an increase in our cash balance. Jesse will have more to say on the numbers in a moment.

Mark Strobeck: The combination of increased sales and greater gross margin has led to cash flow from operations of 1.4 million dollars for the second quarter and as a consequence an increase in our cash balance.

Mark Strobeck: Our cash balance has gone from $8.6 million at the end of the first quarter to $10.2 million around the time we reported our first quarter earnings to $11.9 million at the end of the second quarter. We expect that our cash balance will continue to increase as we continue to be profitable. Jesse will have more to say on the numbers in a moment.

Mark Strobeck: Jesse will have more to say on the numbers in a moment. At the end of the day, the success we have demonstrated and the objectives we set out to achieve have resulted from hard work and consistent execution. In addition to the objectives we presented two years ago, we were also determined to rebuild credibility with our shareholders. We believe it's paramount that shareholders feel confident that the team leading this company today is transparent about its plans and is executing against its plans. We are aware that reestablishing credibility doesn't happen overnight, but we believe that the results speak for themselves.

Mark Strobeck: At the end of the day, the success we have demonstrated and the objectives we set out to achieve have resulted from hard work and consistent execution. We are aware that re-establishing credibility doesn't happen overnight, but we believe that the results speak for themselves. For the past two years, we've said what we were going to do, and we did it. Collectively, our team has successfully turned this organization around and, in turn, continues to rebuild shareholder value. We wouldn't be here if we didn't believe we could execute our game plan and catalyze the success of this organization for years to come.

Mark Strobeck: At the end of the day, the success we have demonstrated and the objectives we set out to achieve have resulted from hard work and consistent execution. In addition to the objectives we presented two years ago, we were also determined to rebuild credibility with our shareholders. We believe it's paramount that shareholders feel confident that the team leading this company today is transparent about its plans and is executing against its plans. We are aware that reestablishing credibility doesn't happen overnight, but we believe that the results speak for themselves.

Mark Strobeck: Jesse will have more to say on the numbers in a moment.

Jesse: At the end of the day, the success we have demonstrated and the objectives we set out to achieve have resulted from hard work and consistent execution.

Mark Strobeck: In addition to the objectives we presented two years ago, we were also determined to rebuild credibility with our shareholders.

Jesse: We believe it's paramount that shareholders feel confident that the team leading this company today is transparent about its plans and is executing against its plans.

Mark Strobeck: We are aware that reestablishing credibility doesn't happen overnight, but we believe that the results speak for themselves. For the past two years, we've said what we were going to do, and we've done it.

Mark Strobeck: For the past two years, we've said what we were going to do, and we've done it. Collectively, our team has successfully turned this organization around and, in turn, continues to rebuild shareholder value. We wouldn't be here if we didn't believe we could execute our game plan and catalyze the success of this organization for years to come.

Mark Strobeck: Collectively, our team has successfully turned this organization around and in turn continues to rebuild shareholder value. We wouldn't be here if we didn't believe we could execute our game plan and catalyze the success of this organization for years to come.

Mark Strobeck: So let's turn to what's next. For the remainder of 2024, we will continue to focus on optimizing our business to drive sustainable profitability and meaningful cash flow. We will continue to execute on the current business plan of growing revenue and adding new customers. We will continue to focus on expanding our concentrates products portfolio, which, as we announced yesterday, now includes a convenience pack that will help us expand our presence in the at-home market. We expect to be able to provide you with a partnership announcement later this quarter. For the first time, we are enhancing our cash balance through the profits we are generating in our business and are beginning to reinvest those profits back into our business.

Mark Strobeck: So let's turn to what's next. For the remainder of 2024, we will continue to focus on optimizing our business to drive sustainable profitability and meaningful cash flow.

Mark Strobeck: We will continue to execute on the current business plan of growing revenue and adding new customers.

Speaker Change: We will continue to focus on expanding our concentrates products portfolio which as we announced yesterday now includes a convenience pack which will help us expand our presence in the at-home market.

Mark Strobeck: We expect to be able to provide you with a partnership announcement later this quarter. Additionally, for the first time, we are enhancing our cash balance through the profits we are generating in our business and are beginning to reinvest those profits back into our business. We continue to reduce the cost to manufacture our products by adding new equipment and enhancing our infrastructure to more fully automate our processes. We expect to fully realize the benefits of these improvements beginning in the fourth quarter of this year.

Mark Strobeck: We expect to be able to provide you with a partnership announcement later this quarter.

Mark Strobeck: For the first time we are enhancing our cash balance through the profits we are generating in our business and are beginning to reinvest those profits back into our business.

Mark Strobeck: We continue to reduce the cost to manufacture our products by adding new equipment and enhancing our infrastructure to more fully automate our processes. We expect to fully realize the benefits of these improvements beginning in the fourth quarter of this year. We are still planning to expand further into the West with a more permanent presence. We could have taken the approach of spending a lot of money to establish a new facility in the West, expecting the business would expand to catch up to the cost of the expansion. However, we are taking a different path, progressing the business in the West to a point that justifies finding a more permanent solution, and we believe we are getting to that point.

Mark Strobeck: We expect to fully realize the benefits of these improvements beginning in the fourth quarter of this year. Additionally, we are currently evaluating various business development opportunities. This is taking time as we want to make sure we make the absolute right decision from a cost-benefit perspective. We hope to have more to say on this in the coming quarter. As a result, we are increasing our guidance for the second time in 2024 across all metrics.

Mark Strobeck: We are still planning to expand further into the West with a more permanent presence. We could have taken the approach of spending a lot of money to establish a new facility in the West, expecting the business would expand to catch up to the cost of the expansion. However, we are taking a different path, progressing the business in the West to a point that justifies finding a more permanent solution, and we believe we are getting to that point. We are currently evaluating various business development opportunities. This is taking time as we want to make sure we make the absolute right decision from a cost-benefit perspective.

Mark Strobeck: We are still planning to expand further into the West with a more permanent presence.

Mark Strobeck: We could have taken the approach of spending a lot of money to establish a new facility in the West, expecting the business would expand to catch up to the cost of the expansion.

Mark Strobeck: However, we are taking a different path, progressing the business in the West to a point that justifies finding a more permanent solution, and we believe we are getting to that point. We are currently evaluating various business development opportunities.

Mark Strobeck: We are currently evaluating various business development opportunities. This is taking time as we want to make sure we make the absolute right decision from a cost-benefit perspective. And finally, we are working to add a new product line to our portfolio outside of concentrates that can expand our overall business. We hope to have more to say on this in the coming quarters.

Mark Strobeck: This is taking time as we want to make sure we make the absolute right decision from a cost-benefit perspective.

Mark Strobeck: And finally, we are working to add a new product line to our portfolio outside of concentrates that can expand our overall business. We hope to have more to say on this in the coming quarter. As a result, we are increasing our guidance for the second time in 2024 across all metrics. Now we expect net sales for 2024 to be between $95 and $98 million, an increase from the previous net sales guidance of between $90 and $94 million.

Mark Strobeck: As a result, we are increasing our guidance for the second time in 2024 across all metrics. Now we expect net sales for 2024 to be between 95 and 98 million dollars and increase from the previous net sales guidance of between 90 and 94 million dollars. We now expect a gross profit for 2024 to be between 14 and 16 million dollars and increase from between 13 and 15 million dollars. We expect the top end of our gross margin range for 2024 to be 17 percent, up from 16 percent. And we now expect to be profitable on an adjusted EBITDA basis between three quarters of a million dollars and one and a half million dollars, up from half a million dollars and one million dollars.

Mark Strobeck: We now expect gross profit for 2024 to be between $14 and $16 million, an increase from between $13 and $15 million. We expect the top end of our gross margin range for 2024 to be 17%, up from 16%. And we now expect to be profitable on an adjusted EBITDA basis between three quarters of a million dollars and one and a half million dollars, up from half a million dollars and one million. All of these metrics represent significant increases and improvements over the results we achieved in 2023.

Mark Strobeck: As a result, we are increasing our guidance for the second time in 2024 across all metrics.

Mark Strobeck: Now, we expect net sales for 2024 to be between $95 and $98 million, an increase from the previous net sales guidance of between $90 and $94 million.

Mark Strobeck: We now expect gross profit for 2024 to be between $14 and $16 million, an increase from between $13 and $15 million.

Mark Strobeck: We expect the top end of our gross margin range for 2024 to be 17%, up from 16%. All of these metrics represent significant increases and improvements over the results we achieved in 2023. Second, Expansion Beyond Concentration. We plan to approach this in an accelerated and responsible way and in a capital-efficient manner. All of this supports our goal to become a major force in nephrology.

Mark Strobeck: We expect the top end of our gross margin range for 2024 to be 17% up from 16%.

Mark Strobeck: and we now expect to be profitable on an adjusted EBITDA basis between three quarters of a million dollars and one and a half million dollars up from half a million dollars and one million dollars.

Mark Strobeck: All of these metrics represent significant increases in improvements over the results we achieved in 2023.

Mark Strobeck: All of these metrics represent significant increases and improvements over the results we achieved in 2023.

Mark Strobeck: For 2025 and beyond, we are focused on two areas. First, growing our concentrates business and making it more profitable as we work toward annual revenues north of a hundred million dollars in gross margins of up to 30 percent. And second, expansion beyond concentrates. We plan to approach this in an accelerated and responsible way and in a capital-efficient manner. All of this supports our goal to become a major force in the nephrology space.

Mark Strobeck: For 2025 and beyond, we are focused on two areas: first, growing our concentrates business and making it more profitable as we work towards annual revenues north of $100 million with gross margins up to 30%, and second, Expansion Beyond Concentrates. We plan to approach this in an accelerated and responsible way and in a capital-efficient manner. All of this supports our goal to become a major force in the nephrology space. With that, I will now turn the call over to Jesse to go into further detail about our second quarter 2024 financial results.

Mark Strobeck: For 2025 and beyond, we are focused on two areas. First, growing our concentrates business and making it more profitable as we work towards annual revenues north of a hundred million dollars in gross margins up to 30 percent.

Mark Strobeck: and second, expansion beyond concentrates. We plan to approach this in an accelerated and responsible way and in a capital-efficient manner. All of this supports our goal to become a major force in the nephrology space.

Jesse Neri: With that, I will now turn the call over to Jesse to go into further detail about second quarter 2024 financial results. Thank you, Mark. Good morning, everyone.

Mark Strobeck: With that, I will now turn the call over to Jesse to go into further detail about second quarter 2024 financial results.

Jesse Neri: Thank you, Mark. Good morning, everyone.

Jesse Neri: As we did last quarter, we will present the financials for the comparable periods in 2023 with and without the 1.5 million in deferred revenue recognized in Q1 of 2023, related to the termination of the back-to-distribution agreement. This offers us the opportunity to more accurately present the progress that we have made and continue to make specifically within our hemodialis concentrates. Net sales for the 2nd quarter, 2024, of 25.8 million are highest quarterly concentrate product revenue to date. This represents an increase of 14% over net sales of 22.7 million in Q1 of this year and a 43% increase over net sales of 18.1 million for the same period in 2023.

Jesse Neri: As we did last quarter, we will present the financials for the comparable periods in 2023 with and without the $1.5 million in deferred revenue recognized in Q1 of 2023 related to the termination of the Baxter Distribution System. This offers us the opportunity to more accurately present the progress that we have made and continue to make, specifically within our hemodialysis concentrate segment. Net sales for the second quarter 2024 were $25.8 million, our highest quarterly concentrate product revenue to date.

Jesse: Thank you Mark. Good morning everyone. As we did last quarter, we will present the financials for the comparable periods in 2023 with and without the $1.5 million in deferred revenue recognized in Q1 of 2023 related to the termination of the Baxter Distribution Agreement.

Speaker Change: This offers us the opportunity to more accurately present the progress that we have made and continue to make specifically within our hemodialysis concentrate segment.

Speaker Change: Net sales for the second quarter 2024 were $25.8 million, our highest quarterly concentrate product revenue to date.

Jesse Neri: This represents an increase of 14% over net sales of $22.7 million in Q1 of this year and a 43% increase over net sales of $18.1 million for the same period in 2023. Excluding Deferred Revenue, this represents a 34% increase over the same period in 2022. Gross profit for Q2 2024 was $4.6 million, which represents a 48% increase over gross profit of $3.1 million for the first quarter of 2024 and a 341% increase over gross profit of $1 million for the same period in 2023.

Jesse Neri: This represents an increase of 14% over net sales of $22.7 million in Q1 of this year and a 43% increase over net sales of $18.1 million for the same period in 2023. Net sales for the six months ended June 30, 2024 were $48.5 million. Excluding deferred revenue, this represents a 34% increase over the same period in 2022. Gross profit for Q2 2024 was $4.6 million, which represents a 48% increase over gross profit of $3.1 million for the first quarter of 2024 and a 341% increase over gross profit of $1 million for the same period in 2023.

Speaker Change: This represents an increase of 14% over net sales of $22.7 million in Q1 of this year and a 43% increase over net sales of $18.1 million for the same period in 2023.

Jesse Neri: Net sales for the 6 months ended June 30th, 2024, are 48.5 million. Excluding deferred revenue, this represents a 34% increase over the same period in 2023. Gross profit for Q2, 2024, was $4.6 million, which represents a 48% increase over gross profit of $3.1 million for the first quarter 2024 and a 341% increase over gross profit of $1 million for the same period in 2023. Gross profit for the 6 months ended June 30th, 2024, with $7.6 million. Excluding deferred revenue, this represents an increase of 252% over the same period in 2023. Net sales for the 2nd quarter, 2024, was 18%, a 3-fold increase from 6% for the same period in 2023.

Mark Strobeck: Net sales for the six months ended June 30, 2024 were $48.5 million. Excluding deferred revenue, this represents a 34% increase over the same period in 2023.

Jesse: Gross profit for Q2 2024 was $4.6 million.

Jesse: which represents a 48% increase over gross profit of $3.1 million for the first quarter 2024 and a 341% increase over gross profit of $1 million for the same period in 2023.

Jesse Neri: Gross profit for the six months ended June 30, 2024 was $7.6 million. Excluding deferred revenue, this represents an increase of 252% over the same period in 2022. Margin for the second quarter of 2024 was 18%, a three-fold increase from 6% for the same period in 2023.

Speaker Change: Gross profit for the six months ended June 30, 2024 was $7.6 million. Excluding deferred revenue, this represents an increase of 252% over the same period in 2023.

Jesse: Close margin for the second quarter of 2024 was 18%, a three-fold increase from 6% for the same period in 2023.

Jesse Neri: Gross margin for the 6 months ended June 30th, 2024, was 16%. Excluding deferred revenue, this represents an increase of 10% increase from 6% for the same period in 2023.

Speaker Change: Gross margin for the six months ended June 30th, 2024, was 16%. Excluding deferred revenue, this represents an increase of 10 percentage points from 6% for the same period in 2023.

Jesse Neri: Excluding deferred revenue, this represents an increase of 10 percentage points from 6% for the same period in 2023. Net income for the three months ended June 30, 2024 was $300,000, compared to a net loss of $3.3 million for the same period in 2023. Excluding deferred revenue, the net loss for the six months ended June 30, 2024, improved by $5.1 million over a net loss of $6.5 million for the same period in 2023.

Jesse Neri: Net income for the 3 months ended June 30th, 2024, was $300,000, compared to a net loss of $3.3 million for the same period in 2023. Excluding deferred revenue, let net loss for the 6 months ended June 30th, 2024, improved by $5.1 million over a net loss of $6.5 million for the same period in 2023. Adjusted EBITDA for the 2nd quarter was a positive $1.5 million, compared with a negative adjusted EBITDA of $2.3 million for the same period in 2023. Adjusted EBITDA for the 6 months ended June 30th, 2024, was a positive $1 million. Excluding deferred revenue, adjusted EBITDA increased by $5.7 million over the first 6 months of 2023.

Jesse Neri: Net income for the three months ended June 30, 2024 was $300,000, compared to a net loss of $3.3 million for the same period in 2020. Excluding deferred revenue, net loss for the six months ended June 30, 2024, improved by $5.1 million over a net loss of $6.5 million for the same period in 2023. Adjusted EBITDA for the second quarter was a positive $1.5 million compared with a negative adjusted EBITDA of $2.3 million for the same period in 2023.

Speaker Change: Net income for the three months ended June 30, 2024 was $300,000, compared to a net loss of $3.3 million for the same period in 2023.

Speaker Change: Excluding deferred revenue, net loss for the six months ended June 30, 2024 improved by $5.1 million over a net loss of $6.5 million for the same period in 2023.

Jesse Neri: Adjusted EBITDA for the second quarter was a positive $1.5 million compared with a negative adjusted EBITDA of $2.3 million for the same period in 2023. Adjusted EBITDA for the six months ended June 30, 2024 was a positive $1 million. Excluding deferred revenue, adjusted EBITDA increased by $5.7 million over the first six months of 2020. Cash, cash equivalents, and investments available for sale at June 30, 2024 were $11.9 million, compared to $8.6 million at March 31, 2024.

Speaker Change: Adjusted EBITDA for the second quarter was a positive $1.5 million compared with a negative adjusted EBITDA of $2.3 million for the same period in 2023.

Speaker Change: Adjusted EBITDA for the six months ended June 30, 2024 was a positive $1,000,000. Excluding deferred revenue, adjusted EBITDA increased by $5.7 million over the first six months of 2023.

Jesse Neri: Excluding deferred revenue, adjusted EBITDA increased by $5.7 million over the first six months of 2022. Cash, cash equivalents, and investments available for sale at June 30, 2024 were $11.9 million, compared to $8.6 million at March 31, 2024. The combination of increased sales and greater gross margin led to cash flow from operations of $1.4 million for the second quarter. Now, the money owed to Evoqua will be paid over eight quarterly installments between July of this year and April of 2026.

Jesse Neri: Cash, cash equivalence and investment available for sale at June 30th, 2024, was $11.9 million, compared to $8.6 million at March 31st, 2024. The combination of increased sales and greater gross margin led to cash flow from operations of $1.4 million for the 2nd quarter.

Speaker Change: Cash, cash equivalents, and investments available for sale at June 30th, 2024 was $11.9 million, compared to $8.6 million at March 31st, 2024.

Jesse Neri: The combination of increased sales and greater gross margin led to cash flow from operations of $1.4 million for the second quarter. On the topic of cash, we are pleased to share with you that we executed an amendment to the Asset Purchase Agreement that we signed with VOCA in July of last year. If you recall, the APA called for Rockwell to pay Avocla two milestone payments of $2.5 million each on the first and second anniversaries of the agreement.

Speaker Change: The combination of increased sales and greater gross margin led to cash flow from operations of $1.4 million for the second quarter.

Jesse Neri: On the topic of cash, we are pleased to share with you that we executed an amendment to the asset purchase agreement that we signed with the Vokua in July of last year. If you recall, the APA called for Rockwell to pay a Vokua, two milestone payments of $2.5 million each on the 1st and 2nd anniversaries of the agreement. Now, money's owed to a Vokua we paid over 8 quarterly installments between July of this year and April of 2026.

Speaker Change: On the topic of cash, we are pleased to share with you that we executed an amendment to the Asset Purchase Agreement that we signed with Avocwa in July of last year. If you recall, the APA called for Rockwell to pay Avocwa two milestone payments of $2.5 million each on the first and second anniversaries of the agreement.

Jesse Neri: Now, the money owed to Evoqua will be paid over eight quarterly installments between July of this year and April of 2026. These quarterly payments will minimize the impact on our cash flow and accelerate our investment in operations. I will now turn the call back over to Mark.

Speaker Change: Now, money is owed to OVOPA will be paid over eight quarterly installments between July of this year and April of 2026.

Mark Strobeck: These quarterly payments will minimize the impact on our cash flow and accelerate our investment in. I'll now turn the call back over to Mark.

Speaker Change: These quarterly payments will minimize the impact on our cash flow and accelerate our investment in operations.

Operator: Thank you, Jesse. Operator, please open the phone lines for any questions. Thank you, Dr. Strobeck, and as mentioned, we are now open for questions. To ask a question on the phone, please press star 1 to raise your hand and join the queue. When called upon to ask your question, we kindly request a limit of one question and one follow-up, and to please ensure your device is unmuted.

Operator: Operator, please open the phone lines for any questions.

Speaker Change: I will now turn the call back over to Mark.

Mark Strobeck: thank you jesse operator please open the phoneon lines for any questions

Operator: Thank you, Dr. Strobeck, and as mentioned, we are now open to questions. To ask a question on the phone, please press star 1 to raise your hand and join the queue. When called upon to ask your question, we kindly request a limit of one question and one follow-up and please ensure your device is unmuted. Again, that is Star 1 to ask a question, and your first question comes from the line of Raghuram Selvaraju from HC Wainwright. Please go ahead.

Speaker Change: Thank you, Dr. Strobeck, and as mentioned, we are now open for questions. To ask a question on the phone, please press star 1 to raise your hand and join the queue. When called upon to ask your question, we kindly request a limit of one question and one follow-up, and to please ensure your device is unmuted.

Raghuram Selvaraju: Again, that is star 1 to ask a question, and your first question comes from the line of Raghuram Selvaraju from H.C. Wang, right? Please go ahead.

Speaker Change: Again, that is star one to ask a question and your first question comes from the line of Raghuram Selvaraju from HC Wainwright. Please go ahead.

Mark Strobeck: Hi, thanks very much for taking my questions, and congratulations on all the important progress notch this quarter. Very creditable. I wanted to ask if you could provide some additional color on the partnership opportunity that you mentioned earlier in the call. If you can give us a sense of what the scope of this might look like, and also if you could talk a little bit more about your expansion strategy in the West and when you ultimately expect to light upon the most appropriate path forward there, and what it could mean for the business in particular with regard to Rockwell's overall positioning within the dialisate's market since you're already the second largest provider of these products.

Mark Strobeck: Hi, thanks very much for taking my questions and congratulations on all the important progress notched this quarter. Very creditable. I wanted to ask if you could provide some additional color on the partnership opportunity that you mentioned earlier in the call, if you can give us a sense of what the scope of this might look like, and also if you could talk a little bit more about your expansion strategy in the West and when you ultimately expect to decide upon the most appropriate path forward there, and what it could mean for the business, in particular with regard to Rockwell's overall positioning within the dial Yep. Thanks, Ram.

Raghuram Selvaraju: Hi, thanks very much for taking my questions and congratulations on all the important progress

Raghuram Selvaraju: I wanted to ask if you could provide some additional color on the partnership opportunity that you mentioned earlier in the call, if you can give us a sense of what the scope of this might look like.

Speaker Change: and also if you could talk a little bit more about your expansion strategy in the West.

Speaker Change: when you ultimately expect to light upon the most appropriate path forward there and what it could mean for the business in particular with regard to Rockwell's overall positioning within the dialysate market since you're already the second largest purveyor of these products. Thank you.

Mark Strobeck: Thank you. Thanks, Ram, and appreciate your support of comments.

Mark Strobeck: Yep. Thanks, Ram, and I appreciate your supportive comments. So, to address the first question, you know, for us to continue to have a meaningful presence in the at-home space, we need to expand our product portfolio beyond what we currently supply, you know, as we need to think about a more convenient option for folks that are going to be administering dialysis at home. The first step in that process for us was to create the convenience pack, which is, you know, the first time that there is a smaller formatted set of products that can be very easily delivered directly to a patient's home for them to administer, as opposed to some of the other formats in which we sell, which are, you know, north of 55-gallon drums.

Operator: Yep. Thanks, Ram.

Speaker Change: Yeah.

Speaker Change: thanks r and appreciate your your support ve comments

Mark Strobeck: To address the first question, for us to continue to have a meaningful presence in the app home space, we need to expand our product portfolio beyond what we currently supply. As we need to think about it more, sort of convenient option for folks that are going to be administering dialysis at home. The first step in that process for us was to create the convenience pack, which is the first time that there is a smaller formatted set of products that can be very easily delivered directly to a patient's home for them to administer, as opposed to some of the other formats in which we sell, which are north of 55-gallon drums. So that was an incredibly important first step, and we are working now with a couple of the leading providers in the app home space, currently providing them concentrates in the larger format and are now working to put in place a collaboration around specifically the convenience pack.

Speaker Change: So to address the first question, you know, for us to continue to have a meaningful presence in the at-home space

Speaker Change: Right, we need to expand our product portfolio beyond what we currently supply, you know as we need to think about a more sort of convenient option for folks that are going to be administering dialysis at home.

Speaker Change: The first step in that process for us was to was to create the convenience pack, which is...

Speaker Change: the first time that there is a smaller formatted set of products that

Speaker Change: you know can be very easily delivered directly to a patients' home for them to administer as opposed to some of the other formats in which we sell which are you know north the fifty five gallon drums

Mark Strobeck: So, that was an incredibly important first step, and we are working now with a couple of the leading providers in the at-home space, currently providing them concentrates in the larger format, and are now working to put in place a collaboration around specifically the convenience pack. So, that's all we can say at the moment, and we hope to have, like I said, more to say this quarter. As it relates to the West, that continues to be an opportunity for us.

Speaker Change: So that was an incredibly important first step and we are working now with a couple of the leading providers in the at-home space currently providing them.

Operator: Colts Conference Call and Webcast. Please note this event is being recorded.

Heather Hunter: At this time I would like to turn the conference call over to Heather Hunter Senior Vice President Chief Corporate Affairs Officer at Rockwell Medical. Heather, please go ahead. Good morning and thank you for joining us for this update on Rockwell Medical.

Speaker Change: concentrates in the larger format and are now working to put in place a collaboration around

Mark Strobeck: So that's all we can say at the moment, and we hope to have, like I said, more to say this quarter.

Speaker Change: specifically the convenience pack. So that's all we can say at the moment and we hope to have, like I said, more to say this quarter.

Mark Strobeck: As it relates to the West, that continues to be an opportunity for us. As you know, through our acquisition of a vocal, we picked up a number of customers that were in the west. Through the course of this year, we have also added to that some of which we announced, some of which we haven't announced. All kind of creating a critical mass now out there for us to really begin to consider a more permanent presence. Our hope is to, by the end of the year, have a pack board identified. The team was actually just recently out there looking at different options for us, and we hope to have that identified and are able to pursue that aggressively to establish the presence.

Heather Hunter: Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer and Jesse Neri, Rockwell Medical Senior Vice President of Finance. Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the Federal Security Laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10K and our subsequent periodic reports filed with the SEC.

Mark Strobeck: As you know, through our acquisition of Evoqua, we picked up a number of customers that were in the West. Through the course of this year, we have also added to that, some of which we have announced, some of which we haven't announced, all kind of creating a critical mass now out there for us to really begin to consider a more permanent presence. Our hope is to have a path forward identified by the end of the year.

Speaker Change: As it relates to the West

Speaker Change: That continues to be an opportunity for us. As you know, through our acquisition of Evoqua, we picked up a number of customers that were in the West.

Speaker Change: through the course of this year we have also added to that some of which we announced some of which we haven't announced all kind of creating a critical mass now out there for us to really begin to consider it more permanent presence

Mark Strobeck: We, you know, the team was actually just recently out there looking at different options for us, and we hope to have that identified and, you know, are able to pursue that aggressively to establish our presence out there. Remember, this is, as you pointed out, this is a two-player market, but in the West, it's essentially a one-player market. It's Fresenius.

Speaker Change: Our hope is to, by the end of the year, have a path forward identified.

Heather Hunter: These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Doctors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC.

Speaker Change: The team was actually just recently out there looking at different options for us.

Speaker Change: and we hope to have that identified and, you know, are able to pursue that aggressively to establish the presence, our presence out there. Remember, this is a, as you pointed out, this is a two-player market, but in the West it's essentially a one-player market. It's Fresenius.

Mark Strobeck: Our presence out there. Remember, as you pointed out, this is a two-player market, but in the West it's essentially a one-player market. It's presinious. And once we are able to establish a more significant presence out there, I think we're going to be a great alternative option for a lot of those folks as we are in the middle in the eastern portions of the country, and we'll be able to compete effectively, and that represents a hundred million dollar market opportunity for us to tap into. So we're excited to do it, but we took the approach, as we said in the script, that we wanted to build a critical mass of business there before we started to make investments, as opposed to the other way around, which I think would have introduced risk here.

Mark Strobeck: And, you know, once we are able to establish a more significant presence out there, I think we're going to be, you know, a great alternative option for a lot of those folks, as we are in the middle and the eastern portions of the country, and we'll be able to compete effectively. And, you know, that represents a $100 million market opportunity for us to tap into. So, we're excited to do it, but we took the approach, as we said in the script, that, you know, we wanted to build a critical mass of business there before we started to make investments, as opposed to the other way around, which I think would have introduced risk here.

Speaker Change: And, you know, once we are able to establish a more significant presence out there.

Heather Hunter: Rockwell Medical's quarterly report on Form 10Q for the three months ended June 30, 2024, was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter, 2024 results. The reconciliation on non-gap measures we discussed on today's call can also be found in today's press release. Our Form 10Q and other reports filed with the SEC, along with today's press release, our investor presentation and a replay of today's conference call and webcast can be found on Rockwell Medical's website under the investor's section.

Speaker Change: I think we're going to be, you know, a great alternative option for a lot of those folks as we are in the middle and the eastern portions of the country, and we'll be able to compete effectively. And, you know, that represents a $100 million market opportunity.

Speaker Change: for us to tap into. So, we're excited to do it, but we took the approach, as we said, in the script.

Speaker Change: That, you know, we wanted to build a critical mass of business there before we started to make investments as opposed to the, you know, the other way around, which I think would have introduced risk here.

Mark Strobeck: Now I would like to turn the conference call over to Rockwell Medical's president and CEO, Dr. Mark Strobek. Thank you, Heather. Good morning, and thank you for joining us today for Rockwell Medical's second quarter 2024 results conference call and webcast.

Mark Strobeck: Thank you very much.

Anthony Vendetti: And your next question comes from the line of Anthony Vendetti from Maxim Group.

Operator: And your next question comes from the line of Anthony Vendetti from Maxim Group. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: And your next question comes from the line of Anthony Vendetti from Maxim Group. Please go ahead.

Mark Strobeck: Please go ahead. Thank you. So Mark, if I understand the opportunity for the home base product. So you've, you've officially, I guess, as of yesterday, launched the convenience pack. But until the partnership is announced, is it safe to say that we shouldn't count on any material or tangible revenue from the convenience pack until this partnership is announced? Is that, would that be accurate? So I think the way to think of it is, you know, now that it's launched, right, we're going to begin sales of that convenience pack. We will begin to start to generate revenue with that here in the near term and will only be accelerated, you know, once we're able to establish a more definitive longer term collaboration with one of the at home providers.

Anthony Vendetti: Thank you. So, Mark, if I understand the opportunity for the home-based product, you've officially, I guess, as of yesterday, launched the convenience pack. But until the partnership is announced, is it safe to say that we shouldn't count on any material or tangible revenue?

Mark Strobeck: Thank you. So, Mark, if I understand the opportunity for the home-based product, you've officially, I guess as of yesterday, launched the convenience pack. But until the partnership is announced, is it safe to say that we shouldn't count on any material or tangible revenue from the convenience pack until this partnership is announced? Is that, would that be accurate?

Mark Strobeck: I'd like to start off this morning by reflecting on the last two years since I joined Rockwell and since we assembled the team we have now who are leading our organization through significant and transformative growth and change. When we presented our second quarter results to shareholders back in 2022, we laid out what we believed were lawfully but attainable goals for Rockwell. For the first time in the company's history, we set out to put Rockwell Medical on a steady path to consistently grow revenue, drive the company to 100 million in annual sales, go from a gross loss on this business to an increasing gross profit, increase our gross margin from a negative number to a consistently greater positive number, attained sustained profitability and significantly lower our debt burden.

Anthony Vendetti: Thank you. So Mark, if I understand the opportunity for the home-based product, so you've officially, I guess as of yesterday, launched the convenience pack.

Anthony Vendetti: But until the partnership is announced, is it safe to say that we shouldn't count on any material or tangible revenue

Speaker Change: from the convenience pack until this partnership is announced? Would that be accurate?

Mark Strobeck: So I think the way to think of it is, you know, now that it's launched, right, we're going to begin sales of that.

Mark Strobeck: So I think the way to think of it is, now that it's launched, right, we're going to begin sales of that convenience pack. We will begin to generate revenue with that here in the near-term and will only be accelerated once we're able to establish a more definitive longer-term collaboration with one of the at-home providers. But that's not to say that revenue itself won't continue to grow.

Mark Strobeck: So, I think the way to think of it is, you know, now that it's launched, right, we're

Speaker Change: that convenience pack.

Speaker Change: We will begin to start to generate revenue with that here in the near term and will only be accelerated.

Mark Strobeck: At the time it was clear that shareholders were apprehensive, doubtful even, that we could and would achieve these objectives. Often times we would get asked, so how are you guys different? Why should we believe you? It was understandable. Over the years Rockwell has had a lot of turnover. The company's financial results were not supporting growth or financial stability and those circumstances damaged Rockwell's credibility with shareholders and stock performance suffered.

Speaker Change: once we're able to establish a more definitive, longer-term collaboration with one of the at-home providers.

Mark Strobeck: But that's not to say that revenue itself won't continue to grow. In fact, we just closed the books on July, and July was the largest revenue to date that the company has had on a monthly basis, around $10 million for the month. So we're going to continue to grow revenue for the existing business, and the convenience pack will just layer onto that.

Mark Strobeck: In fact, we just closed the books on July, and July was the largest revenue to date that the company has had on a monthly basis, around $10 million for the month. So we're going to continue to grow revenue for the existing business, and the convenience pack will just layer onto that.

Speaker Change: But that's not to say that revenue itself won't continue to grow. In fact, we just closed the books on July , and July was the largest revenue to date that the company has had on a monthly basis, around $10 million for the month.

Mark Strobeck: Okay. Great.

Speaker Change: So we're going to continue to grow revenue for the existing business and the convenience pack will just layer on to that.

Mark Strobeck: I am proud and excited to share that we have delivered and continue to deliver on our promises. For the first time in recent memory, we achieved profitability on a cash flow and adjusted EBITDA basis for the second quarter of 2024. We believe that this is a critical turning point for Rockwell and we expect to build upon this momentum in the coming quarters. Let me walk you through some of the numbers that get us to this cash flow positive outcome for Rockwell.

Mark Strobeck: Okay, great. And then just the follow-up on that: are the margins on the convenience pack at your corporate course margins higher, lower than your base business. They're better than we are currently reporting for our base business. Okay, excellent. And then I guess, last, as a follow-up, the partnership is distinct and separate from what you're looking for in terms of a new product line or a complimentary product line for your base business, correct. That's correct. Yep, it's separate. And so we are currently now, you know, working through what those product lines would be, you know, the sort of again, the most cost-effective and capital-efficient manner by which we can add those so that we can start, you know, generating revenue on those as quickly as possible.

Operator: Okay, great, and then just to follow up on that, are the margins on the convenience pack at your corporate gross margin higher or lower than your base business?

Mark Strobeck: And then just to follow up on that, are the margins on the convenience pack at your corporate gross margin higher or lower than your base... They're better than we are currently reporting for our base business. And then, I guess last as a follow-up is... The partnership is distinct and separate from what you're looking for in terms of a new product line or a complementary product line for your base business, correct?

Speaker Change: Okay, great. And then just to follow up on that, are the margins on the convenience pack at your corporate gross margins higher, lower than your base business? They're better than we are currently reporting for our base business.

Speaker Change: Okay, excellent. And then I guess last as a follow-up,

Mark Strobeck: Net sales for the second quarter of 2024 were once again the highest quarterly concentrated product sales generated to date for Rockwell. In the second quarter of 2024, we generated net sales of $25.8 million, which was largely driven by our improved value-based pricing and increasing volumes. Annualizing our second quarter of 2024 net sales would put us north of $100 million in revenue, a goal that we set out to achieve two years ago.

Operator: What you're looking for in terms of a new product line or a complementary product line for your base business, correct? That's correct.

Speaker Change: The partnership is distinct and separate from

Speaker Change: what you're looking for in terms of...

Speaker Change: a new product line or a complementary product line.

Mark Strobeck: And so we are currently now, you know, working through what those product lines would be, and the sort of, again, the most cost-effective and capital efficient manner by which we can add those, so that we can start, you know, generating revenue on those as quickly as possible. We're not looking to do a very costly or long-term sort of clinical development program. This is something where, you know, we are working with organizations that have products that we could potentially bring in that would amplify those here in the United States.

Mark Strobeck: That's correct. Yep, it's separate.

Mark Strobeck: That's correct. Yep, it's separate. And so we are currently now, you know, working through what those product lines would be, and the sort of, again, the most cost-effective and capital-efficient manner by which we can add those so that we can start, you know, generating revenue on those as quickly as possible. We're not looking to do a very costly or long-term sort of clinical development program. This is something where, you know, we are working with organizations that have products that we could potentially bring in that would amplify those here in the United States.

Speaker Change: for your base business, correct?

Speaker Change: That's correct. Yep, it's separate. And so we are currently now...

Speaker Change: working through what those product lines would be.

Speaker Change: Again, the most cost-effective and capital-efficient manner by which we can add those.

Mark Strobeck: Additionally, we continue to achieve consecutive quarters of improved gross profit and gross margin. Having reported $4.6 million in gross profit and 18% gross margin for the second quarter 2024, this quarter's results exceeded the gross margin guidance we projected for the full year of 2024 and is starting to approach the gross margin we expect to achieve in 2025. We believe gross margin will continue to improve and trend upward as we continue to streamline production, improve our processes, enhance our distribution capabilities, and further modernize our infrastructure.

Speaker Change: so that we can start you know generating revenue on those as quickly as possible. We're not looking to you know to do a very costly or long-term sort of you know

Mark Strobeck: We're not looking to, you know, to do a very costly or long-term sort of, you know, clinical development program. This is something where, you know, we are working with organizations that have products that we could potentially bring in that would amplify those here in the United States.

Speaker Change: Clinical Development Program. This is something where, you know, we are working with organizations that have products that we could potentially bring in that would amplify those here in the United States.

Mark Strobeck: Okay, great. Thanks for all the color. Appreciate it. Oh, thanks, Anthony.

Mark Strobeck: Okay, great. Thanks for all the color. I appreciate it. Thank you.

Speaker Change: Okay, great. Thanks for all the color. Appreciate it.

Operator: And a reminder, if you would like to join the queue and ask a question, to please press star one on your telephone keypad now to raise your hand and join the queue. And we'll pause for a few moments for any final questions.

Operator: And a reminder, if you would like to join the queue and ask a question, please press star 1 on your telephone keypad now to raise your hand and join the queue. And we'll pause for a few moments for any final questions. There are no further questions at this time. I will turn the call back over to Dr. Strobeck.

Mark Strobeck: The combination of increased sales in greater gross margin has led to cash flow from operations of $1.4 million for the second quarter and as a consequence, an increase in our cash balance. Our cash balance has gone from $8.6 million at the end of the first quarter to $10.2 million around the time we reported our first quarter earnings to $11.9 million at the end of the second quarter. We expect that our cash balance will continue to increase as we continue to be profitable. Jesse will have more to say on the numbers in a moment.

Speaker Change: And a reminder if you would like to join the queue and ask a question to please press star 1 on your telephone keypad now to raise your hand and join the queue and we'll pause for a few moments for any final questions.

Operator: There are no further questions at this time.

Mark Strobeck: I will turn the call back over to Dr. Strobeck. Thanks. We are extremely proud of the financial and operational results that we shared with you today. It is something that our team at every level within our organization has played a critical role in achieving. This is just the beginning. We continue to focus on optimization, automation, and streamlining our operations to drive sustainable profitability and shareholder value.

Speaker Change: There are no further questions at this time. I will turn the call back over to Dr. Strobeck.

Mark Strobeck: We're extremely proud of the financial and operational results that we shared with you today. It is something that our team at every level within our organization has played a critical role in achieving. This is just the beginning. We continue to focus on optimization, automation, and streamlining our operations to drive sustainable profitability and shareholder value. Thank you for your time today.

Speaker Change: Thanks.

Dr. Strobeck: We're extremely proud of the financial and operational results that we shared with you today. It is something that our team at every level within our organization has played a critical role in achieving.

Speaker Change: This is just the beginning. We continue to focus on optimization, automation, and streamlining our operations to drive sustainable profitability and shareholder value. Thank you for your time today.

Mark Strobeck: Thank you for your time today.

Operator: This concludes today's conference call and welcome. Do you may now disconnect?

Operator: This concludes today's conference call and webcast. You may now disconnect.

Mark Strobeck: We wouldn't be here if we didn't believe we could execute our game plan and catalyze the success of this organization for years to come.

Mark Strobeck: We expect to be able to provide you with a partnership announcement later this quarter. For the first time we are enhancing our cash balance through the profits we are generating in our business and are beginning to reinvest those profits back into our business. We continue to reduce the cost to manufacture our products by adding new equipment and enhancing our infrastructure to more fully automate our processes. We expect to fully realize the benefits of these improvements beginning in the fourth quarter of this year.

Mark Strobeck: We are still planning to expand further into the West with a more permanent presence. We could have taken the approach of spending a lot of money to establish a new facility in the West expecting the business would expand to catch up to the cost of the expansion. However, we are taking a different path, progressing the business in the West to a point that justifies finding a more permanent solution and we believe we are getting to that point.

Mark Strobeck: We are currently evaluating various business development opportunities. This is taking time as we want to make sure we make the absolute right decision from a cost-benefit perspective. And finally we are working to add a new product line to our portfolio outside of concentrates that can expand our overall business. We hope to have more to say on this in the coming quarters.

Mark Strobeck: As a result we are increasing our guidance for the second time in 2024 across all metrics. Now we expect net sales for 2024 to be between 95 and 98 million dollars and increase from the previous net sales guidance of between 90 and 94 million dollars. We now expect a gross profit for 2024 to be between 14 and 16 million dollars and increase from between 13 and 15 million dollars. We expect the top end of our gross margin range for 2024 to be 17 percent up from 16 percent.

Mark Strobeck: And we now expect to be profitable on an adjusted EBITDA basis between three quarters of a million dollars and one and a half million dollars up from half a million dollars and one million dollars. All of these metrics represent significant increases in improvements over the results we achieved in 2023.

Mark Strobeck: For 2025 and beyond we are focused on two areas. First, growing our concentrates business and making it more profitable as we work toward annual revenues north of a hundred million dollars in gross margins up to 30 percent. And second, expansion beyond concentrates. We plan to approach this in an accelerated and responsible way and in a capital efficient manner. All of this supports our goal to become a major force in the nephrology space.

Jesse Neri: With that, I will now turn the call over to Jesse to go into further detail about second quarter 2024 financial results. Thank you, Mark. Good morning, everyone.

Jesse Neri: As we did last quarter, we will present the financials for the comparable periods in 2023 with and without the 1.5 million in deferred revenue recognized in Q1 of 2023, related to the termination of the back-to-distribution agreement. This offers us the opportunity to more accurately present the progress that we have made and continue to make specifically within our hemodialis concentrates. Net Sales for the 2nd quarter, 2024, or 25.8 million are highest quarterly concentrate product revenue to date.

Jesse Neri: This represents an increase of 14% over net sales of 22.7 million in Q1 of this year and a 43% increase over net sales of 18.1 million for the same period in 2023. Net sales for the 6 months ended June 30th, 2024, or 48.5 million. Excluding deferred revenue, this represents a 34% increase over the same period in 2023. Gross profit for Q2, 2024, was $4.6 million, which represents a 48% increase over gross profit of 3.1 million for the first quarter 2024 and a 341% increase over gross profit of 1 million dollars for the same period in 2023.

Jesse Neri: Gross profit for the 6 months ended June 30th, 2024, with $7.6 million. Excluding deferred revenue, this represents an increase of 252% over the same period in 2023. Net sales for the 2nd quarter, 2024, was 18%, a 3-fold increase from 6% for the same period in 2023. Gross margin for the 6 months ended June 30th, 2024, was 16%. Excluding deferred revenue, this represents an increase of 10% increase from 6% for the same period in 2023.

Jesse Neri: Adjusted EBITDA for the 6 months ended June 30th, 2024, was a positive $1 million. Excluding deferred revenue, adjusted EBITDA increased by $5.7 million over the first 6 months of 2023. Cash, cash equivalence and investment available for sale at June 30th, 2024, was $11.9 million, compared to $8.6 million at March 31st, 2024. The combination of increased sales and greater gross margin led to cash low from operations of $1.4 million for the 2nd quarter.

Jesse Neri: On the topic of cash, we are pleased to share with you that we executed an amendment to the asset purchase agreement that we signed with the Vokua in July of last year. If you recall the APA called for Rockwell to pay a Vokua, two milestone payments of $2.5 million each on the 1st and 2nd anniversaries of the agreement. Now, money's owed to a Vokua we paid over 8 quarterly installments between July of this year and April of 2026.

Mark Strobeck: These quarterly payments will minimize the impact on our cash flow and accelerate our investment in I'll now turn the call back over to Mark.

Raghuram Selvaraju: Again, that is star 1 to ask a question and your first question comes from the line of Raghuram Selvaraju from H.C. Wang, right? Please go ahead.

Mark Strobeck: Hi, thanks very much for taking my questions and congratulations on all the important progress notch this quarter, very creditable. I wanted to ask if you could provide some additional color on the partnership opportunity that you mentioned earlier in the call if you can give us a sense of what the scope of this might look like and also if you could talk a little bit more about your expansion strategy in the West and when you ultimately expect to light upon the most appropriate path forward there and what it could mean for the business in particular with regard to Rockwell's overall positioning within the dialisate's market since you're already the second largest provider of these products.

Mark Strobeck: Thank you. Thanks, Ram, and appreciate your support of comments. To address the first question, for us to continue to have a meaningful presence in the app home space, we need to expand our product portfolio beyond what we currently supply. As we need to think about it more sort of convenient option for folks that are going to be administering dialysis at home. The first step in that process for us was to create the convenience pack which is the first time that there is a smaller formatted set of products that can be very easily delivered directly to a patient's home for them to administer as opposed to some of the other formats in which we sell which are north of 55 gallon drums.

Mark Strobeck: So that was an incredibly important first step and we are working now with a couple of the leading providers in the app home space currently providing them concentrates in the larger format and are now working to put in place a collaboration around specifically the convenience pack.

Mark Strobeck: So that's all we can say at the moment and we hope to have, like I said, more to say this quarter. As it relates to the west, that continues to be an opportunity for us. As you know through our acquisition of a vocal, we picked up a number of customers that were in the west. Through the course of this year we have also added to that some of which we announced, some of which we haven't announced.

Mark Strobeck: All kind of creating a critical mass now out there for us to really begin to consider a more permanent presence. Our hope is to by the end of the year have a pack board identified. The team was actually just recently out there looking at different options for us and we hope to have that identified and are able to pursue that aggressively to establish the presence. Our presence out there. Remember, as you pointed out, this is a two-player market but in the west it's essentially a one-player market.

Mark Strobeck: It's presinious. And once we are able to establish a more significant presence out there, I think we're going to be a great alternative option for a lot of those folks as we are in the middle in the eastern portions of the country and we'll be able to compete effectively and that represents a hundred million dollar market opportunity for us to tap into. So we're excited to do it but we took the approach as we said in the script that we wanted to build a critical mass of business there before we started to make investments as opposed to the other way around which I think would have introduced risk here.

Raghuram Selvaraju: Thank you very much.

Anthony Vendetti: And your next question comes from the line of Anthony Vendetti from Maxim Group. Please go ahead. Thank you. So Mark, if I understand the opportunity for the home base product. So you've, you've officially I guess as yesterday launched the convenience pack. But until the partnership is announced, is it safe to say that we shouldn't count on any material or tangible revenue from the convenience pack until this partnership is announced? Is that would that be accurate?

Anthony Vendetti: So I think the way to think of it is, you know, now that it's launched, right, we're going to begin sales of that, that convenience pack. We will begin to start to generate revenue with that here in the near term and will only be accelerated, you know, once we're able to establish a more definitive longer term collaboration with one of the at home providers. But that's not to say that revenue itself won't continue to grow.

Anthony Vendetti: In fact, we just closed the books on July and July was the largest revenue to date that the company has had on a monthly basis around $10 million for the month. So we're going to continue to grow revenue for the existing business and the convenience pack will just layer onto that.

Mark Strobeck: Okay, great. And then just the follow up on that are the margins on the convenience pack at your corporate course margins higher, lower than your base business. They're better than we are currently reporting for our base business. Okay, excellent. And then I guess last as a follow up, the partnership is distinct and separate from what you're looking for in terms of a new product line or a complimentary product line for your for your base business correct.

Mark Strobeck: That's correct. Yep, it's separate. And so we are currently now, you know, working through what those product lines would be, you know, the sort of again, the most cost effective and capital efficient manner by which we can add those so that we can start, you know, generating revenue on those as quickly as possible. We're not looking to, you know, to do a very costly or long term sort of, you know, clinical development program. This is something where, you know, we are working with organizations that have products that we could potentially bring in that would amplify those here in the United States.

Operator: Okay, great. Thanks for all the color. Appreciate it. Oh, thanks Anthony. And a reminder, if you would like to join the queue and ask a question, to please press star one on your telephone keypad now to raise your hand and join the queue. And we'll pause for a few moments for any final questions. There are no further questions at this time.

Q2 2024 Rockwell Medical Inc Earnings Call

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