Q1 2025 Rockwell Medical Inc Earnings Call
Good morning, and welcome to Rockwell Medical's first quarter 2025 results conference call and webcast. Please note that this event is being recorded.
Speaker Change: 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.
Speaker Change: Good morning, and thank you for joining us for this update on Rockwell medical joining.
Speaker Change: Joining me on today's conference call are Dr. Mark Throwback, Rockwell Medical's, President and Chief Executive Officer, and Jesse theory, Rockwell Medical's, Chief Financial Officer 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 states.
Speaker Change: It's identified as forward looking at 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.
Speaker Change: Please note that these forward looking statements reflect our opinions or expectations only as of today.
Speaker Change: 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.
Speaker Change: Rockwell Medicals quarterly report on Form 10-Q for the three months ended March 31, 2025 was filed prior to this call and provide the full analysis of the company's business strategy as well as our first quarter 2025 results. The reconciliation of non-GAAP measures. We discussed on today's call can also be found in today's press release.
Speaker Change: Our Form 10-Q, and other reports filed with the SEC along with today's press release, our updated investor presentation, and a replay of today's conference call and webcast can be found on Rockwell Medical's website under the investors section.
Dr. Mark: Now I would like to turn the call over to Rockwell Medical's, President and CEO, Dr. Mark <unk>.
Dr. Mark: Thank you Heather.
Dr. Mark: Good morning, and thank you for joining us today for Rockwell Medical's first quarter 2025 earnings conference call and webcast.
Dr. Mark: As we discussed back in March the first quarter was going to be a transition period for Rockwell.
Dr. Mark: During the first quarter, we continued to diversify our customer base with some of the leading regional national and global Hemo dialysis providers and health systems.
Dr. Mark: We remain a preferred provider as a result of our continued reliability high quality products and customer centric approach and have signed a number of new contracts. During this period.
Dr. Mark: Our business in the first quarter performed according to plan with revenue and gross profit in line with our expectations for the year.
Dr. Mark: In addition.
Dr. Mark: We continue to consolidate and further automate our manufacturing operations to reduce expenses and sustain our gross margin, which was also within our guidance range for the year.
Dr. Mark: As for our largest customer we continue to work with them to find ways to support their business going forward. Although we have not entered into a new agreement. We are still in active discussions with them about terms for potential contract extension.
Dr. Mark: One area that we are closely monitoring is the recent cyber attack that occurred in our industry.
Dr. Mark: As you May know last month, our largest customer announced a companywide ransomware incident impacting certain elements of its network. We were notified by our customer of the cyber attack and immediately disconnected all systems that were connected to their organization to prevent any potential impact of our own it infrastructure.
We're actively monitoring our network and have not experienced any direct implications to or impact on our systems to date.
Dr. Mark: Another area that we are closely monitoring as tariffs Rockwell Medical's hemodialysis concentrates are manufactured right here in America and have been since the company was founded nearly 30 years ago.
Dr. Mark: Approximately 90% of our revenue comes from dialysis providers within the United States, 10% is generated ex U S of which only one country is directly impacted by the recent U S. Tariff actions. This equates to a negligible amount of our total annualized revenue.
Because we manufacture our products in the United States, we can manage our own supply chain and nimbly respond to real world demand.
Dr. Mark: While we do source a few suppliers from outside the United States, We do not anticipate tariffs to impact our costs on those supplies.
Dr. Mark: In the first quarter, we added a single use bicarbonate cartridges technology to our portfolio of hemodialysis concentrates products the.
Dr. Mark: The addition of this bicarb cartridge to our portfolio represents an exciting opportunity for us to diversify our offerings and address one of the fastest growing segments within the dialysis products market.
Dr. Mark: We officially launched this new product in February and are starting to see some traction with our customers.
Dr. Mark: We continue to be very active in pursuing business development opportunities. We are seeking transactions that can further strengthen our position in the Reno market and will provide access to new markets either through product acquisitions or international expansion.
Dr. Mark: These opportunities are intended to be revenue generating immediately accretive to our business.
We are encouraged in due diligence we are engaged in due diligence on a number of opportunities and are looking for just the right. One that meets our growth targets and objectives. We hope to have more to say on this in the coming quarters.
Dr. Mark: Rockwell remains a leading supplier that has the scalability to manufacture and deliver to the more than 12000 individual purchasing facilities, including outpatient dialysis clinics and hospitals in the U S along with select international markets.
Dr. Mark: We are reiterating our projected guidance for 2025 with net sales between $65 million to $70 million gross margin between 16, and 18% and adjusted EBITDA between a negative $500000 and a positive $500000.
Dr. Mark: Now I will turn the call over to Jesse to review, our first 21st quarter 2025 financial results in further detail Jesse.
Jesse Theory: Thank you Mark Good morning, everyone I will now review, our first quarter 2025 financial results in greater detail.
Jesse Theory: Net sales for the first quarter were $18 9 million, representing a 17% decrease over net sales of $22 7 million for the same period in 2020 for the.
Jesse Theory: The decrease in net sales was driven by our largest customer transitioning to another supplier.
Jesse Theory: This customer agreed to a onetime nonrefundable payment of $900000 to ensure continuity of supply for products purchased during the first quarter.
Jesse Theory: Gross profit for Q1 of 2025 was $3 million.
Jesse Theory: This was in line with gross profit for the same period in 2024.
Jesse Theory: Gross margin for Q1, 2025 was 16% representing an increase from 14% for the same period in 2024.
Jesse Theory: Net loss for Q1, 2025 was $1 5 million, which represents an improvement over a net loss of $1 7 million for the same period in 2024.
Jesse Theory: Adjusted EBITDA for Q1, 2025 with a negative $400000.
Jesse Theory: Seasonal items associated with payroll tax and other public company related expenses historically incurred in Q1 drove our adjusted EBITDA to be slightly negative.
Jesse Theory: Cash cash equivalents and investments available for sale at March 31, 2025 was $17 3 million compared to $21 6 million at December 31 2025.
Jesse Theory: The decrease was driven by timing of payments and collections and seasonal items historically incurred in the first quarter.
Mark Throwback: Now I'll turn the call back over to Mark.
Mark Throwback: Thank you Jessie operator, please open the phone lines for any questions.
Speaker Change: Certainly if you would like to ask a question. Please press star followed by the number one on your telephone keypad to withdraw any questions. Please press star one again.
Ross Silver: Our first question comes from Ross Silver Rajeev <unk> from H C. Wainwright. Please go ahead. Your line is open.
Ross Silver: Hi, Thanks, so much for taking my questions and congrats on the performance so far in the quarter.
Ross Silver: In line with your previously reported guidance.
Ross Silver: I was wondering if you could firstly give us some sense on the following two aspects first.
Ross Silver: Foremost with regard to the negotiations that are ongoing with your largest historical customer kind of give us a sense of you know some scenario that could ultimately arise from those negotiations in other words what.
Ross Silver: Would there be a scaled down contractual commitment by this customer could the customers still elect to diversify away from Rockwell entirely or would there conceivably be a situation in which the customer continue to order from Rockwell at levels comparable to those seen in the past and then.
Ross Silver: Secondly, if you could give us a sense of you know any kind of directionality with regard to top line revenue cadence for the remainder of 2025 and if you have visibility at this point as to which of the remaining three quarters of the year are likely to be the weakest with respect to revenue. Thank you.
Ross Silver: Yes.
Ross Silver: Rob.
Ross Silver: Let me address the first.
Ross Silver: First of your questions.
Ross Silver: So.
Ross Silver: The discussions that we have ongoing right now with our largest customer.
Ross Silver: Our to continue to maintain some level of service to them.
Ross Silver: For the for the future going forward.
Ross Silver: It will likely be at a much smaller scale than we have done previously.
Ross Silver: But I think from the way that we're looking at it is we have a good relationship with them. We were a strong supplier of their organization and so we're looking to put in place a longer term arrangement.
Ross Silver: That will maintain some supply as well as provide them.
Ross Silver: Hum.
Ross Silver: Okay.
Ross Silver: Supply for.
Ross Silver: There.
Ross Silver: They have some safety stocks that they have that we would be we would be looking to replenish. So that's the that's the extent of the <unk>.
Ross Silver: Relationship that we're currently negotiating with them.
Ross Silver: As it relates to revenue going forward.
Ross Silver: <unk>.
Ross Silver: I think it's tough to.
Ross Silver: Predict that in this in the sense of we're in the process right now of signing additional customers.
Ross Silver: <unk> on new customers.
Ross Silver: And some of those are going to be incredibly meaningful. So we're really not in a position today to be able to provide that level of guidance.
Ross Silver: I think safe to say and.
Ross Silver: We feel really confident in the guidance that we've provided.
Ross Silver: And feel good that there is a strong possibility that we will be able to.
Ross Silver:
Ross Silver: Prove that.
Jesse Theory: Jesse I don't know if you have anything further to say.
Jesse Theory: Mark I think Thats right I mean, the way things are looking right now I would say Q2 is probably going to be the low point for the year and then build from there but.
Jesse Theory: But to Mark's point, it's still a little bit early to say.
Speaker Change: Okay, and then if you could comment on any emergent dynamics or anything in the <unk>.
Speaker Change: Respect to the at home dialysis market and specific product offerings that you brought.
Speaker Change: Russ.
Speaker Change: So thank you.
Speaker Change: Yes.
Speaker Change: The auto market I would say is continuing to progress as.
Speaker Change: We had expected.
Speaker Change: It's.
Speaker Change: From our vantage point today.
Speaker Change: It will certainly be a eight.
Speaker Change: Part of the.
Speaker Change: Path to delivering treatments, it's not a large part today, but it's certainly one that continues to grow.
Speaker Change: Our.
Speaker Change: Product offerings that we've put together for the auto market is now beginning to start to.
Speaker Change: I'm sorry.
Speaker Change: Starting to increase sales of that product.
Speaker Change: And we suspect that there will be more coming through the remainder of the year.
Speaker Change: The nice part for us about that product offering not only is it.
Speaker Change: <unk> significantly improves our patient is able to administer the dialysis treatment at home by using.
Speaker Change:
Speaker Change: Product.
Speaker Change: Types that are much more manageable for the patient.
Speaker Change: But it's also a much higher margin product for us.
Speaker Change: And so we're looking to to see that.
Speaker Change: Begin to grow here in the second half of the year.
Speaker Change: Great. Thank you very much.
Ron: Thanks, Ron.
Speaker Change: Our next question comes from Jeremy Pearlman from Maxim Group. Please go ahead. Your line is open.
Speaker Change: Hi, Good morning. Thank you for taking my questions first maybe if you could expand any more information on your international market expansion and on the West Coast.
Speaker Change: You see the opportunities there and have the progressing.
Speaker Change: Yes so.
Speaker Change: We continue to expand our business.
Speaker Change: What we called certain international internationally.
Speaker Change: But it's primarily in Latin America.
Speaker Change: That's a big opportunity for us and one that.
Speaker Change: We continue to see an opportunity for us to provide products to.
Speaker Change: Those emerging dialysis centers.
Speaker Change: And a lot of our growth continues to be within that within that region.
Speaker Change: Again, it's advantageous for US we don't we aren't responsible for the distribution of those products that's taken on by by the customer and so that turns out to be a good piece of business for us as far as expansion into the to the western portion of the United States. We still believe that that's a good opportunity we still believe that.
Speaker Change: Based on our data that is largely being supported by one manufacturer.
Speaker Change: And so we think theres an opportunity there.
Speaker Change: We're still trying to determine what's the best.
Speaker Change: Best approach for us to take.
<unk> enter into that West coast market. We've we've developed now critical mass as it relates to customers out in the west.
Speaker Change: So with that in hand.
Speaker Change:
Speaker Change: Likely makes more sense for us to contemplate establishing a facility out in the west.
Speaker Change: But we haven't made any final determinations, yet on how to best do that but it's certainly an area that we think is a ripe opportunity for us to expand.
Understood. Okay, and then maybe if you could just help us.
Speaker Change: The loss of the largest customer was a little bit of a step back on your trying to mitigate that by taking on new customers. How much of that revenue do you think you could take on is there are there enough in the smaller independent dialysis providers that you'd be able to pick up and to cover most of that expense. The loss revenue. How do you. How are you looking at that.
Speaker Change: We think there are we think there is.
Speaker Change: And it's in the areas likely that you've just discussed.
Speaker Change: And I would add to that within our own existing footprint. Today. There is still a significant number of customers that exist.
Speaker Change: Don't currently purchase Rockwell products that code.
Speaker Change: So our commercial efforts are focused.
Speaker Change: To expand our customer base within our existing footprint b to expand.
Speaker Change: In our customer base.
Speaker Change: Internationally within Latin America, primarily.
Speaker Change: And then third will be to continue to further penetrate into the west.
Speaker Change: We believe that there is an opportunity there that is large enough that would allow us to replace a significant portion of the revenue that we've lost.
Speaker Change: Okay understood and then just last question I think I just want to make sure I think I heard this.
Speaker Change: As part of an answer to another question the revenue guidance that you're reaffirming today, that's as your customer base stands now than in any other customers you may sign on as the year goes on that could just be a potential upside or is that or is there any customers that you.
Speaker Change: Assume forget is baked into that guidance.
Speaker Change: No. So this is based on our current customer base today.
Speaker Change: And so any any new customer.
Speaker Change: Would add to that.
Speaker Change: So there would be potential upside there.
Speaker Change: Okay, great. Thank you for taking my question.
Absolutely. Thank you.
Speaker Change: There are no further questions. This concludes today's conference call and webcast you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].