Q3 2025 Rockwell Medical Inc Earnings Call

Good morning and welcome to Rockwell Medical's third quarter 2025 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, Chief Operating Officer at Rockwell Medical. Heather, please go ahead.

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. 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 meeting 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, 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.

Rockco Medical's quarterly report on forums 10q for the 3-month. And it's September 30th 2025 was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's third, quarter 2025 results.

Our form, 10 q and other reports filed with the FCC along with today's press release, our updated investor presentation, and a replay of today's conference call and webcast can be found on rockco. Medical's website under the investor section,

Thank you, heather.

As we approach the end of the year, I want to provide you with an update on what has truly been a year of resilience transformation and growth for Rockwell.

We are effectively managing the transition of our largest customer away from us. While securing our base business through multi-year contracts, right? Sizing our organization to enhance operational efficiency and adding new customers all while continuing to meet strong, customer Demand, with high-quality products supported by exceptional customer service.

I am proud to say that we have made substantial progress.

We continue to fundamentally strengthen our contract portfolio, with over 80% of our customers operating under long-term agreements. This provides stability and revenue visibility that positions us well for the future.

The Strategic decisions we made earlier in the year are now translating into tangible results and we remain confident in our ability to achieve our full year guidance targets.

This continues to track in line with our full year, guidance range.

while our net sales of 15.9 million reflected the expected impact from our largest customers transition, our adjusted gross margin performance remained consistent and well within the range, well, within our guidance range of 16 to 18%,

We continue to make meaningful progress with both new and existing customers.

These discussions span various customer segments and Geographic markets. And while we maintain our characteristically conservative approach to Guidance, the breadth and quality of these opportunities, reinforce, our optimism about the company's growth, trajectory in 26 and Beyond.

One agreement worth highlighting is with a single dialysis center located in Southern Florida. This is a 3-year commitment with the option to renew for 2 additional 1-year periods, which has the potential to generate approximately $1 million in annualized net sales for the company. During the third quarter, we also expanded our product purchase segment agreement with the largest provider of dialysis in skilled nursing facilities in the United States.

The agreement will be in effect for three years, with the option to renew for one additional year. It will include supply and purchasing minimums for our liquid and dry acid, as well as bicarbonate concentrates, including our bicarbonate cartridge, which, as a reminder, officially launched earlier this year.

Discussions with our formerly largest customer are still ongoing.

We continue to supply them through the third quarter and expect to supply them through the end of the year. As a reminder, this customer originally planned to complete their transition to a new supplier in the middle of this year. However, due to a Class 1 recall of this product by the new supplier and other unforeseen circumstances, the customer continues to rely on Rockwell Medical for a portion of a Teemo dialysis concentrate supply. We believe that this speaks to both the quality of our products and the operational challenges inherent in switching suppliers for mission-critical dialysis treatments.

Relationship remains meaningful to our business. Our successful diversification efforts have significantly reduced our dependence on any single customer.

We believe that this reduced concentration risk, combined, with our strengthened contract portfolio across our Broad, and customer base positions us, well, regardless of how our discussions with the largest customer ultimately end up.

We will continue to approach these discussions with the same professionalism and customer Centric. Focus, that have characterized our long-standing relationship with this, large customer while maintaining our disciplined approach to guidance and ensuring that any future commitments aligned with our strategic objectives and operational capabilities.

Now, I'll turn the call over to Jesse to review our third quarter, 2025 Financial results in further detail.

Our focus in 2025 has been to adjust our cost structure to align with the changes to our customer base.

While, while improving efficiency is an ongoing exercise, we have made progress over the last 2 quarters and restructuring the size of our operations, and expect those efforts to be substantially completed by the end of this year.

We measure our progress in this area by focusing on 3 key metrics.

Gross margin adjusted ibida and cash.

We Believe adjusted ibida is a good proxy for profitability because we remove non-cash items, non-operating items, restructuring costs and other items that are not part of the concentrates business.

Since there have been so many changes over the past year, we believe the most meaningful comparison is against the previous quarter instead of the prior year.

I will now review our financial results for the 3 and 9 months ended September 30th 2025 in Greater detail.

Net sales for the third quarter were 15.9 billion which were in line with net sales for the second quarter and represent a 44% decrease over net sales of 28.3 million for the same period in 2024.

The decrease in net sales was driven by the transition of our largest customer to another supplier.

Net sales for the nine months ended September 30, 2025, were $34.2 million, reflecting a 50.9% decrease from net sales of $76.8 million for the same period in 2024.

Gross profit for the third quarter was $2.3 million, which was in line with the gross profit for the second quarter and represents a 64% decrease from $6.2 million for the same period in 2024.

Gross profit for the 9 months. Ended September 30th was 7.8 Million which represents a 44%, decrease over 13.9 million for the same period in 2024.

Gross margin for the third quarter, 2025 was 14% down from 16% in Q2, 202025 and 22 for the for Q2 2024.

Excluding restructuring costs. Gross margin was 18% in Q3 2025 and improvement over the first and second quarters of 2025.

Gross margin for the 9-month period ending September 30, 2025, was 15%, which represents a decrease from 18% in the same period in 2024.

Gross margin in 2025 was 17% excluding restructuring expenses.

Net loss for the third quarter of 2025 was 1.8 million, which was consistent with the first and second quarters of 2025. But with down compared to net income of 1.7 million for the same period in 2024.

Net loss for the 9 months ended. September 30th, 2025 was 4.8 million compared to an income of 300,000 for the same period in 2024.

Adjusted ibida for Q3 2025 was $50,000, which represents an improvement over adjusted ibida of -200,000, in Q2 2025, and a -400,000 in q1 of 2025.

Adjusted Eva for the 9 months, ended September 30th 2025 with a negative -60000000.

Compared with a positive adjusted Eva of 3.7 million for the same period in 2024.

While this represents a significant year-over-year decline, the trajectory shows meaningful Improvement when compared to the first half performance, indicating that our strategic initiatives, and new customer relationships are beginning to generate positive momentum for our financial results.

Cash Cash equivalents and Investments available for sale at September 30th 2025 with 23.7 million.

And increase from 18.4 million at the end of Q2.

And cash was primarily driven by the issuance of common stock in connection with our ATM facility, partially offset by cash paid in connection with c.

C, A Voca asset acquisition.

The increased cash position offers us the opportunity to continue to preserve pursue.

Business Development opportunities and further invest in infrastructure enhancements and monetization.

Now, I will turn, turn The call back over to March.

Operator. Please open the phone lines for any questions.

Thank you. If you would like to ask a question, please press star, followed by the number 1 on your telephone keypad. Our first question comes from ROM silver Raju from HC Wayne Wright. Please go ahead, your line is open,

Thank you very much for taking my questions. Uh, firstly, I was wondering if, uh, you could give us, uh, some additional color on when you expect the situation with your former largest customer to be fully resolved. If you anticipate, uh, final decision to be taken before the end of this year, or if you anticipate continuing to provide services to this customer into 2026, thank you.

Yeah, thanks, Ron. Um, we expect that to resolve this quarter. Um, we are currently in contract discussions with them, um, and we expect to be able to um discuss that shortly.

Okay. And then, uh, with respect to 2026, can you give us a sense of when you believe you might be in a position to provide forward revenue guidance for the full year 2026? Also, I wondered if you could elaborate on what types of business development activities you might look to undertake, given your current balance sheet strength. Thank you.

Yeah.

You know, early in the year. Um, so we expect to continue to do that. Um, so our anticipation is that as we release our fourth quarter earnings, we'll be able to provide visibility into the company's performance in in 2026 um as far as business development activities. Um we continue to be very active um in that um there are you know now that we have a strong cash balance um you know, that we are now employing as growth Capital. Uh we are currently in discussions with um multiple companies around uh, Acquisitions of their business. Uh,

And customer base. Um and you know assuming those

Continue to progress, we'll be able to announce shortly. What the impact of those will be.

Okay. And then lastly could you just talk a little bit about uh what you see as the key prospects near and medium-term for the bicarbonate, disposables business?

Yeah. So you know, with the with, you know, the

Introduction of our bicarbonate cartridge with, um, you know, earlier in the year and now, with our first large customer, now beginning to, um, access that particular product, we think that there's an opportunity to grow, you know, significantly beyond that. That's a much higher margin product opportunity for us. Um, and, you know, you know, it's been a significant effort to, you know, put that in place in relatively short order have that ready to go having it, you know, again, with the quality standards that we expect, for all of our products, leaving our organization. Um,

You know, it’s taken us some time to put all of that in place, but we are now in a position, I think, to maximize that. And, you know, we expect more and more of our existing customer base to begin purchasing that product from us.

Thank you.

Our next question comes from Nick Sherwood from Maxim group, please go ahead. Your line is open

Hi, good morning everyone. Um, my first question is, how are you balancing? You know, some of this organizational restructuring while also ensuring. You're making proper investments into business. I'm just mentioned potential Acquisitions. But is there anything more internal that we're focusing on? Are you making new hires or is kind of a lot of that investment based on some of these potential Acquisitions you mentioned?

Yeah, so it's, you know, as you can imagine, it's been a, you know, it's been a sort of a tricky algorithm for us um to work through which is you know, decreasing certain

Spontaneously, um, you know, adding new customers and making sure that we continue to supply product, um, to our existing customer base at the quality standards and with the service that we've provided previously, what that has, you know, essentially amounted to is a titration of resources within our organization shifting of priorities, shifting of some of those resources, um, to focus more on growth opportunities and those areas and winding down some of the activities and, um, you know, sort of operations in areas that are are no longer going to be supported by our organization. So it's been a balanced. Um and the team has done an incredibly good job of of managing that difficult sort of titration exercise. And you know, as Jesse pointed out in his um, section, you know, we're beginning to start to see the fruits of that. Um, and you know, we expect more to see more of that here in the 4.

Fourth quarter coming up, um, and through Q2 2026.

I still appreciate the detail. And my second question is, where do you see the most kind of room to run with? Uh, you know, improving your gross margin is it material costs, is it labor costs are there sort of the efficiencies that you can develop in your distribution system, where you can, you know, kind of get more product on fewer shipments or is it packaging? Can you kind of just think about 2026

What are some of those early targets you're looking at that can make the biggest impact in improving margins?

So I think, uh,

Long term. Uh, labor cost is certainly an area where we can become more efficient. So, um,

I think that's number 1, but over the long term, we definitely see upside in uh reducing our materials costs and distribution as well.

Okay, so labor and then

And then some of the materials is after that. And then uh my third and final question is there's on the uh adjusted ebit reconciliation there.

Is a facility closer? Can you kind of just give me a little bit of background to what was happening there and kind of.

Yeah, just in detail. You can provide

Yeah. So we have 1 of our facilities. We've, we've now trimmed um again in part because it was the least for that facility was coming up. Um, we were able to consolidate um,

Our manufacturing activities into our existing facilities. Um, and so we, we were able to, you know, essentially wind that down. Um, and begin to start to offload that expense. Um, so that's what you're you're going to begin to see here in the third quarter. And then more specifically in the fourth quarter.

Okay, so we we should see maybe a little bit of a similar impact on the operating expenses in this, in the fourth quarter as well as compared to the third quarter.

That's correct.

Okay, uh, thanks for answering all my, all my questions. I will return to the queue. Absolutely.

Our last question comes from Anthony Vendetti from Maxim Group. Please go ahead. Your line is open.

Sure, thanks. Um,

So Mark I just wanted to give us an update on on 2 things. 1 is the um the West Coast uh expansion. And then um

Just an update on the home. Dialysis business. Yep.

Um,

yeah, so the West Coast you know,

Continues to be an area of opportunity for us. Um,

We are expanding our customer base now into the West Coast. Um, we expect to have. Um, we hope to have an announcement here, shortly related to, you know, sort of further customers that we are, um, acquiring in that area. Um,

Of where we will contemplate that. Um, so, you know, we believe that's a significant area of growth for us. Um, your second question,

What home? So at home, we continue to be a

You know, we are a very large supplier to that market. As you know, we supply one of the largest at-home hemodialysis providers in the United States.

Our new product configuration which I think is more amendable for at-home use. Um has begun to start to take off.

Again, that is a, you know, higher margin product opportunity for us. Um, and you know, we believe we'll continue to see that growth, um, through the end of the year and into 2026 as more of the at-home users, um, begin to convert to that product configuration. Um, you know, we think that there's a, you know, that will have a place within the overall hemodialysis Market. Um, and those organizations that are are working in there and using our product, I think are are establishing that. Um, so you know, we continue to be excited about the prospects there, but our well, positioned to support that market as it continues to develop.

okay, maybe just just the final question just to get a a

An understanding of the magnitude, what, what percent right now of of your business is at home.

So, you know, right now it's, um, it's a small percentage um, you know, probably single digit percentage um at this point.

Um, and you know, it's our anticipation that that will continue to grow. Um, you know, we think the overall at-home market is probably going to be about 10 to 15% here in the near term, around, you know, in the overall hemodialysis market.

Okay, great. Thank you so much. Appreciate it.

Thanks Anthony.

There are no further questions, I will now turn the call back over to Dr. Strobbe back

Thank you for joining.

An update on Rockwell Medical and we look forward.

This concludes today's call. You may now disconnect