Q3 2025 Nephros Inc Earnings Call
Speaker #3: Good day . And welcome to the Nephros Inc . Third quarter 2020 financial results conference call . All participants will be in listen only mode .
Speaker #3: Should you need assistance , please signal a conference specialist by pressing the star key , followed by zero . After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on your telephone keypad .
Speaker #3: To withdraw your question , please press star . Then two . Please note this event is being recorded . I would now like to turn the conference over to Kieran Smith with Investor Relations .
Speaker #3: Please go ahead .
Speaker #4: Good afternoon everyone . This is Kieran Smith with PCG advisory . Thank you all for participating in Nephros third quarter 2025 conference call .
Speaker #4: Before we begin , I would like to caution that comments made during this conference call by management will contain forward looking statements regarding the operations and future results of Nephros .
Speaker #4: I encourage you to review Nephros Inc filings with the Securities and Exchange Commission , including , without limitation , the company's form 10-K and 10-q , which identify specific factors that may cause actual results or events to differ materially from those described in the forward looking statements .
Speaker #4: Factors that may affect the company's results include , but are not limited to Nephros Inc ability to successfully , timely and cost effectively market and sell its products and service offerings .
Speaker #4: The rate of adoption of its products and services by hospitals and other healthcare providers . The success of its commercialization efforts and the effect of existing and new regulatory requirements on Nephros business and other economic and competitive factors .
Speaker #4: The content of this conference call contains time sensitive information that is accurate only as of the date of the live call today , November 6th , 2025 .
Speaker #4: The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call , except as required by law .
Speaker #4: I would now like to turn the call over to Nephros President and Chief Executive Officer , Robert Robert . Please go ahead .
Speaker #5: Thank you . Karen , and good afternoon , everyone . I'm excited to share the results from our third quarter 2025 , a period that marks another step forward in Nephrosis transformation and growth story .
Speaker #5: We delivered 4.8 million in revenue . Our second highest quarter ever , and we did it with strong contributions across our business . This past quarter also marks our fifth consecutive quarter of profitability .
Speaker #5: And I'm so excited to report that we reached the highest level of programmatic business in our company's history . A milestone that reflects the consistency .
Speaker #5: The resilience and increasing value of our recurring revenue streams . What's driving that ? Well , our filtration installation program continues to be a powerful growth lever .
Speaker #5: We've seen that when we support our customers with the full installation experience , not just a product , reorder rates go up , engagement deepens , and customer loyalty strengthens .
Speaker #5: That's not just good for the quarter . That's good for long term business . Another exciting development . Our path fas PFAS removal solution is now in the field .
Speaker #5: This breakthrough opens the door to new verticals beyond our traditional patient care markets , including municipalities , dialysis centers and labs , as much more attention is being paid to this alarming issue .
Speaker #5: While early the response has been encouraging and we believe that this will be a growth engine for years to come . We've also deepened our commercial traction in cross-functional coordination .
Speaker #5: Our teams are firing on all cylinders , and our sales force continues to bring in high quality opportunities , not just more business , but the right kind of business .
Speaker #5: As we expand into dental , municipal and government facilities , we're doing so with operational discipline and strategic focus . As I look ahead , I'm incredibly optimistic with strong customer retention , a record number of active sites and new innovations already in the market .
Speaker #5: We're executing extremely well today and building momentum for tomorrow . Our intense focus and financial discipline is clearly driving our revenue growth and profitability .
Speaker #5: With our strong balance sheet , zero debt and the robust innovation pipeline , we remain confident that Nephros is well to sustain growth , broaden our market reach and deliver strong value in the quarters ahead .
Speaker #5: Thank you to our employees , our partners and investors for your continued belief in nephros . With that , I'll turn it over to Judy for more detailed look at our financials .
Speaker #5: Judy .
Speaker #6: Thanks , Robert . I will now provide a closer look at Nephros financial performance in the third quarter and year to date of 2025 .
Speaker #6: We reported third quarter net revenue of $4.8 million , a 35% increase over the corresponding period in 2020 . For reflecting strong growth in our programmatic business and significant growth in our service revenue , our active customer sites continued to grow sequentially and were over 1650 as of September 30th , 2025 .
Speaker #6: Gross margins in the quarter came in at 61% , which is consistent with 61% in the third quarter of 2024 , which reflects an increase in inventory handling expenses , including tariffs that were mostly offset by a reduction in inventory reserve adjustments .
Speaker #6: Research and development expenses in the quarter were $338,000 , compared to $188,000 for the same quarter in 2020 . For expenses were higher in 2025 due to higher accrual for employee bonuses and an increase in headcount .
Speaker #6: Sales, general and administrative expenses in the quarter were $2.2 million, compared to $1.7 million for the corresponding period in 2020. This represents an increase of 30% due to higher sales commissions resulting from increased revenue and a higher accrual of employee bonuses.
Speaker #6: We are pleased to report a significant increase in net income for the quarter . We ended up with $337,000 , compared to $183,000 in the same period last year .
Speaker #6: This marks our fifth consecutive quarter of profitability adjusted EBITDA in the quarter was positive $418,000 , compared to $295,000 during the same period in 2024 .
Speaker #6: Net cash provided by operating activities was $99,000 in the third quarter of 2025 , versus net cash used of $623,000 in the prior year period .
Speaker #6: An improvement of $722,000 . Net cash provided in the third quarter of 2025 . Reflects primarily our positive net income , offset by an increase in accounts receivable , net cash used in the third quarter of 2024 reflects primarily our positive net income , offset by an increase in inventory .
Speaker #6: Now , let me turn to our nine month results . Sales for the nine months ending September 30th , 2025 increased by 37% to $14.1 million , from $10.3 million in the prior year period , reflecting strong growth in our programmatic business and emergency response business and service revenue also showed significant growth .
Speaker #6: Gross margins improved to 63% in the nine months ended September 30th , 2025 , from 61% in the prior year period . The increase in gross margin was primarily driven by lower product costs , resulting from a more favorable product mix and a reduction in inventory reserve adjustments .
Speaker #6: FDA expenses were $6.7 million , an increase of 15% in the nine months ended September 30th , 2025 , versus the prior year period due to higher sales commission expense , increased employee bonus accruals , and higher stock based compensation expense income increased to $1.1 million in the nine months ended September 30th , 2025 , from a net loss of 0.3 million in the prior year period .
Speaker #6: Adjusted EBITDA in the nine months ended September 30th , 2025 was positive $1.4 million compared to $67,000 during the same period in 2020 .
Speaker #6: For . I am also pleased to report that our cash balance on September 30th , 2025 increased to $5.2 million compared to $3.8 million as of December 31st , .
Speaker #6: 2024 , Net and we continue to be debt free . So please refer to today's press release for more details about the calculation of adjusted EBITDA and its reconciliation to GAAP net income or loss .
Speaker #6: And as always, additional information about our results can be found in our filing on Form 10-Q, which we filed this afternoon as well.
Speaker #6: I would now like to hand the call back to Robert for concluding comments . Robert .
Speaker #5: Thank you . Judy . As we look to the future , our focus remains clear scale . What's working , pursue what's next , and stay grounded in our mission .
Speaker #5: The progress we've made across operations or commercial strategy and financial performance . Has laid a strong foundation for sustainable growth . In a world where water quality and infection control are increasingly vital .
Speaker #5: Nephros is well positioned to lead . This quarter has shown what's possible when innovation meets execution and purpose drives performance . We are energized by this momentum and we're not only at the beginning of what we believe is a long runway .
Speaker #5: It's a point where the future is up for us at this point , we'd like to open this up for questions . Operator .
Speaker #3: We will now begin the question and answer session . To ask a question , you may press star , then one on your telephone keypad .
Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .
Speaker #3: At this time we will pause momentarily to assemble our roster . The first question comes from Tom McGovern with Maxim Group . Please go ahead .
Speaker #7: Yeah . Thanks , guys , and congrats on another strong quarter here . I just wanted to see if we could dive in a little bit more into the new PFAS filtration solution that you guys launched back in October .
Speaker #7: So it sounds like it kind of broadens your potential market into those municipalities . And some , you know , I guess more rigorous regulatory environments like dialysis and other labs .
Speaker #7: But maybe just kind of unpack for me , you know , just what the significance really is as we look at how it could impact revenues in 26 and in the fourth quarter .
Speaker #7: Thanks .
Speaker #5: Great question and great to hear from you again . Thank you for your support and continuing to dial in . So PFAS , what that does is gives us another opportunity to meet the needs of our customer .
Speaker #5: Often we get hit with the most challenging situations . Typically it's pathogen based and more frequently . Now we're being asked about what do you have to remediate against PFAS ?
Speaker #5: And in addition , we're also being asked about microplastics and nanoplastics . So an effort to meet the needs of our customers instead of turning them away to maybe potentially one of our competitors .
Speaker #5: We introduced this PFAS as an option. And what I've also noticed is it's not typically the same customer that you'd find in a patient care or hospital setting that is concerned about PFAS.
Speaker #5: PFAS tends to be a more longer term impact and have implications over some broader period of time . So we're getting closer to more of the commercial and sometimes even high end residential .
Speaker #5: People are asking us these questions . So the the what , what we have to do at Nephros is figure out how do we turn that opportunity into something that we can make commercial commercializable and not dilute what we're doing with the infection control part of our business ?
Speaker #5: So I love how this is giving us this ability to look into other areas , other markets , and have an opportunity to educate those who are reaching out to us about all the different hazards that they're going to find in water .
Speaker #5: So we see this more as a conjunction or even a door opener for lead in to some of our other technology that we've been growing .
Speaker #5: Our core with . So in those regards , Pufas is a door opener . It's also branching out into new markets and giving us a chance to have a new conversation with somebody who wasn't always curious about viruses , endotoxins , and bacteria in the past .
Speaker #5: So that's pretty exciting for us . And what that means as far as growth is still to be seen . As we're just now getting started and launching and exploring how we treat new customers .
Speaker #5: With that technology . Hopefully that answers the question .
Speaker #7: Yeah , absolutely . No , I really appreciate that insight . So when we kind of take a step back and look at the PFAS versus some of the other innovation you've launched recently , you know , being the whether it's the S100 or the ultra filter , you know , all of those are pretty early stage in terms of how long they've been commercially available .
Speaker #7: But could you give us somewhat of an idea as to what you see as the largest driver of growth in , at least in the near term in 2026 ?
Speaker #7: Then maybe taking a step further back and looking at this as what's the largest opportunity for you guys on the whole , as you guys look at your business long term ?
Speaker #5: That's a good question . The the strategy has always been and will be to to grow the core and make sure that that that we're most differentiated at .
Speaker #5: That's our micro sorry . Our infection control product line . And where I see the new products that we're launched , like the Hydro Guard or even the all the other items that will address St188 .
Speaker #5: What that's doing is allowing us to meet some of the needs specified in Suite 108 and other regulations that hospitals are working with today.
Speaker #5: So those are pretty stringent , and they're asking our customers to do more and more , test more , and be able to have remediation against endotoxins .
Speaker #5: Some of the most difficult pathogen particles to remove . And that's what's driving a lot of our growth today . Customers are trying to understand what that means , how to create water management , safety programs around those regulations .
Speaker #5: And what products they might need to do in order to make sure that they're compliant . And the good part about that is we're very well educated on how to do that .
Speaker #5: We've got experts that are willing to talk , and it doesn't always mean that they're going to buy more nephros filters . They may have to install more testing time taps , for example , or change the order of their equipment or how they maintain their equipment .
Speaker #5: Just the fact that we're there educating them on how to meet some of these guidelines usually means that they turn to us for other solutions .
Speaker #5: And filtration means as well . The philosophy I like to think about is an educated customer is a nephros customer . The more we can teach them about how to meet their water needs and handle some of these more challenging environments , the more likely they are to not turn to a competitor who has technology that may not be able to do what they're trying to do .
Speaker #5: And towards a product which is able to handle the most tough conditions .
Speaker #7: Understood . Thanks for that clarity . You also mentioned in your prepared remarks that you guys have a robust , robust innovation pipeline .
Speaker #7: Just curious if there's anything we should be keeping our eye out as we kind of enter the end of the year and enter 26 as well .
Speaker #5: Your innovation pipeline is is is pretty robust . We always have more that we want to do than we have time or bodies to be able to do .
Speaker #5: So we typically will pivot to try to meet whatever newest challenges are out today and what we see coming in the future . And today , the challenges such as forever chemicals , PFAS and more towards the future a bit .
Speaker #5: The microplastics nanoplastics . I think those are going to be products that you see our pipeline meeting in the meeting and satisfying that will drive more growth in the future .
Speaker #5: And why do I think that ? It's because those situations , especially nanoplastics , are very difficult . The size of those particulates and the harms that they can do by penetrating the blood brain barrier and causing cellular disruption and endocrine disruptions .
Speaker #5: It's a really challenging situation . And as that becomes more and more known , more and more prevalent , there are not solutions out there today that can easily handle it .
Speaker #5: And I think we're well positioned to deploy our technology to be able to remove those nanoplastics . So you'll see innovation in products released in announcements around meeting some of those really tough , challenging questions that are coming in the future .
Speaker #7: Oh , sorry . That was muted there . Understood I appreciate that . I'll have one more and then I'll hop back in queue .
Speaker #7: You know you guys did call out specifically the filter and installation program is continuing to support growth and programmatic business , which is great to see .
Speaker #7: One thing that I didn't hear on the call was comments on the the tracking app . I just wanted to see if we could get an update on that .
Speaker #7: And maybe if you could break out , as you see it , at least , you know , kind of this , this record programmatic sales , how much of that , you know , you have to get super specific , but just kind of high level .
Speaker #7: How much of that growth and programmatic business do you think is attributable to this filter installation program versus the tracking app itself ?
Speaker #5: Yeah , no . Great question . Tracking app is doing well . And continues to grow . We've expanded not as much in the amount of sites that we're tracking , but more in the geographies that we're tracking now .
Speaker #5: We've got key installations in Texas and California , Florida , New York . So the biggest markets and we're still looking to penetrate the Midwest a bit more .
Speaker #5: But this tracking app is doing a couple of things for us . Number one , it's allowing us a tool to give the customer more value .
Speaker #5: They can see the installation , have a picture of what was installed , how it was installed , when it was installed , who did the installation .
Speaker #5: They can also get the messages and reminders that it's time to change it . And I think that's the most important , powerful part from our side as far as getting those repeat customers .
Speaker #5: But in addition , it's allowing us to create more touch points . Now , the touch point is that we are out there doing the install insight , and while the technician might be walking to install something at a sink , he sees a water fountain .
Speaker #5: That might be offline since Covid . It's like , oh by the way , we have a solution that can get that fountain back online .
Speaker #5: And oh , have you guys heard about the new still processing guidelines ? Do you have any instrument washing on site ? So those discussions we don't necessarily show up in service revenue or do show up in core programmatic growth and allow us to expand within those existing sites .
Speaker #5: And that's what's got the most excited about the installation program . It's that dialogue and those touch points . And yet another opportunity to educate the customer about how they can meet those water needs and satisfy the challenging .
Speaker #5: Environments that they face , especially with some of the new regulatory guidelines out today .
Speaker #7: Awesome . Great guys . I'll jump back in queue . Thanks again .
Speaker #5: No problem .
Speaker #3: Again , if you have a question , please press star then one . Our next question comes from Ralph Weil with R Weil Investment Management .
Speaker #3: Please go ahead .
Speaker #8: Hi . You talked about PFAS and you've talked about microplastics . And hopefully you will have solutions for both of them . And I'm just wondering whether you are going to be doing this and trying to enter these businesses on your own through your distributors or with joint ventures or partnerships with people who are already or companies , I should say , who are already in the field and where you could work with them , or they could work with you and penetrating the market with your new products .
Speaker #8: That's one thing . And the second , second question I have at this point is there's been a tremendous amount of publicity about Legionella disease .
Speaker #8: And I'm wondering whether that has had an effect on your quarter . And also whether the government realizing that this is a significant problem with the old water pipes and the sinks , etc.
Speaker #8: , etc. , that the government regulations , whether they be the the word we've heard in the past , so many times , Ashrae or any others , whether they will be more stringently enforced and and thus become more meaningful to you , going forward .
Speaker #5: Hi Ralph , thanks for joining and thanks for the two questions and I'll answer the first one about penetrating the markets . And then we'll touch on Legionella after that .
Speaker #5: And if I don't answer any of them clearly or completely , just please ask more . So how will we penetrate the market when we look at new technologies such as PFAS ?
Speaker #5: And I mentioned this initially that it's not always the same customer that we're talking to today . So penetrating the market is a good question and a key one that we think about of the day , we sell our products to the market directly and through distribution , and that is those are the two channels that we'll continue to to enter the market with .
Speaker #5: And one of the things that we're figuring out is , do we have the right partners to talk about PFAS ? Do we have the right internal arrangement in order to answer the questions and calls that might come in from organizations that are not the typical hospital networks ?
Speaker #5: And that's the question we answer . And look at every day . And we are having to change our models slightly . We're actively pursuing it , but what we find is that at the end of the day , it's still our our salespeople , our experts internally that end up explaining how the remediation is done .
Speaker #5: There's the ones , whether it's through an . to a At the end distributor or whether it's through a direct phone call or a marketing leads , or at a trade show .
Speaker #5: They still are the ones that are explaining the solution , giving the quote , and helping the customer through that solution as they work to remediate that problem .
Speaker #5: So we're excited about the new opportunity . We're excited about the new audiences that it brings us to and the new conversations that we're able to have .
Speaker #5: And as our distributors and partners , some who are firmly entrenched in in markets where it's healthcare and some that are not , both have had opportunities .
Speaker #5: We we see the Non-healthcare partners more so than the healthcare focused partners bringing some of those opportunities . And that's fine . That's quite right .
Speaker #5: And exactly why we have those partners . We don't currently have all of the reach and breadth and relationships that that our partners do have .
Speaker #5: And they've been instrumental in growth . And and we still do what we can to make sure that they're successful and that we support them in their needs and their efforts going forward .
Speaker #5: And that's been working for us . So microplastics , it's not quite as far down the road as I would think that PFAS is .
Speaker #5: And that's just my observation . And as I think it's because the two things one , measuring a nanoplastic that's or microplastic is hard .
Speaker #5: It's difficult to have equipment that can take and separate the microplastics , identify the species and run the centrifuges . It's just hard to do that on large volumes of water to be able to test and identify .
Speaker #5: But it's more of a reactive and anecdotal based on what's seen as a result of everything . And two , it's there's no regulations driving what should be good enough or not good enough .
Speaker #5: So like the other markets , it just takes time for that to develop . It takes time for just enough people that are smart enough with technology good enough to measure it and to be able to track it and trend it and see what's harmful and not harmful .
Speaker #5: And we remained very well poised to address that . When the time comes and even try to drive that market and prompt some of those conversations .
Speaker #5: So very excited about that . And those two opportunities . They are , as I mentioned in summary of that question , first part , different customers usually than we're talking to today , which is often more exciting than anything else .
Speaker #5: It's a new segment , new bubbles , new dams and sources to augment . And we remain focused on making sure that the water quality needs of our customers are met .
Speaker #5: However difficult that might be . Now , regarding your question on Legionella , there has been a lot of publicity . Legionella tends to get the most publicity out of all of the different situations , whether it's norovirus , rotavirus , and some of the more difficult .
Speaker #5: But the truth remains that Legionella still is not the most costly thing that healthcare networks are going to deal with . It's those other , more difficult to remove pathogens that I just mentioned .
Speaker #5: I do see more questions being asked about it often , like several in New York City . It's related to air systems such as cooling towers , where people are inhaling .
Speaker #5: Some of those situations , or some of the viruses and bacteria . So it's not always a water situation that we will address , but happy to have that conversation and give that education .
Speaker #5: And we do see that those that fuel the questions coming in more and more , and it's making us more aware of where the situations are occurring .
Speaker #5: And also proactively able to have the discussion and get people addressing it and looking at it within their facilities . So it's definitely had an effect , I think , on awareness and as previously mentioned , awareness and education brings customers towards Nephros Inc in the long run .
Speaker #5: Every time we prefer educated customers that do ask those questions and we're able to talk to them about the creating water management , safety management programs and the like .
Speaker #5: So very exciting for us . And we hope that the momentum continues along those lines . And we don't hope that people get sick and injured from Legionella , but we do have solutions that will treat that .
Speaker #5: When that does happen . So thanks , Ralph .
Speaker #8: Can I ask one other thing ?
Speaker #5: Absolutely .
Speaker #8: In the in the ten Q you talk about besides the hospital business , you talk about other newer areas where the filters are being deployed , such as laboratories , manufacturing facilities , aviation environments , and government buildings .
Speaker #8: Can you elaborate a little more where you have made inroads and which of these you see could be a bigger market for the company ?
Speaker #8: Obviously not as big as hospitals , but where you can really grow them in a nice way .
Speaker #5: Yeah . So I'd love to share names and locations , but we , our customers often don't want that information out there . But I often am seeing now where people that share the characteristics of patient care facilities when they're populations have those same characteristics .
Speaker #5: They're often very strong candidates for our solution , because you're looking at a market segment that shares a similar buying criteria , they may have populations at risk .
Speaker #5: Our elderly , younger , immune compromised , or they may have high in populations that just concerned about getting sick at all . But people in close proximity , people that have to share space , share appliances such as bathroom fixtures and shower fixtures , those are all opportunities .
Speaker #5: So think about correctional facilities . Maybe schools , municipal buildings and the like . So those are places where we are seeing deployment and it's been that way , not just this quarter , but that's been a trend over the past three quarters or more , especially as the team goes out and focuses on more than just the 8 or 9000 or so hospitals that are out there .
Speaker #5: Hospitals are still and will always be a very strong market for us because they are driven by some of the guidelines and even regulations , and sometimes accreditations .
Speaker #5: So they are they're driven not just by desire for remediating the problems , but also the potential for losing business and customers and patients .
Speaker #5: So, yeah, it's been not sure if that answers the question, but those are really some of the other places we're looking and reaching out.
Speaker #5: And it's been successful in a major driver for us , especially in these past three , four quarters or so .
Speaker #8: Thank you .
Speaker #5: Welcome .
Speaker #3: We have a follow up question from Tom McGovern with Maxim Group . Please go ahead .
Speaker #7: Hey , guys . Yeah , I just wanted to hop back in Q2 ask about the margins . So you guys explained it .
Speaker #7: I know you guys source a lot of your components or maybe not a lot , but some of your components , at least from Italy .
Speaker #7: So it seems like tariffs have had somewhat of an impact . Just as we look at the fourth quarter and 26 , should we expect this kind of you know , you guys were operating around 63% gross margin .
Speaker #7: This was closer to 61 , kind of more in line with some historical . Is this a better run rate for us as we look forward , you think that there will be some things that will alleviate some of the pressures you're seeing now on margin ?
Speaker #7: or do
Speaker #6: Thanks for the question . Good question . So the impact of tariffs , tariff is an expense as we get inventory in stock .
Speaker #6: It's capitalized as we sell through the inventory . It affects the cost of goods sold . So as tariffs impact has started to increase .
Speaker #6: Obviously we do source our a lot of our filters from Italy . It has an impact as we sell through that inventory . So you certainly started to see some of that .
Speaker #6: You know did we see a full quarter of it that quarter . Will we see a full quarter of it this quarter ? It's you know , too close to tell .
Speaker #6: But I don't think it'll have too much more of an impact . But it's a part of our life . So what else affects our gross margins ?
Speaker #6: Certainly is price increases . And we put through a price increase earlier this year
Speaker #6: so if we do put through another price increase next year , that's something that can offset it . We're managing our inventory very carefully and cleanly .
Speaker #6: Our reserves are very clean . It's also the mix of business , certain customers get volume discounts and depending each quarter on how the mix of business comes in , that affects the margins .
Speaker #6: So we don't expect a . And dramatic decrease in margins from the tariffs . But it's a reality . It did have a small impact .
Speaker #6: We still hope to maintain , you know , 60 plus gross margins that will just move around a bit to bit . We're not going to make any projections , but I think it's mostly manageable .
Speaker #7: Understood . And last just a clarifying question real quick . So when you talk about service revenue , that's just really pertaining to this , the the installation program that you guys have when you go in and actually , you know , outfit the the facility and exchange or replace filters , that type of thing , or is there anything else that's falling into that bucket .
Speaker #7: Thanks .
Speaker #5: Service revenue refers to when we're going in . There's two types for us . There's the initial installation where the customer may be either using a competitor's filter or no filter at all .
Speaker #5: In those cases , we would often put these quick connect fittings and make it a properly installed scenario . Maybe it's a manifolds as well .
Speaker #5: So there's that initial install . It tend to take a little bit longer . And there's also just the regular replacement business where after three months , after six months , whatever the filters expiration or the rated life of it might be , we would go in and change out that filter as well so that that service revenue refers to those activities that are charged and build under either contract or one time services .
Speaker #5: With that customer . For performing those tasks .
Speaker #7: Understood . I appreciate you guys taking the time to thoughtfully answer all of my questions . Congrats again on the quarter and looking forward to seeing what you guys can do moving forward .
Speaker #5: Absolutely . Thank you .
Speaker #3: Our next question comes from Nick farewell with Arbor Group . Please go ahead .
Speaker #9: Robert . Judy , thank you very much for this very strong quarter . I'm curious . And two questions . One is can you talk a little bit about the trade off between trying to maximize margins and get capture higher incremental margins by managing SG&A ?
Speaker #9: Or are you still in a mode where you feel incremental dollars spent in a or more valuable than incremental profitability ?
Speaker #6: I'll jump in there first and let Robert add anything additional . We very much have enjoyed this year . Profitability , EBITDA positive .
Speaker #6: It feels good . It's a good place to be . We certainly know that we are under in many areas . There's always room to add more resources in a small growing company , and we have departments that would like more resources .
Speaker #6: So we do want to manage it carefully . Obviously , we are continuing to add valuable sales resources . In fact , we'll have another one coming on sort of an inside sales person supporting further our Western region .
Speaker #6: It's been a great fit , and we think the return is significantly there , but we do want to manage for profitability . We do think it's important .
Speaker #6: So we way opportunities carefully and we want to be able to support the growth to from the warehouse perspective , from the quality perspective .
Speaker #6: So we're very carefully adding resources as we need them . But I do think it's important to try and maintain fiscal discipline as we continue to grow the company .
Speaker #6: And again , Robert , if you have more that you'd like to add , please jump in .
Speaker #5: Yep . Absolutely , absolutely . When I think about SG&A and adding costs , whether it be headcount , vehicles , anything , it's still guided by the same principle .
Speaker #5: I always have . If it makes sense . And I can show a return for that investment . That's a reasonable and favorable , then I'll do it .
Speaker #5: If it means adding more people where necessary . But basically we tested a model a couple of years ago with the Diesel Associates working under the regional sales managers , and they basically were able to free up our experts to give them time to go out and talk and educate and cultivate and grow these new sales .
Speaker #5: While the associates were cultivating the existing accounts , super happy with the way that turned out . And were double , triple and quadruple down on that model .
Speaker #5: And which what it costs . But it is more than offsetting those costs with the amount of revenue and profits being generated .
Speaker #9: And a little add on question that is , how have you changed your go to market strategy as you address new market verticals ?
Speaker #9: Are there different ways you can go to market that would you can leverage your G&A organization , sales organization ?
Speaker #5: Yeah , absolutely . The one we just described is the most different , where we are no longer focused on head down and and hospitals , but gotten out to even well beyond patient care areas into other different verticals .
Speaker #5: By doing that . And it's using both direct and indirect channels . But in addition , it's trying to meet those decision makers where they are .
Speaker #5: And by understanding who is making the buying decision , learn why they're making that decision . And then focusing on potential objections to them , choosing Nephros as their solution has really pushed us and led us to different types of solutions .
Speaker #5: That's why you'll see us take a number of different paths in ways to make touch points with the customers . We've been attending more trade shows and more talking engagements , speaking engagements this year , and that's paid off as well .
Speaker #5: By getting the Nephros name and solutions out there and matching up those solutions with our technology has been a winning formula for us .
Speaker #9: Thank you .
Speaker #3: There are no more questions . I would like to turn the conference back over to Robert Banks for any closing remarks .
Speaker #5: Thank you . Thank you . Great , great . Robust question and answer session today . I really enjoyed the questions . Where we're asking about how we're growing and really when we're scaling and getting more speaking engagements and going to more of these conferences and hosting webinars .
Speaker #5: Here's a plug for our LinkedIn page . You can go there and check out some of those speaking opportunities . It's really helping us to go beyond even individual hospitals and get more to the networks , get more to people to help them build their safety management plans .
Speaker #5: And I wanted to thank our exceptional team , our customers and our shareholders . You guys have been very supportive . And as always , if you have any questions , please feel free to reach out to us directly .
Speaker #5: With that , I'd like to wish you all a great day , great evening .
Speaker #3: The conference is now concluded . Thank you for attending today's presentation . You may now disconnect .