Nephros, Inc. Fourth Quarter 2025 Earnings Call - 33% Revenue Growth, Services and Education to Drive Recurring Revenue

Jamie, Conference Specialist/Operator: Good afternoon, everyone, and welcome to the Nephros, Inc. fourth quarter 2025 financial results conference call. All participants will be in a listen-only mode. 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 and then one on your touchtone telephones. To withdraw your questions, you may press star and two. Please also note today’s event is being recorded. At this time, I would like to turn the floor over to Kirin Smith, Investor Relations. Please go ahead.

Kirin Smith, Investor Relations, PCG Advisory: Thank you, Jamie, and good afternoon, everyone. This is Kirin Smith with PCG Advisory. Thank you all for participating in Nephros’ fourth quarter and fiscal year 2025 conference call. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of Nephros. I encourage you to review Nephros’ filings with the Securities and Exchange Commission, including, without limitation, the company’s Forms 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.

Factors that may affect the company’s results include, but are not limited to, Nephros’ ability to successfully, timely, and cost-effectively market and sell its products and service offerings, the rate of adoption of its products and services by hospitals 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. The contents of this conference call contains time-sensitive information that is accurate only as of the date of the live call today, March 12, 2026. 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. I would now like to turn the call over to Nephros’ President and Chief Executive Officer, Robert Banks. Robert, please go ahead.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Thank you, Kirin. Good afternoon, everyone, and thank you for taking the time to join us today. 2025 was a great year, and I’m extremely proud of the team and all their amazing accomplishments. I’ve been excitedly awaiting this day, so I can share with you the results of the great things that have happened since our last full year’s recap. You know, clean water is essential for healthcare, hospitality, food services, and everyday life. We have the right products to address these needs and have been doing so successfully in patient care situations. We’ve made great progress in non-patient care applications over the past year. We look forward to developing channels to penetrate other markets, such as residential and commercial, through key relationships that we are creating. Over the past several years, we’ve built a clear strategy to deliver on that message.

Today, the strategy is anchored around three core pillars, products, services, and education. Together, these pillars are driving our growth and positioning Nephros as a leader in water safety solutions. Our first pillar, products, is our differentiated portfolio. It remains the foundation of our success. Nephros develops advanced filtration technologies designed to remove bacteria, viruses, and other contaminants that threaten water safety. These products are trusted in hospitals, laboratories, and commercial facilities where reliability is critical. Innovation continues to expand our reach. Recent product launches allow us to address new high-impact applications, including ice machines, drinking fountains, bottle filling stations, and sterile processing environments. These are everyday touchpoints where water safety matters. By delivering filtration solutions that are both high performance and easy to deploy, we are expanding our addressable market well beyond traditional patient care applications.

This product innovation pipeline is a key driver core to our continued growth. In 2025, we launched our second pillar, services. While products start a relationship with customers, services sustain it. Water filtration systems require regular replacement, monitoring, and installation expertise. Historically, this has been fragmented and difficult for facility operators to manage. Nephros is solving that problem. Under the leadership of our service organization, we’ve expanded our installation and replacement capabilities, enabling us to provide customers with a complete lifecycle solution. This includes rapid product delivery, professional installation, scheduled replacement programs, and ongoing technical support and training. By offering these services directly, we reduce barriers to adoption and strengthen long-term customer relationships. Most importantly, this model supports recurring revenue through programmatic filter replacements, which creates a more predictable and scalable business. Our newest and recently launched pillar is the strategy around education.

It represents one of the most exciting developments for our company. We’ve touched over 1,000 people through our webinar series and conducted numerous site-based training sessions. Water safety is becoming an increasingly important topic across healthcare, hospitality, and public facilities. However, many organizations lack the expertise needed to manage waterborne pathogen risks effectively. To address this gap, we launched the Nephros Water Institute. This institute is dedicated to expanding knowledge around waterborne pathogen mitigation, facility water safety programs, and compliance-driven filtration solutions. Through education and engagement with industry stakeholders, we are establishing Nephros as a trusted authority in water safety. This initiative does more than just share knowledge, it builds a long-term demand for filtration, services, and compliance solutions. In other words, education strengthens our entire ecosystem. The impact of this three-pillar strategy is already visible in our financial performance.

In 2025, Nephros delivered 33% revenue growth, reaching $18.8 million total revenue while continuing to scale our operations. We also reported net income of approximately $1.2 million, marking our second consecutive year of profitability, a significant milestone for the company. These results reflect strong order reactivity, growth in active customer sites, expansion of service capabilities, and increasing demand for our solutions. At the same time, we remain debt-free and financially disciplined with approximately $5.4 million in cash at the year-end. Looking forward, we believe Nephros is positioned at the intersection of several powerful trends. Increased awareness of waterborne pathogens, rising regulatory expectations around water safety, aging infrastructure in healthcare and hospitality, and a growing need for reliable filtration solution. Our integrated strategy, products, services, and education allows us to address all three challenges simultaneously.

It also creates a business model built not just on filter sales, but on long-term relationships and recurring value creation. I’d like to thank the entire Nephros team for their hard work and commitment. Now let me turn it over to our CFO, Judy Krandel, to go over the financials. Judy?

Judy Krandel, Chief Financial Officer, Nephros, Inc.: Thanks, Robert. I will now provide a closer look at Nephros’ financial performance in the fourth quarter and full year of 2025. We reported fourth quarter 2025 net revenue of $4.7 million, a 22% increase over the corresponding period in 2024. For the full year of 2025, net revenue grew 33% to $18.8 million from $14.2 million. This increase was primarily driven by higher programmatic revenue, reflecting strong reorder activity and the addition of several new active sites. In addition, we experienced solid growth in our emergency response business, as well as significant growth in service revenue. Active customer sites continued to grow and were just over 1,680 as of the end of 2025, as compared to just over 1,500 as of December 31st, 2024.

Gross margin was 62% for both of the years ending December 31, 2025 and 2024, respectively. Gross margin for the fourth quarter of 2025 was 58%, compared with 64% in the fourth quarter of 2024. Although we achieved higher margins during the first half of fiscal 2025, those margins eroded somewhat during the second half of the year, primarily due to the impact of tariffs. Since April 2025, we have been subject to a 15% tariff on all goods imported from Italy, which was reduced to 10% as of February 22, 2026. While this reduction provides some near-term relief, U.S. tariff policy remains unpredictable, creating uncertainty around potential future margin impacts. Research and development expenses for the years ended December 31, 2025 and 2024 were $1.3 million and $0.9 million, respectively.

R&D expenses for the fourth quarter of 2025 were $0.4 million compared with $0.3 million in the fourth quarter of 2024, an increase of 57%, primarily due to higher headcount and bonuses. Selling general and administrative expenses for the year ended 2025 were $9 million, compared with $7.7 million in 2024, an increase of 17% due to an increase in bonuses and sales commissions. Selling general and administrative expenses for the fourth quarter of 2025 were approximately $2.3 million compared with $1.9 million in 2024, an increase of 24% due primarily to an increase in bonuses and sales commissions. SG&A expenses in the fourth quarter also had some one-time expenses associated with product development and market analysis work.

Net income for the year ended December 31, 2025 was $1.2 million, compared with $0.1 million in 2024. Net income for the fourth quarter of 2025 was $0.1 million, compared with $0.3 million during the same period in 2024, primarily reflecting the decline in gross margins and increase in bonuses and sales commissions. Our improvement in 2025 net income was largely due to our increased sales revenue. We are extremely pleased to report positive net income for the second consecutive year, the only two in the company’s history. Adjusted EBITDA in the fourth quarter was a positive $131 thousand compared to positive $481 thousand during the same period in 2024.

For the full year of 2025, adjusted EBITDA was positive $1.6 million versus positive $548,000 in 2024. Net cash provided by operating activities was $1.6 million for the year ended December 31, 2025, compared to net cash used in operating activities of approximately $ half a million for the year ended December 31, 2024. Net cash provided by operating activities in 2025 was primarily due to net income of approximately $1.2 million, an increase in accrued expenses of approximately $1 million, an increase in accounts payable of approximately $0.3 million, offset by an increase in accounts receivable of approximately $0.6 million, and an increase in inventory of approximately $0.7 million.

Net cash used in operating activities in 2024 was primarily due to an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million. Our cash balance on December 31, 2025 was $5.4 million compared to $5.2 million as of September 30, 2025, and $3.8 million as of December 31, 2024. We continue to be debt-free. Please refer to today’s press release for more details about the calculation of adjusted EBITDA and its reconciliation to GAAP net income or loss. Additional information about our results can be found in our filing on Form 10-K, which we filed earlier today.

I will now turn the call back to Robert for some closing remarks. Robert, please go ahead.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Thank you, Judy. In closing, Nephros is proving that a focused, disciplined company with the right technology and strategy can create meaningful impact. We are improving water safety. We are expanding into new markets, and we are building a durable platform for long-term growth. Thank you for your time today and your continued interest in Nephros. This concludes our formal presentation remarks. We’ll now take time for questions from the audience. Operator, please open the call for questions.

Jamie, Conference Specialist/Operator: At this time, we’ll begin that question-and-answer session. To ask a question, you may press star and then one on your touch-tone phones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Anthony Vendetti from Maxim Group. Please go ahead with your question.

Anthony Vendetti, Analyst, Maxim Group: Thank you. Yes, a couple questions. One is on the programmatic sales, what % of revenues for the fourth quarter and the full year were programmatic sales? Do you have an outlook on how you expect that to evolve in 2026? Then your active customer sites, do you have a count on that number as of 12/31/2025?

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Yeah, certainly. I’ll answer the second part first and then turn it over to Judy for the other for the first part of your question. Programmatic sales just under 1,700, so that was 1,681 sites. That’s a significant and steady growth, well above what we were when we finished a year ahead. It’s really due to some efforts that we’re making for customer retention and also outreach in areas of conferences, trade shows. Most of that new business is coming from customers who tell a friend who are happy and delightful with what they’ve experienced with us, the problems we’ve solved, and then they have a neighboring facility or related, and they let them know, so we pick up that business as well. Really proud of that active sites number.

As it continues to grow, it just reflects the excellent work from our sales, women and men who have been doing a great job of selling our products. Judy.

Judy Krandel, Chief Financial Officer, Nephros, Inc.: Yeah. We don’t give out exact numbers, but Anthony, the fourth quarter, programmatic was certainly 90%+ of our business, which is similar for the year. Emergency response was helpful and did grow, but, you know, sort of high single digits, similar type number.

Anthony Vendetti, Analyst, Maxim Group: High single-digit growth in programmatic sales? Okay.

Judy Krandel, Chief Financial Officer, Nephros, Inc.: No, no. I mean, you—I think you wanted to know what percent, if I recall, apologize, of our sales were programmatic versus emergency response.

Anthony Vendetti, Analyst, Maxim Group: Yes. Okay. Emergency response, what was the number you cut out for a second?

Judy Krandel, Chief Financial Officer, Nephros, Inc.: Oh, okay. Yeah. You know, high single digits, round figures. Similarly, it was a little less in the fourth quarter than it was for the full year, but somewhat similar.

Anthony Vendetti, Analyst, Maxim Group: Okay. Okay, great. Just maybe on an even higher level, just as you know, I think obviously, I’m sure you agree, clean water, whether it’s hospital-based or outside of the hospital, is probably a growing trend and a growing need worldwide. I’m just wondering, as you look towards the other opportunities, you know, outside of medical in the commercial space, whether that’s hospitality or restaurants, can you talk a little bit about that pipeline potential and how you see that sort of evolving either in 2026 or over the next couple of years? Thanks.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Sure. Certainly. When you think about the business, the core business of Nephros getting its start in dialysis and then really focusing on the hospital market patient care, those are areas that are highly regulated. We’ve got different rules and Joint Commission and inspections, all those drive action. The testing occurs and there are results and problems that need to be solved. Once you step outside of the patient care world, you don’t have those same regulatory environments that are driving the growth. That’s why this pillar I introduced recently, the education, is so important. We’ve got to let different people in different markets know why it’s important, why it matters, the impact to their facilities and really the return on investment for investing in a Nephros filtration as a medical device in a non-medical application.

I see that growth happening as the education improves, as we get more and more people that we touch via outreach. That’s the main barrier. You’re selling against doing nothing. The second barrier that we have to overcome is what may be perceived complexity around installation. It’s not just as simple as when you walk up to your refrigerator or a filter on the end of your sink where you twist it off and put a new one on. There’s some cleaning and sanitization involved. That’s why our services group and portfolio is so important. We start to remove the barriers for why someone might be interested in a solution because they may not be interested in going through some of the, I guess, work required in order to get an effective result from this filtration system.

As we grow and build those markets, we create an ecosystem of people that understand that there is a solution. They don’t have to handle and deal with microplastics or other problems they might be dealing with, and we have the answers for those. Building that whole solution from just, "You’ve got a problem. Here’s your problem. Here’s how you can solve it," to, "Let us implement that solution for you and take care of it going forward," is how we’re growing that business. If you remember, it took a while, even after some of the regulations in the hospital market, for us to really capitalize on that and grow that hospital business. I anticipate it’ll take the same as we’re going into the non-healthcare, non-patient care market as we work to build those markets up.

Anthony Vendetti, Analyst, Maxim Group: Okay. If I had to sum it up, you would say this is a multi-year strategy to build these other verticals.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Yes. We’ve been starting on this for some time already. We’re not entering it fresh in 2026. As those markets and paths mature, we already have seen a few of those in some of the big areas. It’s not a significant part of our business right now. I anticipate it’ll be a larger and larger portion going forward.

Anthony Vendetti, Analyst, Maxim Group: Okay, great. Thanks for all that, Robert Banks. I’ll jump back in the queue. Thank you.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Thank you.

Jamie, Conference Specialist/Operator: Once again, if you would like to ask a question, please press star and then one. Our next question comes from Ralph Weil from R. Weil Investment Management. Please go ahead with your question.

Ralph Weil, Investor/Analyst, R. Weil Investment Management: It must have been an accident or a butt dial, but since I didn’t have a question prepared, can you just, I know you’re talking about the new markets and what you’re doing there and how you’re going about it with the education, et cetera, et cetera. Can you elaborate a little more on some of the successes that you may have had so far? I know that doesn’t come easily when you’re trying to penetrate new markets, but can you just comment a little about the successes so far?

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Yes. You’re referring to the education success, successes or just in anything in general?

Ralph Weil, Investor/Analyst, R. Weil Investment Management: Yeah. No. We’re in the newer markets. I mean, hospitals have been your big market and medical facilities. In the newer markets that you’ve entered, can you comment just a little more on where you may have seen successes on which you’re basing your optimism?

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Sure. Okay.

Ralph Weil, Investor/Analyst, R. Weil Investment Management: -going forward? I really didn’t press the button, but, since it was a butt call.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: I understand, Ralph. If I can try to address that. If you think about where we’ve been focusing, we were in a hospital inpatient care. Non-patient care applications where we’ve found some successes, we were looking at areas where there’s large populations of people. We’ve got a party that’s interested in keeping the mass of people under them healthy. If you think of correctional facilities where if someone gets sick or ill, they can spread and contaminate to other places. Schools and universities where there are groups of people in one room or one area. Not to say that a school is similar to a jail, where you’ve got large groups of people who might be susceptible to different pathogens spreading.

We’ve also seen in some aviation facilities where government are concerned about what might be passed through water there. I’m really surprised at the number of just drinking water fountain applications where people have fountains that may have been shut down since COVID, where they’re facing the risk, the situation where they either rip them off the wall, which is very expensive, or try to get them running again. We’re able to go in, clean them up, and reopen fountains that have been shut down for quite some while. Wherever you see large numbers of bottle fillers and drinking fountains, those are also good targets.

I think some of the newer non-patient areas have also been sterile processing facilities that have instruments and probes and other stuff that come in contact with humans by rinsing them with water that’s free of viruses, endotoxins, and other potential contaminants. We are finding a good amount of success there. Some of the newer areas which are starting to gain traction are eye wash stations, emergency showers, those types of applications that are found outside of patient care as well, when you have water sitting stagnant where bacteria have a chance to grow. It’s very numerous. It’s not one area.

It’s lots of pockets here and there, which is why the education part of what we’re doing is so important, really getting the word out and letting people know where and how what we’re doing can help what they are trying to do and the mission that they’re trying to accomplish. I mean, we’ve had hundreds, over 1,000 people attending these seminars that we’re hosting. I encourage anyone who is interested to listen and find out. You’ll see an interaction and a level of transparency and information sharing that you don’t get from any of the other related types of talks. It really does showcase Nephros as being experts in the field and willing to talk agnostically about how to solve some of these problems, which people really appreciate. They come back.

They trust us, whether it’s a property management company or others who have just people under their responsibility that they don’t want to get in a situation where they’re contaminated. It’s really exciting. It’s been really refreshing and fun. It’s been us learning how to speak something other than hospital language. I think the team has really risen to the occasion and been doing a fantastic job of making that education and inroads and penetrating other areas.

Ralph Weil, Investor/Analyst, R. Weil Investment Management: Thank you.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Thanks, Ralph Weil.

Jamie, Conference Specialist/Operator: Once again, if you would like to ask a question, please press Star and one.

Robert Banks, President and Chief Executive Officer, Nephros, Inc.: Okay. It looks like there’s not any other calls in the queue. As just to close it out, I just want everyone to know I’m extremely excited about Nephros products and what the future holds. Just thank you so much for your support and believing in Nephros. Please, stay tuned and give us a call and reach out if you do have any questions or want to know more. Thank you and have a great rest of your evening.

Jamie, Conference Specialist/Operator: With that, everyone, we’ll be concluding today’s conference call and presentation. We do thank you for joining. You may now disconnect your lines.