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Nephros Announces Results for Quarter Ended September 30, 2023

Nephros, Inc.
Nephros, Inc.

Third-Quarter Net Revenue of $3.7 Million, a 55% Increase Over 2022;
Net Loss from Continuing Operations Narrows 85% to $0.2 Million;
$1.1 Million in Positive Year-to-Date Net Cash Flows from Operating Activities

SOUTH ORANGE, NJ, Nov. 08, 2023 (GLOBE NEWSWIRE) -- via NewMediaWireNephros, Inc. (Nasdaq: NEPH), a leading water technology company providing filtration solutions to the medical and commercial markets, today announced financial results for the third quarter ended September 30, 2023.

Financial Highlights*

  • Third-quarter net revenue of $3.7 million, an increase of 55%;

  • Third-quarter net loss from continuing operations of $0.2 million, compared to $1.3 million;

  • Third-quarter adjusted EBITDA positive $11,000, compared to negative $304,000;

  • Year-to-date positive net cash flow from operating activities of $1.1 million, compared to negative $3.0 million.

*Stated performance is compared to the same period in 2022

“We are very pleased with our third-quarter results,” said Robert Banks, President and Chief Executive Officer. “Nephros has delivered high levels of sustained growth over the past three quarters with gross margins up significantly from the same period last year. In addition, our cash flows from operating activities in 2023 have been consistently positive, totaling $1.1 million so far this year. We remain laser-focused on financial growth and offering an effective and reliable solution for our infection control and dialysis customers. Furthermore, our commercial business continues to mature under the efficient operating model in place with Donastar. Overall, I am very encouraged.”

Judy Krandel, Chief Financial Officer commented, “Year-to-date revenue growth was extremely strong this quarter, at 48% over the same period in 2022. Further, we believe our positive net cash flows are a good indicator of progress towards GAAP profitability, which we expect to achieve within the next few quarters.”

Financial Performance for the Quarter Ended September 30, 2023
Net revenue from continuing operations for the quarter ended September 30, 2023, was $3.7 million, compared with $2.4 million in the corresponding period in 2022, an increase of 55%.

Net loss from continuing operations for the quarter ended September 30, 2023, was $0.2 million, compared with $1.3 million during the same period in 2022. The decrease in net loss from continuing operations was driven by increased revenue and gross margins and decreased research and development costs due to the cessation of our HDF business.

Adjusted EBITDA from continuing operations for the quarter ended September 30, 2023, was $11,000, compared with ($0.3 million) during the same period in 2022.

Cost of goods sold for the quarters ended September 30, 2023 and September 30, 2022, was $1.5 million and $1.6 million, respectively. Gross margin for the quarter ended September 30, 2023 was 59%, compared with 32% during the same period in 2022.

Research and development expenses for the quarter ended September 30, 2023, were $0.2 million, compared with $0.3 million during the quarter ended September 30, 2022.

Depreciation and amortization expenses for the quarter ended September 30, 2023 were approximately $55,000, compared with approximately $48,000 for the corresponding period in 2022.

Selling, general and administrative expenses for the quarter ended September 30, 2023, were approximately $2.1 million compared with approximately $1.7 million for the corresponding period in 2022.

As of September 30, 2023, Nephros had cash and cash equivalents of $4.6 million.

Adjusted EBITDA Definition and Reconciliation to GAAP Financial Measures
Adjusted EBITDA from continuing operations is calculated by taking net loss from continuing operations calculated in accordance with generally accepted accounting principles (“GAAP”) and excluding all interest-related expenses and income, tax-related expenses and income, non-recurring expenses and income, and non-cash items, including depreciation, amortization, and non-cash compensation. The following table presents a reconciliation of Adjusted EBITDA from continuing operations to net loss from continuing operations, the most directly comparable GAAP financial measure, for the third quarter of the 2023 and 2022 fiscal years:

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

2023

 

2022

 

 

 

 

(in $ thousands)

 

Reconciliation of net loss from continuing operations:

 

 

 

 

Net loss from continuing operations

 

(182

)

(1,250

)

 

 

 

 

 

 

Adjustments:

 

 

 

 

Depreciation of property and equipment

 

9

 

12

 

 

Amortization of other assets

 

46

 

44

 

 

Interest expense

 

-

 

4

 

 

Interest income

 

(11

)

(4

)

 

Non-cash stock-based compensation

 

149

 

225

 

 

Increase in inventory reserve

 

-

 

665

 

 

 

 

 

 

 

Adjusted EBITDA loss from continuing operations

 

11

 

(304

)

 

Nephros believes that Adjusted EBITDA from continuing operations provides useful information to management and investors regarding certain financial and business trends relating to Nephros’ financial condition and results of operations. Management does not consider Adjusted EBITDA from continuing operations in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of Adjusted EBITDA from continuing operations is that it excludes significant expenses and income that are required by GAAP to be recognized in Nephros’ financial statements. In addition, Adjusted EBITDA from continuing operations is subject to inherent limitations as it reflects the exercise of judgments by management about which expenses and income are excluded or included in determining Adjusted EBITDA from continuing operations. To compensate for these limitations, management presents Adjusted EBITDA from continuing operations in connection with net loss from continuing operations, the most directly comparable GAAP financial measure. Nephros urges investors to review the reconciliation of Adjusted EBITDA from continuing operations to net loss from continuing operations and not to rely on any single financial measure to evaluate the business.

Note Regarding Active Customer Site (ACS) Counts
The Company recently corrected a database problem which erroneously inflated previously reported Active Customer Site (“ACS”) counts. The ACS metric is calculated by counting unique customer addresses. During a recent invoice audit, the Company found that certain addresses were not properly formatted, resulting in their being incorrectly identified as unique sites. These invoices have been corrected retroactively, as reflected in the table below. While this correction reduces historical site counts, the Company’s management believes that its impact on growth calculations is insignificant.

 

2021

 

2022

 

2023

 

 

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Active Sites

 

 

 

 

 

 

 

 

 

 

 

Previous Calculation

1,087

1,117

 

1,182

 

1,180

 

1,276

 

1,349

 

1,390

 

1,394

 

1,408

 

1,443

 

 

Corrected

897

915

 

982

 

974

 

1,043

 

1,135

 

1,156

 

1,172

 

1,187

 

1,205

 

1,237

 

YoY Active Site Growth

 

 

 

 

 

 

 

 

 

 

 

Previous Calculation

NA

NA

NA

NA

17

%

21

%

18

%

18

%

10

%

7

%

 

Corrected

NA

NA

NA

NA

16

%

24

%

18

%

20

%

14

%

6

%

7

%

QoQ Active Site Growth

 

 

 

 

 

 

 

 

 

 

 

Previous Calculation

NA

3

%

6

%

-0

%

8

%

6

%

3

%

0

%

1

%

2

%

 

Corrected

NA

2

%

7

%

-1

%

7

%

9

%

2

%

1

%

1

%

2

%

3

%

 

 

 

 

 

 

 

 

 

 

 

 

Conference Call Today at 4:30pm ET
Nephros will host a conference call today at 4:30pm ET, during which management will discuss Nephros’ financial results and provide a general business overview.

Participants may dial into the call as follows:
Domestic access: 1 (844) 808-7106
International access: 1 (412) 317-5285

Upon joining, please ask to be joined into the Nephros conference call.

An audio archive of the call will be available shortly after the call on the Nephros Investor Relations page.

Alternatively, a replay of the call may be accessed until November 15, 2023 at 1 (877) 344-7529 or
1 (412) 317-0088 for international callers and entering replay access code: 8716026.

About Nephros
Nephros is committed to improving the human relationship with water through leading, accessible technology. We provide innovative water filtration products and services, along with water-quality education, as part of an integrated approach to water safety. Nephros goods serve the needs of customers within the healthcare and commercial markets, offering both proactive and emergency solutions for water management.

For more information about Nephros, please visit nephros.com.

Forward-Looking Statements
This release contains forward-looking statements that are subject to various risks and uncertainties. Such statements include statements regarding Nephros’ expected future revenue, gross margins, cash flows, profitability and other financial performance, including the timing thereof. Forward-looking statements in this release may be identified by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential,” or similar words.  Such statements are not historical facts but reflect our management’s beliefs based upon information currently available to them.  Actual results could differ materially from those described in these forward-looking statements due to certain factors, including inflationary factors and general economic conditions, changes in business and competitive conditions, the availability of capital when needed, dependence on third-party manufacturers, distributors and researchers, and regulatory reforms. These and other risks and uncertainties are detailed in Nephros’ reports filed with the U.S. Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2022, which it may update in Part II, Item 1A – Risk Factors in its Quarterly Reports on Form 10-Q that it has filed or will file hereafter. Nephros does not undertake any responsibility to update the forward-looking statements in this release.

Investor Relations Contacts:
Kirin Smith, President
PCG Advisory, Inc.­­­
(646) 823-8656
ksmith@pcgadvisory.com

Robert Banks, CEO
Nephros, Inc.
(201) 343-5202
robert.banks@nephros.com

Judy Krandel, CFO
Nephros, Inc.
(201) 343-5202
judy.krandel@nephros.com


NEPHROS, INC. AND SUBSIDIARIES

 

 

CONSOLIDATED BALANCE SHEETS

 

 

(In thousands, except share and per share amounts)

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

ASSETS

 

September 30, 2023

 

December 31, 2022

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,622

 

 

$

3,634

 

 

 

Accounts receivable, net

 

 

1,443

 

 

 

1,286

 

 

 

Inventory

 

 

2,268

 

 

 

3,153

 

 

 

Prepaid expenses and other current assets

 

 

173

 

 

 

188

 

 

 

Total current assets

 

 

8,506

 

 

 

8,261

 

 

 

Property and equipment, net

 

 

88

 

 

 

116

 

 

 

Lease right-use-of assets

 

 

750

 

 

 

984

 

 

 

Intangible assets, net

 

 

392

 

 

 

423

 

 

 

Goodwill

 

 

759

 

 

 

759

 

 

 

License and supply agreement, net

 

 

301

 

 

 

402

 

 

 

Other assets

 

 

123

 

 

 

54

 

 

 

TOTAL ASSETS

 

$

10,919

 

 

$

10,999

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of secured note payable

 

$

-

 

 

$

71

 

 

 

Accounts payable

 

 

805

 

 

 

740

 

 

 

Accrued expenses

 

 

712

 

 

 

285

 

 

 

Current portion of lease liabilities

 

 

311

 

 

 

316

 

 

 

Total current liabilities

 

 

1,828

 

 

 

1,412

 

 

 

Equipment financing, net of current portion

 

 

-

 

 

 

1

 

 

 

Lease liabilities, net of current portion

 

 

469

 

 

 

705

 

 

 

TOTAL LIABILITIES

 

 

2,297

 

 

 

2,118

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

Preferred stock, $.001 par value; 5,000,000 shares authorized at September 30, 2023 and December 31, 2022; no shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

-

 

 

 

-

 

 

 

Common stock, $.001 par value; 40,000,000 shares authorized at September 30, 2023 and December 31, 2022; 10,484,932 and 10,297,429 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

10

 

 

 

10

 

 

 

Additional paid-in capital

 

 

152,364

 

 

 

148,413

 

 

 

Accumulated deficit

 

 

(143,752

)

 

 

(142,831

)

 

 

Subtotal

 

 

8,622

 

 

 

5,592

 

 

 

Noncontrolling interest

 

 

-

 

 

 

3,289

 

 

 

TOTAL STOCKHOLDERS' EQUITY

 

 

8,622

 

 

 

8,881

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

10,919

 

 

$

10,999

 

 

 

 

 

 

 

 

 

 


NEPHROS, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

Three Months Ended September 30,

 

 

 

2023

 

 

 

2022

 

Net revenue:

 

 

 

 

 

 

Product revenues

 

$

3,713

 

 

$

2,399

 

Royalty and other revenues

 

 

29

 

 

 

10

 

Total net revenues

 

 

3,742

 

 

 

2,409

 

Cost of goods sold

 

 

1,548

 

 

 

1,647

 

Gross margin

 

 

2,194

 

 

 

762

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative

 

 

2,137

 

 

 

1,743

 

Research and development

 

 

205

 

 

 

252

 

Depreciation and amortization

 

 

55

 

 

 

48

 

Total operating expenses

 

 

2,397

 

 

 

2,043

 

Operating loss from continuing operations

 

 

(203

)

 

 

(1,281

)

Other (expense) income:

 

 

 

 

 

 

Interest expense

 

 

-

 

 

 

(4

)

Interest income

 

 

11

 

 

 

4

 

Other (expense) net

 

 

10

 

 

 

31

 

Total other expense:

 

 

21

 

 

 

31

 

Loss from continuing operations

 

 

(182

)

 

 

(1,250

)

Net loss from discontinued operations

 

 

-

 

 

 

(1,904

)

Net loss

 

 

(182

)

 

 

(3,154

)

Less: Undeclared deemed dividend attributable to noncontrolling interest

 

 

-

 

 

 

(77

)

Net loss attributable to Nephros Inc. shareholders

 

$

(182

)

 

$

(3,231

)

 

 

 

 

 

 

 

Net loss per common share, basic and diluted from continuing operations

 

$

(0.02

)

 

$

(0.12

)

Net loss per common share, basic and diluted from discontinued operations

 

 

-

 

 

 

(0.18

)

Net loss per common share, basic and diluted

 

$

(0.02

)

 

$

(0.30

)

Net loss per common share, basic and diluted, attributable to continuing noncontrolling interest

 

 

-

 

 

 

(0.01

)

 

 

 

 

 

 

 

Net loss per common share, basic and diluted, attributable to Nephros, Inc, shareholders

 

$

(0.02

)

 

$

(0.31

)

Weighted average common shares outstanding, basic and diluted

 

 

10,460,866

 

 

 

10,303,818

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(182

)

 

$

(3,154

)

Other comprehensive loss, foreign currency translation adjustments, net of tax

 

 

-

 

 

 

-

 

Comprehensive loss

 

 

(182

)

 

 

(3,154

)

Comprehensive loss attributable to continuing noncontrolling interest

 

 

-

 

 

 

(77

)

Comprehensive loss attributable to Nephros, Inc. shareholders

 

$

(182

)

 

$

(3,231

)