Nephros Inc (NEPH) 2024 Q2 法說會逐字稿

Good day, and welcome to the Nephros Inc. second-quarter 2024 financial results conference call. (Operator Instructions) Please note, today's event is being recorded.

美好的一天，歡迎參加 Nephros Inc. 2024 年第二季財務業績電話會議。（操作員說明）請注意，今天的活動正在錄製中。

I'd now like to turn the conference over to Kirin Smith with Investor Relations. Please go ahead.

我現在想將會議轉交給投資者關係部門的 Kirin Smith。請繼續。

Good afternoon, everyone, and welcome to Nephros's Q2 2024 earnings conference call. This is Kirin Smith with PCG Advisory. Thank you, all, for participating in Nephros's second-quarter 2024 conference call.

大家下午好，歡迎參加 Nephros 2024 年第二季財報電話會議。我是 PCG Advisory 的 Kirin Smith。感謝大家參加 Nephros 2024 年第二季電話會議。

Before we begin, I would like to remind you that this call will include forward-looking statements regarding the operations and future results of Nephros. For a discussion of these forward-looking statements, please review Nephros's SEC filings, including 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.

在我們開始之前，我想提醒您，本次電話會議將包括有關 Nephros 的營運和未來業績的前瞻性陳述。有關這些前瞻性陳述的討論，請查看Nephros 向SEC 提交的文件，包括表格10-K 和10-Q，其中確定了可能導致實際結果或事件與前瞻性陳述中描述的結果或事件存在重大差異的具體因素。

Factors that may affect the company's results include, but are not limited to, Nephros's ability to successfully, timely and cost effectively market and sell its products and service offerings.

可能影響公司業績的因素包括但不限於 Nephros 成功、及時且具成本效益地行銷和銷售其產品和服務的能力。

The rate of adoption of its products and services by hospitals and other health care providers, the success of its commercialization efforts and the effect of existing and new regulatory requirements on Nephros's business and other economic and competitive factors.

醫院和其他醫療保健提供者對其產品和服務的採用率、其商業化努力的成功以及現有和新監管要求對 Nephros 業務的影響以及其他經濟和競爭因素。

The content of this conference call contains time-sensitive information that is accurate only as of the date of the live call today, August 8, 2024. 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.

本次電話會議的內容包含時間敏感訊息，僅截至今天（2024 年 8 月 8 日）即時電話會議之日準確。除非法律要求，否則本公司不承擔修改或更新任何聲明以反映本次電話會議日期之後發生的事件或情況的義務。

Now I would like to turn the call over to Nephros's President and Chief Executive Officer, Robert Banks.

現在我想將電話轉給 Nephros 總裁兼執行長羅伯特班克斯 (Robert Banks)。

Robert, please go ahead.

羅伯特，請繼續。

Thank you, Kirin, and good afternoon, everyone. We appreciate you joining us on our Q2 2024 earnings call. I want to start by expressing my gratitude to the entire Nephros team for their continued hard work and dedication.

謝謝 Kirin，大家下午好。感謝您參加我們的 2024 年第二季財報電話會議。首先，我想對整個 Nephros 團隊的持續辛勤工作和奉獻精神表示感謝。

Today, we reported our 2024 second-quarter results. As in the previous quarter, we began to break out the programmatic business and emergency response business in order to provide greater clarity of the health of the core business.

今天，我們公佈了 2024 年第二季業績。與上一季一樣，我們開始拆分程序化業務和緊急應變業務，以便更清晰地了解核心業務的健康狀況。

Programmatic describes the sales of filters as part of an ongoing, long-term water management solution for the control of pathogens in water, while the emergency response business can fluctuate with large onetime orders and that's just due to the nature of that business. I'm proud to report that in the first half of 2024, we have achieved the highest number of active customer sites ever with a 15% increase over last year, adding over 300 customers in the past 12 months.

程序化將過濾器的銷售描述為持續、長期的水管理解決方案的一部分，用於控制水中的病原體，而應急響應業務可能會隨著大量的一次性訂單而波動，這只是由於該業務的性質所致。我很自豪地向大家報告，2024 年上半年，我們的活躍客戶站點數量創歷史新高，比去年增加了 15%，在過去 12 個月內增加了 300 多個客戶。

In Q2, we have managed the highest retention rate in the past 6 quarters. These reasons why I am very proud of all the Nephros team for executing on such a high and consistent level. In the second quarter of 2024, we experienced a very positive increase in nonemergency response business, up 8% compared to Q2 of last year.

在第二季度，我們實現了過去 6 個季度以來最高的保留率。這些都是我為所有 Nephros 團隊以如此高且一致的水平執行的原因感到非常自豪的原因。2024 年第二季度，我們的非緊急應變業務出現了非常積極的成長，與去年第二季度相比成長了 8%。

This solid growth was offset by a 92% year-over-year decline in our smaller emergency response business, resulting in an 8% decline overall in Q2 total revenue. We also just reported a 28% year-over-year improvement in our net loss as we continue to focus on cash flow generation and overall profitability.

這一穩健的成長被規模較小的緊急應變業務年減 92% 所抵消，導致第二季總收入整體下降 8%。我們還剛剛報告稱，由於我們繼續專注於現金流生成和整體盈利能力，淨虧損同比改善了 28%。

We believe that one contributor to the decline in the emergency response business is the reduced stringency of waterborne risk response and territories previously committed to both proactive filtration measures and robust corrective actions.

我們認為，導致緊急應變業務下降的原因之一是水性風險響應的嚴格性降低以及先前致力於主動過濾措施和強有力的糾正措施的地區。

We continue to focus on key initiatives that drive long-term growth. One significant achievement is the expansion of our digital tools, including the filter tracking app, which is designed to enhance customer engagement and ensure consistent filter replacements.

我們持續專注於推動長期成長的關鍵舉措。一項重大成就是我們數位工具的擴展，包括過濾器追蹤應用程序，旨在提高客戶參與度並確保過濾器更換的一致性。

The speed of implementation has not yet met our expectations as we continue to fine-tune the platform and online operability. Additionally, we are advancing our capabilities to address the growing concern around nano and micro plastics, NMPs, leveraging our unique position with the smallest pore size in the market, which is a key competitive strength and allows us to offer an excellent solution to this dire problem.

隨著我們不斷微調平台和線上可操作性，實施速度尚未達到我們的預期。此外，我們正在提高我們的能力，以解決人們對奈米和微塑膠(NMP) 日益增長的擔憂，利用我們在市場上最小孔徑的獨特地位，這是一個關鍵的競爭優勢，使我們能夠為此可怕的問題提供卓越的解決方案。

We are seeking relationships with other entities and OEMs that may purchase and integrate our solution to their offerings, enabling them to make the claim of the mediating NMPs. Looking ahead, we are also strategically positioning ourselves to capitalize on growth opportunities in various sectors beyond hospitals to areas like dental practices, scale processing and endoscopy processing where we are seeing there is clear growth opportunity.

我們正在尋求與其他實體和 OEM 的關係，這些實體和 OEM 可能會購買我們的解決方案並將其整合到他們的產品中，使他們能夠向調解 NMP 提出要求。展望未來，我們也對自己進行策略性定位，以利用醫院以外各領域的成長機會，例如牙科診所、規模加工和內視鏡加工等領域，我們認為這些領域存在明顯的成長機會。

I remain excited about our overall value proposition and long-term growth prospects, while focusing on profitability and return on investment for our stakeholders, as we help the world meet its critical water filtration demands.

我對我們的整體價值主張和長期成長前景仍然感到興奮，同時關注利益相關者的獲利能力和投資回報，因為我們幫助世界滿足其關鍵的水過濾需求。

I will now turn the call over to our CFO, Judy Krandel, to discuss our financial performance in detail. Judy?

我現在將把電話轉給我們的財務長 Judy Krandel，詳細討論我們的財務表現。朱迪？

Thank you, Robert. I'm pleased to provide an overview of our financial performance for the second quarter of 2024. Our Q2 2024 net revenue was $3.25 million, down 8% compared to Q2 2023. As Robert alluded to, this decrease reflects the continued low contribution from emergency revenue.

謝謝你，羅伯特。我很高興概述我們 2024 年第二季的財務表現。我們 2024 年第二季的淨收入為 325 萬美元，比 2023 年第二季下降 8%。正如羅伯特所提到的，這一下降反映出緊急收入的貢獻持續較低。

Excluding the emergency response revenue, sales increased 8% due in part to the increasing success from our longer-term and newer sales personnel hired in 2023.

不包括緊急應變收入，銷售額成長了 8%，部分原因是我們在 2023 年聘用的長期和新銷售人員取得了越來越大的成功。

Our gross margin remained strong at 59%, flat year over year and a slight decrease from 62% in the first quarter of 2024. The sequential decrease was due to increased shipping expenses and additional reserves primarily for slow-moving commercial products.

我們的毛利率維持在 59% 的強勁水平，與去年同期持平，較 2024 年第一季的 62% 略有下降。環比下降的原因是運輸費用增加以及主要針對滯銷商業產品的額外儲備。

Despite these challenges, our product gross margins before shipping and noncash reserves stayed very healthy, indicating strong underlying product performance. We achieved a 33% improvement in our net loss of $289,000, down from the $433,000 loss in the second quarter of 2023. This was primarily due to reduced SG&A expenses, which declined by 13%, driven by lower stock compensation, bonus accruals, commissions and professional fees.

儘管面臨這些挑戰，我們的產品出貨前毛利率和非現金儲備仍然非常健康，顯示潛在的產品表現強勁。我們的淨虧損為 289,000 美元，較 2023 年第二季的 433,000 美元虧損減少了 33%。這主要是由於股票薪酬、應計獎金、佣金和專業費用下降導致 SG&A 費用減少，下降了 13%。

Adjusted EBITDA improved to a loss of $133,000 in the second quarter of 2024 from a loss of $183,000 in the prior year period. Moving on to the six-month period. Sales for the six months ending June 30, 2024, declined by 6% from the prior year period. But again, excluding the emergency response revenue, sales increased by 10%. Gross margins improved to 61% in the first half of 2024 from 58% in the prior year period.

2024 年第二季調整後 EBITDA 虧損從去年同期的 183,000 美元改善為虧損 133,000 美元。接下來是六個月的時段。截至 2024 年 6 月 30 日的六個月銷售額較去年同期下降 6%。但同樣，剔除緊急應變收入後，銷售額成長了 10%。2024 年上半年毛利率從去年同期的 58% 提高至 61%。

SG&A expenses decreased by 6% in the first half of 2024 versus the prior year period due to a decrease in bonus accrual, sales commission expense, stock compensation expense and professional fees, offset in part by an increase in salary expense. Our net loss decreased 38% to $458,000 in the first half of 2024 from $739,000 loss in the prior year period.

由於應計獎金、銷售佣金費用、股票補償費用和專業費用減少，2024 年上半年的銷售管理、行政管理費用較上年同期下降 6%，但被工資費用的增加部分抵銷。2024 年上半年，我們的淨虧損從去年同期的 739,000 美元減少 38% 至 458,000 美元。

Our balance sheet remains strong with a cash balance of approximately $3.1 million as of June 30, 2024. This is a decrease from $4.3 million at the end of the first -- the end of the last year, 2023, mainly due to increased inventory and accounts receivable and the payment of annual bonuses. Despite these changes, we continue to operate debt-free, providing us with flexibility to invest in growth initiatives.

截至 2024 年 6 月 30 日，我們的資產負債表依然強勁，現金餘額約 310 萬美元。這比去年年底（2023 年）的 430 萬美元有所減少，主要是由於庫存和應收帳款增加以及年度獎金的支付。儘管發生了這些變化，我們仍繼續無債務運營，為我們提供了投資成長計劃的靈活性。

As we look to the future, we are focused on maintaining financial discipline, while investing strategically in areas that will drive long-term value. This includes optimizing our product pricing, improving operational efficiencies and exploring strategic opportunities for expansion.

展望未來，我們專注於維持財務紀律，同時對能夠推動長期價值的領域進行策略性投資。這包括優化我們的產品定價、提高營運效率和探索策略擴張機會。

I will now turn the call back to Robert for some concluding remarks. Robert?

現在我將把電話轉回給羅伯特，讓他做一些總結性發言。羅伯特？

Thank you, Judy. As we move forward, Nephros is well positioned to continue to grow its trajectory by focusing on innovation, customer engagement and strategic expansion. We remain committed to providing high-quality water filtration solutions that meet the needs of our evolving customers. I want to extend my gratitude to our investors, partners and the entire Nephros team for their continued support and dedication. We look forward to sharing more updates on our progress in the coming quarters.

謝謝你，朱迪。隨著我們不斷前進，Nephros 已做好充分準備，透過專注於創新、客戶參與和策略擴張，繼續發展其發展軌跡。我們始終致力於提供高品質的水過濾解決方案，以滿足不斷變化的客戶的需求。我要感謝我們的投資者、合作夥伴和整個 Nephros 團隊的持續支持和奉獻。我們期待在未來幾季分享更多有關我們進展的最新資訊。

This concludes our formal presentation. We will now open the floor for questions. Operator, please open the call for Q&A.

我們的正式演講到此結束。我們現在開始提問。接線員，請打開電話問答。

(Operator Instructions) Tom McGovern, Maxim Group.

（操作員說明）Tom McGovern，Maxim Group。

So yes, so first question, I just wanted to see if you guys could elaborate a little bit more on the reduced stringency for the waterborne risk response in certain territories? Just wondering if there was a specific reason you guys could identify for that reduced stringency. And then maybe a follow-up question on that is, with the ASHRAE 514, I believe it is the standard that came out. I think it was at the end of last year. Just curious if you could give an update on that?

所以，是的，所以第一個問題，我只是想看看你們是否可以詳細說明某些地區水性風險應對措施的嚴格程度的降低？只是想知道你們是否可以找出降低嚴格性的具體原因。也許接下來的一個問題是，對於 ASHRAE 514，我相信這是一個已經問世的標準。我想那是去年年底的事了。只是好奇能否提供最新情況？

I know you guys are doing a good job of trying to inform clients of that, but have you guys seen maybe a shift in clients that guideline applies to in terms of reorder rate? Any color on that would be very helpful.

我知道你們在向客戶通報這一點方面做得很好，但是你們是否看到該指南適用的客戶在再訂購率方面可能發生了變化？任何顏色都會非常有幫助。

Yes. Thanks for the question. So on the first question, identifying any specific actions or things that may have happened, if I look specifically at Ohio in the Department of Health, their system was basically overwhelmed with a number of cases and urgencies and positive test responses. So the mentality change that in order not to overwhelm the system, they changed that stance. They stopped testing so excessively and reverted back to a method of letting each individual entity handle the situation.

是的。謝謝你的提問。因此，關於第一個問題，確定可能發生的任何具體行動或事情，如果我專門關注俄亥俄州衛生部，他們的系統基本上被大量病例、緊急情況和積極的測試反應所淹沒。因此，心態發生了變化，為了不壓倒系統，他們改變了立場。他們停止瞭如此過度的測試，並恢復到讓每個單獨的實體處理這種情況的方法。

Now, not to say that there is a lax in care of the importance of patients. But coming out in the future in that same region, Ohio Administrative Code Rule #3701-20-07, it's a membrane requiring testing. And in order for you to obtain a hospital license, you'll have to show that you've tested over some period. So that starts on October 1 of this year. So we could see a return to some higher level of those emergency responses and in other states and areas in the region following suit.

現在，並不是說存在著對病人照護重要性的鬆懈。但未來在同一地區出現，俄亥俄州行政法規則#3701-20-07，這是一種需要測試的膜。為了獲得醫院許可證，您必須證明您已經接受過一段時間的測試。這要從今年 10 月 1 日開始。因此，我們可以看到這些緊急應變措施將恢復到更高水平，該地區的其他州和地區也將效仿。

I'm seeing similar legislation in New Jersey as well. So that, I think, is a big influence based on the second part of your question of the ASHRAE guidelines, and that's now requiring testing as well. So I think that those two influences coming on the pipe will -- could change that. But going forward, I cannot rely on emergency response as part of the forecast since it is something in the more noncontrollable state of business. So I hope that answers your question.

我在新澤西州也看到了類似的立法。因此，我認為，根據 ASHRAE 指南問題的第二部分，這是一個很大的影響，現在也需要測試。所以我認為管道上的這兩種影響將會——可能會改變這一點。但展望未來，我不能依賴緊急應變作為預測的一部分，因為它處於更不可控的業務狀態。所以我希望這能回答你的問題。

Despite that emergency response, you'll see that, that core is still strong, maintaining an average around that double-digit growth trajectory, which is impressive in the time that we have today. So thanks for that question.

儘管採取了緊急應對措施，但您會發現，該核心仍然強勁，平均保持兩位數增長軌跡，這在我們今天的時代令人印象深刻。謝謝你提出這個問題。

Got you. Appreciate it. And then I have one more, and I can jump back in the queue. So this is just on the filter trackers. So obviously, rollout seems to be maybe not quite as rapid as you had expected as you guys are working through some kinks for maybe adding improvements to the platform.

明白你了。欣賞它。然後我還有一個，我可以跳回隊列。所以這只是過濾器追蹤器上的。顯然，推出似乎可能沒有您預期的那麼快，因為您正在解決一些問題，以便可能對平台進行改進。

So I was just wondering if you could give an update on how you're seeing this rollout? Last time we spoke, you said it was the 12-month implementation timeline, which we have it fully rolled out and integrated by the end of the first quarter in '25.

所以我只是想知道您是否可以提供有關您如何看待此次推出的最新資訊？上次我們談話時，您說這是 12 個月的實施時間表，我們已在 25 年第一季末全面推出並整合。

Is that still the case you guys got -- was that possible delays cooked into that timeline? Or now do you expect it to maybe be pushed to the end of second quarter? And then just a follow-up on that would just be, have you seen changes in reorder rates from the clients that have the prototype of this?

你們遇到的情況仍然是這樣嗎——時間軸中是否有可能出現延誤？或者現在您預計它可能會被推遲到第二季末嗎？然後，後續行動就是，您是否看到具有此原型的客戶的再訂購率發生變化？

Have you seen that it's been working? Any commentary you can have on just initial success of the platform would be helpful as well.

你看到它已經發揮作用了嗎？您對該平台的初步成功的任何評論也會有所幫助。

Great question. And the filter tracker app we were talking about, and we didn't have to come up with a better name than that, boring name. But the app was having some issues, but we knew they would have issues, the offline version of it. Many of these filters are located in parts of hospitals or patient care facilities that don't have good reception. So the scanning and not part of the tool had to be updated and revamped and then -- so that it works on most phones or all phones.

很好的問題。我們正在談論的過濾器追蹤器應用程序，我們不需要想出比這個更好的名字，無聊的名字。但該應用程式遇到了一些問題，但我們知道他們的離線版本也會出現問題。許多過濾器位於醫院或病患照護設施中接收條件較差的地方。因此，掃描而不是工具的一部分必須進行更新和改進，然後才能在大多數手機或所有手機上運行。

It was working fine on some. So that -- those kinks and problems seem to have been worked out as of very recently. Places where we are using it are full-service accounts that were already changing their filters on a regular basis. But alluded to -- or the underlying problem your question is addressing is the reorder rate. These are people who have programmatic long-term water treatment plans using our filters, but then for whatever reason are not changing them on a regular basis.

對某些人來說效果很好。因此，這些糾結和問題似乎最近已經解決。我們使用它的地方是全方位服務帳戶，這些帳戶已經定期更改其過濾器。但提到的——或者你的問題要解決的根本問題是再訂購率。這些人使用我們的過濾器製定了長期的水處理計劃，但無論出於何種原因，都沒有定期更換它們。

They may not have the staff, they forget about -- The nurses as in don't complain, so they (inaudible). A whole number of reasons why the filters aren't getting changed out on a regular basis, but I do believe that's a low-hanging fruit, easy problem that we'll be able to rectify once we get this filter tracker and other digital online tools in place to better monitor and keep up with that business. Thanks for asking. That's a good question.

他們可能沒有工作人員，他們忘記了——護士們不會抱怨，所以他們（聽不清楚）。過濾器沒有定期更換的原因有很多，但我確實相信這是一個容易實現的問題，一旦我們獲得這個過濾器追蹤器和其他數位線上產品，我們就能夠糾正這個簡單的問題適當的工具可以更好地監控和跟上該業務的發展。謝謝你的詢問。這是個好問題。

Got you. I appreciate that. And just one last thing. I know you guys commented on -- you added 300 accounts -- active accounts recently over the past 12 months, was it possibly 6 months I've to go back and check. But did you guys give us the total number of active accounts as of the end of the second quarter?

明白你了。我很欣賞這一點。最後一件事。我知道你們評論過——你們最近在過去 12 個月裡添加了 300 個帳戶——活躍帳戶，是否可能是 6 個月我必須回去檢查。但是你們給我們提供了截至第二季末的活躍帳戶總數嗎？

I know that's a figure you used to give. I'm not sure if you're still planning on doing that?

我知道這是你曾經給的一個數字。不知道你現在還打算這麼做嗎？

Yes, let me -- one second, unless you have it, Judy, I'll find it in about three seconds.

是的，讓我——一秒鐘，除非你有它，朱迪，我會在大約三秒鐘內找到它。

Yes, we will look at that number for you.

是的，我們會為您查看該數字。

Pull it back to slide 15 at the end of Q2, 1,384.

將其拉回第 2 季末的幻燈片 15，即 1,384。

All right, guys. Great. I appreciate you taking time to answer my questions and I'll hop back in the queue. Appreciate it.

好吧，夥計們。偉大的。感謝您抽出時間回答我的問題，我會重新加入隊列。欣賞它。

You're welcome. Thank you.

不客氣。謝謝。

(Operator Instructions) And this concludes our question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks.

（操作員說明）我們的問答環節到此結束。我想將會議轉回公司進行閉幕致詞。

Thank you. And I appreciate everyone joining the call today and we look forward to talking again in the future. Please have a great rest of your day and week.

謝謝。我感謝今天加入電話會議的每個人，我們期待將來再次交談。請好好休息一天和一週。

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

謝謝。今天的電話會議到此結束。我們感謝大家參加今天的演講。您現在可以斷開線路並度過美好的一天。