NEPHROS INC (NEPH)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered net revenue of $4.4M (+36% YoY), gross margin of 63% (+400 bps YoY), and the company’s third consecutive profitable quarter, supported by programmatic reorders and new active sites .
• Results were a clear beat vs Wall Street: revenue $4.42M vs $3.60M consensus and EPS $0.02 vs -$0.03 consensus; two estimates were tracked, indicating limited coverage but a meaningful surprise. Values retrieved from S&P Global.*
• Sequentially, revenue moderated from a record Q1 ($4.88M) to $4.42M in Q2, but profitability and cash generation remained intact; cash grew to $5.1M and NEPH remains debt-free .
• Management cited all-time highs in programmatic sales and active-site counts, the largest dialysis filtration PO in company history, and strong retention; sales capacity expansion into non-healthcare verticals is an ongoing constraint and opportunity .

What Went Well and What Went Wrong

What Went Well

• Programmatic sales reached an all-time high; trailing-12-month revenue climbed from $13.8M to $16.7M, underpinning durable demand and recurring revenue momentum .
• Gross margin expanded to 63% (vs. 59% LY), driven primarily by reduced shipping costs and inventory reserve adjustments; adjusted EBITDA turned positive to $355K (vs. -$133K LY) .
• Customer metrics and commercial traction strengthened: “active-site counts reached all-time highs across infection control, dialysis water, and commercial” and the dialysis water segment delivered its second-highest performance on record .

What Went Wrong

• Sequential top-line deceleration from Q1’s record ($4.88M) to Q2 ($4.42M) reflects normalization after emergency response strength and pre-ordering ahead of a small price increase in February .
• SG&A rose 13% YoY to ~$2.2M on higher commissions, bonus accruals, and stock comp, highlighting investment intensity during growth scaling .
• Sales coverage remains a limiting factor: “We don’t have the salesforce we need in every place… we’ve been strategic… and will have to keep expanding” (Robert Banks) .

Financial Results

Income Statement Trend (oldest → newest)

Operating Expense Detail (oldest → newest)

Balance Sheet and Cash KPIs

KPIs and Commercial Metrics

Q2 2025 vs Wall Street Consensus (S&P Global)

Values retrieved from S&P Global.*

Guidance Changes

Management reiterated confidence and strategic focus but did not provide numeric guidance ranges in Q2 materials .

Earnings Call Themes & Trends

Management Commentary

• “Programmatic sales reached an all-time high in Q2… active-site counts reached all-time highs across infection control, dialysis water, and commercial segments.” (Robert Banks) .
• “We now serve over 1,500 active customer sites and… Q2 brought in the highest retention rate of the past six quarters.” (Robert Banks) .
• “Gross margin for the second quarter of 2025 was 63%, compared with 59% in the second quarter of 2024… driven by a reduction in shipping costs and inventory reserve adjustments.” (CFO commentary embedded in release) .
• “Net cash provided by operating activities was $994,000… reflecting positive net income, a decrease in accounts receivable and an increase in accrued expenses.” (Judy Krandel) .

Q&A Highlights

• Growth drivers: App visibility, service implementation, and closer sales engagement collectively improved reorder rates; management emphasized sustainable, intentional growth and customer peace-of-mind in infection control .
• Sales capacity: “We don’t have the salesforce we need in every place… we will have to keep expanding it” — expanding coverage with junior associates while seasoned reps pursue new business .
• Vertical expansion: Entering dental, government, municipal; education and speaking engagements/social channels boosting awareness and pipeline beyond healthcare .
• Trajectory: Management confident in continuing momentum into 2H with operational discipline and profitability focus .

Estimates Context

• Q2 2025 beat consensus on both revenue and EPS: $4.42M vs $3.60M and $0.02 vs -$0.03, with two estimates contributing to consensus. Values retrieved from S&P Global.*
• Given sustained gross margin improvement and recurring programmatic momentum, Street models likely need to raise near-term revenue and EPS, and reflect structurally higher margins (shipping cost and reserve tailwinds, plus mix) .

Key Takeaways for Investors

• Strong beat and third straight profitable quarter underscore a turning point in fundamentals; margin drivers appear durable and cash generation improved materially .
• Recurring programmatic engine is scaling with app-enabled compliance and service; this should support visibility and reduce volatility vs emergency response cycles .
• Dialysis water is emerging as a growth pillar (record PO, near-record performance), aided by product innovation like the 20" HydraGuard and use-cases in sterile processing/labs .
• Capacity is the constraint: expanding salesforce and entering new verticals should unlock incremental growth; monitor hiring pace and coverage expansion as near-term catalysts .
• Sequential revenue dip from Q1’s record looks like normalization post emergency activity and pre-ordering; profitability and cash build suggest resilience into 2H .
• With limited Street coverage, upside surprises can be meaningful; expect consensus revisions upward on revenue, EPS, and margin assumptions following Q2 .
• Risk watch: tariff/macro and emergency-response variability remain external factors; however, recurring programmatic demand and high retention mitigate these risks .