Sign in
NI

NEPHROS INC (NEPH)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net revenue was $3.870M (+19% year over year) with gross margin of 64% (+200 bps YoY); net income was $0.349M and adjusted EBITDA was $0.466M, marking a strong finish to the year and sustained operational discipline .
  • FY 2024 net revenue was flat at $14.162M, but Nephros delivered its first annual net income of $0.074M as supplier term improvements and SG&A reductions lifted profitability; management indicated gross margins in the low-60s should be sustainable .
  • Strategic catalysts: launch of the 20" HydraGuard UltraFilter targeted at sterile processing under ANSI/AAMI ST108, plus expansion into non-healthcare verticals (office, airports, transportation) to diversify demand and drive programmatic growth .
  • Liquidity improved sequentially: Q4 operating cash flow was +$1.3M; year-end cash was $3.760M and the company remains debt-free, supporting selective investment in R&D and marketing .
  • Estimates context: Wall Street consensus via S&P Global was not retrievable for Q4 2024 in this session; as such, no beat/miss vs estimates is shown, and any future comparison will anchor to S&P Global data.

What Went Well and What Went Wrong

What Went Well

  • Record profitability milestones: first profitable quarter in Q3 and first annual net income driven by cost control and better supplier terms; Q4 adjusted EBITDA of $0.466M and net income of $0.349M continued momentum .
  • Product innovation and regulatory alignment: launch of the 20" HydraGuard UltraFilter, positioned to meet sterile processing needs under ST108; “tightest control of bacteria and endotoxins on the market” per management .
  • Commercial traction: 600 new customer sites added ($2M sales; >13% of FY revenue) and active sites grew to >1,500, bolstering recurring programmatic revenue base .

What Went Wrong

  • Emergency response exposure: significant decline in emergency response revenue in H1 (historically double-digit % of total) to single digits; recovery came only in H2, leaving FY revenue flat .
  • Reorder cadence and regional softness: slower-than-usual reorders at larger accounts and underperformance in the South Central region weighed on programmatic sales in Q3 before initiatives began to mitigate reorders and bolster service .
  • Q2 headwinds: total revenue declined 8% YoY in Q2 due to a 92% YoY drop in emergency response; adjusted EBITDA loss of $0.133M and net loss of $0.289M signaled transitional dynamics before improvements took hold .

Financial Results

Quarterly comparisons

MetricQ2 2024Q3 2024Q4 2024
Net Revenue ($USD Millions)$3.250 $3.518 $3.870
Gross Margin %59% 61% 64%
Net Income ($USD Millions)$(0.289) $0.183 $0.349
Diluted EPS ($USD)—$0.02 $0.03
Adjusted EBITDA ($USD Millions)$(0.133) $0.295 $0.466

Key implications:

  • Sequential acceleration: revenue +8% q/q into Q3 and +10% q/q into Q4; gross margins scaled from 59% → 61% → 64%; profitability improved from Q2 losses to Q3/Q4 profits .
  • YoY Q4: revenue +19%, GM +200 bps, EPS swung to $0.03 from $(0.06) .

Revenue composition

MetricQ3 2024Q4 2024
Product Revenues ($USD Millions)$3.472 $3.849
Royalty & Other Revenues ($USD Millions)$0.046 $0.021
Total Net Revenues ($USD Millions)$3.518 $3.870

Operating expenses and margin drivers (Q4 2024)

  • SG&A was $1.872M (−22% YoY on lower bonuses, commissions, and professional fees); R&D was $0.252M (+21% YoY on higher headcount) .
  • GM uplift linked primarily to improved terms with the largest supplier; shipping expenses remained reasonable .

KPIs and liquidity

KPIQ3 2024Q4 2024
Active Customer Sites (approx.)~1,384 at Q2 end >1,500 at YE
New Customer Sites Added (FY)—600 ($2M sales; >13% of FY revenue)
Operating Cash Flow ($USD Millions)—$1.3 (Q4)
Cash & Cash Equivalents ($USD Millions)$2.457 (Q3 end) $3.760 (YE)
DebtDebt-free Debt-free

Non-GAAP adjustments

  • Adjusted EBITDA excludes interest, taxes, non-recurring items, and non-cash items (D&A, stock comp, inventory write-offs). Q4 reconciliation: Net income $0.349M; add-backs include D&A $0.035M, stock comp $0.062M, inventory impairments $0.048M, and net interest income $(0.028)M, yielding adjusted EBITDA $0.466M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Not providedNot providedMaintained: no formal guidance
Gross Margin %FY 2025Not providedTarget low-60s sustainability (qualitative)—
OpExFY 2025Not providedSelective investments in R&D/marketing, maintain cash-positive bias—
Other (OI&E, tax)FY 2025Not providedNot providedMaintained: no formal guidance

Note: Nephros did not issue numerical guidance in the Q4 press release or call; commentary framed margin sustainability and selective investments but no explicit ranges .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
Digital tracking app for reordersQ2: rollout slower than expected; targeting end-Q1’25; focus on improving offline scanning Launched mid-Q4 ahead of plan; ~300+ sites tracked; improving same-site sales visibility Improving execution; adoption expanding
Emergency response businessQ2: −92% YoY; drove total revenue −8% YoY H2 recovery; overall Q4 +19% YoY; core programmatic growth resumed Recovering; less reliance on emergency
Gross margin trajectoryQ2: 59%Q3: 61%; Q4: 64%; CFO views low-60s sustainable Strengthening; sustainable level indicated
20" HydraGuard/ST108Q2/Q3: emerging focus on sterile processing; competitive differentiation Product launched; positioning for regulatory-driven demand in sterile processing Product-market fit solidifying
Market expansion beyond healthcareQ3: exploring commercial/dental; ER-to-programmatic conversion Pursuing airports, correctional facilities, schools, large offices, transportation Broadening verticals
Cost disciplineQ2/Q3: SG&A reductions; EBITDA improved Company remains lean; selective R&D/marketing investments linked to revenue growth Lean operating model; targeted investments
Macro/tariffs—Limited impact to date; components largely from Europe; monitoring possible tariff changes Watching risk; currently manageable

Management Commentary

  • CEO on product/regulatory positioning: “Most notable was the launch of our 20” HydraGuard Ultrafilter… we believe the new HydraGuard… has the potential to serve as a key asset for sterile processing compliance, while supporting improved patient safety.”
  • CEO on H2 recovery and growth: “We were able to overcome this headwind in the second half of 2024, particularly with 19% year-over-year growth in total sales in the fourth quarter.”
  • CFO on margin sustainability: “We don’t have a reason to believe that there’s a big hit coming to margins… within that kind of low 60s, we’re hoping that it’s very sustainable.”
  • CFO on investment stance: “We are about as lean as we possibly could go… select investments in R&D and marketing… carefully along with revenue growth… maintain cash positive.”
  • CEO on market expansion: “We are primarily healthcare… but we’re looking at other verticals… airports, correctional facilities, schools, large office buildings… where people are interested in not having bacteria and endotoxins in those waters.”

Q&A Highlights

  • HydraGuard opportunity sizing: Management sees a “healthy pipeline” but will quantify once closure rates are clearer; expects the product to be “a pretty good part of our programmatic growth business” .
  • Digital reorder tracking: Launched mid-Q4 with >300 sites; improved visibility to same-site sales and reorders; designed to address earlier programmatic reordering gaps .
  • Cost structure and investments: Organization is very lean; incremental investments in R&D/marketing to be paced with sales to maintain cash positivity .
  • Gross margin drivers: Margin gains from supplier terms; shipping costs reasonable; product/customer mix influences margins; low-60s seen as sustainable .
  • Macro/tariffs: Minimal immediate effects; monitoring potential EU tariff changes; long-term agreements and supplier locations mitigate exposure .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 were not retrievable during this session; therefore, beat/miss vs estimates is not shown. Future comparisons will anchor to S&P Global Wall Street consensus when accessible.

Key Takeaways for Investors

  • Margin resilience and profitability: The step-up from 59% to 64% gross margins and back-to-back quarterly profitability suggests structurally improved earnings power; watch for confirmation of low-60s GM sustainability in 2025 .
  • Programmatic growth underpinning: Active sites >1,500 and 600 new sites ($2M) bolster recurring revenue; the digital tracking/app and service-led installs should lift reorder cadence and reduce slippage .
  • New product/regulatory tailwinds: 20" HydraGuard aligned with ST108 requirements is a tangible growth driver in sterile processing; expanding into non-healthcare verticals can diversify revenue and reduce emergency-response lumpiness .
  • Cash discipline with targeted investments: Q4 OCF of $1.3M and debt-free status enable measured R&D/marketing spend while preserving optionality; monitor opex leverage and productivity of incremental spend .
  • Watch ER dynamics, but thesis rests on core: Emergency response remains variable; management’s emphasis on core programmatic revenue and service/digital initiatives is the primary driver for medium-term compounding .
  • Near-term catalysts: Additional HydraGuard wins, evidence of improved reorder cycles from the app, and continued margin strength are likely stock narrative movers; listen for quantitative guidance or KPI disclosures in upcoming calls .
  • Risk checks: Regulatory timing and adoption, potential tariff changes, and customer mix can influence margins and cadence; management is monitoring and positioning accordingly .