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DATE
Thursday, August 14, 2025 at 8 a.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Mark Strobeck
Chief Financial Officer — Jesse Neri
Investor Relations — Heather H. Hunter
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RISKS
Revenue Decline— Net sales (GAAP) decreased 38% to $16.1 million, down from $25.8 million in Q2 2024, due to the largest customer moving to a new supplier.
Profitability Impact— Net loss (GAAP) widened to $1.5 million, compared to net income of $300,000 in Q2 2024.
Gross Profit Pressure— Gross profit (GAAP) declined 45% to $2.5 million, down from $4.6 million in Q2 2024
TAKEAWAYS
Net Sales-- Net sales (GAAP) were $16.1 million, reflecting a 38% decrease from the prior-year period due to customer transition.
Gross Margin-- Gross margin was 16%, holding steady from Q1 and aligning with management guidance.
Adjusted EBITDA-- Adjusted EBITDA was negative $200,000, an improvement from negative $400,000 in Q1 2025 but down from positive adjusted EBITDA of $1.4 million in Q2 2024.
Cash Position-- $18.4 million in cash, cash equivalents, and investments available for sale as of June 30, 2025, up from $17.3 million at the prior quarter-end
Customer Concentration-- The largest customer now accounts for 10% of revenue, down from 40%-45% a year ago. Two other large customers each contribute 10%-12% of revenue.
Long-Term Contracts-- Over 80% of customers are under long-term agreements, increasing business predictability and “stickiness”
Major Agreement-- New multi-year, multimillion-dollar supply deal with Innovative Renal Care includes utilization commitments, spanning three years with option to extend.
Other Agreements-- Secured new contracts with the largest rural health system in the U.S, a major inpatient dialysis provider in South Florida, and a specialized home care provider, each with minimum purchase requirements and renewal options (subtotals do not sum to the major agreement).
2025 Guidance-- Management reiterated net sales guidance of $65 million–$70 million, gross margin guidance of 16%-18%, and adjusted EBITDA (non-GAAP) range of negative $500,000 to positive $500,000.
Operational Efficiency-- Staff reductions and investment in automation have supported continued gross margin stability despite revenue declines, with gross margin reported at 16%.
Market Opportunity-- Western U.S. expansion targeted, with only one current competitor and estimated $100 million market size, according to management statements.
Customer Retention-- Continuing to supply largest customer, with active negotiations underway for a potential new long-term supply contract.
Product Recall Impact-- Management confirmed a competitor’s liquid product recall resulted in patient harm; Rockwell is supplementing supply for affected providers.
SUMMARY
Rockwell Medical (RMTI -2.87%) reported a substantial drop in revenue and gross profit, attributing declines to the loss of its largest customer, but stabilized gross margins (16%) and improved quarter-on-quarter adjusted EBITDA (from negative $400,000 in Q1 2025 to negative $200,000 in Q2 2025, non-GAAP) suggest successful cost control measures are in effect. The firm’s strategic pivot to long-term contracts, now covering over 80% of its customer base, coupled with new multimillion-dollar supply relationships, signals greater revenue predictability despite near-term sales headwinds. Cash flow from operations turned positive, bolstering liquidity. Management emphasized ongoing negotiations for major new agreements as a catalyst for future growth, particularly in underpenetrated Western markets.
Management described customer concentration risk as “way down,” with the largest customer now contributing 10% of revenue, compared to 40%-45% a year earlier.
Capital allocation has shifted toward automation and manufacturing efficiency investments, deprioritizing debt repayment for now.
Negotiations for Western U.S. expansion and new supply contracts with large providers may have a material financial impact later in the year and beyond.
The firm’s role in alleviating competitor recall disruptions was highlighted as reinforcing its supply reliability and customer trust.
INDUSTRY GLOSSARY
Hemodialysis Concentrates: Solutions used in dialysis to remove toxins and balance electrolytes in patients with kidney failure.
510(k) Approved: U.S. Food and Drug Administration (FDA) clearance indicating a medical device is safe and effective, based on substantial equivalence to a legally marketed device.
Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain one-time or non-operational items.
Full Conference Call Transcript
Heather H. Hunter: Good morning, and thank you for joining us for this update on Rockwell Medical. Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer, and Jesse Neri, Rockwell Medical's Chief Financial Officer. Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws, including, but not limited to, the types of statements identified as forward-looking in our annual report on Form 10-Ks and our subsequent periodic reports filed with the SEC. These statements are subject to risks and uncertainties that could cause actual results to differ.
Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those discussed are available in our SEC filings. Rockwell Medical's quarterly report on Form 10-Q for the three months ended 06/30/2025, was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter 2025 results. The reconciliation of non-GAAP measures we discuss on today's call can also be found in today's press release.
Our Form 10-Q and other reports filed with the SEC, along with today's press release and a replay of today's conference call and webcast, can be found on Rockwell Medical's website under the Investors section. Now I would like to turn the conference call over to Rockwell Medical's President and CEO, Dr. Mark Strobeck.
Mark Strobeck: Thank you, Heather. Good morning and thank you for joining us today for Rockwell Medical's second quarter 2025 earnings conference call and webcast. We are past the midpoint of what we recognize as a transition year for Rockwell Medical. Our core objectives for 2025 have been to secure our base business with long-term contracts, right-size our organization while meeting the demands of our customers, and fill the revenue gap in the wake of our largest customer moving to another supplier. We believe that we are successfully managing through this transition. For the second quarter, we improved our cash position. Our gross margin was consistent with quarter one and in line with guidance.
We were only slightly negative on an adjusted EBITDA basis and were cash flow positive from operations. We continue to work on a number of significant opportunities with new and existing customers that, if successful, could be transformational for Rockwell. We find ourselves in the back half of the year in a steady state and are well-positioned for continued growth. Our long-standing reputation for high-quality products, a reliable supply chain, and a customer-centric approach continue to differentiate us in the hemodialysis concentrates marketplace. We remain a leading supplier that has the scalability to manufacture and deliver to the more than 12,000 individual purchasing facilities, including outpatient dialysis clinics and hospitals in the U.S., along with select international markets.
Additionally, we remain the leading manufacturer and supplier of liquid bicarbonate products in the United States, which continues to hold strategic value for us. Year to date, we have signed several contracts with new customers and have renewed contracts with existing customers. Today, more than 80% of our customers are under long-term contracts, which is in stark contrast to where we were just a few years ago. This stickiness is important for Rockwell as it demonstrates stability and predictability in our business and offers strong growth opportunities in the coming years.
During the second quarter, we entered into a new product purchase agreement with Innovative Renal Care, formerly American Renal Associates, one of the largest dialysis service providers in the U.S. Under the terms of the agreement, we are supplying IRC with liquid and dry acid and bicarbonate hemodialysis concentrates as well as our dry acid concentrate mix system, which is 510(k) approved only to be used with our dry acid concentrate powders. This represents a multimillion-dollar purchase agreement with utilization commitments and will remain in effect for three years, with the option to extend an additional one-year period. Other customer wins include a product purchase agreement with the largest rural health system in the U.S. with a two-year agreement with minimums that has the option to renew for two additional twelve-month periods. We have also contracted with the largest provider of inpatient dialysis in South Florida and a provider of specialized home care services to ill, disabled, and vulnerable individuals in their home and places of residence. Both of these agreements are multi-year long-term contracts with purchase minimums and renewal options. As for our largest customer, we are continuing to supply them well past their June 30 transition date and are working with them to find additional ways to support their business going forward. We are still in active discussions about terms for a new contract. To remain on the conservative side, we are reiterating our guidance for 2025 as follows: net sales will be $65 million to $70 million, gross margin will be between 16-18%, and adjusted EBITDA will be between negative $500,000 and positive $500,000. I will now turn the call over to Jesse to review our second quarter 2025 financial results in further detail. Jesse?
Jesse Neri: Thank you, Mark. Good morning, everyone. I will now review our second quarter 2025 financial results in greater detail. Net sales for the second quarter were $16.1 million, representing a 38% decrease over net sales of $25.8 million for the same period in 2024. The decrease in net sales was driven by our largest customer transitioning to another supplier. Net sales for the six months ended 06/30/2025, were $35 million, which represents a 28% decrease over net sales of $48.5 million for the same period in 2024. Gross profit for the second quarter was $2.5 million, which represents a 45% decrease from $4.6 million for the same period in 2024.
Gross profit for the six months ended June 30 was $5.5 million, which represents a 27% decrease from $7.6 million for the same period in 2024. Gross margin for 2025 was 16%, which was consistent with 2024 and represents a slight decrease from 18% for the same period in 2024. Gross margin for the six months ended 06/30/2025 was 16%, which is also consistent with the same period in 2024. Net loss for Q2 2025 was $1.5 million, consistent with 2025, and represents a decrease from a net income of $300,000 for the same period in 2024.
Net loss for the six months ended 06/30/2025 was $3 million compared to a net loss of $1.4 million for the same period in 2024. Adjusted EBITDA for Q2 2025 was a negative $200,000, which represents an improvement over adjusted EBITDA of negative $400,000 in Q1 2025, compared to a positive adjusted EBITDA of $1.4 million for Q2 2024. Adjusted EBITDA for the six months ended 06/30/2025 was a negative $700,000 compared with a positive adjusted EBITDA of $900,000 for the same period in 2024. Cash, cash equivalents, and investments available for sale at 06/30/2025 was $18.4 million, an increase from $17.3 million at the end of Q1.
The increase in cash was driven by $1.8 million in cash flow from operations. Now I'll turn the call back over to Mark.
Mark Strobeck: Thank you, Jesse. Operator, please open the phone lines for any questions.
Operator: Our first question comes from Ram Selvaraju from H.C. Wainwright. Please go ahead. Your line is open.
Ram Selvaraju: Thanks very much for taking my questions. I just wanted to ask about your expansion plans in the Western United States and if you can provide us with any additional granularity regarding how those initiatives are proceeding and when we might see additional customer acquisition in those territories?
Mark Strobeck: Yes. Thanks, Ram, for the question. So, we continue to believe the West is a significant opportunity for Rockwell as there is only one provider of concentrates within that marketplace and we believe it represents an approximate $100 million opportunity. Our focus right now has been not only in sort of working through this transition period but also lining up larger customers for that expansion. I think we'll be able to give greater visibility towards that as we get later into the year and some of the discussions that we have ongoing now with DaVita, Fresenius, and others begin to play out.
But it is still our intent and it's still our belief that does represent a large opportunity for us and we should be able to give more clarity at that point.
Ram Selvaraju: The second question I wanted to ask pertains to the negotiations you continue to have with your largest customer. I was wondering if you could give us some sense of what the open questions or key parameters are around potentially reaching a new deal with this customer. If this might ultimately take the form of a long-term agreement like the ones you have in place with the majority of your other customers now. And if by the time we get to the end of those negotiations, such an agreement might be reached in time to have a meaningful upside impact on your 2025 revenue guidance? Thank you.
Mark Strobeck: So our discussions continue in earnest with DaVita. As I think everyone knows, DaVita had alerted us at the beginning of the year that they were going to begin to transition away with a goal to move away from Rockwell by the middle of the year. DaVita continues to be a purchaser of products from Rockwell beyond that point. It is clear that will continue through the remainder of the year. We are working with DaVita now on putting in place a long-term supply arrangement. Rockwell is not in the business of single small projects of supply in an effort to fill gaps or to supplement other suppliers. We are in the business of putting in place long-term supply arrangements.
That message has been communicated, and we feel optimistic that we will come out of those discussions with a long-term supply agreement. That I think will certainly ideally impact financials towards the end of the year, but will certainly impact our financials going forward. I think it's also fair to say that we are working with two other incredibly large suppliers, one being the largest dialysis provider in the world, on a supply arrangement that if completed would have a meaningful impact on fourth-quarter financials.
So we've got a number of I think really great opportunities and that is a result of the fact that Rockwell continues, despite the changes in the marketplace, to be a reliable consistent supplier of products that are safe, that are of the highest quality, and the marketplace knows that.
Ram Selvaraju: And just two other very quick things. Firstly, with respect to the available cash on hand, can you give us a sense of how you're thinking about prioritization with respect to allocation of capital? In particular, how you look at the partitioning of capital allocation between debt pay down, debt repayment and investment into new customer acquisition activities? And also, if you can give us a sense of given the shift towards ensuring that you have long-term relationships and long-term agreements in place with your key customers, how that might translate into greater predictability of revenue in 2026? Thank you.
Mark Strobeck: Yes. So as far as capital allocation, right now the primary focus is the use of that capital in continuing to invest in capital equipment that allows us to further automate our manufacturing processes and reduce the cost of manufacturing our products. That is exclusively where our resources are being focused, all in an effort to be able to make our products more efficiently. We've obviously modeled out the next five years and certainly believe we've got enough resources and based on the performance of the business to have cash sufficient to satisfy our debt obligation and our lenders certainly firmly believe that as well.
So but as far as allocation right now, it's primarily in capital equipment and customer, new customer acquisition. As far as your second question, the number one objective for this organization is to create a reliable and reproducible business that is consistently performing and generating positive cash flow and profitability. All of the arrangements that we've established with our customers, which is a change in direction as we've mentioned previously from not but a couple of years ago is to continue to create that reliable revenue source and that reliable performance of our business. Had we not had the change in our largest customer, I think we were well on our way to doing that.
And I think you can look historically over the last 2.5, three years and seen a very consistently reliable growing revenue base. With this change, it has certainly altered that for the period. We have now gone through that transition. We've restabilized the base and are now positioned for further growth to, I would say, get back to growing at a steady and consistent level, but with a highly reliable and reproducible revenue stream.
Jeremy Pearlman: Thank you.
Operator: Our next question comes from Jeremy Pearlman from Maxim Group. Please go ahead. Your line is open.
Jeremy Pearlman: Thank you. Good morning. Just the first question related to gross margins. You were able to keep them relatively flat quarter over quarter even though revenue declined. Maybe just talk a little about what actions you're taking and what's going behind that to keep these gross margins stable.
Jesse Neri: Thanks, Jeremy. So we've right-sized the organization really at the beginning of towards the end of Q1 and the beginning of Q2. We've had some staff reductions as it relates to operations, you know, to further decline, you know, in line with essentially our new revenue base. We've also invested in some new equipment, which has increased our efficiency, which is also helping, and we're expecting to see more results better results from that in the future.
Mark Strobeck: Yes. And I might also add to Jesse's comments. As we've said previously, the gross margin and profit we were making on our largest customer was not a significant piece driving our overall business, right? That has proven itself out by the fact that revenue has been reduced as a result of them moving away, and it hasn't ultimately significantly affected our gross margin. So I think that's consistent with what Jesse has said, this is another factor here. I think looking forward, I think we are in an incredibly good position, and we've already begun to see even this month a tick up in our gross margin and gross profit.
And I think that's as a result of the changes that Jesse just outlined that we are making. So I think we're well-positioned as we go through the second half of the year to be able to maximize that even further.
Jeremy Pearlman: Okay. Understood. Great. And maybe also, I know, you know, prior to when you had the largest customer on board fully, there was a high customer concentration risk that has how much has that been mitigated now that, you know, that contract technically ended at the middle of this year? Or is there still some concentration risk? Are there still some major customers that make up the bulk of the revenue, or has that really been, you know, spread out?
Jesse Neri: I'll say it's been spread out. So, back in this time last year, DaVita represented about 40 or 45% of our revenue base. Now they're down to 10%. The other we have two other larger large customers, but they're both around, I would say, 10% to 12% of our revenue. So that concentration risk has gone way down.
Mark Strobeck: Yeah. And I think to follow on from that, I mean, we knew when we started this about three years ago that, you know, one of the major risks within this business was so much of our business was concentrated with a single customer. You know, we've worked continuously to diversify that by adding new customers, by completing the acquisition of Metivators, by doing a number of other things to try to dilute that. The work that we completed in an effort to do that, I think, is what creates the base that allows us to go through that transition of losing our largest customer, right, while still being able to maintain a sizable business.
Had that occurred three years ago, I don't think we would be sitting in this position. So, all of the work that we've done has been essentially to address that, right? The fact that we continue to exist and continue to be able to grow this business in a meaningful way, I think speaks to all of the things that we've done. But as Jesse points out, we are not going to find ourselves in that position again going forward.
Jeremy Pearlman: Okay. Great. And then just last question. You know, in April, one of your competitors had a voluntary recall of contaminated product. Have you been able to, I mean, I know to, you know, utilize that to any advantage when you're negotiating with customers since then? I mean, it's been four months now.
Mark Strobeck: Yes. It's a great question. Yes. Unfortunately, the organization that our largest customer shifted towards did have a significant issue in the manufacturing of their liquid products. As you pointed out, there was a significant recall of all of their liquid products. Unfortunately, there was contamination associated with the products that led to not only serious health consequences to patients but apparently according to what we learned in the Federal Register actually unfortunately killed the patient.
So we are obviously working quite closely with them to supplement their supply as well as working with our largest customer to make sure that there is continuous supply of liquid both acid and bicarbonate products in an effort to maintain patient care and the ability of patients to continue to access dialysis treatments.
Jeremy Pearlman: Okay. Great. Thank you so much for taking my questions. Have a nice day.
Mark Strobeck: Thanks, Jeremy.
Operator: We hope there are no further questions. I'll turn the call back over to Dr. Strobeck.
Mark Strobeck: Thank you for joining us today for an update on Rockwell Medical. We look forward to providing you with more updates next quarter.
Operator: This concludes today's call. You may now disconnect.