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Date

Thursday, March 12, 2026 at 4:30 p.m. ET

Call participants

  • Chief Executive Officer — Robert Banks
  • Chief Financial Officer — Judy Krandel

Takeaways

  • Total Revenue -- $18.8 million for the year, up 33%, driven by programmatic sales, service revenue, and emergency response business.
  • Fourth Quarter Revenue -- $4.7 million, a 22% increase compared to the corresponding period.
  • Net Income -- $1.2 million for the year, marking the second consecutive year of profitability and a significant increase from $0.1 million in the prior year.
  • Adjusted EBITDA -- $1.6 million for the year versus $548,000 previously, with fourth quarter adjusted EBITDA at $131,000 compared to $481,000 in the prior year’s corresponding period.
  • Gross Margin -- 62% for the year, unchanged, but fourth quarter gross margin fell to 58% from 64%, impacted by tariffs.
  • Active Customer Sites -- 1,680 at year-end, up from just over 1,500 at the previous year-end.
  • Programmatic Revenue Contribution -- CFO Judy Krandel said, "the fourth quarter, what's programmatic was certainly 90% plus of our business, which is similar for the year."
  • Research and Development Expenses -- $1.3 million for the year, up from $0.9 million, and $0.4 million for the quarter, attributable to increased headcount and bonuses.
  • Selling, General, and Administrative Expenses -- $9 million for the year, up 17% due to higher bonuses and commissions, with fourth quarter SG&A of $2.3 million, a 24% increase, including onetime product development and market analysis costs.
  • Cash and Debt Position -- $5.4 million in cash at year-end; the company remains debt-free.
  • Tariff Impact -- Since April, all goods imported from Italy faced a 15% tariff, reduced to 10% as of February 22, 2026; CFO Krandel stated that tariff policy "remains unpredictable, creating uncertainty around potential future margin impacts."
  • Net Cash from Operations -- $1.6 million provided in the year, driven by net income and increases in accrued expenses and accounts payable, partially offset by higher accounts receivable and inventory.
  • Strategic Pillars -- Management highlighted a three-pillar approach: Products, Services, and Education, with the Nephros Water Institute established to lead education efforts.
  • Service Business -- Expanded installation and replacement capabilities enabled lifecycle solutions and drove recurring revenue.
  • Expansion Beyond Healthcare -- The organization noted "recent product launches" targeting ice machines, drinking fountains, bottle filling stations, and sterile processing environments as part of non-patient care market penetration efforts.

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Risks

  • Gross margin contracted in the second half due to tariffs, with ongoing margin uncertainty: CFO Krandel stated, "U.S. tariff policy remains unpredictable, creating uncertainty around potential future margin impacts."
  • SG&A escalated 17% for the year and 24% for the quarter, affected by increased bonuses, sales commissions, and onetime product development and market analysis expenses.
  • Management identified the absence of regulatory tailwinds and market inertia as barriers in the commercial and non-patient care segments, requiring significant education efforts to drive adoption.

Summary

Nephros (NEPH 6.84%) reported substantial revenue growth and consecutive annual profitability, supported by increased programmatic sales, new customer acquisition, and expansion into non-healthcare verticals. The company introduced targeted educational initiatives, notably the Nephros Water Institute, to establish thought leadership and spur demand across new markets. Net cash from operations improved due to strong sales and disciplined cash management, while management continues to prioritize recurring revenue services as a strategic focus. Product innovation targeted high-volume, non-patient care applications, diversifying end markets. Cash reserves increased to $5.4 million, and the company stated it remains debt-free.

  • Management confirmed that non-healthcare adoption remains a "multiyear strategy," with gradual progress observed in correctional facilities, schools, aviation, and large public venues.
  • The expansion of services addresses technical barriers for customers, including complex installations and maintenance previously seen as obstacles outside of healthcare.
  • Education initiatives engaged over 1,000 industry stakeholders through webinars and training, broadening awareness of waterborne pathogen risks and compliance needs.
  • CEO Banks shared, "Recent product launches allow us to address new high-impact applications, including ice machines, drinking fountains, bottle filling stations and sterile processing environments."
  • Management stated that sustained order reactivity and high retention from referrals supported the growth in active customer sites.

Industry glossary

  • Programmatic Revenue: Recurring sales from contracted or scheduled filter replacements, as opposed to one-time or emergency-response sales.
  • Sterile Processing: Healthcare and institutional setting focused on cleaning and disinfecting instruments and equipment potentially exposed to pathogens.

Full Conference Call Transcript

Robert Banks: Thank you, Kirin. Good afternoon, everyone, and thank you for taking the time to join us today. 2025 was a great year, and I'm extremely proud of the team and all their amazing accomplishments. I've been excitedly awaiting this day so I can share with you the results of the great things that have happened since our last full year's recap. Clean water is essential for health care, hospitality, food services and everyday life. We have the right products to address these needs and have been doing so successfully in patient care situations. We've made great progress in non-patient care applications over the past year.

We look forward to developing channels to penetrate other markets, such as residential and commercial through key relationships that we are creating. Over the past several years, we've built a clear strategy to deliver on that message. And today, the strategy is anchored around 3 core pillars: products; services; and education. Together, these pillars are driving our growth and positioning Nephros as a leader in water safety solutions. Our first pillar, Products is our differentiated portfolio. It remains the foundation of our success. Nephros develops advanced filtration technologies designed to remove bacteria, viruses and other contaminants that threaten water safety. These products are trusted in hospitals, laboratories and commercial facilities where reliability is critical. Innovation continues to expand our reach.

Recent product launches allow us to address new high-impact applications, including ice machines, drinking fountains, bottle filling stations and sterile processing environments. These are everyday touch points where water safety matters. By delivering filtration solutions that are both high performance and easy to deploy, we are expanding our addressable market well beyond traditional patient care applications. This product innovation pipeline is a key driver core to our continued growth. In 2025, we launched our second pillar, Services. While products start the relationship with customers, Services sustain it. Water filtration systems require regular replacement, monitoring and installation expertise. Historically, this has been fragmented and difficult for facility operators to manage. Nephros is solving that problem.

Under the leadership of our service organization, we've expanded our installation and replacement capabilities, enabling us to provide customers with a complete lifestyle -- life cycle solution. This includes rapid product delivery, professional installation, scheduled replacement programs and ongoing technical support and training. By offering these services directly, we reduced barriers to adoption and strengthen long-term customer relationships. Most importantly, this model supports recurring revenue to programmatic filter replacements, which creates a more predictable and scalable business. Our newest and recently launched pillar is the strategy around Education. It represents one of the most exciting developments for our company. We've touched over 1,000 people through our webinar series and conducted numerous site-based training sessions.

Water safety is becoming an increasingly important topic across health care, hospitality and public facilities. However, many organizations lack the expertise needed to manage waterborne pathogen risks effectively. To address this gap, we launched the Nephros Water Institute, this institute is dedicated to expanding knowledge around waterborne pathogen mitigation, facility water safety programs and compliance-driven filtration solutions. Through education and engagement with industry stakeholders, we are establishing Nephros as a trusted authority in water safety. This initiative does more than just share knowledge, it builds a long-term demand for filtration, services and compliance solutions. In other words, education strengthens our entire ecosystem. The impact of this 3-pillar strategy is already visible in our financial performance.

In 2025, Nephros delivered 33% revenue growth, reaching $18.8 million in total revenue, while continuing to scale our operations. We also reported net income of approximately $1.2 million, marking our second consecutive year of profitability, a significant milestone for the company. These results reflect strong order reactivity, growth in active customer sites, expansion of service capabilities and increasing demand for our solutions. At the same time, we remain debt-free and financially disciplined with approximately $5.4 million in cash at the year-end.

Looking forward, we believe Nephros is positioned at the intersection of several powerful trends, increased awareness of waterborne pathogens, rising regulatory expectations around water safety, aging infrastructure in health care and hospitality and a growing need for a reliable filtration solution. Our integrated strategy, products, services and education, allows us to address all 3 challenges simultaneously. It also creates a business model built not just on filter sales, but on long-term relationships and recurring value creation. I'd like to thank the entire Nephros team for their hard work and commitment. Now let me turn it over to our CFO, Judy Krandel to go over the financials. Judy?

Judy Krandel: Thanks, Robert. I will now provide a closer look at Nephros' financial performance in the fourth quarter and full year of 2025. We reported fourth quarter 2025 net revenue of $4.7 million a 22% increase over the corresponding period in 2024. And for the full year 2025, net revenue grew 33% to $18.8 million from $14.2 million. This increase was primarily driven by higher programmatic revenue, reflecting strong reorder activity and the addition of several new active sites. In addition, we experienced solid growth in our emergency response business as well as significant growth in service revenue.

Active customer sites continued to grow, and we're just over 1,680 as of the end of 2025 as compared to just over 1,500 as of December 31, 2024. Gross margin was 62% for both of the years ending December 31, 2025 and 2024, respectively. Gross margin for the fourth quarter of 2025 was 58% compared with 64% in the fourth quarter of 2024. Although, we achieved higher margins during the first half of fiscal 2025, those margins eroded somewhat during the second half of the year, primarily due to the impact of tariffs. Since April 2025, we have been subject to a 15% tariff on all goods imported from Italy which was reduced to 10% as of February 22, 2026.

While this reduction provides some near-term relief, U.S. tariff policy remains unpredictable, creating uncertainty around potential future margin impacts. Research and development expenses for the years ended December 31, 2025 and 2024, were $1.3 million and $0.9 million, respectively. R&D expenses for the fourth quarter of 2025 were $0.4 million compared with $0.3 million in the fourth quarter of '24, an increase of 57%, primarily due to higher headcount and bonuses. Selling, general and administrative expenses for the year ended 2025 were $9 million compared with $7.7 million in 2024, an increase of 17% due to an increase in bonuses and sales commissions.

Selling, general and administrative expenses for the fourth quarter of 2025 were approximately $2.3 million compared with $1.9 million in '24, an increase of 24% due primarily to an increase in bonuses and sales commissions. SG&A expenses in the fourth quarter also had some onetime expenses associated with product development and market analysis work. Net income for the year ended December 31, 2025, was $1.2 million compared with $0.1 million in '24. Net income for the fourth quarter of '25 was $0.1 million compared with $0.3 million during the same period in 2024, primarily reflecting the decline in gross margins and increase in bonuses and sales commissions.

Our improvement in 2025 net income was largely due to our increased sales revenue. We are extremely pleased to report positive net income for the second consecutive year, the only 2 in the company's history. Adjusted EBITDA in the fourth quarter was a positive $131,000 compared to positive $481,000 during the same period in '24. For the full year 2025, adjusted EBITDA was a positive $1.6 million versus positive $548,000 in 2024. Net cash provided by operating activities was $1.6 million for the year ended December 31, 2025, compared to net cash used in operating activities of approximately $0.5 million for the year ended December 31, '24.

Net cash provided by operating activities in '25 was primarily due to net income of approximately $1.2 million, an increase in accrued expenses of approximately $1 million, an increase in accounts payable of approximately $0.3 million, offset by an increase in accounts receivable of approximately $0.6 million and an increase in inventory of approximately $0.7 million. Net cash used in operating activities in '24 was primarily due to an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million.

Our cash balance on December 31, 2025, was $5.4 million compared to $5.2 million as of September 30, 2025, and $3.8 million as of December 31, 2024, and we continue to be debt-free. Please refer to today's press release for more details about the calculation of adjusted EBITDA and its reconciliation to GAAP net income or loss. And additional information about our results can be found in our filing on Form 10-K, which we filed earlier today. I will now turn the call back to Robert for some closing remarks. Robert, please go ahead.

Robert Banks: Thank you, Judy. In closing, Nephros is proving that a focused, disciplined company with the right technology and strategy can create meaningful impact. We are improving water safety. We are expanding into new markets, and we are building a durable platform for long-term growth. Thank you for your time today and your continued interest in Nephros. This concludes our formal presentation remarks. We'll now take time for questions from the audience. Operator, please open the call for questions.

Operator: [Operator Instructions] And our first question today comes from Anthony Vendetti from Maxim Group.

Anthony Vendetti: Yes, a couple of questions. One is on the programmatic sales, what percent of revenues for the fourth quarter and the full year were programmatic sales? And do you have an outlook on how you expect that to evolve in 2026? And then your active customer sites, do you have a count on that number as of 12/31, '25?

Robert Banks: Yes, certainly, I'll answer the second part, first and then turn it over to Judy for the other -- for the first part of your question. Programmatic sales, just under 1,700. So that was 1,681 sites, and that's a significant and steady growth, well above what we were when we finished the year ahead. And it's really due to some efforts that we're making for customer retention, and also outreach in areas of conferences, trade shows, but most of that new business is coming from customers who tell a friend, who are happy and delightful what they've experienced with us, the problems we've solved and then they have a neighboring facility or related and they let them know.

So we pick up that business as well. So really proud of that active sites number. And as it continues to grow, it just reflects the excellent work from our sales women and men who have been doing a great of selling our products. Judy?

Judy Krandel: Yes. We don't give out exact numbers. But Anthony, the fourth quarter, what's programmatic was certainly 90% plus of our business, which is similar for the year. Emergency response was helpful and did grow, but sort of high single digits, similar type number.

Anthony Vendetti: High single-digit growth in programmatic sales. Okay.

Judy Krandel: No, no, you talked -- I mean I think you wanted to know what percent, if I recall, apologize, of our sales were programmatic versus emergency response?

Anthony Vendetti: Yes, yes. Okay. Okay. And emergency response, what was the number you cut out for a second.

Judy Krandel: Okay. Yes. High single digits, round figures similarly -- was a little less in the fourth quarter than it was for the full year, but somewhat similar.

Anthony Vendetti: Okay. Okay. Great. And then just maybe just on an even higher level. Just as -- I think, obviously, I'm sure you agree, clean water, whether it's hospital-based or outside of the hospital is probably a growing trend and a growing need worldwide. I'm just wondering, as you look towards the other opportunities outside of medical, in the commercial space, whether that's hospitality or restaurants. Can you talk a little bit about that pipeline potential and how you see that sort of evolving either in '26 or over the next couple of years?

Robert Banks: Sure, certainly. When you think about the business, the core business of Nephros, getting it start in dialysis and then really focusing on the hospital market, patient care, those are areas that are highly regulated. We've got different rules and joint commissions and inspections, all really drive action. Testing occurs and there are results and problems that need to be solved. Once you step outside of the patient care world, you don't have those same regulatory environments that are driving the growth. And that's why this pillar I introduced recently, the education is so important.

We've got to let different people in different markets know why it's important, why it matters, the impact to their facilities and really the return on investment for -- investing in the Nephros filtration as a medical device in a nonmedical application. So I see that growth happening as the education improves as we get more and more people that we touch via outreach. And that's the main barrier you're selling against doing nothing. The second barrier that we have to overcome is the -- what may be perceived complexity around installation.

It's not just as simple as when you walk up to your refrigerator, or a filter and then your sink, where you twist it off and put a new one on. There's some cleaning and sanitations involved. So that's why our services group and portfolio is so important. We start to remove the barriers for why someone might be interested in a solution because they may not be interested in going through some of the, I guess, work required in order to get an effective result from the filtration system. So as we grow and build those markets, we create an ecosystem of people that understand that there is a solution.

They don't have to handle and deal with microplastics or other problems they might be dealing with, and we have the answers for those. Building that whole solution from just you've got a problem, here's your problem, here's how you can solve it to let us implement that solution for you and take care of it going forward, is how we're growing that business. If you remember, it took a while, even after some of the regulations in the hospital market for us to really capitalize on that and grow that hospital business. And it's -- I anticipate it will take the same as we're going into the non-healthcare, non-patient care market as we work to build those markets up.

Anthony Vendetti: Okay. So if I had to sum it up, you would say this is a multiyear strategy to build these other verticals.

Robert Banks: Yes. But we've been starting on this for some time already. We're not entering it fresh in '26. So as those markets in past mature, we already have seen a few of those in some of the big areas. It's not a significant part of our business right now. I anticipate it will be a larger and larger portion going forward.

Operator: [Operator Instructions] Our next question comes from Ralph Weil from R. Weil Investment Management.

Ralph Weil: I really -- it must have been an accident or a b*** call, but since I didn't have a question prepared, can you just -- and I know you're talking about the new markets and what you're doing there and how you're going about it with the education, et cetera, et cetera. Can you elaborate a little more on some of the successes that you may have had so far? And I know it doesn't come easily when you're trying to penetrate new markets. But can you -- just comment a little about the successes so far.

Robert Banks: Yes. So you're referring to the education successes or just anything, in general?

Ralph Weil: Yes. No, we're in the newer markets, I mean, hospitals have been your big market and medical facilities. In the newer markets that you've entered, can you comment just a little more on where you may have seen successes on which you're basing your optimism going forward. And I really didn't press the button. But since it was a b*** call.

Robert Banks: I understand, Ralph. So if I can try to address that. If you think about where we've been focusing, we're in a hospital in patient care. So non-patient care applications where we've found some successes. We were looking at areas where there's large populations of people. We've got a party that's interested in keeping the mass of people under them, healthy. If you think of correctional facilities where if someone gets sick or ill, they can spread and contaminate to other places, schools and universities where there are groups of people in one room or one area.

Not to say that a school is similar to a jail, but where you've got large groups of people who might be susceptible to different pathogens spreading. We've also seen in some aviation facilities where governments are concerned about what might be passed through water there. And I'm really surprised that the number of just drinking water fountain applications where people have felt that may have been shut down since COVID where they're facing the risk -- situation where they either rip them off the wall, which is very expensive or try to get them running again. We're able to go in, clean them up and reopen fountains that have been shut down for quite some while.

So wherever we see large numbers of bottle fillers and drinking fountains, those are also the targets. I think some of the newer non-patient has also been sterile processing. Facilities that have instruments and probes and other stuff that go -- that come in contact with humans by rinsing them with water that's free of viruses and the toxins and other potential contaminants, we are finding a good amount of success there. Some of the newer areas, which are starting to gain traction are eyewash stations, shower -- emergency showers, those types of applications that are found outside of patient care as well when you have water sitting stagnant where bacteria have a chance to grow. So it's very numerous.

It's not one area. It's lots of pockets here and there, which is why the education part of what we're doing is so important. Really getting the word out and letting people know where and how what we're doing can help with what they are trying to do and the mission that they're trying to accomplish, meaning we've had hundreds -- over 1,000 people attending these seminars that we're hosting, and I encourage anyone who is interested to listen and find out, you'll see an interaction and a level of transparency and information sharing that you don't get from any of the other related types of parks.

So it really does showcase Nephros as being experts in the field and willing to talk agnostically about how to solve some of these problems, which people really appreciate to come back, they trust us, whether it's a property management company or others who have just people under their responsibility that they don't want to get in the situation where they're contaminated. So it's really exciting. It's been really refreshing and fun. It's been us learning how to speak something other than hospital language. And I think the team has really risen to the occasion and been doing a fantastic job of making that education inroads and penetrating other areas.

Operator: [Operator Instructions]

Robert Banks: Okay. So it looks like there is not any other calls in the queue. So just to close it out, I just want everyone to know, I'm extremely excited about Nephros products. and what the future holds. Just thank you so much for your support and believing in Nephros. And please stay tuned and give us a call and reach out if you do have any questions or want to know more. Thank you and have a great rest of your evening.

Operator: And with that, everyone, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.