Nephros (NEPH) investor relations material

Executive summary

• Net revenue for Q1 2026 reached $5.2 million, a 7% year-over-year increase and the first time quarterly revenue surpassed $5 million, driven by 23% growth in programmatic business and expanding product adoption, partially offset by lower emergency response sales.

• Net income was $140,000, down from $558,000 in Q1 2025, with adjusted EBITDA at $206,000 versus $667,000 a year ago, reflecting higher costs and lower gross margin.

• Strategic expansion into commercial applications, new markets, and enhanced service and education offerings are positioning the business for long-term growth and diversification.

• Active customer sites reached 1,676, with steady growth and increased revenue per customer due to expanded services.

• The company focuses on high-performance water filtration solutions for medical and commercial markets, operating as a single segment.

Financial highlights

• Gross margin declined to 57% from 65% year-over-year, mainly due to higher product costs from tariffs, currency fluctuations, and a greater mix of lower-margin commercial revenues.

• Selling, general and administrative expenses rose 12% to $2.5 million, and research and development expenses increased by $51,000 due to higher salary expenses.

• Cost of goods sold rose to $2.2 million, reflecting higher sales and increased product costs.

• Cash and cash equivalents were $4.0 million as of March 31, 2026, down from $5.4 million at year-end 2025, with the company remaining debt-free.

• Net cash used in operating activities was $1.7 million for Q1 2026, mainly due to increased accounts receivable and decreased accruals.

Outlook and guidance

• Expect continued revenue growth from expansion in key markets like New York and Puerto Rico, and increased contribution from programmatic installations and replacements.

• Margin improvement anticipated as lower tariff rates and mitigation strategies take effect throughout the year.

• Commercial segment growth expected to drive incremental gross profit dollars, despite lower margins.

• Management expects sufficient cash to fund operations for at least the next 12 months, with ongoing focus on revenue growth and cost control.

• Future liquidity depends on market acceptance, cost management, and ability to maintain or increase revenue.