Full Press Release Details
Reports Second Quarter Financial Results
Revenue up 88% over Q2 2018;
Reiterates 2019 Full-Year Revenue Guidance
ORANGE, NJ, August 7, 2019 - Nephros, Inc. (OTCQB:NEPH), a commercial stage company that develops and sells high performance
water purification products to the medical device and commercial markets, today announced financial results for the three months
ended June 30, 2019.
Quarter Financial Highlights
| Product revenue was $2.3 million, up 88% compared with $1.2 million in 2018 | ||
| Net revenue was also $2.3 million, up 69% compared with $1.4 million in 2018. | ||
| Net loss in the Water Filtration business segment was $0.5 million, an improvement of 8% compared with a net loss of $0.6 million in Q2 2018. | ||
| Adjusted EBITDA in the Water Filtration business segment was ($0.1) million, an improvement of 62% compared with ($0.3) million in Q2 2018. |
are very pleased with our second quarter results, as well as our revenues in July, which exceeded $1 million in a single month
for the first time in our history," said Daron Evans, President and CEO of Nephros. "Thanks to our strategic partners
and our supportive customers, quarterly revenues have increased an average of 65% for the past 12 quarters. We look forward to
launching our pathogen diagnostic product later this year, expanding support of our customer's efforts to protect their
patients from water borne pathogens. We also reaffirm our full-year revenue guidance of $8.5 to 9.5 million."
Performance for the Quarter Ended June 30, 2019
revenue for the quarter ended June 30, 2019 was $2.3 million, compared with $1.4 million in 2018, an increase of 69%. Product
revenues represented approximately 99% of net revenues, and increased 88%, from $1.2 million to $2.3 million.
of goods sold for the quarter ended June 30, 2019 was $0.9 million, compared with $0.5 million in 2018, an increase of 76%. Gross
margins for the quarter ended June 30, 2019 were 59%, compared with 61% in 2018. Management expects future gross margins to continue
in the range of 55% to 60%.
and development expenses for the quarter ended June 30, 2019 were $0.8 million, compared with $0.4 million in 2018, an increase
of 125%. The increase was driven primarily by investments in a new water diagnostics product, and also by investments in the second-generation
HDF product being developed by our SRP subsidiary.
and amortization expenses for the quarter ended June 30, 2019 were approximately $48,000, compared with approximately $40,000
in 2018, an increase of 20%. This increase was driven by the acquisition of fixed assets in the recent Biocon transaction.
general and administrative expenses for the quarter ended June 30, 2019 were $1.4 million, compared with $1.1 million in 2018,
an increase of 29%. This growth rate was driven primarily by new headcount to support our increased product revenue.
of June 30, 2019, we had cash and cash equivalents of approximately $4.3 million.
EBITDA Definition and Reconciliation to GAAP Financial Measure
EBITDA is calculated by taking net (loss) income calculated in accordance with GAAP and excluding all interest-related expenses
and income, tax-related expenses and income, non-recurring expenses and income, and non-cash items, including depreciation and
amortization and non-cash compensation. The following table presents Adjusted EBITDA calculations for the second quarter of the
2019 and 2018 fiscal years:
| Three Months Ended June 30, | ||||||||
| Water Filtration Business Segment | 2019 | 2018 | ||||||
| Net loss | (532 | ) | (578 | ) | ||||
| Adjustments: | ||||||||
| Depreciation of property and equipment | 8 | 7 | ||||||
| Amortization of other assets | 44 | 33 | ||||||
| Interest expense | 46 | 28 | ||||||
| Noncash interest expense | - | - | ||||||
| Interest Income | - | (1 | ) | |||||
| Change in fair value of contingent consideration | (9 | ) | - | |||||
| Noncash compensation | 150 | 226 | ||||||
| Other noncash items | 31 | (7 | ) | |||||
| Sub-Total | (262 | ) | (292 | ) | ||||
| Non-Recurring Expenses: | ||||||||
| Diagnostics Product Development | 150 | - | ||||||
| Adjusted EBITDA | (112 | ) | (292 | ) |
believe that Adjusted EBITDA provides useful information to management and investors regarding certain financial and business
trends relating to our financial condition and results of operations. Management does not consider Adjusted EBITDA in isolation
or as an alternative to financial measures determined in accordance with GAAP. The principal limitation of Adjusted EBITDA is
that it excludes significant expenses and income that are required by GAAP to be recognized in our consolidated financial statements.
In addition, it is subject to inherent limitations as it reflects the exercise of judgments by management about which expenses
and income are excluded or included in determining Adjusted EBITDA. In order to compensate for these limitations, management presents
Adjusted EBITDA in connection with net (loss) income, the closest comparable GAAP financial measure. We urge investors to review
the reconciliation of Adjusted EBITDA to net (loss) income and not to rely on any single financial measure to evaluate the business.
Call Today at 4:30 p.m. EDT
will host a conference call today at 4:30 PM ET, during which management will discuss the company's financial results and
provide a general business overview.
may dial into the following number to access the call: 1-866-652-5200. International
callers may use +1-412-317-6060. Please ask to be joined into the Nephros conference
call. A replay of the call can be accessed until Aug 14, 2019 at 1-877-344-7529 or
1-412-317-0088 for international callers and entering replay access code: 10134030.
An audio archive of the call will be available shortly after the call on the Nephros investor
relations page at https://www.nephros.com/investor-relations/.
is a commercial stage company that develops and sells high performance water purification products to the medical device and commercial
markets. Nephros ultrafilters are used in hospitals and medical clinics for added protection in retaining bacteria (e.g., Legionella,
Pseudomonas) and viruses from water, providing barriers that assist in improving infection control in showers, sinks, and ice
machines. Additionally, Nephros ultrafilters are used by dialysis centers for assisting in the added removal of endotoxins and
other biological contaminants from the water and bicarbonate concentrate supplied to hemodialysis machines and patients.
filters, including AETHER brand filters, improve the taste and odor of water and reduce biofilm, bacteria, and scale build-up
in downstream equipment. Nephros and AETHER products are used in the health care, food service, hospitality, and convenience
more information about Nephros, please visit our website at www.nephros.com. ww.nephros.com.
release contains forward-looking statements that are subject to various risks and uncertainties. Such statements include statements
regarding our expected revenue and financial performance in 2019, our potential for further growth and our expected growth in
medical, commercial and industrial filter sales, our anticipated launch of a new diagnostic product, our sales and marketing plans
and strategies for 2019, management's expectations regarding our future gross margins, our ability to respond to outbreaks
in water borne pathogens, anticipated investment in the development of a second-generation HDF system and other statements that
are not historical facts, including statements which may be accompanied by the words "intends," "may,"
"will," "plans," "expects," "anticipates," "projects," "predicts,"
"estimates," "aims," "believes," "hopes," "potential" or similar words.
Actual results could differ materially from those described in these forward-looking statements due to certain factors, including
uncertainty in clinical outcomes, potential delays in the regulatory approval process, changes in business, economic and competitive
conditions, the availability of capital when needed, our dependence on third-party manufacturers and researchers, regulatory reforms,
uncertainties in litigation or investigative proceedings, and the availability of financing. These and other risks and uncertainties
are detailed in our reports filed with the U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K for
the year ended December 31, 2018. We do not undertake any responsibility to update the forward-looking statements in this release.
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
thousands, except share amounts)
| June 30, 2019 | Dec. 31, 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 4,318 | $ | 4,581 | ||||
| Accounts receivable, net | 1,539 | 1,452 | ||||||
| Inventory, net | 2,314 | 1,864 | ||||||
| Prepaid expenses and other current assets | 266 | 276 | ||||||
| Total current assets | 8,437 | 8,173 | ||||||
| Property and equipment, net | 89 | 91 | ||||||
| Operating lease right-of-use assets | 1,250 | - | ||||||
| Intangible assets, net | 569 | 590 | ||||||
| Goodwill | 759 | 748 | ||||||
| License and supply agreement, net | 871 | 938 | ||||||
| Other assets | 39 | 18 | ||||||
| TOTAL ASSETS | $ | 12,014 | $ | 10,558 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Secured revolving credit facility | $ | 1,021 | $ | 991 | ||||
| Current portion of secured note payable | 203 | 195 | ||||||
| Accounts payable | 915 | 836 | ||||||
| Accrued expenses | 601 | 396 | ||||||
| Current portion of contingent consideration | 329 | 236 | ||||||
| Current portion of operating lease liabilities | 223 | - | ||||||
| Total current liabilities | 3,292 | 2,654 | ||||||
| Secured note payable, net of current portion | 730 | 843 | ||||||
| Contingent consideration, net of current portion | 163 | 263 | ||||||
| Operating lease liabilities, net of current portion | 1,023 | - | ||||||
| TOTAL LIABILITIES | 5,208 | 3,760 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 16) | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Preferred stock, $.001 par value; 5,000,000 shares authorized at June 30, 2019 and December 31, 2018; no shares issued and outstanding at June 30, 2019 and December 31, 2018. | - | - | ||||||
| Common stock, $.001 par value; 40,000,000 and 10,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively; 7,672,816 and 7,179,514 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively. | 8 | 7 | ||||||
| Additional paid-in capital | 130,169 | 127,873 | ||||||
| Accumulated other comprehensive income | 70 | 71 | ||||||
| Accumulated deficit | (126,444 | ) | (124,153 | ) | ||||
| Subtotal | 3,803 | 3,798 | ||||||
| Noncontrolling interest | 3,003 | 3,000 | ||||||
| TOTAL STOCKHOLDERS' EQUITY | 6,806 | 6,798 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 12,014 | $ | 10,558 |
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
thousands, except share and per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net revenues: | ||||||||||||||||
| Product revenues | $ | 2,284 | $ | 1,216 | $ | 4,013 | $ | 2,174 | ||||||||
| Royalty and other revenues | 25 | 150 | 65 | 177 | ||||||||||||
| Total net revenues | 2,309 | 1,366 | 4,078 | 2,351 | ||||||||||||
| Cost of goods sold | 942 | 536 | 1,713 | 1,054 | ||||||||||||
| Gross margin | 1,367 | 830 | 2,365 | 1,297 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 793 | 352 | 1,549 | 641 | ||||||||||||
| Depreciation and amortization | 48 | 40 | 98 | 81 | ||||||||||||
| Selling, general and administrative | 1,403 | 1,091 | 2,906 | 2,351 | ||||||||||||
| Change in fair value of contingent consideration | (9 | ) | - | (19 | ) | - | ||||||||||
| Total operating expenses | 2,235 | 1,483 | 4,534 | 3,073 | ||||||||||||
| Loss from operations | (868 | ) | (653 | ) | (2,169 | ) | (1,776 | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Loss on extinguishment of debt | - | - | - | (199 | ) | |||||||||||
| Interest expense | (46 | ) | (28 | ) | (92 | ) | (114 | ) | ||||||||
| Interest income | - | 1 | - | 2 | ||||||||||||
| Other expense, net | (28 | ) | (2 | ) | (30 | ) | (24 | ) | ||||||||
| Net loss | (942 | ) | (682 | ) | (2,291 | ) | (2,111 | ) | ||||||||
| Less: Undeclared deemed dividend attributable to noncontrolling interest | (61 | ) | - | (120 | ) | - | ||||||||||
| Net loss attributable to Nephros, Inc. shareholders | $ | (1,003 | ) | $ | (682 | ) | $ | (2,411 | ) | $ | (2,111 | ) | ||||
| Net loss per common share, basic and diluted | $ | (0.14 | ) | $ | (0.10 | ) | $ | (0.33 | ) | $ | (0.32 | ) | ||||
| Weighted average common shares outstanding, basic and diluted | 7,387,930 | 7,028,410 | 7,259,491 | 6,647,856 | ||||||||||||
| Comprehensive loss: | ||||||||||||||||
| Net loss | $ | (942 | ) | $ | (682 | ) | $ | (2,291 | ) | $ | (2,111 | ) | ||||
| Other comprehensive (loss) income, foreign currency translation adjustments, net of tax | 2 | (6 | ) | (1 | ) | (3 | ) | |||||||||
| Comprehensive loss | (940 | ) | (688 | ) | (2,292 | ) | (2,114 | ) | ||||||||
| Comprehensive loss attributable to noncontrolling interest | (61 | ) | - | (120 | ) | - | ||||||||||
| Comprehensive loss attributable to Nephros, Inc. shareholders | $ | (1,001 | ) | $ | (688 | ) | $ | (2,412 | ) | $ | (2,114 | ) |