Nephros (NEPH) investor relations material

Strategic direction and market positioning

• Focus on water purification in critical environments, expanding beyond healthcare into commercial, institutional, and adjacent markets.

• Emphasis on prevention of water quality issues, leveraging advanced membrane technology for targeted purification.

• Business model built on three pillars: differentiated products, responsive service, and education, fostering long-term customer relationships.

• Expansion into new verticals such as government buildings, universities, food processing, and dental, with tailored solutions for each.

• OEM partnerships and custom product development are key growth drivers, enabling scalable solutions across industries.

Financial performance and outlook

• Q1 revenue reached $5.2 million, a 7% year-over-year increase, driven by over 20% growth in programmatic revenue and significant service business growth.

• Gross margin declined to 57% from 65% due to tariffs, customer mix, and euro-dollar exchange rates, but margins are expected to recover as tariffs expire.

• Net income dropped to $140,000 from $558,000, with cash at $4.1 million, reflecting increased accounts receivable and inventory to support growth.

• Emergency response business now represents a smaller share of revenue as recurring programmatic sales become the core growth engine.

• Strategic capital allocation focuses on maintaining a strong balance sheet, investing in talent, and pursuing growth opportunities, including potential acquisitions.

Innovation, technology, and customer engagement

• Innovation strategy centers on execution, customer problem-solving, and balancing resources between medical and commercial sectors.

• Broad technology portfolio includes hollow fiber ultrafiltration, microfiltration, and media filters for contaminants like PFAS, lead, and microplastics.

• Regulatory expertise in FDA Class II medical devices accelerates product development and market entry for partners.

• Education, through the Nephros Water Institute, is integral to customer engagement, supporting compliance and expanding market reach.

• Service investments create recurring revenue and ensure optimal product performance, differentiating from traditional distributors.