Rockwell Medical, Inc. Price & Performance (RMTI)

Joining me on today's conference call are Doctor. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer and Jesse Meery, 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 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 expressed in or implied by such forward looking statements are discussed in greater detail in our periodic reports filed with the SEC. Rockwell Medical's quarterly report on Form 10 Q for the three months ended 03/31/2025, was filed prior to this call and provides a full analysis of the company's business strategy as well as our first quarter twenty twenty five 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, our updated investor presentation 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 call over to Rockwell Medical's President and CEO, Doctor. Mark Strobeck. Thank you, Heather.

Good morning and thank you for joining us today for Rockwell Medical's first quarter twenty twenty five Earnings Conference Call and Webcast. As we discussed back in March, the first quarter was going to be a transition period for Rockwell. During the first quarter, we continued to diversify our customer base, with some of the leading regional, national and global hemodialysis providers and health systems. We remain a preferred provider as a result of our continued reliability high quality products and customer centric approach. And have signed a number of new contracts during this period. Our business in the first quarter performed according to plan with revenue and gross profit in line with our expectations for the year. In addition, we continue to consolidate and further automate our manufacturing operations to reduce expenses and sustain our gross margin, which was also within our guidance range. For the year. As for our largest customer, we continue to work with them to find ways to support their business going forward. Although we have not entered into a new agreement, we are still in active discussions with them about terms for potential contract extension. One area that we are closely monitoring is the recent cyber attack that occurred in our industry.

As you may know, last month, our largest customer announced a company wide ransomware incident impacting certain elements of its network. We were notified by our customer of this cyber attack and immediately disconnected all systems that were connected to their organization to prevent any potential impact of our own IT infrastructure. We are actively monitoring our network and have not experienced any direct implications to or impact on our systems to date. Another area that we are closely monitoring is tariffs. Rockwell Medical's hemodialysis concentrates are manufactured right here in America. And have been since the company was founded nearly thirty years ago. Approximately 90% of our revenue comes from dialysis providers within the United States. 10% is generated ex U. S, of which only one country is directly impacted by the recent U. S. Tariff actions. This equates to a negligible amount of our total annualized revenue. Because we manufacture our products in The United States, we can manage our own supply chain and nimbly respond to real world demand. While we do source a few supplies from outside The United States, we do anticipate tariffs to impact our costs. On those supplies. In the first quarter, we added a single use bicarbonate cartridge technology to our portfolio of hemodialysis concentrates products.

The addition of this bicarb cartridge to our portfolio represents an exciting opportunity for us to diversify our offering and address one of the fastest growing segments within the dialysis products market. We officially launched this new product in February and are starting to see some track traction with our customers. We continue to be very active in pursuing business development opportunities. We are seeking transactions that can further strengthen our position in the renal market and or provide access to new markets either through product acquisitions or international expansion. These opportunities are intended to be revenue generating immediately accretive to our business. We are encouraged in due diligence we are engaged in due diligence on a number of opportunities and are looking for just the right one that meets our growth targets and objectives. We hope to have more to say on this in the coming quarters. Rockwell remains a leading supplier that has the scalability to 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. We are reiterating our projected guidance for 2025 with net sales between 65,000,000 and $70,000,000 gross margin between 1618% and adjusted EBITDA between a negative $500,000 and a positive $500,000 Now I will turn the call over to Jesse to review our first first quarter twenty twenty five financial results in further detail.

Jesse? Thank you, Mark. Good morning, everyone.

I will now review our first quarter twenty twenty five financial results in greater detail. Net sales for the first quarter were $18,900,000 representing a 17% decrease over net sales of $22,700,000 for the same period in 2024. The decrease in net sales was driven by our largest customer transitioning to another supplier. This customer agreed to a onetime nonrefundable payment of $900,000 to ensure continuity of supply for products purchased during the first quarter. Gross profit for Q1 of twenty twenty five was $3,000,000 which was in line with gross profit for the same period in 2024. Gross margin for Q1 twenty twenty five was 16%, representing an increase from 14% for the same period in 2024. Net loss for Q1 twenty twenty five was $1,500,000 which represents an improvement over a net loss of $1,700,000 for the same period in 2024.

Adjusted EBITDA for Q1 twenty twenty five a negative $400,000 Seasonal items associated with payroll tax and other public company related expenses historically incurred in Q1 drove our adjusted EBITDA to be slightly negative. Cash, cash equivalents, and investments available for sale at 03/31/2025 was $17,300,000 compared to 21,600,000.0 at 12/31/2025. The decrease was driven by timing of payments and collections and seasonal items historically incurred in the first quarter. Now I'll turn the call back over to Mark.

Thank you, Jesse. Operator, please open the phone lines for any questions.

Certainly. Our first question comes from Ram Selvaraju from H. C. Wainwright.

Hi. Thanks so much for taking my questions. And congrats on the performance notch so far in the quarter. In line with your previously reported guidance. I was wondering if you could firstly give us some sense on the following two aspects. First, and foremost, with regard to the negotiations that are ongoing with your largest historical customer, kind of give us a sense of some scenarios that could ultimately arise from those negotiations? In other words, would there be a scaled down contractual commitment by this customer? Could the customer still elect to diversify away from Rockwell entirely?

Or would there conceivably be a situation in which the customer continued to order from Rockwell at levels comparable to those seen in the past? And then secondly, if you could give us a sense of any kind of directionality with regard to top line revenue cadence for the remainder of 2025? And if you have visibility at this point as to which of the remaining three quarters of the year are likely to be the weakest with respect to revenue? Thank you. [indiscernible] Thank you, Ram. Let me address the first, the first of your questions. So I I the discussions that we have ongoing right now with our our largest customer, are to continue to maintain some level of service to them. Know, for the, you know, for the future going forward. It will likely be at a much smaller scale than we have done previously. But I I think from, you know, the way that we're looking at it is you know, we have a good relationship with them. You know, we're a strong supplier of their organization. And so looking to put in place a a longer term arrangement that will maintain some supply as well as provide them some supply for their they have safety stock that they have that we would be we would be looking to replenish.

So that's the that's the extent of the of the relationship that we're currently negotiating with them. As it relates to revenue going forward, you know, I think it's tough to predict that in the in the sense of we're in the process right now of [indiscernible] additional customers, bringing on new customers, And some of those are be incredibly meaningful. So we're really not in a position today to be able to provide that level of guidance I think safe to say, you know, we feel really confident in the guidance that we've provided. And feel good that there is a strong possibility that we will be able to, improve that. Jesse, I don't know if you have anything further to say.

Mark, I think that's right. I mean, the way things are looking right now, would say Q2 is probably going to be the low point for the year and then build from there. But to Mark's point, it's still a little bit early to say.

Okay. And then if you could comment on any emergent dynamics or or anything respect to the at home dialysis market and the specific product offerings that you've brought [indiscernible] Thank you.

Yep.

You know, the the at home market, I would say, is continuing to progress as we've expected.

It's know, as from our vantage point today, it will certainly be a a part of the you know, the path to delivering treatments. It's not a large part today, but it's certainly one that continues to grow. Our product offering that we've put together for the at home market is now beginning to start to we're starting to increase sales of that product. And we suspect that there will be more coming through the remainder of the year. The nice part for us about that product offering, not only is it you know, significantly improves allocation is able to administer the dialysis treatment at home by using, you know, [indiscernible] types that are much more manageable for the patient but it's also a much better higher margin product for us. And so we're looking to see that begin to grow here in the second half of the year. Great. Thank you very much.

Thanks, Ron.

Our next question comes from Jeremy Perlman from Maxim Group. Please go ahead. Your line is open.

Good morning. Thank you for taking my questions. First, maybe if you could expand any more information on your international market expansion and on the West Coast, what and we see the opportunities there and how's that progressing?

Yeah. So we continue to expand our business. What we call sort of [indiscernible] But it's primarily in Latin America. That's a big opportunity for us and one that, you know, we continue to see an opportunity for us to provide products to those emerging dialysis centers. And a lot of our growth continues to be within that within that region. Again, it's advantageous for us You know, we don't we aren't responsible for the distribution of those products. That's taken on by by the customer. And so that turns out to be a a good piece of business for us. As far as expansion into the to the Western portion of The United States, We still believe that that's a good opportunity. We still believe that based on our data, that is largely being supported by one manufacturer. And so we think there's an opportunity there. We're still trying to determine what's the sort of the best approach for us to take to enter into that West Coast market. We've we've developed now critical mass as it relates to customers out the West. So with that, in hand, you know, it likes likely makes more sense for us to contemplate establishing a a facility out in the West.

But we haven't made any final determinations yet on how to best do that. But it's certainly an area that we think is a ripe opportunity for us to expand. Understood.

Ken, then maybe if you could just help us know, the loss of the largest customer was a little bit of a step back on trying to mitigate that by taking on new customers. How much of that revenue do you think you know, you could take on it? Is there an are there enough in the smaller independent dialysis providers that you'd be able to you know, pick up and and to cover most of that expense the the lost revenue? How do how are you looking at that?

We think there are we think there is. And it's in the areas, you know, likely that you've just discussed. And I would add to that, within our own existing footprint today, there's still a significant number of customers that exist that don't currently purchase Rockwell products that could. So our commercial efforts are focused a, to expand our customer base within our existing footprint b, to expand our customer base internationally within Latin America primarily. And then third will be to continue to further penetrate into the West. We believe that there is an opportunity there that is large enough that would allow us to replace a significant portion of the revenue that we've lost.

Okay. Understood. And then just last question. Think I I just wanna make sure. I think I heard the c u part of an answer to another question. The revenue guidance that you're reaffirming today, that's as your customer base stands now. And then if any other customers you may sign on as the year goes on that could just be potential upside? Or is that or is there any customers that you assume or that you have to get to bake into that guidance?

No. So this is based on our current customer base today. And so any any new customer would would add to that. So there would be potential upside there. Okay. Great.

Thank you for taking my questions. Have a nice day.

Absolutely. Thank you.

There are no further questions. This concludes today's conference call and webcast. You may now disconnect.