Nephros, Inc.

Good day and welcome to the Nefros, Inc. first quarter 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Karen Smith, Investor Relations. Please go ahead.

Good afternoon, everyone. This is Karen Smith with PCG Advisory. Thank you all for participating in NEPHROES' first quarter 2026 conference call. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of NEPHROES. I encourage you to review NEPHROES' filings with the Securities and Exchange Commission, including, without limitation, Companies Forms 10-K and 10-Q. to identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Factors that may affect the company's results include, but are not limited to, Netflix's ability to successfully, timely, and cost-effectively market and sell its products and service offerings, the rate of adoption of its products and services by hospitals and other healthcare providers, the success of its commercialization efforts, and the effect of existing and new regulatory requirements and competitive factors. The content of this conference call contains time-sensitive information that is accurate only as of the date of the live call, today, May 7th, 2026. The company takes no obligation to revise or update any statements to reflect the times or circumstances after the date of this conference call, except as required by law. I would now like to turn the call over to NAFSA's President and Chief Executive Officer, Robert Banks. Robert, please go ahead. Thank you, Karen, and good afternoon, everyone. I'm very pleased to welcome you to the call. Q1 2026 was a milestone quarter for Netflix. We delivered 5.2 million in revenue, representing a new all-time high for the company and marking the first time we crossed the 5 million dollar threshold in a single quarter. This performance reflects continued execution across our core business, expanding adoption of our products and new applications, and increasing contributions from our service and installation capabilities. Importantly, this growth is driven by strong programmatic performance, which increased approximately 23% year-over-year. That is the clearest signal that our model is working. Customers are installing, reordering, and expanding usage over time. At the same time, we saw a decline in emergency response revenue compared to last year's first quarter, which included an unusually high active opportunity that did not repeat. Despite the normal proliferation, we still achieved record revenue, which speaks to the strength and durability of the underlying business. Now, let me address margins directly. First margin for the first quarter came in at 57%. compared to 65% the prior year, and that decline was driven by three very clear factors. First, tariffs created a meaningful headwind, contributing over 200,000 in incremental cost during the quarter. Without the tariffs, our gross margins would have been in the low 60s. We are actively pursuing refund opportunities with respect to tariffs that we paid prior to February 2026, US Supreme Court decision and implementing mitigation strategies to reduce exposure going forward. Just a reminder, our tariff rate declined from 15% to 10% as of the end of February. That improvement will start to help us later this year as our newer inventory gets sold. Second, currency pressure. Specifically, the strength of the euro increased our product costs year over year. And third, product mix. we are intentionally expanding into commercial applications which carry lower margins than our core infection control business. Let me be very clear. None of these factors reflect deterioration in the business. They reflect external cost pressures and deliberate strategic expansion into larger markets. The shift towards commercial applications is intentional and important. We are expanding into areas such as ice machines, drinking fountains, bottle fillers, other high-use water applications. These represent a much larger addressable market than our traditional segments. While this impacts margin in the new term, it positions us for scale, diversification, and long-term growth. Beyond products, we are seeing strong traction across our broader strategy. One, our installation and replacement programs are driving recurring revenue and strengthening customer relationships. Two, our service capabilities are expanding our role from product provider to full solution partner. Number 30. And our education initiative, including the Netflix Water Institute, are positioning us earlier in the customer's decision cycle. These are not short-term drivers. They are structural advantages that will continue to build over time. Looking forward, we remain highly confident in the trajectory of the business. We expect continued growth driven by expansion in key markets such as New York and Puerto Rico, increasing contribution from programmatic inflations and replacements, and continued adoption of our broader products, services, and education platform. We are building a larger, more durable, and scalable business. Near-term margin variability driven by tariffs, currency, product mix does not change our trajectory. I want to thank our employees for their clear execution, our customers for their continued trust, and our investors for their ongoing support. With that, I'll turn the call over to our CFO, Judy Crandall, for a closer look at the financials.

Thank you, Robert. I will now provide a closer look at NetVose's financial performance in the first quarter of 2026. We reported first quarter net revenue of $5.2 million, compared to $4.9 million in the first quarter of 2025, an increase of 7%. Product revenue related to our programmatic business grew strongly, while emergency response revenue declined compared to an elevated prior year quarter. Cost of goods sold increased to approximately $2.2 million, reflecting growth in sales as well as higher product costs driven by tariffs, currency impacts, and product mix. Consequently, Close margin for the quarter was 57% compared to 65% in the prior year period. As Robert mentioned, we expect to see some improvement with our new tariff rate that started the end of February. Research and development expenses increased to approximately $346,000, or 17%, primarily due to higher headcount. Selling, general, and administrative expenses were approximately $2.5 million, or an increase of 12%, reflecting increased headcount and professional fees. As a result of the changes, net income declined 75% for the quarter to approximately $140,000 compared to $558,000 in the prior year period. And adjusted EBITDA declined 69% to approximately $206,000 compared to $667,000 in the prior year. As of March 31, 2026, we had approximately $4 million in cash and remained debt-free. Our cash balance has declined from December 31, 2025, due to timing of receiving inventory as well as collections on accounts receivable. Since then, we have received customer payments, which translate right to cash. I will now turn the call back to Robert for closing remarks. Robert?