Rockwell Medical, Inc.

Good morning and welcome to Rockwell Medical's third quarter 2024 results conference call and webcast. Please note this event is being recorded. At this time, I would like to turn the conference call over to Heather Hunter, Senior Vice President, Chief Corporate Affairs Officer at Rockwell Medical. Heather, please go ahead.

Good morning and thank you for joining us for this update on Rockwell Medical. Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer, and Jesse Meary, Rockwell Medical's Senior Vice President of Finance. 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-K 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 or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the FCC. Rockwell Medical's quarterly report on Form 10-Q for the third quarter of 2024 provides a full analysis of the company's business strategy, as well as the company's financial and operational results for the three and nine months ended September 2024. The reconciliation of non-GAAP measures we discussed on today's call can also be found in today's press release. Our Form 10-Q and other reports filed with the SBC, 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 conference call over to Rockwell Medical's president and CEO, Dr. Mark Strovak.

Thank you, Heather. Good morning, and thank you for joining us today for Rockwell Medical's third quarter 2024 earnings conference call and webcast. First, I'm going to review our third quarter results, then provide you with a preview of what we expect in the fourth quarter, and then our outlook on 2025. We are pleased to share with you that for a second consecutive quarter, we achieved profitability on a cash flow and adjusted EBITDA basis. Additionally, for the third quarter 2024, we achieved the highest quarterly concentrates product sales, the highest quarterly gross profit, and the highest quarterly gross margin in Rockwell's history. Revenue for the third quarter was positively impacted by consistent sales from our current customers, as well as our largest customer making a special large order of premium price products during the quarter. Our largest customer is expected to continue to make those purchases into the fourth quarter of 2024. The increase in gross profit was due to higher gross margin on our current business, coupled with the special large order of premium price products from our largest customers. This, in turn, led to an increase in our gross margin for the third quarter and profitability on a cash flow and adjusted EBITDA basis. As a result of the third quarter of 2024 being our second consecutive quarter of positive cash flow, we are now eligible to extend the interest-only period of our loan and security agreement with Innovata from 30 months, which has an amortization date of August 1, 2026, August 1, 2026, the 36th month, which has an amortization date of February 1, 2027. We intend to take advantage of this extension. During the third quarter of 2024, we entered into a multimillion-dollar distribution agreement with NEPRO Medical Corporation. Under the terms of the agreement, we will continue to supply NEPRO with our liquid and dry acid and bicarbonate hemodialysis concentrate for which NEPRO has the right to distribute our products outside of the United States. The two-year agreement has an option to extend for an additional one-year period and includes product purchasing minimums of $5 million for the first year and incremental increases each subsequent year. As we noted in our last earnings call, We expanded our concentrates product portfolio to include a convenience pack that will help Rockwell Medical expand our presence in the at-home market. Subsequently, we announced a product purchase agreement with a leading at-home and acute care dialysis equipment manufacturer in the United States. Under the terms of the agreement, we will supply this customer with our liquid acid and liquid bicarbonate both of which will be packaged in either our four-per-case packaging or larger dialysis settings or two-per-case packaging for smaller acute care and at-home settings. Rockwell Medical also renewed its supply agreement with AquaDialysis. As part of the renewal, we expanded our distribution to all Texas-based AquaDialysis clinics, supplying them with our liquid and dry acid and bicarbonate hemodialysis concentrates and other associated hemodialysis products. Now turning our attention to the fourth quarter of 2024, we project that our revenue will be between $23 million and $25 million. Our gross margin will be in line with previous quarters, and we will be profitable on an adjusted EBITDA basis. As a result, we have increased our 2024 guidance for net sales to between $98 million and $101 million, gross profit to between $15 million and $17 million, gross margin to between 16% and 18%, and adjusted EBITDA to between $4 million and $5 million. These targets represent significant improvements over what we initially guided at the beginning of this year in addition we have significantly both bolstered our cash position more than doubling it from where our cash position was at the end of the first quarter 2024. these accomplishments and revised projections are a direct result of our team's hard work and dedication to deliver against the goals and objectives we Steve, over two years ago, which include focusing on growing Rockwell's revenue-generating business, driving profitability for our overall business, and achieving profitability in 2024. Continually assessing our strategic priorities and capital structure, managing cash, reducing our debt, and placing Rockwell Medical on firmer, stronger, more stable financial footing. Every member of our organization has been instrumental in turning Rockwell Medical around, helping to rebuild shareholder value, and in turn, positively impacting more patients with end-stage kidney disease. 2024 will reflect the best performance this company has had in 25-plus years of its history. As we look towards 2025, we expect to encounter a shift in our customer makeup, as we move away from less profitable business to focus on more profitable growth opportunities. The first of these changes will come from the relationship with our largest customer. During the third quarter, we received confirmation that our largest customer will extend their product purchase agreement with Rockwell through the end of 2025, during which product pricing will be increased. This customer has indicated to us that it expects volume to decline during this extended period as they work to diversify their supplier base. We are actively working with this customer in an effort to focus their volume reduction on products that we believe are least profitable for Rockwell. Currently, we believe that our largest customer's net sales in 2025 will decline between $31 million and $38 million, depending on the final volume forecast for 2025, which we expect to receive on or by December 15th. Although our top line revenue will be negatively impacted in the short term, we believe we will in 2025. And this is before any new customer contracts, product purchase agreements, distribution agreements, new product opportunities, or potential acquisitions are put in place. While this revised forecast downward is certainly disappointing, we have always known that we have a significant portion of our revenue with a single customer which presented a risk to Rockwell. We have been working incredibly hard to mitigate that risk by adding new customers and growing our top line beyond our largest customer. We are working to replace this top line revenue with opportunities that we believe will be more profitable to Rockwell in 2025 and beyond. Let me walk you through some of the activities we are currently pursuing. We are in the process of negotiating a large multi-year supply agreement with the world's largest leading provider, of dialysis products and services and hope to be able to announce the execution of this agreement later this month. We are in the final stages of contract negotiations to add two new complementary hemodialysis products to our portfolio in 2025. We have new customer contracts under review that we expect to announce shortly. Finally, we have several acquisition opportunities we are currently evaluating that would add new capabilities and products to our portfolio. Because of all the changes we have made here at Rockwell over the last two-plus years, the change in our largest customer's forecast, while a short-term setback, doesn't impact the strong foundation that we've built. We have a number of exciting opportunities we are working on that we believe will continue to support a profitable, growing business going forward. Now I will turn the call over to Jesse to go into further detail about our third quarter financial results.