5/12/2025

speaker
Heather
Investor Relations Representative

I have 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 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-K for the three months ended March 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 2025 results. The reconciliation of non-GAAP measures we discussed in 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, Dr. Mark Srobek.

speaker
Dr. Mark Srobek
President and CEO

Thank you, Heather. Good morning and thank you for joining us today for Rockwell Medical's first quarter 2025 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 30 years ago. Approximately 90% of our revenue comes from dialysis providers within the United States. 10% is generated ex-US of which only one country is directly impacted by the recent US 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 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 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 manufacture 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 and 70 million, gross margin between 16 and 18 percent, 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 quarter 2025 financial results in further detail. Jesse?

speaker
Jesse
Financial Officer

Thank you, Mark. Good morning, everyone. I will now review our first quarter 2025 financial results in greater detail. Net sales for the first quarter were $18.9 million, representing a 17 percent decrease over net sales of $22.7 million 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 one-time non-refundable payment of $900,000 to ensure continuity of supply for products purchased during the first quarter. Gross profit for Q1 of 2025 was $3 million, which was in line with gross profit for the same period in 2024. Gross margin for Q1 2025 was 16 percent, representing an increase from 14 percent for the same period in 2024. Net loss for Q1 2025 was $1.5 million, which represents an improvement over a net loss of $1.7 million for the same period in 2024. Adjusted EBITDA for Q1 2025 was 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 March 31, 2025, was $17.3 million, compared to $21.6 million at December 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.

speaker
Dr. Mark Srobek
President and CEO

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

speaker
Operator
Conference Call Operator

Certainly. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw any questions, please press star one again. Our first question comes from Ram Silverajoo from HC Wainwright. Please go ahead. Your line is open.

speaker
Ram Silverajoo
Analyst, HC Wainwright

Hi, thanks so much for taking my questions and congrats on the performance not 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, foremost, with regard to the negotiations that are ongoing with your largest historical customer, kind of give us a sense of, you know, 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, you know, 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.

speaker
Dr. Mark Srobek
President and CEO

Yeah, thank you, Ron. Let me address the first of your questions. So the discussions that we have ongoing right now with our largest customer are to continue to maintain some level of service to them. You know, for the future going forward, it will likely be at a much smaller scale than we have done previously. But 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 we're looking to put in place 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 this in the sense of we're in the process right now of signing additional customers, bringing on new customers. And some of those are going to 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. Jeffy, I don't know if you have anything further to say.

speaker
Jesse
Financial Officer

Mark, I think that's right. I mean, the way things are looking right now, I 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 it's still a little bit early to say.

speaker
Ram Silverajoo
Analyst, HC Wainwright

OK, and then if you could comment on any emergent dynamics or thinking in respect to the at home dialysis market and the specific product offerings that you brought. Right.

speaker
Dr. Mark Srobek
President and CEO

Thank

speaker
Ram Silverajoo
Analyst, HC Wainwright

you.

speaker
Dr. Mark Srobek
President and CEO

Yeah, you know, the the at home market, I would say, is continuing to progress as we've expected. It's, you know, as from our vantage point today, it will certainly be a a part of the, you know, the path to delivering treatment. It's not a large part today, but it's certainly one that continues to to grow. Our product offering that we've put together for the at home market is now beginning to start to, you know, 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 significantly improves our patient is able to administer the dialysis treatment at home by using. You know, product types that are much more manageable for the patient, but it's also a much better higher margin product for us. And so, you know, we're looking to to see that begin to grow here in the second half of the year.

speaker
Ram Silverajoo
Analyst, HC Wainwright

Great. Thank you very much. Thanks, Ron.

speaker
Operator
Conference Call Operator

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

speaker
Jeremy Perlman
Analyst, Maxim Group

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's the opportunities there and how's that progressing?

speaker
Dr. Mark Srobek
President and CEO

Yeah, so we continue to expand our business, you know, what we call sort of internationally, but it's primarily in Latin America. That's a big opportunity for us and one that we continue to see an opportunity for us to 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 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 in the West. So, you know, with that in hand, you know, it likely makes more sense for us to contemplate establishing 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.

speaker
Jeremy Perlman
Analyst, Maxim Group

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

speaker
Dr. Mark Srobek
President and CEO

think there are we think there is and it's in the areas likely that you've just discussed. And I would add to that, you know, 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. You know, we believe that there's an opportunity there that is large enough that would allow us to to replace a significant portion of the revenue that we've lost.

speaker
Jeremy Perlman
Analyst, Maxim Group

Okay, I understand. And then just last question, I think I just want to make sure I think I heard this part of an answer to another question. The revenue guidance that you're reaffirming today. That's as your customer base stands now and in any other customers you may sign on as the year goes on that could just be potential outside or is that or is there any customers that you assume or you have to get into that guy?

speaker
Dr. Mark Srobek
President and CEO

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,

speaker
Jeremy Perlman
Analyst, Maxim Group

great. Thank you. We take my question. Have a nice day. Absolutely. Thank you.

speaker
Operator
Conference Call Operator

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

Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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