Net Revenue down 32% due to COVID-19 Interruptions
via NEWMEDIAWIRE -- Nephros,
Inc. (Nasdaq:NEPH), a commercial-stage company that develops
and sells high performance water purification products and pathogen
detection systems to the medical and commercial markets, today
announced financial results for the three months ended June 30,
2020.
Financial Highlights
Water Filtration Business Segment Highlights
- Net revenue was $1.6 million, down 32% compared with $2.3
million in 2019
- Net loss was $0.9 million, compared with $0.3 million in
2019
- Adjusted EBITDA was ($0.7 million), compared with breakeven in
2019
Consolidated Highlights
- Net revenue was $1.6 million, down 32% compared with $2.3
million in 2019
- Net loss was $1.7 million, compared with $0.9 million in
2019
- Adjusted EBITDA was ($1.4 million) compared with ($0.5 million)
in 2019
“While COVID-19 broke our streak of 15 quarters of
year-over-year growth, we remain optimistic about our growth
prospects,” said Daron Evans, President and CEO. “We have already
seen some strengthening of the market in early Q3, and we hope to
see a return to revenue growth soon, as the pandemic evolves from
an all-hands-on-deck emergency to a ‘new normal’ background
issue.”
Mr. Evans continued, “During the relatively slower
second quarter, our team focused on building new capabilities,
including the acceleration and release of our SequaPath™
product and our recently published study of water in
buildings affected by COVID-19-related shutdowns. In the near
future, we will also release DialyPath™, our real-time test for
dialysis clinics that will detect and quantify endotoxin-producing
Gram-negative bacteria.”
Consolidated Financial Performance for the
Quarter Ended June 30, 2020
Net revenue for the quarter ended June 30, 2020
was $1.6 million, compared with $2.3 million in 2019, a decrease of
32%.
Net loss for the quarter ended June 30, 2020 was
$1.7 million, compared with a net loss of $0.9 million in 2019 an
increase of 76%.
Adjusted EBITDA for the quarter ended June 30,
2020 was ($1.4 million), compared with ($0.5 million) in 2019.
Cost of goods sold for the quarter ended June 30,
2020 was $0.7 million, compared with $0.9 million in 2019, a
decrease of 28%. Gross margins for the quarter ended June 30, 2020
were 57%, compared with 59% in 2019. Management expects future
gross margins to continue in the range of 55% to 60%.
Research and development expenses for the quarter
ended June 30, 2020 were $0.84 million, compared with $0.80 million
in 2019, an increase of 5%.
Depreciation and amortization expenses for the
quarter ended June 30, 2020 were approximately $47,000, compared
with approximately $48,000 in 2019, a decrease of 2%.
Selling, general and administrative expenses for
the quarter ended June 30, 2020 were $1.6 million, compared with
$1.4 million in 2019, an increase of 15%.
As of June 30, 2020, Nephros had cash and cash
equivalents of $7.0 million.
Adjusted EBITDA Definition and
Reconciliation to GAAP Financial Measures
Adjusted EBITDA is calculated by taking net (loss)
income calculated in accordance with generally accepted accounting
principles (“GAAP”) and excluding all interest-related expenses and
income, tax-related expenses and income, non-recurring expenses and
income, and non-cash items, including depreciation and amortization
and non-cash compensation. The following table presents a
reconciliation of Adjusted EBITDA to net (loss) income, the most
directly comparable GAAP financial measure, for the second quarter
of the 2020 and 2019 fiscal years for both Nephros (on a
consolidated basis) and the Water Filtration Business Segment:
|
3 Months Ended Jun 30, |
Water
Filtration Business Segment |
2020 |
2019 |
|
|
|
Net loss |
(911) |
(408) |
|
|
|
Adjustments: |
|
|
Depreciation of property and equipment |
6 |
8 |
Amortization of other assets |
45 |
44 |
Interest expense |
30 |
46 |
Noncash interest expense |
- |
- |
Interest income |
(4) |
- |
Change in fair value of contingent consideration |
- |
(9) |
Noncash compensation |
166 |
150 |
Other noncash items |
12 |
31 |
Nonrecurring: Biocon & Pathogen Detection |
- |
150 |
Adjusted
EBITDA |
(656) |
12 |
|
3 Months Ended Jun 30, |
Consolidated Results |
2020 |
2019 |
|
|
|
Net loss |
(1,657) |
(942) |
|
|
|
Adjustments: |
|
|
Depreciation of property and equipment |
6 |
8 |
Amortization of other assets |
45 |
44 |
Interest expense |
30 |
46 |
Noncash interest expense |
- |
- |
Interest Income |
(4) |
- |
Change in fair value of contingent consideration |
- |
(9) |
Noncash compensation |
179 |
150 |
Other noncash items |
12 |
31 |
Nonrecurring: Biocon & Pathogen Detection |
- |
150 |
Adjusted
EBITDA |
(1,389) |
(522) |
Nephros believes that Adjusted EBITDA provides
useful information to management and investors regarding certain
financial and business trends relating to Nephros’s financial
condition and results of operations. Management does not consider
Adjusted EBITDA in isolation or as an alternative to financial
measures determined in accordance with GAAP. The principal
limitation of Adjusted EBITDA is that it excludes significant
expenses and income that are required by GAAP to be recognized in
Nephros’s consolidated financial statements. In
addition, Adjusted EBITDA is subject to inherent limitations as it
reflects the exercise of judgments by management about which
expenses and income are excluded or included in determining
Adjusted EBITDA. In order to compensate for these limitations,
management presents Adjusted EBITDA in connection with net (loss)
income, the most directly comparable GAAP financial measure.
Nephros urges investors to review the reconciliation of Adjusted
EBITDA to net (loss) income and not to rely on any single financial
measure to evaluate the business.
Conference Call Today at 4:30 p.m.
ET
Nephros will host a conference call today
at 4:30 PM Eastern Time, during which management will discuss
Nephros’s financial results and provide a general business
overview.
Participants may dial into the following number
to access the call: 1-844-808-7106.International callers may
use 1-412-317-5285. Please ask to be joined into the Nephros
conference call. A replay of the call can be accessed until August
12, 2020 at 1-877-344-7529or 1-412-317-0088for
international callers and entering replay access
code: 10144283. An audio archive of the call will be
available shortly after the call on the Nephros investor relations
page at https://investors.nephros.com/events/.
About Nephros
Nephros is a commercial-stagecompany that
develops and markets high-performance water purification products
and pathogen detection systems for medical and commercial
markets.
Nephros ultrafilters are used in hospitals,
medical clinics, and commercial facilities to retain bacteria and
viruses from water, providing barriers that aid in infection
control for showers, sinks, and ice machines. Nephros ultrafilters
are also used in dialysis centers to aid in the removal of
endotoxins and other biological contaminants from water and
bicarbonate concentrate in hemodialysis machines.
Nephros pathogen detection systems, including
thePluraPathand SequaPathsystems, provide near-real time
information on bacterial genera, waterborne bacteria, and viruses
to medical and water safety professionals. These products integrate
Nephros ultrafilters with DNA sequencing and quantitative
polymerase chain reaction (qPCR) technology.
Nephros commercial filters, including AETHER™
brand filters, improve the taste and odor of water, and reduce
scale build-up in downstream equipment. Nephros and AETHER products
are used in the health care, food service, hospitality, and
convenience store markets.
For more information about Nephros, please visit
its website at www.nephros.com.
Forward-Looking Statements
This release contains forward-looking statements
that are subject to various risks and uncertainties. Such
statements include statements regarding the potential for further
growth and the expected growth in medical, commercial and
industrial filter sales, management’s expectations regarding future
gross margins, Nephros’s ability to respond to outbreaks in water
borne pathogens and other statements that are not historical facts,
including statements which may be accompanied by the words
“intends,” “may,” “will,” “plans,” “expects,” “anticipates,”
“projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,”
“potential” or similar words. Actual results could differ
materially from those described in these forward-looking statements
due to certain factors, including the impact of Covid-19,
uncertainty in clinical outcomes, potential delays in the
regulatory approval process, changes in business, economic and
competitive conditions, the availability of capital when needed,
dependence on third-party manufacturers and researchers, regulatory
reforms, uncertainties in litigation or investigative proceedings,
and the availability of financing. These and other risks and
uncertainties are detailed in Nephros’s reports filed with the U.S.
Securities and Exchange Commission, including its Annual Report on
Form 10-K for the year ended December 31, 2019. Nephros
does not undertake any responsibility to update the forward-looking
statements in this release.
Contacts:
Investor RelationsKirin Smith,
PresidentPCG Advisory, Inc.(646)
863-6519ksmith@pcgadvisory.comwww.pcgadvisory.com
Media Relations:Bill
DouglassGotham Communications, LLC(646)
504-0890bill@gothamcomm.comwww.gothamcomm.com
Company:Andy Astor, COO &
CFONephros, Inc.(201) 345-0824andy@nephros.comwww.nephros.com
NEPHROS, INC. AND SUBSIDIARIES |
|
CONSOLIDATED BALANCE SHEETS |
|
(In thousands, except share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
June 30, 2020 |
|
December 31, 2019 |
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$7,046 |
|
$4,166 |
|
Accounts receivable, net |
|
870 |
|
1,045 |
|
Inventory, net |
|
4,769 |
|
2,562 |
|
Prepaid expenses and other current assets |
|
385 |
|
526 |
|
Total current assets |
|
13,070 |
|
8,299 |
|
Property and equipment, net |
|
296 |
|
81 |
|
Operating right-use-of assets |
|
1,171 |
|
1,106 |
|
Intangible assets, net |
|
527 |
|
548 |
|
Goodwill |
|
759 |
|
759 |
|
License and supply agreement, net |
|
737 |
|
804 |
|
Other assets |
|
89 |
|
32 |
|
Total assets |
|
$16,649 |
|
$11,629 |
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Secured revolving credit facility |
|
- |
|
$560 |
|
Secured note, current portion |
|
220 |
|
211 |
|
PPP loan, current portion |
|
278 |
|
- |
|
Accounts payable |
|
1,316 |
|
959 |
|
Accrued expenses |
|
449 |
|
136 |
|
Current portion of contingent consideration |
|
187 |
|
300 |
|
Current portion lease liabilities |
|
315 |
|
262 |
|
Total current liabilities |
|
2,765 |
|
2,428 |
|
Secured note payable, long term portion |
|
491 |
|
613 |
|
PPP loan, net of current portion |
|
201 |
|
- |
|
Financing obligation, net of current portion |
|
8 |
|
10 |
|
Contingent consideration, net of current portion |
|
- |
|
- |
|
Lease liabilities |
|
908 |
|
889 |
|
Total liabilities |
|
4,373 |
|
3,940 |
|
|
|
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
Preferred
stock, $.001 par value; 5,000,000 shares authorized at December 31,
2019 and 2018; no shares issued and outstanding and December 31,
2019 and 2018 |
|
- |
|
- |
|
Common stock,
$.001 par value; 40,000,000 and 10,000,000 shares authorized at
December 31, 2019 and 2018, respectively; 9,016,550 and 8,058,850
shares issued and outstanding and December 31, 2019 and 2018,
respectively |
|
9 |
|
8 |
|
Additional paid-in
capital |
|
139,243 |
|
131,934 |
|
Accumulated other
comprehensive income |
|
65 |
|
65 |
|
Accumulated deficit |
|
(130,087) |
|
(127,332) |
|
Subtotal |
|
9,230 |
|
4,675 |
|
Noncontrolling interest |
|
3,046 |
|
3,014 |
|
Total stockholders'
equity |
|
12,276 |
|
7,689 |
|
Total liabilities and
equity |
|
$16,649 |
|
$11,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
NEPHROS, INC. AND SUBSIDIARIES |
CONSOLIDATED OF OPERATIONS AND COMPREHENSIVE LOSS |
(In thousands, except share amounts) |
|
|
Three Months Ended June 30, |
|
|
2020 |
|
2019 |
Net revenues: |
|
|
|
|
Product revenues |
|
$1,564 |
|
$2,284 |
Royalty and other
revenues |
|
13 |
|
25 |
Total net revenues |
|
1,577 |
|
2,309 |
Cost of goods sold |
|
682 |
|
942 |
Gross margin |
|
895 |
|
1,367 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
Research and development |
|
836 |
|
793 |
Depreciation and amortization |
|
47 |
|
48 |
Selling, general and administrative |
|
1,610 |
|
1,403 |
Change in fair value of contingent consideration |
|
- |
|
(9) |
Total operating expenses |
|
2,493 |
|
2,235 |
Loss from operations |
|
(1,598) |
|
(868) |
Interest expense |
|
(30) |
|
(46) |
Interest income |
|
4 |
|
- |
Other income (expense),
net |
|
(33) |
|
(28) |
Loss before income taxes |
|
(1,657) |
|
(942) |
Income tax benefit |
|
- |
|
- |
Net profit (loss) |
|
(1,657) |
|
(942) |
|
|
|
|
|
Less: Deemed
dividend attributable to noncontrolling interest |
|
(60) |
|
(61) |
|
|
|
|
|
Net loss attributable to
Nephros Inc |
|
(1,717) |
|
(1,003) |
|
|
|
|
|
Net loss per common share,
basic and diluted |
|
$(0.19) |
|
$(0.14) |
Weighted
average common shares outstanding, basic and diluted |
|
8,986,134 |
|
7,387,930 |
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
Net Loss |
|
(1,657) |
|
(942) |
Other
comprehensive income(loss), foreign currency translation
adjustments |
|
1 |
|
2 |
Comprehensive
loss |
|
(1,656) |
|
(940) |
Comprehensive
loss attirbutable to noncontrolling interest |
|
(60) |
|
(61) |
Total comprehensive loss
attributable to Nephros Inc shareholders |
|
$(1,716) |
|
$(1,001) |
|
|
|
|
|
|
|
|
|
|
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