Good morning, and welcome to Rockwell Medical's Second 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 Neri, 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 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 June 30, 2024, was filed prior to this call and provides a full analysis of the company's business strategy, as well as the company's second quarter 2024 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 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 Strobeck..

first, growing our concentrates business and making it more profitable as we work towards annual revenues north of $100 million and gross margins up to 30%; and second, expansion beyond concentrates. We plan to approach this in an accelerated and responsible way and in a capital-efficient manner.

All of this supports our goal to become a major force in the nephrology space. With that, I will now turn the call over to Jesse to go into further detail about second quarter 2024 financial results..

Thank you, Mark. Good morning, everyone. As we did last quarter, we will present the financials for the comparable periods in 2023 with and without the $1.5 million in deferred revenue recognized in Q1 of 2023 related to the termination of the Baxter distribution agreement.

This offers us the opportunity to more accurately present the progress that we have made and continue to make, specifically within our hemodialysis concentrate segment. Net sales for the second quarter of 2024 were $25.8 million, our highest quarterly concentrate product revenue to-date.

This represents an increase of 14% over net sales of $22.7 million in Q1 of this year and a 43% increase over net sales of $18.1 million for the same period in 2023. Net sales for the six months ended June 30, 2024, were $48.5 million. Excluding deferred revenue, this represents a 34% increase over the same period in 2023.

Gross profit for Q2 2024 was $4.6 million, which represents a 48% increase over gross profit of $3.1 million for the first quarter of 2024 and a 341% increase over gross profit of $1 million for the same period in 2023. Gross profit for the six months ended June 30, 2024, was $7.6 million.

Excluding deferred revenue, this represents an increase of 252% over the same period in 2023. Gross margin for the second quarter of 2024 was 18%, a three-fold increase from 6% for the period -- same period in 2023. Gross margin for the six months ended June 30, 2024, was 16%.

Excluding deferred revenue, this represents an increase of 10 percentage points from 6% for the same period in 2023. Net income for the three months ended June 30, 2024, was $300,000 compared to a net loss of $3.3 million for the same period in 2023.

Excluding deferred revenue, net loss for the 6 months ended June 30, 2024, improved by $5.1 million over a net loss of $6.5 million for the same period in 2023. Adjusted EBITDA for the second quarter was a positive $1.5 million compared with a negative adjusted EBITDA of $2.3 million for the same period in 2023.

Adjusted EBITDA for the six months ended June 30, 2024, was a positive $1 million. Excluding deferred revenue, adjusted EBITDA increased by $5.7 million over the first six months of 2023. Cash, cash equivalents and investments available for sale at June 30, 2024, was $11.9 million compared to $8.6 million at March 31, 2024.

The combination of increased sales and greater gross margin led to cash flow from operations of $1.4 million for the second quarter. On the topic of cash, we are pleased to share with you that we executed an amendment to the asset purchase agreement that we signed with Evoqua in July of last year.

If you recall, the APA called for Rockwell to pay Evoqua, two milestone payments of $2.5 million each on the first and second anniversaries of the agreement. Now, money to Evoqua we paid over eight quarterly installments between July of this year and April of 2026.

These quarterly payments will minimize the impact on our cash flow and accelerate our investment in operations. I will now turn the call back over to Mark..

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

Thank you, Dr. Strobeck. And as mentioned, we are now open for questions. [Operator Instructions] And your first question comes from the line of Ram Selvaraju from H.C. Wainwright. Please go ahead..

Hi. Thanks very much for taking my questions and congratulations on all the important progress notch this quarter, very creditable. I wanted to ask if you could provide some additional color on the partnership opportunity that you mentioned earlier in the call, if you can give us a sense of what the scope of this might look like.

And also, if you could talk a little bit more about your expansion strategy in the West and when you ultimately expect to light upon the most appropriate path forward there and what it could mean for the business, in particular with regard to Rockwell's overall positioning within the dialysates market since you're already the second largest purveyor of these products.

Thank you..

Yes. Thanks Ram, and I appreciate your support of comments.

So, to address the first question, for us to continue to have a meaningful presence in the app home space, right, we need to expand our product portfolio beyond what we currently supply as we need to think about a more sort of convenient option for folks that are going to be administering dialysis at home.

The first step in that process for us was to create the convenience pack, which is the first time that there is a smaller formatted set of products that can be very easily delivered directly to a patient's home for them to administer as opposed to some of the other formats in which we sell, which are north of 55-gallon drums.

So that was an incredibly important first step. And we are working now with a couple of the leading providers in the at-home space currently providing them, concentrates in the larger format, and are now working to put in place a collaboration around specifically the convenience pack.

So that's all we can say at the moment, and we hope to have, like I said, more to say this quarter. As it relates to the West, that continues to be an opportunity for us. As you know, through our acquisition of Evoqua, we picked up a number of customers that were in the West.

Through the course of this year, we have also added to that, some of which we announced, some of which we haven't announced, all kind of creating a critical mass now out there for us to really begin to consider a more permanent presence. Our hope is to, by the end of the year, have a path forward identified.

We -- the team was actually just recently out there looking at different options for us, and we hope to have that identified and are able to pursue that aggressively to establish the presence, our presence out there. Remember, this isn't -- as you pointed out, this is a two-player market, but in the West, it's essentially a one-player market.

It's proscenius. And once we are able to establish a more significant presence out there, I think we're going to be a great alternative option for a lot of those folks, as we are in the middle and the eastern portions of the country, and we'll be able to compete effectively. And that represents a $100 million market opportunity for us to tap into.

So we're excited to do it, but we took the approach, as we said in the script, that we wanted to build a critical mass of business there before we started to make investments, as opposed to the other way around, which I think would have introduced risk here..

Thank you very much..

And your next question comes from the line of Anthony Venditti from Maxim Group. Please go ahead..

Thank you. So, Mark, if I understand the opportunity for the home-based product. So you've officially, I guess, as of yesterday, launched the convenience pack.

But until the partnership is announced, is it safe to say that we shouldn't count on any material or tangible revenue from the convenience pack until this partnership is announced? Would that be accurate?.

So I think the way to think of it is, now that it's launched, right, we're going to begin sales of that convenience pack. We will begin to start to generate revenue with that here in the near term, and we'll only be accelerated, once we're able to establish a more definitive, longer-term collaboration with one of the at-home providers.

But that's not to say that revenue itself won't continue to grow. In fact, we just closed the books on July, and July was the largest revenue to date that the company has had on a monthly basis around $10 million for the month. So we're going to continue to grow revenue for the existing business and the convenience path will just layer on to that..

Okay. Great. And then just a follow-up on that.

Are the margins on the convenience pack at your corporate gross margins higher or lower than your base business?.

They're better than we are currently reporting for our base business..

Okay. Excellent. And I guess last as a follow-up.

The partnership is distinct and separate from what you're looking for in terms of a new product line or a complementary product line for your base business, correct?.

That's correct. Yes, it's separate. And so we are currently now working through what those product lines would be, the sort of, again, the most cost-effective and capital-efficient manner by which we can add those -- so that we can start generating revenue on those as quickly as possible.

We're not looking to do a very costly or long-term sort of clinical development program. This is something where we are working with organizations that have products that we could potentially bring in that would amplify those here in the United States..

Okay. Great. Thanks for all the color. Appreciate it..

Thanks, Anthony..

[Operator Instructions]. There are no further questions at this time. I will turn the call back over to Dr. Strobeck.

Thanks. We're extremely proud of the financial and operational results that we shared with you today. It is something that our team at every level within our organization has played a critical role in achieving. This is just the beginning.

We continue to focus on optimization, automation and streamlining our operations to drive sustainable profitability and shareholder value. Thank you for your time today..

This concludes today's conference call and webcast. You may now disconnect..