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Operator: Good day, and welcome to the Nephros, Inc. First Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kirin Smith, Investor Relations. Please go ahead.

Kirin Smith: Good afternoon, everyone. This is Kirin Smith with PCG Advisory. Thank you all for participating in Nephros’ 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 Nephros. I encourage you to review Nephros’ filings with the Securities and Exchange Commission, including, without limitation, the company’s Forms 10-K and 10-Q, which 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, Nephros’ 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 on Nephros’ business and other economic 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 7, 2026. The company undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call, except as required by law. I would now like to turn the call over to Nephros’ President and Chief Executive Officer, Robert Banks. Robert, please go ahead.

Robert Banks: Thank you, Kirin, and good afternoon, everyone. I’m very pleased to welcome you to the call. Q1 2026 was a milestone quarter for Nephros. We delivered $5.2 million in revenue, representing a new all-time high for the company and marking the first time we’ve crossed the $5 million threshold in a single quarter. This performance reflects continued execution across our core business, expanding adoption of our products in new applications and increasing contribution from our service and installation capabilities. Importantly, this growth was 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 exit opportunity that did not repeat. Despite the normal fluctuation, we still achieved record revenue, which speaks to the strength and durability of the underlying business. Now let me address margins directly. Gross margin for the first quarter came in at 57% compared to 65% in the prior year, and that decline was driven by 3 very clear factors. First, tariffs created a meaningful headwind, contributing over $200,000 in incremental costs 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 U.S. 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 strengthening 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 and other high-use water applications.

These represent a much larger addressable market than our traditional segments. While this impacts margin in the near term, it positions us for scale, diversification and long-term growth. Beyond products, we are seeing strong traction across our broader strategy. Number 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. Third, and our education initiatives, including the Nephros Water Institute, are positioning us earlier in the customers’ 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 installations 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 that 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 Krandel, for a closer look at the financials.

Judy Krandel: Thank you, Robert. I will now provide a closer look at Nephros’ 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, gross 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 at 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, an increase of 12%, reflecting increased headcount and professional fees. As a result of the above 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 the 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?

Robert Banks: Thank you, Judy. This quarter demonstrates the strength of what we are building at Nephros. We are growing revenue, expanding into larger markets and strengthening our recurring revenue model, all while navigating external pressures that we believe are temporary and manageable. The fundamentals of the business remain strong, and our strategy is working. We are confident in our ability to continue driving both growth and long-term value. Thank you again for your time and support. Operator, please open the line for questions.

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Operator: [Operator Instructions] The first question comes from Nick Sherwood with Maxim Group.

Nicholas Sherwood: My first question is about the certification for the water management program development as a service. Is that — how are you charging, by the hour, by the person that holds the certification? Is it based on the whole team? And are you expecting more employees to receive that certification or to hire people that may already have that certification?

Robert Banks: So the certification or — falls under the Nephros Education arm of our pillar. We’re not currently charging for services yet. It’s something that we’re training and getting our partners up to speed on, and we do have an employee or 2 that are capable of creating these water safety management plans. This is new service that we offer, but by and large, our partners offer this service as well. It’s in instances where we don’t have the coverage from our partner that we can come in and help create those plans. We do see this evolving as we move forward into a service that we’re offering more to smaller entities or hospital groups, those who just don’t understand the new regulations as they come out. And that’s been an area for us to at least have that conversation where we can start the decision-making process and engaging those who are deciding to use Nephros earlier in that process.

So the capability of the certifications is just getting started. We are still kind of rolling that out and getting — formalizing the offering as a product that we offer going forward, and we’re pretty excited about it and lots of interest and so far, so good. We hope to report more wins in the future as we get that further developed.

Nicholas Sherwood: Understood. And then my next question is about hiring of the sales leader and focus in the New York market. Part of that increased focus was due to sort of increased regulatory focus from the New York itself. Can you kind of explain what that opportunity is in the New York City area or New York region?

Robert Banks: Yes. Absolutely. Yes. If you look at New York City, the greater region, 5 boroughs there are a very high density of hospitals and others with infection control needs in that area. In the past, we’ve broken out our sales force into kind of these 4 or 5 large regions. And the person covering all of New York, [indiscernible], was not able to really focus on the New York City region when it’s a completely different, I guess, sales cycle, sales process and value proposition. In addition, there’s been a number of outbreaks from Legionella and other in that region that have kind of really got a lot of questions coming to us. So we took the step to look for someone who knows the 5 boroughs extremely well and has been doing business in the healthcare space for quite some time and decided to augment their capabilities by bringing that person on board to be able to focus on that unique and specific direct need in the area.

And so far, we’re quite pleased. It does take some time to seed and educate and build and sell. So we’re still early in the game, early innings. And I look forward to showing that revenue growth. There’s no reason that New York City, by itself, can’t be as large as any of our other regions combined. So that’s the reason we’ve decided to really put a focused effort in that area.

Nicholas Sherwood: Understood. And my last question is, what was the number of active customer sites at the end of the quarter?

Robert Banks: Active customer sites is 1,676. It’s been growing very steadily, very healthy, not as fast as our revenue, which, in my mind, tells me that we’re earning more per customer, which makes sense considering that we’re offering services and even expanding commercial filter sales into some of those customers as well. So continued steady active customer site growth, and there’s no reason that shouldn’t continue past 1,700. So lots of adoption, and we’re quite pleased with the results there.

Operator: [Operator Instructions] The next question is from [ Ankur Sagar ], who’s a private investor.

Unknown Attendee: Congratulations to you on this milestone for the company achieving north of $5 million revenue in 1 quarter for the first time.

Judy Krandel: Thank you.

Robert Banks: That was — we’re quite proud of that. It’s been very exciting for us.

Unknown Attendee: Yes, it is indeed. Robert, 23% growth, programmatic growth, I mean, is great. I think it [ masculates ] the sort of like the overall growth. Could you — I know you don’t break it out, but could you provide some number on what portion of the revenue came from programmatic and what was emergency response? Because 23% is just really great on year-over-year from what the company did even in ’25, in prior year.

Robert Banks: Yes. And you’re right, we don’t typically break that out. In the past, we’ve been seeing emergency response can average anywhere between 10% and 15% of our sales. In Q1, it was significantly less than that. So it’s really a good thing to see. The team really stepped up. But the big difference is, from prior year, emergency response was a big part of that. Now although we don’t go out and create the emergency response, we don’t create the outbreak, it does take a presence. You have to have your name known, that Nephros is someone that you can call in these situations. That comes from our presence in trade shows and networking and word of mouth, with many of our new customers coming from referrals and even our partners who run into problems, and they call Nephros, “They can solve this.” So what we’re seeing is that recognition bringing us these emergency response opportunities more and more frequently when it’s a really tough situation.

So although there’s not as many of these opportunities, when they do come, they tend to be a bit larger. And that’s — this particular quarter, there was none of that happening. So it doesn’t mean that it’s something that we can count on and repeat. But really, if I’m trying to measure how healthy the business is, I really want to know what the core is doing, the things that we are actively going out and selling and closing, and that’s when I — while we turn to that programmatic number. So that’s a long-winded answer, not exactly giving you the answer, but at least giving you a flavor that we were one of the few that are able to get that.

Unknown Attendee: No, I appreciate that. And just to clarify, I mean, this is great. I mean like — so normally, the emergency response is up to like 10% to 15%, but you’re saying this, over $5 million quarterly number, is entirely or mostly programmatic revenue?

Robert Banks: I can’t characterize how much of it, just that it was significantly less than what we’ve been seeing in the past.

Unknown Attendee: Okay. Okay. And one part of your strategy has been to really grow beyond the health care vertical over — since you joined as CEO. Anything you could share in terms of — I mean, what sort of like subverticals have you been able to penetrate, get some early success within that commercial segment?

Robert Banks: Sure. I can characterize that a little bit. Nephros being originally in dialysis, we — our healthcare is our sweet spot. That’s really where we shine, mainly because that’s a regulated environment. FDA regulated, in many cases, our medical devices, being Class II, give us an edge. When you’ve got the competitors who can come in and sell and make claims, they don’t have the clearances and FDA certifications to back it up. When I go into other spaces, such as aviation or hospitality or government, municipal buildings, retail, real estate management, large properties, of that nature, schools, universities, they’re not regulated in many cases by the FDA. So the competition is a lot more, and there’s not any watchdog saying that they can or can’t do what they say.

So tend to also see a little lower margins in some of these other spaces as the competitive landscape is basically based on results, and people do give a shot before they fail, then they call us. So seeing traction in these other areas that I just mentioned is important and growing. And what we’re finding and what we saw in healthcare is, most of our new sales come from referrals, meaning someone who used us somewhere, had great success and then told a friend, or they went and worked somewhere else. Similar occurrences are starting, not happened yet, but just starting to take place in some of the other commercial applications that I mentioned in locations. So one place might use us and then the management team leaves or go somewhere else, but at the same time, some management team comes in, and they’re used to using somebody else, so it becomes a bit stiffer competition for holding on to some of those spaces.

So some of it, the business is a little less sticky. Much, much larger TAM if we’re looking at TAMs and SAMs. But it is more competitive and a lot more churn. So we have to balance what our core sweet spot is, and that still remains where the lion’s share of our margins are coming from, the healthcare space, and we’ll always probably be that as well. But I do like the large scale, because a margin dollar versus a percent is also very important, especially as we scale to some of these larger numbers. So when we figure out how to conquer those spaces and get the same, similar types of competitive advantage and our name out there, you’ll start to see those grow at some of the same paces that we do grow in the healthcare space. So it’s exciting.

I wouldn’t look for quarter 2, quarter 3 for it to be something significantly moving the needle, but it is part of the long-term strategy, especially if there’s any ups or downs in the healthcare space that we want to kind of make us a bit immune to. We want other ways to make money and grow, not just the place we’re the best at.

Unknown Attendee: And a couple of examples that you mentioned like large buildings or airports or airlines. I mean, just — I assume these would be larger in size compared to what the company has done typically in healthcare?

Robert Banks: I would say larger in points of application, but not necessarily large flow rates at one time. I mean we’re not doing the entire building. It would be fixture by fixture. And they do seem attractive. But some of those — they’re just — even though it makes sense, they’re not always making a decision that would make sense to us. Say like, cruise ships, for example, when we reach out to them and try to get them to adopt some of the filters, it still comes down to price. And more often than not, our competition is against doing nothing, not a competitor. So it still takes a lot of education, and that’s why the education arm of pillar that we’re really focusing on now is going to be so important, because it’s really going to be kind of creating the market as we’re building and growing it.

And that’s what that blank space, that white space of sales is super exciting. It does take some time, effort in development, but that’s — I see it as another frontier that we can start to open up.

Unknown Attendee: Okay. One last one. I’ll make it a 2 part. EPA has — there is a new push on from the EPA with new regulations for PFAS and microplastics. I think you have talked about those 2 in the past where you have some products in the area. Do you expect those regulations, when they come into play, to help? Are you already hearing from customers or new customers about that? And the second part for Judy is, I mean, the gross margin was light due to the external factors, but how do you expect that to trend further out in the year in Q2, Q3, Q4?

Robert Banks: I’ll answer the first part, and then turn it over to Judy after that. Short answer, yes. As there are drivers such as regulations, guidelines, even if it’s not a rule, but it’s a suggestion, we do see the activity and the churn. The issue we have now is that there is not enough of a driver to overcome the cost. Adding a filter of any kind is a cost. And when we’re talking to the average homeowner, when they’re trying to decide between the price of gas or a filter, they start to make certain choices that are pretty clear. But we do get a ton of questions about nanoplastics, microplastics. Every time an article comes out in a different periodic publication, we see that as an opportunity for us to market our product as a solution for that.

Right now, it tends to be limited to bigger spenders or people with some other need because the plastics and forever chemicals problem is not such an acute right now problem. It’s something that you’re preventing injury longer term. So it has to be an education so that people do see the long-term benefit of spending the extra money to have safer water. So I really am excited and looking forward to kind of the discussions that we continue to have. We’ve got some excellent people in our team who are sharing that message and how to make things change. Brianne McGuire’s work with the Water Institute, and all of our sales team, Shane Sullivan and the guys and gals are really good at going in and solving some of these problems for our customers. And a lot of times it’s just curiosity plants the seed.

And when they decide to make a move, they come to us. So that’s a really fun part of our job, and I’m fortunate enough to be able to participate in many of those conversations as well. So for the second part, I’ll turn it over to Judy.

Judy Krandel: Great. Thank you for the question. First, we do want to point out that last year’s first quarter had an unusually high gross margin. The euro was weaker against the dollar, tariffs weren’t there. If you look at sort of the gross margin from Q4 of last year to Q1, it was only slightly lower. And so if you think about it, we did mention our tariff cost is over $200,000 this quarter. When tariffs moved from 15% to 10%, 1/3 of that, we would not have experienced. So you can sort of do the math, 1/3 of that tariff would not have been there, which really will improve our margins. I think as most of you know who are familiar with the business, we buy inventory ahead of time to be prepared, and we have been growing inventory to support higher sales.

So as the inventory with the 15% tariff flows through and we start seeing the new inventory come through, we will see an improvement in margins, with all other things being equal. As Robert mentioned, we’re considering other mitigation factors. Are there — can we pass on some of this tariff to our customers as we watch what customers or our other competitors are doing. So we’re looking for ways to mitigate this as well. And of course, we’ll see how successful commercial is as a percent of business, but don’t forget every incremental dollar of commercial business drives incremental gross profit dollars. So we are hopeful that we’ll see some improvement in margins as we go through the year and these things take effect, but we feel very good about the health of our core product margins.

These are just some external factors.

Unknown Attendee: Got it. Got it. I know it takes a lot to produce this number. So a great job on this programmatic revenue numbers and turnaround.

Operator: At this time, there are no further questions. So this concludes our — we have a question from Ralph Weil with R. Weil Investment Management.

Ralph Weil: Nice quarter in the programmatic business. Have there been any pricing pressures from your competitors in the business that may have been more so than normal? And maybe I missed it, but I heard about the nano, microplastic comments. But what about the PFAS area? Are we able to make any headways in that area? Or is that something that’s become too difficult? And can you comment about the potential in the home market. I see a lot of ads about filters for the homes, et cetera. Is that something that we might be looking at? And I’m sure that if we would be doing that, it wouldn’t be on our own, maybe with a partner, for all I know. Can you just comment on any of that at this point in time?

Robert Banks: I can talk to all 3 of those points. And at the end of this, if I missed any of the point, please just reask. First thing you asked about was price pressures. At Nephros, we’ve never been seeking the lowest cost per filter. And the price pressures we’ve always faced has been a purchasing agent that looks at a SKU and compares our filter to the next. Well, that’s fine and dandy, but if our filter costs 20% more, but it lasts 100% longer, 60 days instead of 30 or 6 months instead of 3 months, then that price per SKU goes out the window. What we have been seeing is that the low end is getting more competition where we see some entrants come in. But what I’ve noticed in the field, and I’ve been getting reports from our friends out in the West Coast and Kelly down in the South, is that the filters start to crack and leak and cause problems, and it’s a great opportunity for us to step in with our products.

So price pressures, yes. We’ve been able to incrementally raise prices year-over-year, and we do that each year. It does not keep up with inflation necessarily, but it is something that we try to make sure we try to stay on top of. We really want to talk about value and what we provide with our filters, how much water we filter, the contaminants that we’re removing, because there isn’t really a filter doing the same thing. So the price comparison becomes inadequate comparison when the 2 filters do and can accomplish different tasks. We’re always looking at that market situation and trying to capture price where necessary. We’re making sure that we create customers that stay with us for a long time. We have a very high retention rate. And we look — we’re in it for solving their problems and providing them more value than what they pay us in price.

So we’re always happy to have that discussion when it comes up, and it’s easy when you have kind of a product like Nephros to be able to get past that and win the opportunity. As far as PFAS. PFAS, forever chemicals, we do hear a lot about that. We see a lot about that. But it’s not too difficult, quite the opposite. PFAS is actually fairly easy. There’s quite a few species and more specific types that we’re trying to remove. You have to take a look at what we’re trying to address at any particular application. Our filters, our solutions for PFAS are slightly different. They also remove other contaminants, iron and some other things as well. So we try to provide some differentiation. But because there are a number of solutions out there, and it just becomes a little bit harder to command the price that we want or to prove it when there’s other people making claims as well that maybe don’t have as much rigor as we do.

So we continue to see PFAS as something where we’re opportunistic about. I don’t know that it’s going to eclipse sales in our infection control product line to that extent. So it’s more of a commercial product line. But always happy to address and look at any of the opportunities because at a minimum, it starts the dialogue where I can go and talk to them about infection control and other filters that they have needs for. Now speaking about the home market and the potential there. The home space is huge. There are millions — tens of millions of people filtering water in their homes, whether they’re on well water, city water, whether they’re concerned about contaminants coming from surface, lots of different needs and questions. And there’s a lot of commodity filters providers out there, anything from the pictures of water filters or the ones that go in your tap.

What I started to see more and more today that I have not seen in the past is people concerned about what’s coming in their water from a biological perspective. So once the conversation starts turning towards infection control, that’s where we shine, and we have great solutions for either point of use — fixture points, and not yet for the whole home, but that’s something that we’re exploring. But to your point, when we start dealing with the average homeowner, there’s a lot of regulation out there saying that you’ve got to remove a certain amount of viruses or bacteria or endotoxins from your water. So we rely on an educated customer who can come in and request it. We have partners that do very well and service those homeowners in different markets, typically high-end homes or maybe homebuilders.

And we’re starting to form more and more arrangements with those partners. And that’s how I tend to address the home market. And I hope that, in the quarters to come, maybe a couple, 4, 6 quarters out that we have some meaningful movement in those areas to report and share with you. But that is an exciting market that I hope to figure out how to penetrate without sacrificing our infection control product lines in the healthcare space.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Robert Banks for any closing remarks.

Robert Banks: Thanks, Debbie. And guys, it’s been a really great quarter, and the team is working really hard. We’ve got our rockstars across the board. Stacy with dialysis is just phenomenal. Kelly, Nick, shout out to those guys who are just rock solid. I mentioned the Shane in the West. And with Dana’s expertise in New York City and Jim with his years and years and years of sales experience, I just feel really comfortable with this team. By adding our service pillar and what Alfred is doing to really help the team install and get safety, it’s been a big boost. And now augmenting it with education to kind of grow it and see that market upstream, I have full confidence that Brianne and other webinars and the full team support behind, we’ll just do phenomenal things going forward. So look forward to the future growth and more great stuff. So thanks for joining and all the continued support. Bye, everybody.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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