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Good day, welcome to the Nephros, Inc. Q1 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kirin Smith, Investor Relations. Please go ahead.

Good afternoon, everyone. This is Kirin Smith with PCG Advisory. Thank you all for participating in Nephros' Q1 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 contents 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.

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 and 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 Q1, which included an unusually high active 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 Q1 came in at 57%, compared to 65% the prior year, and that decline was driven by three 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 US 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. 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. Number three, our education initiatives, including the Nephros Water Institute, are positioning us earlier in the customer's 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. 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.

Thank you, Robert. I will now provide a closer look at Nephros' financial performance in the Q1 of 2026. We reported Q1 net revenue of $5.2 million compared to $4.9 million in the Q1 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 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. 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?

Thank you, Judy. This quarter demonstrates the strength of what we're 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.

The first question comes from Nick Sherwood with Maxim Group. Please go ahead.

Hi, good evening. Thank you for taking my question. My first question is about the certification for the water management program development as a service. You know, how are you charging? Is that, like, by the hour, by the person that holds the certification? Is it based on the whole team? Are you expecting more employees to receive that certification or to hire people that may already have that certification?

The certification 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. We do have an employee or two 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 go forward into a service that we're offering more to smaller entities or hospital groups or those who just don't understand the new regulations as they come out.

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

Understood. My next question is, you know, about hiring of the sales leader and a greater focus in the New York market. You know, part of that increased focus was due to, sort of increased regulatory focus from the, you know, New York itself. You know, can you kinda explain what that opportunity is in the New York City area or New York region?

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 four or five large regions, and the person covering all of New York, New England 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.

We took the step to look for someone who knows the five boroughs extremely well and has been doing business in the healthcare space for quite some time and decided to augment our capabilities by bringing that person on board to be able to focus on that unique and specific direct need in the area. 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, you know, 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.

Understood. Thank you for the details. My last question is, what was the number of active customer sites at the end of the quarter?

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 now that we're offering services and even expanding commercial filter sales into some of those customers as well. Continued steady active customer site growth, and there's no reason that shouldn't continue past 1,700. Lots of adoption, and we're quite pleased with the results there.

All right. Great. Thank you for answering all my questions. I'll return to the queue.

No problem. Thanks, Nick.

Again, if you have a question, please press star then one. The next question is from Ankur Sagar, who's a private investor. Please go ahead.

Yeah, hi. Good afternoon, Robert and Judy. Thank you for taking my questions. Congratulations to you on this milestone for the company achieving, north of $5 million revenue, in one quarter for the first time.

Thank you. Thank you. We're quite proud of that. It's been very exciting for us.

Yes, it is indeed. Robert, 23% growth, programmatic growth, I mean, is great. I think it masquerades the, you know, sort of like the overall growth, you know. Could you know, I know you don't really break it out, but could you provide some number on what portion of the revenue came from programmatic and what was emergency response? You know, 23% is just, you know, really great on year-over-year from what the company did even, you know, in 2025 in prior year.

You're right, we don't typically break that out. In the past, we've been seeing emergency response can average anywhere between 10%-15% of our sales.

In Q1, it was significantly less than that. It's, it's really a good thing to see. The team really stepped up. A big difference is from prior year, emergency response was a big part of that. 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, and 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 say, "Call Nephros, they can solve this." What we're seeing is that recognition bringing us these emergency response opportunities more and more frequently, when it's a really tough situation. Although there's not as many of these opportunities, when they do come, they tend to be a bit larger. That's this particular quarter, there was none of that happening. Doesn't mean that it's something that we can count on and repeat.

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 why we turn to that programmatic number. That's a long-winded answer, not exactly giving you the answer, but at least giving you a flavor that, we feel quite pleased.

No-

with us being able to do that.

No, I appreciate that. Just to clarify, I mean, this is great. I mean, like, you know, normally the emergency response is, you know, up to like 10%-15%, but you're saying this, you know, over $5 million quarterly number is entirely or mostly, you know, programmatic revenue?

Yeah, I didn't characterize how much of it, just that it was significantly less than what we've been seeing in the past.

Okay. Okay. You know, you know, one part of your strategy has been to really grow beyond the healthcare vertical, you know, over since you joined as CEO. Anything you could share in terms of, you know, I mean, in what sort of like sub-verticals, you know, have you been able to penetrate, you know, get some early success within that commercial segment?

Sure. I can characterize that a little bit. Nephros being originally in dialysis, 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 maybe 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. The competition is a lot more, and there's not any watchdog saying that they can or can't do what they say.

We 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. Seeing traction in these other areas that I just mentioned is important and growing. 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 and locations.

One place might use us and then the management team leaves or goes somewhere else, at the same time, some management team comes in and they're used to using somebody else, it becomes a bit stiffer competition for holding on to some of those places. Some of it, the business is a little less sticky. Much larger TAM, if we're looking at TAMs and SAMs. It is more competitive, a lot more churn. We do 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 will always probably be that as well.

I do like the large scale, 'cause a margin dollar versus a percent is also very important, especially as we scale to some of these larger numbers. 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. It's exciting. I wouldn't look for, you know, quarter two, quarter three 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 wanna kind of make us a bit more immune to.

We want other ways to make money and grow, not just the place we're the best at.

Couple of examples that you mentioned, like, you know, large buildings or airports, airlines, I mean, you know, just I assume these would be larger in size compared to what the company has done in a typically in healthcare, right?

I would say larger in points of application, but not necessarily large flow rates at one time, meaning we're not doing the entire building. It would be, you know, fixture by fixture. They do seem attractive, but some of those, they're just, even though it makes sense, they're not always making the 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. More often than not, our competition is against doing nothing, not a competitor.

It still takes a lot of education, that's why the education arm of pillar that we're really focusing on now is gonna be so important 'cause it's really gonna be kind of creating the market as we're building and growing it. That's what the that blank space, that white space of sales is super exciting. Does take some more time, effort in development, that's the I see that as a, another frontier that we can start to open up.

Okay. One last one. I'll make it a two-part. You know, EPA has, there was a new push on from the EPA with new regulations for PFAS and microplastics. I think, you have talked about those two 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? The second part for Judy is, I mean, the gross margin, you know, was light, you know, due to the external factors, but how do you expect that to trend further out in the year in Q2, Q3, Q4?

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. 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. 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. It has to be an education so that people do see the long-term benefit of spending the extra money to have safer water. I really am excited and looking forward to kind of the discussions that we continue to have. We've got some excellent people on our team who are kind of sharing that message and how to make things change.

You know, Brianne McGuire's work with the Water Institute, and all of our sales team, Shane Phillip and the guys and gals are really good at kind of 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. 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. For the second part, I'll turn it over to Judy.

Great. Thank you for the question. First, we do wanna point out that last year's Q1 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. If you think about it, we did mention our tariff cost us over $200,000 this quarter. When tariffs move from 15%-10%, one-third of that we would not have experienced. You can sort of do the math. A third 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. 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. Now, 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 other competitors are doing? We're looking for ways to mitigate this as well. Of course, we'll see how successful commercial is as a % of business, but don't forget, every incremental dollar of commercial business drives incremental gross profit dollars.

We're 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.

Got it. Got it. I know it takes a lot to produce this number, so in a great job on this, you know, programmatic revenue numbers and turnaround. That's all. Thank you for taking my questions.

Thank you.

Great. Thank you.

At this time, there are no further questions, this concludes our. Oh, we have a question from Ralph Weil with R Weil I'm sorry, Ralph Weil with R Weill Investment Management. Please go ahead.

Hi. Nice quarter in the programmatic business, good to talk to you. Have there been any pricing pressures from your competitors in the business that may have been more so than normal? You know, maybe I missed it, but I heard about the nano microplastic comments, what about the PFAS area? Are we able to make any headways in that area or is that something that's become too difficult? 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? You know, 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?

Sure. I can talk to all three of those points. If I, at the end of this, if I miss any of the point, please just re-ask. First thing you asked about was price pressures. We at Nephros, we've never been seeking the lowest cost per filter. 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 six months instead of three 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.

What I've noticed from the field, and I've been getting reports from our friends out on the West Coast and Kelly down in the South, is that these filters start to crack and leak and cause problems and it's a great opportunity for us to step in with our product. Price pressures, yes. We've been able to incrementally raise prices year-over-year, and we do that each year. 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 wanna 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.

The price comparison becomes an inadequate comparison when the two filters do and can accomplish different tasks. We're always looking at 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 with a very high retention rate. We're in it for, you know, solving their problems and providing them more value than what they pay us in price. We're always happy to have that discussion when it comes up, and it's easy when you have kind of product like Nephros to be able to get past that. As far as PFAS, forever chemicals, we do hear a lot about that. We see a lot about that.

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. 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, you know, prove it when there's other people making claims as well that maybe don't have as much rigor as we do. 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. It's more of the commercial product line. 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. 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. There's a lot of commodity filters providers out there, anything from the pitchers of water filters or the ones that go in your tap.

What I'm starting to see more and more today that I had not seen in the past is people concerned about what's coming in their water from a biological perspective. 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. To your point, when we start dealing with the average homeowner, there's not a regulation out there saying that you've got to remove a certain amount of, you know, viruses or bacteria or endotoxins from your water. We rely on an educated customer who can come in and request it.

We have partners, that, you know, do very well and service those homeowners in different markets, typically high-end homes or maybe home builders. We're starting to form more and more arrangements with those partners. That's how I intend to address the home market. I hope that, you know, in the quarters to come, maybe two, four, six quarters out, that we have some meaningful movement in those areas to report and share with you. 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.

Thank you.

Great questions. Mm-hmm.

Well, this concludes our question and answer session. I would like to turn the conference back over to Robert Banks for any closing remarks.

Thanks, Debbie. Guys, it's been a really great quarter, and the team is working really hard. We've got our rock stars across the board. You know, Stacy with dialysis is just phenomenal. Kelly, Nick, shout out to those guys who are just rock solid. I mentioned Shane in the West, with Dana's expertise in New York City and Jim with his years of sales experience, I just feel really comfortable with this team. By adding our service pillar and what Alfred's doing to really help the team install and get sticky, it's been a big boost.

Now augmenting it with education to kind of grow it and see that market upstream, I have full confidence that Brianne and all the webinars, and the full team support behind will just do phenomenal things going forward. Look forward to the future calls and more great stuff. Thanks for joining and all the continued support. Bye everybody.

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

Good afternoon, everyone, and welcome to the Nephros Inc. Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the floor over to Kirin Smith, Investor Relations. Please go ahead.

Thank you, Jamie, and good afternoon, everyone. This is Kirin Smith with PCG Advisory. Thank you all for participating in Nephros' Fourth Quarter and Fiscal Year 2025 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 health care providers, the success of its commercialization efforts, and the effects 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, March 12, 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.

Thank you, Kirin. Good afternoon, everyone, and thank you for taking the time to join us today. 2025 was a great year, and I'm extremely proud of the team and all their amazing accomplishments. I've been excitedly awaiting this day so I can share with you the results of the great things that have happened since our last full year's recap. Clean water is essential for health care, hospitality, food services and everyday life. We have the right products to address these needs and have been doing so successfully in patient care situations. We've made great progress in non-patient care applications over the past year. We look forward to developing channels to penetrate other markets, such as residential and commercial through key relationships that we are creating. Over the past several years, we've built a clear strategy to deliver on that message. And today, the strategy is anchored around 3 core pillars: products; services; and education. Together, these pillars are driving our growth and positioning Nephros as a leader in water safety solutions. Our first pillar, Products is our differentiated portfolio. It remains the foundation of our success. Nephros develops advanced filtration technologies designed to remove bacteria, viruses and other contaminants that threaten water safety. These products are trusted in hospitals, laboratories and commercial facilities where reliability is critical. Innovation continues to expand our reach. Recent product launches allow us to address new high-impact applications, including ice machines, drinking fountains, bottle filling stations and sterile processing environments. These are everyday touch points where water safety matters. By delivering filtration solutions that are both high performance and easy to deploy, we are expanding our addressable market well beyond traditional patient care applications. This product innovation pipeline is a key driver core to our continued growth. In 2025, we launched our second pillar, Services. While products start the relationship with customers, Services sustain it. Water filtration systems require regular replacement, monitoring and installation expertise. Historically, this has been fragmented and difficult for facility operators to manage. Nephros is solving that problem. Under the leadership of our service organization, we've expanded our installation and replacement capabilities, enabling us to provide customers with a complete lifestyle -- life cycle solution. This includes rapid product delivery, professional installation, scheduled replacement programs and ongoing technical support and training. By offering these services directly, we reduced barriers to adoption and strengthen long-term customer relationships. Most importantly, this model supports recurring revenue to programmatic filter replacements, which creates a more predictable and scalable business. Our newest and recently launched pillar is the strategy around Education. It represents one of the most exciting developments for our company. We've touched over 1,000 people through our webinar series and conducted numerous site-based training sessions. Water safety is becoming an increasingly important topic across health care, hospitality and public facilities. However, many organizations lack the expertise needed to manage waterborne pathogen risks effectively. To address this gap, we launched the Nephros Water Institute, this institute is dedicated to expanding knowledge around waterborne pathogen mitigation, facility water safety programs and compliance-driven filtration solutions. Through education and engagement with industry stakeholders, we are establishing Nephros as a trusted authority in water safety. This initiative does more than just share knowledge, it builds a long-term demand for filtration, services and compliance solutions. In other words, education strengthens our entire ecosystem. The impact of this 3-pillar strategy is already visible in our financial performance. In 2025, Nephros delivered 33% revenue growth, reaching $18.8 million in total revenue, while continuing to scale our operations. We also reported net income of approximately $1.2 million, marking our second consecutive year of profitability, a significant milestone for the company. These results reflect strong order reactivity, growth in active customer sites, expansion of service capabilities and increasing demand for our solutions. At the same time, we remain debt-free and financially disciplined with approximately $5.4 million in cash at the year-end. Looking forward, we believe Nephros is positioned at the intersection of several powerful trends, increased awareness of waterborne pathogens, rising regulatory expectations around water safety, aging infrastructure in health care and hospitality and a growing need for a reliable filtration solution. Our integrated strategy, products, services and education, allows us to address all 3 challenges simultaneously. It also creates a business model built not just on filter sales, but on long-term relationships and recurring value creation. I'd like to thank the entire Nephros team for their hard work and commitment. Now let me turn it over to our CFO, Judy Krandel to go over the financials. Judy?

Thanks, Robert. I will now provide a closer look at Nephros' financial performance in the fourth quarter and full year of 2025. We reported fourth quarter 2025 net revenue of $4.7 million a 22% increase over the corresponding period in 2024. And for the full year 2025, net revenue grew 33% to $18.8 million from $14.2 million. This increase was primarily driven by higher programmatic revenue, reflecting strong reorder activity and the addition of several new active sites. In addition, we experienced solid growth in our emergency response business as well as significant growth in service revenue. Active customer sites continued to grow, and we're just over 1,680 as of the end of 2025 as compared to just over 1,500 as of December 31, 2024. Gross margin was 62% for both of the years ending December 31, 2025 and 2024, respectively. Gross margin for the fourth quarter of 2025 was 58% compared with 64% in the fourth quarter of 2024. Although, we achieved higher margins during the first half of fiscal 2025, those margins eroded somewhat during the second half of the year, primarily due to the impact of tariffs. Since April 2025, we have been subject to a 15% tariff on all goods imported from Italy which was reduced to 10% as of February 22, 2026. While this reduction provides some near-term relief, U.S. tariff policy remains unpredictable, creating uncertainty around potential future margin impacts. Research and development expenses for the years ended December 31, 2025 and 2024, were $1.3 million and $0.9 million, respectively. R&D expenses for the fourth quarter of 2025 were $0.4 million compared with $0.3 million in the fourth quarter of '24, an increase of 57%, primarily due to higher headcount and bonuses. Selling, general and administrative expenses for the year ended 2025 were $9 million compared with $7.7 million in 2024, an increase of 17% due to an increase in bonuses and sales commissions. Selling, general and administrative expenses for the fourth quarter of 2025 were approximately $2.3 million compared with $1.9 million in '24, an increase of 24% due primarily to an increase in bonuses and sales commissions. SG&A expenses in the fourth quarter also had some onetime expenses associated with product development and market analysis work. Net income for the year ended December 31, 2025, was $1.2 million compared with $0.1 million in '24. Net income for the fourth quarter of '25 was $0.1 million compared with $0.3 million during the same period in 2024, primarily reflecting the decline in gross margins and increase in bonuses and sales commissions. Our improvement in 2025 net income was largely due to our increased sales revenue. We are extremely pleased to report positive net income for the second consecutive year, the only 2 in the company's history. Adjusted EBITDA in the fourth quarter was a positive $131,000 compared to positive $481,000 during the same period in '24. For the full year 2025, adjusted EBITDA was a positive $1.6 million versus positive $548,000 in 2024. Net cash provided by operating activities was $1.6 million for the year ended December 31, 2025, compared to net cash used in operating activities of approximately $0.5 million for the year ended December 31, '24. Net cash provided by operating activities in '25 was primarily due to net income of approximately $1.2 million, an increase in accrued expenses of approximately $1 million, an increase in accounts payable of approximately $0.3 million, offset by an increase in accounts receivable of approximately $0.6 million and an increase in inventory of approximately $0.7 million. Net cash used in operating activities in '24 was primarily due to an increase in accounts receivable of approximately $0.3 million, a decrease in accounts payable and accrued expenses of approximately $0.2 million each, offset by an increase in inventory impairments and write-offs of approximately $0.3 million. Our cash balance on December 31, 2025, was $5.4 million compared to $5.2 million as of September 30, 2025, and $3.8 million as of December 31, 2024, and we continue to be debt-free. Please refer to today's press release for more details about the calculation of adjusted EBITDA and its reconciliation to GAAP net income or loss. And additional information about our results can be found in our filing on Form 10-K, which we filed earlier today. I will now turn the call back to Robert for some closing remarks. Robert, please go ahead.

Thank you, Judy. In closing, Nephros is proving that a focused, disciplined company with the right technology and strategy can create meaningful impact. We are improving water safety. We are expanding into new markets, and we are building a durable platform for long-term growth. Thank you for your time today and your continued interest in Nephros. This concludes our formal presentation remarks. We'll now take time for questions from the audience. Operator, please open the call for questions.

[Operator Instructions] And our first question today comes from Anthony Vendetti from Maxim Group.

Yes, a couple of questions. One is on the programmatic sales, what percent of revenues for the fourth quarter and the full year were programmatic sales? And do you have an outlook on how you expect that to evolve in 2026? And then your active customer sites, do you have a count on that number as of 12/31, '25?

Yes, certainly, I'll answer the second part, first and then turn it over to Judy for the other -- for the first part of your question. Programmatic sales, just under 1,700. So that was 1,681 sites, and that's a significant and steady growth, well above what we were when we finished the year ahead. And it's really due to some efforts that we're making for customer retention, and also outreach in areas of conferences, trade shows, but most of that new business is coming from customers who tell a friend, who are happy and delightful what they've experienced with us, the problems we've solved and then they have a neighboring facility or related and they let them know. So we pick up that business as well. So really proud of that active sites number. And as it continues to grow, it just reflects the excellent work from our sales women and men who have been doing a great of selling our products. Judy?

Yes. We don't give out exact numbers. But Anthony, the fourth quarter, what's programmatic was certainly 90% plus of our business, which is similar for the year. Emergency response was helpful and did grow, but sort of high single digits, similar type number.

High single-digit growth in programmatic sales. Okay.

No, no, you talked -- I mean I think you wanted to know what percent, if I recall, apologize, of our sales were programmatic versus emergency response?

Yes, yes. Okay. Okay. And emergency response, what was the number you cut out for a second.

Okay. Yes. High single digits, round figures similarly -- was a little less in the fourth quarter than it was for the full year, but somewhat similar.

Okay. Okay. Great. And then just maybe just on an even higher level. Just as -- I think, obviously, I'm sure you agree, clean water, whether it's hospital-based or outside of the hospital is probably a growing trend and a growing need worldwide. I'm just wondering, as you look towards the other opportunities outside of medical, in the commercial space, whether that's hospitality or restaurants. Can you talk a little bit about that pipeline potential and how you see that sort of evolving either in '26 or over the next couple of years?

Sure, certainly. When you think about the business, the core business of Nephros, getting it start in dialysis and then really focusing on the hospital market, patient care, those are areas that are highly regulated. We've got different rules and joint commissions and inspections, all really drive action. Testing occurs and there are results and problems that need to be solved. Once you step outside of the patient care world, you don't have those same regulatory environments that are driving the growth. And that's why this pillar I introduced recently, the education is so important. We've got to let different people in different markets know why it's important, why it matters, the impact to their facilities and really the return on investment for -- investing in the Nephros filtration as a medical device in a nonmedical application. So I see that growth happening as the education improves as we get more and more people that we touch via outreach. And that's the main barrier you're selling against doing nothing. The second barrier that we have to overcome is the -- what may be perceived complexity around installation. It's not just as simple as when you walk up to your refrigerator, or a filter and then your sink, where you twist it off and put a new one on. There's some cleaning and sanitations involved. So that's why our services group and portfolio is so important. We start to remove the barriers for why someone might be interested in a solution because they may not be interested in going through some of the, I guess, work required in order to get an effective result from the filtration system. So as we grow and build those markets, we create an ecosystem of people that understand that there is a solution. They don't have to handle and deal with microplastics or other problems they might be dealing with, and we have the answers for those. Building that whole solution from just you've got a problem, here's your problem, here's how you can solve it to let us implement that solution for you and take care of it going forward, is how we're growing that business. If you remember, it took a while, even after some of the regulations in the hospital market for us to really capitalize on that and grow that hospital business. And it's -- I anticipate it will take the same as we're going into the non-healthcare, non-patient care market as we work to build those markets up.

Okay. So if I had to sum it up, you would say this is a multiyear strategy to build these other verticals.

Yes. But we've been starting on this for some time already. We're not entering it fresh in '26. So as those markets in past mature, we already have seen a few of those in some of the big areas. It's not a significant part of our business right now. I anticipate it will be a larger and larger portion going forward.

[Operator Instructions] Our next question comes from Ralph Weil from R. Weil Investment Management.

I really -- it must have been an accident or a b*** call, but since I didn't have a question prepared, can you just -- and I know you're talking about the new markets and what you're doing there and how you're going about it with the education, et cetera, et cetera. Can you elaborate a little more on some of the successes that you may have had so far? And I know it doesn't come easily when you're trying to penetrate new markets. But can you -- just comment a little about the successes so far.

Yes. So you're referring to the education successes or just anything, in general?

Yes. No, we're in the newer markets, I mean, hospitals have been your big market and medical facilities. In the newer markets that you've entered, can you comment just a little more on where you may have seen successes on which you're basing your optimism going forward. And I really didn't press the button. But since it was a b*** call.

I understand, Ralph. So if I can try to address that. If you think about where we've been focusing, we're in a hospital in patient care. So non-patient care applications where we've found some successes. We were looking at areas where there's large populations of people. We've got a party that's interested in keeping the mass of people under them, healthy. If you think of correctional facilities where if someone gets sick or ill, they can spread and contaminate to other places, schools and universities where there are groups of people in one room or one area. Not to say that a school is similar to a jail, but where you've got large groups of people who might be susceptible to different pathogens spreading. We've also seen in some aviation facilities where governments are concerned about what might be passed through water there. And I'm really surprised that the number of just drinking water fountain applications where people have felt that may have been shut down since COVID where they're facing the risk -- situation where they either rip them off the wall, which is very expensive or try to get them running again. We're able to go in, clean them up and reopen fountains that have been shut down for quite some while. So wherever we see large numbers of bottle fillers and drinking fountains, those are also the targets. I think some of the newer non-patient has also been sterile processing. Facilities that have instruments and probes and other stuff that go -- that come in contact with humans by rinsing them with water that's free of viruses and the toxins and other potential contaminants, we are finding a good amount of success there. Some of the newer areas, which are starting to gain traction are eyewash stations, shower -- emergency showers, those types of applications that are found outside of patient care as well when you have water sitting stagnant where bacteria have a chance to grow. So it's very numerous. It's not one area. It's lots of pockets here and there, which is why the education part of what we're doing is so important. Really getting the word out and letting people know where and how what we're doing can help with what they are trying to do and the mission that they're trying to accomplish, meaning we've had hundreds -- over 1,000 people attending these seminars that we're hosting, and I encourage anyone who is interested to listen and find out, you'll see an interaction and a level of transparency and information sharing that you don't get from any of the other related types of parks. So it really does showcase Nephros as being experts in the field and willing to talk agnostically about how to solve some of these problems, which people really appreciate to come back, they trust us, whether it's a property management company or others who have just people under their responsibility that they don't want to get in the situation where they're contaminated. So it's really exciting. It's been really refreshing and fun. It's been us learning how to speak something other than hospital language. And I think the team has really risen to the occasion and been doing a fantastic job of making that education inroads and penetrating other areas.

[Operator Instructions]

Okay. So it looks like there is not any other calls in the queue. So just to close it out, I just want everyone to know, I'm extremely excited about Nephros products. and what the future holds. Just thank you so much for your support and believing in Nephros. And please stay tuned and give us a call and reach out if you do have any questions or want to know more. Thank you and have a great rest of your evening.

And with that, everyone, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.