Earnings call transcript: Nuwellis Q1 2025 shows growth in revenue, stock stable

Nuwellis Inc. (NUWE), with a market capitalization of $4.46 million, reported its financial results for the first quarter of 2025, showcasing a 3% increase in revenue year-over-year. Despite the positive revenue growth, the company experienced a net loss of $3 million, or $0.69 per share. The stock remained relatively stable with a slight increase of 0.99%, though InvestingPro data shows the shares have declined nearly 89% over the past year. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation.

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Key Takeaways

• Revenue increased by 3% year-over-year in Q1 2025.
• Gross margin decreased to 56% from 64.1% in the previous year.
• Operating expenses were reduced by 31%.
• The company maintains no outstanding debt, with cash reserves of $2.6 million.

Company Performance

Nuwellis demonstrated resilience in Q1 2025 with a 3% revenue increase compared to the same period last year. The company continues to focus on its Aquadex therapy, which has shown promising results in reducing heart failure events. Despite the decline in gross margin, Nuwellis has managed to reduce its operating expenses significantly, which has contributed to a more sustainable financial outlook.

Financial Highlights

• Revenue: $1.9 million, a 3% increase year-over-year.
• Gross Margin: 56%, down from 64.1% last year.
• Operating Expenses: $4.1 million, a 31% improvement.
• Net Loss: $3 million, or $0.69 per share.
• Cash and Equivalents: $2.6 million, with no outstanding debt.

Outlook & Guidance

Nuwellis expects its critical care sales to stabilize in the upcoming quarters, with anticipated growth in outpatient clinic revenue from Q2 to Q4 2025. The company is also continuing enrollment in the REVERSE HF clinical trial and plans to initiate the Vivian clinical trial by late 2025 or early 2026. Analyst consensus from InvestingPro suggests a hold rating, with revenue growth forecast at 24% for FY2025, though the company is not expected to achieve profitability this year.

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Executive Commentary

John Erb, CEO of Nuwellis, highlighted the company’s strategic position, stating, "We are at a strategic inflection point." He emphasized the importance of Aquadex therapy, describing it as "a lifesaving tool for pediatric nephrologists." Rob Scott, CFO, reiterated the company’s focus on "disciplined expense management."

Risks and Challenges

• Decreasing gross margin could affect profitability if not addressed.
• The temporary slowdown in clinical trial enrollment due to past recalls may delay future product launches.
• Market competition in critical care and pediatric sectors remains intense.
• Potential economic downturns could impact healthcare spending and reimbursement rates.

Q&A

During the earnings call, analysts inquired about the Q1 sales drop, which the company attributed to inventory-related issues rather than seasonal factors. Nuwellis is actively working with hospitals to implement outpatient clinics, indicating a strategic shift towards expanding its market presence.

Full transcript - Nuwellis Inc (NUWE) Q1 2025:

Conference Operator: Good day, everyone, and welcome to Newellis First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Later, you will have an opportunity to ask questions during the question and answer session. Please note this call is being recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today’s program over to Louisa Smith with Investor Relations.

Louisa Smith, Investor Relations, Newellis: Thank you, operator, and thank you for joining today’s conference call to discuss Newellis’ corporate developments and financial results for the first quarter ended 03/31/2025. In addition to myself, with us today on the call are John Erb, Newellis’ Chairman of the Board and Interim CEO and Rob Scott, Chief Financial Officer. At 8AM Eastern Time today, Newellis released financial results for the first quarter twenty twenty five. If you have not received Newellis’ earnings release, please visit the Investors page on the company’s website. During this conference call, the company will be making forward looking statements.

All forward looking statements made during today’s call will be protected under the Private Securities Litigation Reform Act of 1995. Any statements that relate to expectations or predictions of future events and market trends, as well as our estimated results or performance are forward looking statements. All forward looking statements are based on our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements. All forward looking statements are based upon current available information, and the company assumes no obligation to update these statements.

Accordingly, you should not place undue reliance on these statements. Please refer to the cautionary statements and discussion of risk in the company’s filings with the Securities and Exchange Commission, including the latest 10 ks. With that, I would now like to turn the call over to John.

John Erb, Chairman of the Board and Interim CEO, Newellis: Thank you, Louisa, and good morning, everyone. Welcome to Newellis first quarter twenty twenty five earnings conference call. Today, I’ll walk through our first quarter results, highlight key areas of growth and operational progress and share how we are building a strong foundation for long term success. Next, our Chief Financial Officer, Rob Scott will provide a detailed commentary on our financial results before opening up the call for questions. We’ll begin with an overview of the quarter.

Newellis generated $1,900,000 in revenue for the first quarter of twenty twenty five, representing a 3% increase year over year supported by a 4% increase in consumables utilization and an increase in U. S. Console sales, partially offset by a decrease in international sales. By customer category, we have had a strong quarter within pediatrics and heart failure, which saw 3828% growth over prior year respectively, driven by an increase in consumable utilization. Within pediatrics, we opened two new accounts during the quarter.

Each of these additions underscores our strategic focus on the pediatrics category, where clinicians increasingly use Aquadex as a general alternative in cases where continuous renal replacement therapy or CRRT is not feasible due to the lower blood volumes and delicate hemodynamic balances required in pediatric patients. Sales in the critical care category decreased by 25% compared to the prior year. This decrease can be attributed primarily to one of our largest customers that acquired excess inventory at the end of ’twenty four. This is a one time impact and we expect critical care to stabilize in the coming quarter. We continue to see positive trends in account penetration, Increasing clinical adoption, expanding reimbursement coverage and enhanced physician advocacy continues to support a long term growth and strategy.

We continue to strengthen the clinical foundation supporting Aquadex therapy. Toward that end, the Journal of the American College of Cardiology Heart Failure published in February of this year included a reanalysis of data from the AVOID HF trial, a randomized clinical trial evaluating ultrafiltration versus intravenous diuretics in patients with heart failure. This study demonstrated a sixty percent reduction in heart failure events with ultrafiltration at thirty days compared to standard intravenous diuretic therapy and significantly fewer heart failure hospitalizations. In addition to these clinical trial findings, real world data are also building. An observational analysis titled Outcomes in Community Hospitals study led by Doctor.

John Jeffries evaluated the use of Aquadex across two regional hospitals. The study showed a statistically significant reduction in sixty day heart failure readmission rates, volume loss and weight reduction among patients treated with ultrafiltration along with stable renal function and meaningful clinical benefit. These results reinforce the value of Aquadex in community based care settings where effective fluid management can have a substantial impact on patient outcomes and hospital resources. Together, these findings strengthen the clinical case for Aquadex across a range of hospital environments. As I outlined on our fourth quarter call, we have also seen important progress in reimbursement coverage that strengthens our commercial opportunities.

Effective January 1, OXWAD X was reassigned to a new outpatient reimbursed level by CMS, increasing the facility reimbursement fee for the therapy by nearly four times to $16.39 dollars per day. This adjustment increases the accessibility and financial viability of Aquadex in hospital based outpatient settings, thereby enabling hospitals to provide improved fluid management outcomes relative to diuretics. The combination of improved reimbursement and our expanding clinical evidence base is paving the way to advance our outpatient strategy. These enhancements allow us to expand our reach and use cases while leveraging the same call point as our core inpatient business. Already, we see encouraging momentum in the outpatient setting and expanded coverage makes Aquadex therapy more economically viable and accessible.

We have built a growing pipeline of target outpatient facilities, representing an addressable market opportunity of approximately $717,000,000 that we anticipate will help drive significant future top line growth. Finally, before I turn the call over to Rob, I’d like to detail Newellis’ current exposure to tariffs. At this point, we manufacture our products in house at our facilities in Minnesota with only a very small portion of our raw materials being sourced internationally. Our limited exposure to international components leaves us confident we will not materially be affected by current tariff policies. I’d now like to turn it over to Rob to detail our Q1 financial results.

Rob Scott, Chief Financial Officer, Newellis: Thank you, John, and good morning, everyone. Turning to the first quarter financial results, revenue was $1,900,000 representing 3% increase over the prior year period. This growth was driven by a 4% increase in consumables utilization and an increase in US console sales partially offset by a decrease in international sales. By customer category, pediatric and heart failure revenues increased 3828% respectively compared to the first quarter of twenty twenty four, supported by growth in consumables utilization. Critical care revenue declined 25% year over year primarily due to the driver John referenced earlier.

Gross margin for the first quarter was 56 compared to 64.1% in the same period last year. The decline was mainly driven by unfavorable manufacturing variances, lower fixed overhead absorption tied to reduced production volumes, and an inventory adjustment related to the FlexFlow console. Operating expenses continue to improve. Selling, general and administrative expenses were $3,600,000 a 22% reduction compared to $4,600,000 in the first quarter of twenty twenty four. The improvement reflects lower headcount and compensation related expenses, along with reduced professional services fees.

Research and development expenses were $550,000 for the quarter compared to $1,300,000 in the prior year period. This decrease was primarily due to lower headcount and a reduction in R and D project spend. In total, operating expenses for the quarter were $4,100,000 a 31% improvement compared to the first quarter of twenty twenty four. Operating loss narrowed to $3,100,000 compared to an operating loss of $4,700,000 in the prior year quarter. Net loss attributable to common shareholders was $3,000,000 or a loss of $0.69 per share compared to a net loss attributable to common shareholders of $3,800,000 or a loss of $24.11 per share for the same period in 2024.

At 03/31/2025, we ended the quarter with $2,600,000 in cash and cash equivalents, and we continue to operate with no debt on the balance sheet. We remain focused on disciplined expense management in maintaining a strong financial position to support the continued expansion of our commercial initiatives. I’ll now turn it back to John for additional remarks.

John Erb, Chairman of the Board and Interim CEO, Newellis: Thank you, Rob. We are excited to continue our progress into the year and capitalize on the positive momentum we’ve created in seeking to position Aquadex as a standard of care within fluid management. I would like to reiterate that Newellis is at a strategic inflection point. We are focusing on critical care, pediatrics and outpatient heart failure. Critical care, primarily cardiac surgery, represents approximately forty percent of our current business.

Approximately eighty percent of the patients weaned from a heart lung machine experience acute kidney injury due to the low hematocrit levels of diluted red blood cell counts. Aquadex can protect the kidneys by safely increasing hematocrit levels as excess fluid is removed post cardiac surgery. Aquadex has been used in 47 children’s hospitals in The U. S. And represents approximately 40% of our current business.

Aquadex is a lifesaving tool for pediatric nephrologists treating children with little to no kidney function. With the recent fourfold increase in outpatient reimbursement and our growing partnerships with nephrologists, we will expand into the $773,000,000 outpatient market as our current hospital accounts complete the logistical challenges of finding space and nursing resources. Treating heart failure patients in the hospital outpatient clinic will reduce the economic burden to hospitals of extended hospital stays and the penalties associated with thirty day readmission rates. The availability of hospital outpatient clinics will benefit heart failure patients where the chronic condition of fluid overload can be effectively managed and therefore avoid the acute distress that requires the patient to be hospitalized. We’re also engaging with a large nephrology company to contract hospital nephrology services to provide Aquadex for fluid management in hospital outpatient clinics.

We’re also continuing patient enrollment in our REVERSE HF clinical study, which directly compares Aquadex to IV loop diuretics and reducing time to first heart failure event within thirty days. We’re nearing the halfway mark toward our enrollment goal of three seventy two patients. We are shifting our customer focus to cardiac surgeons and perfusionists in critical care to pediatric nephrologists in the pediatric category and to nephrologists supporting the hospital outpatient based centers. We are diligently looking at ways to reduce our cash burn without jeopardizing our growth I’m particularly pleased with our 31% reduction in operating expenses.

Additionally, we have recently signed an agreement with KDI Precision Manufacturing, a well known local contract manufacturing company to move manufacturing from our facility, which we believe can result in meaningful expense reductions over the next twelve months. We’ll then look further at reducing additional operating expenses, including evaluating our future space requirements. We will continue to execute towards our inpatient and outpatient goals and will provide further details on our progress throughout the year. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Conference Operator: Thank And we’ll take our first question from Jonathan Aschoff with Roth. Your line is now open.

Jonathan Aschoff, Analyst, Roth: Thanks. Thank you for going through the first quarter there. So if the pediatric revenue grew 38% year on year on flattish revenue, so the adult revenue must have dropped. And was that entirely due to lower international sales or was there lower sales domestically as well?

John Erb, Chairman of the Board and Interim CEO, Newellis: If you’re addressing the drop in critical care, that was primarily due to our largest customer building their inventory in the fourth quarter of last year. So they didn’t purchase as much in the first quarter. They have now begun repurchasing in the second quarter. So we expect our critical care business volume to kind of come back up to normal levels this quarter.

Jonathan Aschoff, Analyst, Roth: Okay. Does that happen all the time? Because I’ve noticed that there’s a drop in the first quarter. So it seems quite seasonal, drop from the fourth and kind of bounces back in the second. So is this really just more of that seasonality?

John Erb, Chairman of the Board and Interim CEO, Newellis: I would say there’s not a lot of seasonality in our business. I think this was specific to a recall we had in the fourth quarter where this high volume account wanted to make sure they protected their patient volume with the product and purchased it in the fourth quarter. So I think there was an incident that drove that change and I think things will level out in the future. Thanks. So what has

Jonathan Aschoff, Analyst, Roth: transpired at the relevant facility since the January 1? In other words, what does expanding the outpatient pipeline specifically mean for the outpatient application of Aquadex?

John Erb, Chairman of the Board and Interim CEO, Newellis: Right, we’re working currently right now with four hospitals that are wanting to implement their outpatient clinic. And what they’re working on basically is identifying the location for it. A couple of them have actually identified their hospital dialysis unit as the location. And now they’re working on getting the nursing resources necessary to support that outpatient clinic. So there’s a little bit of a logistical change for hospitals to implement the outpatient clinic and we’re helping them and working through that.

So that’s the activity that’s going on. We really expect these hospitals to start treating patients this quarter and start seeing revenue growth. We’ll see a bit in the second quarter. We expect it to start growing more rapidly in the third and fourth quarter.

Jonathan Aschoff, Analyst, Roth: And thank you. Lastly, can you help us better understand the Phase three trial enrollment with Aquadex? And the second part of that question is VIVIAN clinical trial start timeline.

John Erb, Chairman of the Board and Interim CEO, Newellis: Sure, the REVERSE HF, we’re continuing to enroll. Because of the fourth quarter recall that we went through, we’ve solved those problems and we purposely slowed down enrollment, just didn’t push. As patients came up, the physicians were still enrolling, but it slowed down a little bit. So we’ve solved those issues by the way and ready to start picking back up with our efforts to increase and drive enrollment. So we’re about halfway and continuing to work hard on that.

The Vivian clinical trial, there’s still a period that we’ll go through with further development of the device itself, then we’ll be ready to submit for an IDE clinical trial with the FDA. I wouldn’t say that the actual clinical trial will start until later this year, early next year.

Jonathan Aschoff, Analyst, Roth: That’s very helpful. Thanks a lot, John.

Conference Operator: Thank you. And we have no further questions at this time. I’ll turn the program back over to John Erb for any additional or closing remarks.

John Erb, Chairman of the Board and Interim CEO, Newellis: Thank you. I’d like to thank all of our stakeholders, Newellis employees, shareholders, physicians, nurses, patients and healthcare workers in the field for their ongoing support. So thank you, and I hope you all have a great day.

Conference Operator: Thank you. This does conclude today’s program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.

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