Earnings call transcript: Nuwellis Q2 2025 sees revenue drop, stock dips

Nuwellis Inc (NASDAQ:NUWE) reported a challenging second quarter of 2025, with a noticeable decline in revenue and a drop in stock price. The company saw a 21% year-over-year decline in total revenue, reporting CAD $1.7 million, alongside a significant net loss. This continues a concerning trend, as InvestingPro data shows revenue has declined 1.21% over the last twelve months. Despite the operational challenges, Nuwellis is focusing on strategic initiatives to improve its financial standing and expand market presence.

Key Takeaways

• Revenue declined by 21% year-over-year to CAD $1.7 million.
• Gross margin fell to 55.5% from 67.2% in the same quarter last year.
• Stock price fell by 2.36% post-earnings, with a significant drop of 9.09% in premarket trading.
• Strategic focus on pediatrics, cardiac surgery, and outpatient heart failure.

Company Performance

Nuwellis experienced a downturn in its financial performance, with revenue dropping significantly compared to the previous year. The company is facing challenges in maintaining its previous gross margin levels, which decreased to 55.5%. Despite these setbacks, Nuwellis is actively working on strategic initiatives to enhance its operational efficiencies and market positioning, particularly in the pediatric and cardiac surgery markets.

Financial Highlights

• Total revenue: CAD $1.7 million (21% decline year-over-year)
• Gross margin: 55.5% (down from 67.2% in Q2 2024)
• Operating loss: $2.9 million (compared to $2.3 million in Q2 2024)
• Net loss: $12.6 million or $60.99 per share
• Cash and cash equivalents: $4.5 million

Market Reaction

Nuwellis’ stock experienced a decline following the earnings announcement, with a decrease of 2.36% in regular trading and a further drop of 9.09% in premarket trading. The stock is currently trading near its 52-week low, reflecting investor concerns over the company’s financial performance and future outlook.

Outlook & Guidance

Looking forward, Nuwellis aims to achieve cash flow positivity and meet commercial targets in its key focus areas. InvestingPro data reveals the company maintains a healthy current ratio of 2.23, with more cash than debt on its balance sheet, providing some financial flexibility. However, the negative free cash flow yield of -14.85% suggests challenges ahead. The company is optimistic about the growth potential in outpatient heart failure treatments and is committed to completing its manufacturing transition to KDI Precision Manufacturing. The guidance for future quarters remains cautious, with expectations of ongoing challenges but potential growth in targeted segments. Get detailed insights and comprehensive analysis with InvestingPro’s exclusive research report, part of our coverage of over 1,400 US stocks.

Executive Commentary

CEO John Erb emphasized the company’s commitment to expanding access to its Aquadex device and delivering value to stakeholders. He stated, "Every decision has been guided by a simple question, how do we deliver more value to patients, providers, and importantly, our stockholders?" Erb also highlighted the substantial opportunities ahead, despite the current financial challenges.

Risks and Challenges

• Declining revenue and gross margin, impacting financial stability.
• Potential operational disruptions during the manufacturing transition.
• Market competition and the need for increased clinical awareness of Aquadex.
• Economic uncertainties that could affect healthcare spending.

Q&A

During the earnings call, analysts inquired about the impact of the resolved sterilization vendor issue, which the company confirmed had no ongoing effects. Questions also focused on growth opportunities, with Nuwellis identifying the outpatient heart failure segment as having the fastest growth potential.

Full transcript - Nuwellis Inc (NUWE) Q2 2025:

Conference Operator: Good day, everyone, and welcome to today’s Newellis Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. Later, you may have the opportunity to ask questions during the question and answer session. Please note, today’s call will be recorded. It is now my pleasure to turn the conference over to Leah McMullen, Director of Communications.

Please go ahead.

Leah McMullen, Director of Communications, Newellis: Thank you, operator, and good morning, everyone. Thank you for joining today’s conference call to discuss Newellis’ financial results for the second quarter ended 06/30/2025. With me on the call are John Erb, our Chairman of the Board and Chief Executive Officer and Rob Scott, our Chief Financial Officer. Earlier today, we issued a press release that outlines our financial results for the quarter. If you haven’t had the chance to review it, you can find it on the Investor page of our website.

Before we begin, I’d like to remind everyone that we’ll be making forward looking statements on today’s call. These statements are protected under the Private Securities Litigation Reform Act of 1995 and are based on current assumptions and estimates. Actual results could differ materially from those described, and we encourage you to review the risk factors included in our filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward looking statements. Please do not place any undue reliance on these statements.

With that, I’ll turn the call over to John Erbmann.

John Erb, Chairman of the Board and Chief Executive Officer, Newellis: Thank you, Leah, and good morning, everyone. We entered the second quarter focused on strengthening the fundamentals of our business, operational discipline, commercial execution and strategic investments in areas where we see the greatest opportunity for impact and growth, all of which we believe position Newellis for growth and the opportunity to drive shareholder value. Revenue for the second quarter was CAD1.7 million, a year over year decline of 21%. While the top line reflects some difficult headwinds, I want to address the context behind these numbers. Due to an industry wide issue with our sterilization vendor, we experienced a temporary back order of approximately $400,000 in revenue.

During this time, our team acted quickly and decisively to prioritize our pediatric patients ensuring that our most vulnerable patients received access to our lifesaving therapy. I believe we successfully navigated this temporary setback. And importantly, in the July, we fully reconciled this backorder and are no longer in backorder. This gives us a strong footing entering Q3. I’ll now break things down further by customer category.

Our pediatrics business remains a cornerstone of the company. We continue to see strong demand for our established hospital customers and ongoing interest from new centers looking for a safe and effective therapy for patients who cannot tolerate traditional renal replacement modalities. Aquadex remains one of the only two FDA cleared devices in The US that enables fluid removal in patients weighing as little as 20 kilograms. And that differentiation continues to translate into clinical interest and sustained utilization. Within critical care, we saw increasing adoption as many of our accounts moved from initial trialing into consistent practice.

Our strategy shifted to deeper support for clinical teams and alignment with protocol based fluid management, particularly post cardiac surgery where acute kidney injury poses serious risk. In heart failure, our efforts are increasingly centered on the outpatient opportunity. As hospitals prepare to launch dedicated outpatient clinics or expanding existing heart failure programs, Aquadex is showing its value as a cost efficient alternative. There are clear and logical challenges to scaling, staffing and space to name a few. But we continue to engage directly with hospitals working through these questions.

Based on these early learnings, we’re refining our support tools and enhancing our site engagement program for the back half of the year. We also implemented several important strategic decisions this quarter. We continue to plan for an orderly and efficient transition from our manufacturing to KDI precision manufacturing with go live planned for October. We expect this move to result in meaningful operational efficiencies and cost savings over the next twelve months. Additionally, we recently terminated the REVERSE HF clinical trial.

While the study was designed to build additional evidence for inpatient heart failure, we believe this indication does not align with our investment focus or other sufficient near term commercial opportunities. By ending the trial, we can reallocate approximately $4,000,000 previously budgeted to support REVERSE HF toward higher impact growth areas. It is important to note that our decision to terminate this post market clinical study was not related to device performance or patient safety concerns. Looking ahead, our growth strategy is centered on the key areas of cardiac surgery within critical care, pediatrics and outpatient heart failure. In cardiac surgery, Aquadex offers unique ability to manage post operative fluid overload and protect renal function.

In pediatrics, Aquadex remains a viable fluid management option for many children with little to no kidney function. And in outpatient heart failure, we believe that the expanded reimbursement and clinical need are paving the way for broader access to safe, effective ultrafiltration. With that, I’ll turn the call over to Rob Scott to walk through our financial results in more detail.

Rob Scott, Chief Financial Officer, Newellis: Thank you, John, and good morning, everyone. Total revenue for the second quarter was $1,700,000 down from $2,200,000 in Q2 of last year. The decline was primarily driven by the temporary product backorder described earlier. By customer category, pediatric revenues increased 23% compared to the 2024. Heart failure and critical care revenue declined 5335% respectively, with the temporary backorder having a significant impact.

Gross margin for the quarter was 55.5% compared to 67.2% in Q2 twenty twenty four. The margin impact was largely due to under absorption of fixed overhead because of lower production volumes. Selling, general and administrative expenses for the quarter was $3,200,000 which is flat to last year. Research and development expense was $675,000 which is a slight increase compared to $558,000 in the same period last year. Total operating expenses for the quarter were $3,900,000 a 2% increase over prior year.

Operating loss for Q2 was $2,900,000 compared to $2,300,000 in Q2 twenty twenty four. Net loss attributable to common shareholders was $12,600,000 or a loss of $60.99 per share, compared to a net loss attributable to common shareholders of $7,700,000 or a loss of $791.22 per share for the same period in 2024. We ended the quarter with $4,500,000 in cash and cash equivalents and remain debt free. The recent $5,000,000 gross capital raise bolsters our financial position and provides us with flexibility to support our core growth initiatives. With that, I’ll turn the call back to John for closing remarks.

John Erb, Chairman of the Board and Chief Executive Officer, Newellis: Thanks, Rob. We believe that sustained success requires both a focused strategy and the ability to adapt quickly when necessary. Over the past six months, we’ve demonstrated our commitment to doing just that. From terminating Reverse HF to transitioning our manufacturing partner extreme mining operations, every decision has been guided by a simple question, how do we deliver more value to patients, providers, and importantly, our stockholders? Looking ahead, we will continue to build on this disciplined execution.

Our priorities are straightforward, progressing towards being cash flow positive, delivering on our commercial targets pediatrics and cardiac surgery, deepening outpatient engagement with heart failure programs, completing our manufacturing transition and driving increased clinical awareness of Aquadex’s role in fluid management. We remain committed to expanding access to Aquadex and building a portfolio that enables clinicians to manage fluid across multiple care settings and patient types. We are still in our growth story and we are confident that the opportunities in front of us are substantial. And we believe we have the strategy, the product and the team to deliver meaningful results.

Rob Scott, Chief Financial Officer, Newellis: Go ahead, operator.

Conference Operator: We’ll move first to Anthony Benedetti with The Maxim Group. Your line is open.

Anthony Benedetti, Analyst, The Maxim Group: Thank you. You mentioned the issue with the vendor or regarding sterilization and believe that account for around $400,000 in revenue. It sounds like that was resolved. If so, when was it resolved? And will there be any impact in the current third quarter that we’re in?

John Erb, Chairman of the Board and Chief Executive Officer, Newellis: It was resolved in the July. And we’ve not been in back order. In fact, we’re now building finished good inventory pretty rapidly. Actually building inventory to get ready for the transfer to KDI manufacturing. So the issue is behind us.

The sterilization provider is back up and running with all of its chambers available to us. So fortunately, it’s behind us. And the impact was primarily in heart failure and cardiac surgery, simply because we are allocating the inventory we had to pediatrics. And as Rob said, our pediatric volume in Q2 grew mostly just from demand and us having the product available for them.

Anthony Benedetti, Analyst, The Maxim Group: Okay, great. And then maybe just in general, as you see the business evolve, John, and maybe just where do you see right now the largest opportunity? Is it pediatrics? Is it critical care? Heart failure?

Is it all three? And which one, though, specifically do you see the most opportunity?

John Erb, Chairman of the Board and Chief Executive Officer, Newellis: Well, I think it is all three. I think pediatrics, continue to add children’s hospitals as customers as they adopt the Aquadex to take care of these small babies that have kidney issues or not functioning properly. We’re growing in cardiac surgery, know, care primarily in cardiac surgery, where the patients are seeing the opportunity to get this fluid off after open heart surgery, much more efficiently get them off of the ventilator faster, and out of the ICU by taking the fluid off using Aquadex. So those are two growth areas. I think the faster growing area is probably going to be heart failure because of the outpatient opportunity.

As you probably remember earlier this year, we received an increase in our reimbursement from $413 a day to $16.39 dollars a day for patients that are treated in a hospital outpatient clinic. So we have seven or eight hospitals today that are in the process of setting up these clinics. We’ve actually already treated our first patient most recently at Prisma Richland Hospital. So that I think we’re going to see a lot of growth there just as hospitals take advantage of this increased reimbursement.

Anthony Benedetti, Analyst, The Maxim Group: Okay, great. Thanks so much. I’ll hop back in the queue.

Conference Operator: And it does appear that there are no further questions at this time. But again, that is star and one. We’ll pause just another moment. And there are no further questions at this time. I would now like to turn it back to management for any additional or closing remarks.

John Erb, Chairman of the Board and Chief Executive Officer, Newellis: Well, I’d like to thank all of our Newellis employees, stockholders, physicians, nurses, patients, and health care workers for your continued support. Thank you, and that’s it for today.

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

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