Nephros, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net revenue for the three months ended September 30, 2026, increased 18% year-over-year to $5.6 million, compared to $4.8 million in the same period in 2025.
• Net income for the quarter increased to $0.5 million, up from $0.3 million in the third quarter of 2025.
• Adjusted EBITDA for the quarter rose to $0.6 million, compared to $0.4 million in the prior-year quarter.
• For the nine months ended September 30, 2026, net revenue was $16.9 million, a 20% increase from $14.1 million in the same period of 2025.
• Core programmatic revenue grew 19% year-over-year for the nine-month period.
• Net income for the nine months ended September 30, 2026, increased to $1.8 million, compared to $1.1 million in 2025.
• Adjusted EBITDA for the nine-month period increased to approximately $2.0 million, up from $1.4 million in 2025.
• Cost of goods sold for the quarter was $2.3 million (26% increase from $1.8 million in 2025).
• Gross margin for the quarter was 58%, down from 61% in 2025.
• Gross margin for the nine months ended September 30, 2026, was 61%, down from 63% in 2025.
• Selling, general and administrative expenses were $2.4 million for the quarter (9% increase from $2.2 million in 2025) and $7.4 million for the nine months (10% increase from $6.7 million in 2025).
• Research and development expenses were $331,000 for the quarter (2% decrease from $338,000 in 2025) and $1.0 million for the nine months (up from $0.9 million in 2025).
• As of September 30, 2026, the company held cash and cash equivalents of approximately $4.5 million, down from $5.4 million as of December 31, 2025.
• The company remains debt-free.

Guidance and Future Outlook:

• Management expressed confidence in the underlying strength and durability of the business based on performance through the first nine months of the year.
• The company aims to finish 2026 strong and continue building a larger, more predictable, and more valuable company for shareholders.
• Nephros plans to deepen investment in education as a driver of commercial growth and market development.
• Management intends to leverage emerging industry standards, regulatory developments, and market intelligence to support expansion into new applications and markets.

Business Segments and Product Lines:

• The company added approximately 31 new customer sites in the third quarter, bringing the active installed base to a record 1,766 sites.
• Healthcare represented approximately 64% of new sites added during the quarter.
• Commercial and industrial customers accounted for approximately 17% of new sites, with the remainder from government, military, hospitality, residential, retail, and other applications.
• Revenue growth was driven by programmatic growth (8% increase in the quarter), significant growth in emergency response revenue, and growth in service revenue.
• The Nephros Water Institute continues to operate educational webinars as a third pillar of the business alongside products and service.
• Gross margin compression in the nine-month period was attributed to the weakening of the U.S. dollar against the Euro and rapid revenue growth from commercial products and services, which yield lower margins than the infection control business.
• The nine-month gross margin benefited from the recognition of an IEEPA tariff refund of approximately $0.6 million, recorded as a reduction of cost of goods sold.

Market and Competitive Landscape:

• Competition continues to evolve, and the broader economic environment remains uncertain.
• The company is expanding its presence beyond traditional healthcare markets into diverse commercial and industrial applications.
• Management believes the combination of differentiated products, service capabilities, and education increasingly distinguishes Nephros in the markets it serves.

Risks and Challenges:

• Forward-looking statements note risks including the ability to further develop the sales organization and realize increased revenues.
• Financial results based on emergency response sales may be outside the company's control.
• U.S. tariffs may increase expenses.
• Inflationary factors and other economic and competitive conditions pose risks.
• The company faces risks related to the availability of capital when needed and dependence on third-party manufacturers and researchers.
• Regulatory reforms could impact future revenue growth.

Management Commentary and Tone:

• Robert Banks, President and CEO, stated that the third quarter continued strong momentum and that the company translated growth into improved profitability.
• Management highlighted the expansion of the customer base and the breadth of applications as encouraging indicators.
• The tone was confident, with management stating the company is entering the final months of the year from a position of strength.
• Management emphasized the strategy of evolving beyond products alone to include service and education.

Other Key Points:

• The company reported trailing twelve-month revenue of more than $21 million.
• The IEEPA tariff refund of $0.6 million covered tariffs paid from April 2025 to February 2026; approximately $0.3 million corresponded to inventory converted to revenue in 2026, and the remaining $0.3 million corresponded to inventory converted to revenue in 2025.
• A conference call was hosted on November 5, 2026, at 4:30 PM Eastern Time to discuss results.
• The company has no preferred stock issued or outstanding.
• Common shares issued and outstanding increased to 10,870,004 as of September 30, 2026, from 10,644,268 as of December 31, 2025.