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    NEPH
    Earnings call· Jun 2026(Q2 FY26)

    NEPHROS Q2 FY26 earnings call NEPH

    Aug 6, 2026 Source

    Executive summary

    Nephros Q2 FY26 — Record Revenue and Profitability Driven by Broad-Based Growth

    Nephros delivered a record-breaking quarter, showcasing broad-based growth across products and services, underpinned by strong execution and customer retention. While a significant tariff refund boosted reported profitability, the underlying business demonstrated robust expansion, particularly in recurring programmatic revenue and service offerings. The company continues to invest in market expansion, new product development, and educational initiatives to drive future growth, despite ongoing tariff and currency headwinds.

    Highlights

    5

    • Record quarterly revenue of $6 million, up 36% year-over-year.

    • Core programmatic product revenue grew approximately 27% year-over-year.

    • Service-only revenue nearly tripled.

    • Net income increased over 400% to $1.2 million for the quarter.

    • Adjusted EBITDA increased 260% to $1.3 million for the quarter.

    Concerns

    5

    • Gross margin continues to be impaired by the ongoing 10% tariff.

    • Weakening U.S. dollar relative to the Euro increased shipping costs.

    • Growing contribution from lower-margin commercial and service revenue impacted blended gross margin.

    • Net cash provided by operating activities declined by $313,000 year-over-year in Q2.

    • Net cash used in operations for the first half of FY26 was $990,000.

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Core Programmatic Product Revenue
    This represents the recurring foundation of the business, with customers purchasing replacement filters over time.
    		—27%——
    Service-Only Revenue
    Customers are increasingly relying on Nephros for installation, replacement, and ongoing support, leading to significant growth. This revenue stream currently carries lower margins than core infection control products.
    		—nearly tripled——
    Emergency Response Revenue
    This business can fluctuate based on outbreaks and infrastructure issues. While it increased meaningfully in Q2 FY26, it slightly offset overall growth for H1 FY26 and is not a primary driver of long-term strategy.
    		—increased meaningfully——

    Operational metrics

    27
    Total Revenue
    $6 million36% increase YoY
    Q2 FY26

    Highest quarterly revenue in company history.

    Total Revenue
    $4.4 million
    Q2 FY25

    Prior year comparative revenue for Q2.

    Total Revenue
    15%sequential increase QoQ
    Q2 FY26

    Sequential increase from record first quarter.

    Total Revenue
    $11.2 million21% increase YoY
    H1 FY26

    Total revenue for the first six months of the year.

    Total Revenue
    $9.3 million
    H1 FY25

    Prior year comparative revenue for H1.

    Gross Profit Margin
    67%vs 63% in Q2 FY25
    Q2 FY26

    Reported gross profit margin, largely due to tariff refund.

    Gross Profit Margin
    63%vs 64% in H1 FY25
    H1 FY26

    Reported gross profit margin for the first six months.

    Tariff Refund
    $600,000
    Q2 FY26

    Refund primarily recognized as a reduction of cost of goods sold. $30,000 of the refund related to Q2 FY25 sales, which would have increased Q2 FY25 GPM by ~1 percentage point.

    R&D Expenses
    $366,00018% increase YoY
    Q2 FY26
    R&D Expenses
    $712,00017% increase YoY
    H1 FY26
    SG&A Expenses
    $2.4 million10% increase YoY
    Q2 FY26
    SG&A Expenses
    $4.9 million11% increase YoY
    H1 FY26
    Net Income
    $1.2 million400% increase YoY
    Q2 FY26

    Compared to $237,000 in the prior year period.

    Net Income
    $237,000
    Q2 FY25

    Prior year comparative net income for Q2.

    Net Income
    $1.3 million68% increase YoY
    H1 FY26

    Compared to $800,000 in the prior year period.

    Net Income
    $800,000
    H1 FY25

    Prior year comparative net income for H1.

    Adjusted EBITDA
    $1.3 million260% increase YoY
    Q2 FY26

    Compared to $355,000 in the prior year period.

    Adjusted EBITDA
    $355,000
    Q2 FY25

    Prior year comparative adjusted EBITDA for Q2.

    Adjusted EBITDA
    $1.5 million46% increase YoY
    H1 FY26

    Compared to $1 million in the prior year period.

    Adjusted EBITDA
    $1 million
    H1 FY25

    Prior year comparative adjusted EBITDA for H1.

    Net Cash Provided by Operating Activities
    $681,000declined $313,000 YoY
    Q2 FY26

    Compared to $994,000 provided in Q2 FY25.

    Net Cash Provided by Operating Activities
    $994,000
    Q2 FY25

    Prior year comparative net cash from operating activities for Q2.

    Net Cash Used in Operations
    $990,000
    H1 FY26

    Compared to net cash provided by operations of $1.3 million in H1 FY25.

    Net Cash Provided by Operations
    $1.3 million
    H1 FY25

    Prior year comparative net cash from operating activities for H1.

    Cash Balance
    $4.7 millionincreased from $4 million as of March 31, 2026
    as of June 30, 2026
    Debt Status
    debt-free
    as of June 30, 2026
    Customer Count
    1,724just a few more than last quarter
    Q2 FY26

    Growth primarily from sales within existing customers rather than new customer acquisition.

    Industry KPIs

    3
    MetricValueDetails
    Tariff cost impact$600,000USD
    Parts aftermarket businessnearly tripled
    Data center prime power demand—

    Product announcements

    1
    ProductTypeDetails
    PFAS, Microplastics, Nanoplastics, Sterile Processing, and Broader Commercial Application Productslaunch

    Risks & headwinds

    4
    Continuing Tariff Policyongoing

    10% tariff

    Mitigation: Evaluating pricing, sourcing, freight, product mix, and operational efficiencies to offset costs.

    Currency FluctuationsQ2 FY26

    Weakening of the U.S. dollar relative to the Euro increased shipping costs.

    Mitigation: Evaluating pricing, sourcing, freight, product mix, and operational efficiencies to offset costs.

    Product Mix Impact on Gross Marginongoing

    Growing contributions from commercial and service revenue, which currently carry lower margins than core infection control products.

    Mitigation: Focus on margin improvement through various operational levers.

    Net Cash from Operations DeclineQ2 FY26 and H1 FY26

    Net cash provided by operating activities declined by $313,000 YoY in Q2 FY26 and was a net use of $990,000 in H1 FY26.

    Mitigation: Positive net income was more than offset by increases in accounts receivable and inventory.

    What to watch in Q3 FY26

    4

    New Product Adoption

    next 2-3 quarters
    Currentnot yet gained traction
    Targetincreased sales and market penetration

    Why it matters

    New products for PFAS, microplastics, nanoplastics, and sterile processing are expected to be future growth drivers, indicating the company's ability to evolve and leverage R&D.

    The microplastics or more importantly, nanoplastics as well as PFAS and some of the other newer products have recently been released. It's with the exception of sterile processing and maybe the HydraGuard, which were earlier prior year, the new products haven't quite gained traction yet, and it does take some time for adoption to occur.

    Q&A highlights

    5

    Were new product launches (microplastics, PFAS) reflected in Q2 results, or was growth primarily from core legacy products?

    New products like those addressing microplastics and PFAS have only recently been released and have not yet gained significant traction. They are expected to be future drivers, likely 2-3 quarters out, as market education and regulation increase. Current growth is primarily from core products.

    “The microplastics or more importantly, nanoplastics as well as PFAS and some of the other newer products have recently been released. It's with the exception of sterile processing and maybe the HydraGuard, which were earlier prior year, the new products haven't quite gained traction yet, and it does take some time for adoption to occur.”

    asked by Unknown Analyst · answered by Robert Banks

    2 min read5 chapters

    Detailed Narrative

    01

    Record Revenue and Profitability

    Nephros achieved its highest quarterly revenue in history, reaching $6 million, a 36% increase over Q2 FY25. This growth was broad-based, with core programmatic product revenue increasing by approximately 27% year-over-year and service-only revenue nearly tripling. The company also reported its highest quarterly net income of $1.2 million, up over 400%, and adjusted EBITDA of $1.3 million, up 260%.

    02

    Gross Margin Dynamics and Tariff Impact

    Reported gross margin for Q2 FY26 was 67%, compared to 63% in Q2 FY25. This increase was primarily due to a $600,000 tariff refund recognized, with $100,000 relating to Q2 FY26 sales and $500,000 to prior periods. The refund boosted Q2 FY26 gross margin by approximately 9 percentage points. However, ongoing 10% tariffs, increased shipping costs due to a weakening Euro, and a growing mix of lower-margin commercial and service revenue continue to pressure underlying margins.

    03

    Strategic Pillars for Growth

    The company is building an integrated water safety platform around three pillars: differentiated products, installation and replacement services, and education through the Nephros Water Institute. This strategy aims to deepen customer relationships, ease product adoption, and inform customers about water safety risks. Investments are focused on expanding presence in key markets like Greater New York and Puerto Rico, increasing service adoption, and growing education-led demand.

    04

    New Product Development and Market Awareness

    Nephros is introducing new products addressing emerging concerns such as PFAS, microplastics, nanoplastics, sterile processing, and broader commercial applications. While these newer products have not yet significantly contributed to current revenue, they are expected to be future growth drivers as market education and regulatory awareness increase. The company is also strengthening investor awareness through events and increased communication around water quality issues.

    05

    Operational Investments and Cash Flow

    Research and development expenses increased by 18% in Q2 and 17% in H1, driven by higher salary expenses from increased headcount. Selling, general, and administrative expenses rose 10% in Q2 and 11% in H1 due to increased headcount and sales commissions. Net cash provided by operating activities declined in Q2 and resulted in net cash used in operations for H1 FY26, primarily due to increases in accounts receivable and inventory. The company maintains a strong balance sheet with $4.7 million in cash and no debt.

    AI-generated summary of the company’s earnings call. Not investment advice.