Rockwell Medical, Inc. (DE) Common Stock 2026 Q2 Earnings Call

Heather, please go ahead. Good morning, everyone, and thank you for joining us for this update on Rockwell Medical.

Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and CEO, and Jesse Neri, Rockwell Medical's CFO. Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the SEC. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events.

Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC. Rockwell Medical's quarterly report on Form 10-Q for the three months ended June 30, 2026 was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's second quarter 2026 results. The reconciliation of non-GAAP measures we discuss on today's call can also be found in today's press release. Our Form 10-Q and other reports filed with the SEC, along with today's press release, our updated investor presentation, and a replay of today's call can be found on our website under the investors section. Now, I will turn the call over to Rockwell Medical's President and CEO, Dr. Mark Strobeck.

Thank you, Heather, and good morning, everyone. Thank you for joining us today on Rockwell Medical's second quarter 2026 earnings conference call and webcast. The second quarter was another important step forward for Rockwell Medical. We delivered strong year-over-year growth, continued to expand gross margin, generated positive operating cash flow, strengthened our customer portfolio, and advanced the operational initiatives that we believe will continue to drive long-term shareholder value. As a result, we remain on track to achieve our full year 2026 guidance while continuing to execute against our strategy for further growth in the years ahead. When I think about where Rockwell is today compared to just a few years ago, the difference is significant.

Our focus over the last several years has been straightforward: to build a strong business, improve profitability, generate cash, diversify our customer base, increase operational efficiency, and establish a foundation capable of supporting long-term growth. Those objectives have driven nearly every strategic and operational decision we have made. Today, we are seeing tangible evidence that those efforts are working. During the second quarter, net sales increased 11% compared to the prior year period, driven by continued customer growth, increased purchase activity from existing customers, and the impact of pricing actions implemented across portions of our portfolio. Gross profit increased and gross margin expanded to 18%, reflecting higher volumes and improved operating efficiency. We also generated positive cash flow from operations and ended the quarter with a strong cash position. These results demonstrate continued progress in the execution of our strategy and further improvement in our financial performance.

Perhaps equally important, these results are not driven by a single customer, a one-time initiative, or a short-term event. They are being generated through disciplined execution across the organization. A key component of our strategy has been creating a more diversified and durable revenue base. We currently serve approximately 300 customers, including all five major U.S. dialysis providers, while also supplying products to more than 30 international markets. Over time, we have worked deliberately to reduce customer concentration and increase the percentage of business conducted under longer-term agreements that provide greater visibility and predictability. The second quarter included additional progress on this front. We announced a new agreement with Heritage Dialysis, the renewal of our long-standing relationship with aQua Dialysis. Both agreements reinforce our position as a trusted supplier and further strengthen the recurring nature of our revenue base.

Importantly, these agreements also include annual pricing provisions that better align our products with the value we provide our customers. Our commercial momentum also continues to build in regions where we are investing significant effort. As a result, we continue to see meaningful growth in the Western United States as recently onboarded customers continue to transition business to Rockwell. These wins are particularly important because they demonstrate our ability to compete successfully in new geographies while leveraging existing manufacturing and distribution infrastructure. We continue to remain the leading supplier of liquid bicarbonate concentrates and one of the largest overall providers of hemodialysis concentrates in the United States. We believe our products and services provide meaningful value, and our customers continue to depend on us to deliver high-quality products reliably and consistently in an environment where supply continuity is critical. Another area where we are seeing encouraging progress is operational efficiency.

We have invested substantial time and resources into improving our manufacturing footprint, streamlining operations, optimizing distribution, and implementing automation initiatives. Many of these projects required upfront investment and significant organizational focus. While they were designed to create long-term benefits, we are now beginning to see those benefits reflected in our financial results. One of the clearest examples is the successful activation of two new automated liquid production lines, which increase our manufacturing capacity, improve efficiency, reduce labor intensity, and lower production costs. As utilization continues to grow, we expect these and future investments to continue to contribute to margin expansion and profitability improvements over the coming years. Our objective is not simply to improve margins for a quarter or two. We are focused on creating structural advantages that support sustainable profitability over the long term.

When we discuss our goal of achieving approximately 30% gross margins by 2029, that target is not based on a single initiative. It reflects multiple drivers working together, including higher volume, pricing discipline, increased automation, improved manufacturing efficiency, distribution optimization, and continued operating leverage as the business grows. We believe the progress we delivered during the second quarter demonstrates that these initiatives are moving in the right direction. Beyond our core concentrates business, we are also focused on creating future growth opportunities that are closely aligned with our existing renal care platform. During the second quarter, we incurred a modest amount of expense related to the evaluation and development of a new medical device opportunity that we believe complements our current product portfolio and leverages the commercial relationships, manufacturing expertise, and market knowledge we have built over many years.

Importantly, this is a measured investment that is being funded within our existing operating plan and does not alter our commitment to maintaining a strong balance sheet and positive operating cash flow. While it is still early in the process, we believe this opportunity offers an attractive way to expand our offerings while remaining focused on disciplined capital allocation and creating long-term shareholder value. We will provide additional updates as they become available. Looking ahead, our long-term growth strategy remains centered around three core pillars. First, we will continue growing our core hemodialysis concentrates business through customer acquisition, geographic expansion, enhanced customer retention, and disciplined pricing. Second, we intend to broaden our portfolio with complementary renal care products that can leverage our existing infrastructure. Third, we will continue to evaluate innovations that improve the patient experience and expand our portfolio within the broader renal care ecosystem.

Together, these initiatives support our goal of generating annual net sales in excess of $100 million by 2029 while continuing to improve profitability and cash generation. Before I turn the call over to Jesse, I'd like to address our recently completed reverse stock split. We recognize that some investors may naturally compare this reverse stock split to actions taken during prior periods in the company's history, particularly those who have followed Rockwell Medical for many years. However, it is important to recognize that the circumstances surrounding this reverse split are fundamentally different. The reverse stock split completed this year was undertaken to regain compliance with Nasdaq's minimum bid price requirement to increase interest from institutional investors and reassure customers' confidence in Rockwell Medical.

While market conditions and trading dynamics contributed to Rockwell Medical's share price performance, the reverse split was not driven by the need to raise capital, the deterioration in our operating performance, liquidity concerns, financial concerns, or change in our business outlook. Unlike prior periods, this reverse split was not undertaken in connection with, nor will be followed by a capital raise. At the time of the split, Rockwell Medical has demonstrated continued revenue growth, improving profitability, positive operating cash flow, expanded margins, and a strengthened balance sheet. Since completing the reverse split, we have regained compliance with Nasdaq's listing requirements, and the matter has been closed. More importantly, today, Rockwell Medical is fundamentally stronger than it was several years ago. We have strengthened our balance sheet, improved profitability, expanded margins, diversified our customer base, generated positive operating cash flow, invested in automation, and established a clear strategic roadmap for future growth.

We believe these accomplishments are what should define today's Rockwell Medical. We also continue to believe there is a meaningful disconnect between our current market valuation and the progress being made within the business. While markets ultimately determine value, our responsibility is straightforward: execute our strategy, meet our commitments, communicate transparently, and continue to build a business that generates sustainable long-term returns. We believe the best way to close that gap is through continued execution, and our team remains intensely focused on delivering results. As the second half of 2026 gets fully underway, we are encouraged by the momentum in the business. We believe our company is stronger operationally, healthier financially, and better positioned strategically than it has been in recent years.