Good morning, everyone, and welcome to the Nuwellis Fourth Quarter and Full Year 2023 Earnings Conference Call. Please also note that today's event is being recorded. At this time, I'd like to turn the floor over to Vivian Cervantes from Investor Relations. Ma'am, please proceed.

Thank you, operator. Good morning, everybody. Thank you for joining us on today's conference call to discuss Nuwellis' corporate developments and financial results for the fourth quarter and full year ended December 31, 2023. In addition to myself, with us today are Nestor Jaramillo, Nuwellis' President and CEO; Rob Scott, our CFO; and Dr. John Jefferies, our Chief Medical Officer. Mr. Jaramillo is reporting from Boston. He's attending the 2024 THT conference. At 8 a.m. Eastern today, Nuwellis released financial results for the quarter and year ended December 31, 2023. If you have not received Nuwellis' earnings press release, please visit the Investor Relations 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 upon 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 SEC including the latest 10-K. With that, I would now like to turn the call over to Nestor.

Thank you, Vivian, and good morning, everyone. Welcome to Nuwellis Fourth Quarter and Full Year 2023 Earnings Conference Call. As Vivian mentioned, I'm currently in Boston attending the Technology and Heart Failure Therapeutics Conference, also known as THT. This conference provides attendees with a look into the latest heart failure innovations, focusing on device and technology-based treatment for heart failure. This has been a productive meeting for us with much to report. Last night, we hosted a well-attended symposium titled, Aquapheresis: New Technological and Clinical Developments, where 4 of our key opinion leaders presented 3 significant clinical evidence findings on the safety and efficacy of the Aquadex therapy. Dr. Jefferies will provide more detail later on this call regarding this symposium. Yesterday, we had a podium presentation showing statistical significance in several endpoints at 30 days, including fewer patients rehospitalized, fewer days in the hospital due to heart failure readmissions, lower rehospitalization rates due to cardiovascular events, fewer rehospitalization days due to cardiovascular events, and fewer patients rehospitalized for cardiovascular events. More detail on this data will be presented tomorrow in a late-breaking clinical trial presentation. This conference has served as a platform for the clinical reestablishment of the superiority of ultrafiltration using Nuwellis Aquadex technology compared to traditional diuretics. I'm happy to open our call today with an emphasis on how excited we are about the future of Nuwellis despite the difficult environment for micro-cap companies like Nuwellis. With our steadfast focus on executing our strategic growth initiatives, positive momentum in our business continues to build. 2024 is poised to be another important year for us with key value milestones targeted. This includes the continued commercial introduction of our strategic collaborator, SeaStar Medical, with their selective cytokine therapeutic device branded Quelimmune for the treatment of pediatric acute kidney injury, for which we have exclusive U.S. license and distribution rights. We also look forward to steady progress on our product pipeline with our new pediatric dedicated CRRT device, branded Vivian. We anticipate completing our DaVita pilot program in 2024, paving the way for expanded clinical and market access for our Aquadex system. And finally, we expect to complete the IDE submission for Vivian. I will dive deeper into each one of these initiatives momentarily and provide an overview of our fourth quarter and full-year results. Dr. John Jefferies, our Chief Medical Officer, will also discuss recent positive peer-reviewed publications on our Aquadex system, including expanded applications for our therapy for end-stage liver disease, in addition to providing an update on the clinical evidence presented here at the THT conference. Our Chief Financial Officer, Rob Scott, will provide detailed financial results before opening up the call for questions, followed by my closing remarks. I'm pleased to report that we ended 2023 on a high note, recording our highest total quarter revenue in the company's history. In the fourth quarter of 2023, Nuwellis generated $2.6 million in revenue, a 9% increase compared to the fourth quarter of 2022, led by an increase in disposable utilization and record quarterly international sales. For the full year 2023, Nuwellis generated revenue of $8.9 million, a 4% increase compared to the full year 2022. While our overall growth might seem modest at 4%, we had a very strong second half of the year, resulting in a 27% revenue growth compared to the first half of the year. Our capital equipment sales faced industry-wide headwinds in the first half of the year. However, we saw a remarkable turnaround in the second half with domestic console sales skyrocketing 207% compared to the first half. This signifies strong potential for future utilization growth. Hospitals navigated budget limitations by utilizing our rental programs, resulting in a 23% year-over-year revenue growth, highlighting the flexibility and affordability that we offer. Despite the nursing staff shortages, the number of patients treated with Aquadex therapy increased by 9% from the first half of 2023 to the second half of 2023, demonstrating the value our therapy provides. Now back to the fourth quarter results. In the fourth quarter, our pediatric customer category once again led the way with 35% growth over the prior year driven by a 28% increase in utilization and a 49% increase in console sales, along with opening 4 new pediatric accounts. Heart failure and critical care sales declined 27% and 7%, respectively. For the full year 2023, there was a 7% increase in disposable utilization. The pediatric customer category led with an 11% increase in utilization, followed by critical care with a 9% increase in utilization. Heart failure was relatively flat, posting a 1% decline in utilization. Total sales decreased, total console sales, decreased by 21% for the year due to the industry headwinds we faced in the first half of the year. Overall, we continue to drive utilization gains and open new accounts reflecting a continued increase in the number of patients being treated with Aquadex therapy on an expanding console footprint. Now turning to our recent commercial developments and expected new product introductions. In early January of this year, we were pleased to announce that we received FDA clearance for an additional dual lumen extended-length peripheral catheter, also called dELC. The addition of a new 12-centimeter catheter provides clinicians who treat patients with fluid overload with an additional venous access option to use our Aquadex ultrafiltration system. This new 12-centimeter dELC has the same features as the longer 16-centimeter option but eliminates the need for trimming when a shorter catheter is needed, ultimately leading to increased patient comfort. The introduction of these new catheters should be well-received, with clinicians firming the need for this product. On February 22, we were pleased to announce that our strategic collaborator, SeaStar Medical, received Humanitarian Device Exemption or HDE from the FDA for its selective cytokine therapeutic device branded Quelimmune for use in pediatric acute kidney injury patients. We have exclusive U.S. license and distribution rights for Quelimmune, and we have begun commercial launch activities at targeted medical centers, with further commercial expansion expected later in the first half of this year. The unique technology behind Quelimmune has demonstrated a 50% reduction in mortality rates in children with potentially deadly hyperinflammation. The addition of this product to our growing pediatric customer category will help save the lives of many pediatric patients and further bolster our top-line growth. We are also encouraged by our own internal product development program as we continue to advance the development of our pediatric continuous kidney replacement therapy device branded Vivian. We, along with many pediatric nephrologists, believe this product will have an extremely positive impact on survival and significantly improve the lives of neonates and small children with kidney issues or those born without kidneys. This device complements SeaStar's medical Quelimmune, and we believe these two products will add tremendous value to our growing portfolio serving pediatric patients with fluid overload and renal disease. Our collaboration with DaVita is progressing well, with both teams actively engaged in key areas like pilot selection, patient criteria development, target metric definition, and establishing patient care pathways and order sets for medical staff to start treating patients. We recognize the novelty of these initiatives for DaVita, for hospitals, and for all of us at Nuwellis, and we are taking a meticulous approach to ensure a successful pilot launch. This initiative will enable us to begin treating patients in the inpatient setting with DaVita's personnel and resources. We look forward to sharing further updates on this program's progress in the near future. I would now like to turn the call over to our Chief Medical Officer, Dr. John Jefferies, to discuss recent peer-reviewed publications on our Aquadex system and provide an update on last night's symposium. John?

Thank you, Nestor, and good morning, everyone. We are pleased to continue expanding our clinical evidence, including a symposium yesterday at THT on the clinical merits of Aquadex for a growing number of patients. THT is a conference attended by heart failure specialists who are looking for innovative med tech solutions. The presentations at the symposium last night highlighted 3 important topics, including the role of ultrafiltration in the treatment of acute decompensated heart failure, a clinical comparison of ultrafiltration and diuretics using data from a 224 patient trial called AVOID-HF, and ultrafiltration best practices from a high-volume center. These 3 presentations further reinforced the efficacy of ultrafiltration, reestablishing Aquadex as the preferred method of treating congestion in patients with fluid overload resistant to diuretics. Of the recent clinical publications highlighting the benefits of our Aquadex therapy, let me highlight a new case series featured in Clinical Transplantation, which demonstrated the potential of Aquadex to safely and effectively remove fluid volume for end-stage liver disease patients who do not respond to diuretics. Notably, the findings present a new clinical application for Aquadex already within its current FDA labeling and adds a new patient population for treatment. This publication is a single-center retrospective case series that assessed the utilization of aquapheresis therapy with Aquadex in the intensive care unit setting at Mount Sinai Hospital between January 2020 and July 2023. Fourteen severely ill patients with end-stage liver disease were treated with the Aquadex system during this period. For clinicians treating patients with end-stage liver disease, it can be an enormous challenge to remove fluid when patients don't respond or can't tolerate diuretic therapy safely and effectively. This study demonstrates a new application for the Aquadex system for a large and growing patient population with end-stage liver disease. Unlike continuous renal replacement therapies, Aquadex allows for slow, controlled, and predictable fluid removal that can reduce the risk of kidney injury and help alleviate hepatorenal syndrome. Additionally, treatment with Aquadex may help patients participate in physical therapy and better prepare them for subsequent surgery and liver transplantation. Let me turn it back over to Nestor. Thank you.

Thank you, Dr. Jefferies. I'd like to now return to discuss our Q4 financial results, and I'm going to turn it over to our CFO, Rob Scott.

Thank you, Nestor, and good morning, everyone. Turning to the Q4 financial results. Revenue for the fourth quarter was $2.6 million, representing 9% year-over-year growth and a 6% sequential increase from the third quarter of 2023. This follows a similarly strong third quarter, which saw a 16% growth over Q2 2023. Our pediatric customer category had the strongest growth in Q4 with a 35% increase year-over-year. Heart failure and critical care decreased 27% and 7%, respectively. Gross margin was 54.4% for the fourth quarter compared to a gross margin of 56.9% in the prior year quarter. The margin decline is primarily driven by product and geographical sales mix and lower fixed overhead manufacturing absorption, leading to more efficient inventory levels. Selling, general, and administrative expenses were $3.6 million in the fourth quarter, a decrease of 23% compared to $4.7 million in the fourth quarter of 2022. The decrease in SG&A was primarily due to reduced headcount and related compensation expenses. Fourth-quarter research and development expense was $1.4 million compared to $1.2 million in the prior year period, reflecting a modest increase in R&D spend related to the development of our new pediatric dedicated CRRT device as we approach IDE submission. In the current year period, the company recorded a nonrecurring expense reduction of approximately $800,000, reducing incentive compensation impacting both SG&A and R&D. Additionally, the company recorded a $550,000 SG&A expense in the current year period for contractual spend related to the SeaStar license and distribution agreement. Total operating expenses were $5 million in the quarter, a decrease of approximately $884,000 compared to the fourth quarter of 2022. The period-over-period decrease was due to cost-saving measures implemented early in the second half of the year, which continued through year-end 2023 as we continue to drive operating efficiencies. The operating loss in the fourth quarter was $3.6 million compared to an operating loss of $4.5 million in the prior year period, resulting in a $941,000 period-over-period reduction. The net loss attributable to common shareholders in the fourth quarter was $7.9 million, or a loss of $2.24 per share compared to a net loss attributable to common shareholders of $1.9 million or $0.05 per share for the same period in 2022. The current period's net loss attributable to common shareholders includes $2 million of other expenses and $2.4 million of a deemed dividend and PIK dividend related to the company's October 2023 financing. The prior year period's net loss attributable to common shareholders includes $2.6 million of other income related to the company's October 2022 financing. We ended the fourth quarter with $3.8 million in cash and cash equivalents and no debt on our balance sheet. Understanding the near-term need to raise capital, we have recently undertaken steps to reduce our monthly cash burn rate by approximately 40%, balanced against our strategic growth initiatives, which will provide more flexibility in anticipation of tougher capital market conditions for micro-cap companies like Nuwellis. This concludes our prepared remarks. Operator, we would now like to open the call to questions.

Our first question today comes from Jeffrey Cohen from Ladenburg Thalmann.

Just a couple of questions from our end. So could you talk about the SeaStar Quelimmune device as far as any patient experience thus far? Or what you're saying is your second half launch?

Most of, if not all of the clinical experience with Quelimmune has been in the clinical study they have performed. We have not done any patients under the collaboration agreement yet. Now that we have the HDE, the next step is for census in HDE approval. Each site needs to get their own IRB approval. So we are in that process right now, and then the utilization can start.

Okay. Got it. And nextly, is the 12-centimeter one also being manufactured in your facility?

That is correct, yes. It has been manufactured in our facility, and we plan to start selling it in the next 2 weeks.

Got it. And then could you compare and contrast with us what's working in pediatrics that's so beneficial on the top line growth and what's not working, in particular, in heart failure that's driving the decline?

Regarding pediatrics, this pediatric initiative started back in 2019 with a landmark publication showing that when you have kids under 10 kilograms born with renal disease or absence of kidneys, having continuous renal replacement therapy to serve as the kidneys of the children is beneficial. However, there has not been a pediatric dedicated device. Most of these children are treated with adult CRRT because Aquadex has such a slower rate and a very small extracorporeal volume of fluid. It became very safe, gentle, and effective for treating these children under 10 kilograms. The fact of the matter is that it was not such a therapy. The results of this study show that patients under 10 kilograms treated with Aquadex survived the therapy at a rate of 66%. So that's what drove our business. That started in 2019. I'm just going to make a point here because that's exactly what we are seeing right now with the end-stage liver disease. Coming back to pediatrics, I mentioned the reason for this success in pediatrics is that there is no other therapy. Regarding heart failure, the decline is explainable. We believe that now with the clinical data we have, there will be more appetite for using Aquadex in heart failure patients. We're still working on our evidence and reimbursement. Thus, once we get those in place, we expect to see an increase in sales.

I can provide a little bit more color on just the heart failure decline specifically for the quarter. From a dollar perspective, it was about $160,000 decline. The percentages can be misleading, but the $160,000 was the total dollar amount. About $90,000 of that was driven by capital sales, with a reduction of about $90,000. So we had 3 less capital sales period-over-period. The majority of that is driven by capital, which can be certainly bumpy from time to time. Utilization kind of made up the balance there. We had a couple of accounts that were just a bit soft in Q3; just a handful of them. If those accounts had performed where we typically expect, this quarter could have been even better for us regarding revenue.

That's helpful. And then lastly, could you talk about the current commercial footprint as far as the FDA is concerned and maybe give us a breakdown of the commercial organization's focus in particular areas?

We have about 23 people in the field right now. Nine of them are account managers, and the other 14 are clinical specialists who provide clinical and technical support in the hospitals. All the utilization growth that Rob just mentioned has been purely organic.

Our next question comes from Anthony Vendetti from Maxim Group.

Just on the SeaStar device, the SCD device. Since they have the HDE, you can now go forward, but each hospital has to get their IRB. How long does that take? And are you targeting the hospitals where you already have relationships with your Aquadex system? What is the plan to roll out beyond that? Is this a multi-quarter plan? Or do you feel that as you start to commercialize it into your current base, you could simultaneously start marketing this device with your device to other hospitals?

Good questions, Anthony. Let me try to answer your three-part question. First, regarding the time it takes to get the IRBs, it depends on the hospitals. Some hospitals have IRBs that meet on a monthly or weekly basis; we expect those to be quicker. Others use general IRBs, which may take longer. That's on the IRB timeline. The reason they require IRB is that this is a Humanitarian Device Exemption by the FDA; it is not the regular 510(k) approval. In terms of overlap, which was your second question, the reason why we believe this collaboration is strategically beneficial between the two companies is because the majority of the centers that participated in the clinical studies of Quelimmune are the same customers using our products and reporting on them, so they're our top pediatric accounts in the United States. The first five accounts that we're targeting, three of them are top users of the Aquadex device. After that, we will roll out additional accounts in the following quarters, continuing to expand our reach.

Okay, great. And then obviously, since there is a lot of overlap, it seems like there's obvious cross-selling opportunities. Does that go both ways? In other words, does SeaStar have opportunities in some hospitals that you don't? Does that make it easier to sell the Aquadex system as well?

Absolutely. By being there with Quelimmune, it provides an opportunity to talk about Aquadex, our current device, and also start paving the way for our pediatric dedicated device.

That's right. And then on the cost-cutting, I heard about a 40% cut in monthly costs. Can you outline where that is coming from? And when did those cuts start?

Yes, it started on March 1. There are general expenses; we're becoming more efficient in our headquarters regarding the personnel we need for our strategic growth initiatives. This also includes travel and related expenses and salary cuts for the executive team, along with board fees.

I see. And it sounds like, obviously critical to your success, is the clinical specialists and sales. So that's an area that has, I wouldn’t say off-limits, but hasn't borne the brunt of the cost-cutting at this point. Is that correct?

Correct. We're not touching the sales organization as they are essential for continuing our growth in 2024.

Okay. And then lastly, some companies at this stage also employ independent distributors. Is there an opportunity to do that to help spur sales going forward?

Absolutely. Yes. That's a very good point, Anthony. We have two independent distributors in key markets for us: one in New York City and the other in Northern California. We continue to look at opportunities to add more independent distributors.

Ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Mr. Nestor Jaramillo, CEO, for closing remarks.

Yes. Thank you, everyone, for participating. As I mentioned before, we're very excited about 2024. We continue to execute our strategies, redesigning our commercial strategy by adding DaVita and collaborating with SeaStar. We'll also continue our product development with our pediatric dedicated device, and we remain committed to clinical research with our reverse heart failure trial. I want to thank all our stakeholders, including our employees, stockholders, medical staff, visionaries, and healthcare workers. Without your help, we would not be able to achieve the transformation in the lives of patients suffering from fluid overload. Thank you.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.