Good day, everyone, and welcome to today's New Ellis Second Quarter 2025 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, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Leah McMullen, Director of Communications. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining today's conference call to discuss New Ellis' financial results for the second quarter, ended June 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. 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 Irvin.

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 positioned New Ellis for growth and the opportunity to drive shareholder value. Revenue for the second quarter was $1.7 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 backorder 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 life-saving therapy. I believe we successfully navigated this temporary setback, and importantly, in the first week of July, we fully reconciled this backorder and are no longer in backorder. This gives us a strong footing in 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-clear devices in the U.S. 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 GoLive planned for October. We expect this move to result in meaningful operational efficiencies and cost savings over the next 12 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 million 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 ultra-filtration. With that, I'll turn the call over to Rob Scott to walk through our financial results in more detail.

Thank you, John, and good morning, everyone. Total revenue for the second quarter was $1.7 million, down from $2.2 million in Q2 of last The decline was primarily driven by the temporary product backorder described earlier. By customer category, pediatric revenues increased 23% compared to the second quarter of 2024. Heart failure and critical care revenue declined 53% and 35%, respectively, with the temporary backorder having a significant impact. Gross margin for the quarter was 55.5% compared to 67.2% in Q2 2024. The margin impact was largely due to underabsorption of fixed overhead because of lower production volumes. Selling general and administrative expenses for the quarter was $3.2 million, 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. operating expenses for the quarter were $3.9 million, a 2% increase over prior year. Operating loss for Q2 was $2.9 million compared to $2.3 million in Q2 2024. Net loss attributable to common shareholders was $12.6 million for a loss of $60.99 per share compared to a net loss attributable to common shareholders of $7.7 million or a loss of $791.02 per share for the same period in 2024. We ended the quarter with $4.5 million in cash and cash equivalents and remained debt-free. The recent $5 million 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.

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 and streamlining 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 in 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. Go ahead, operator.

At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. Once again, that is star and 1. We'll move first to Anthony Bendetti with the Maxim Group. Your line is open.

Thank you. You mentioned the issue with the vendor regarding sterilization, and I believe that accounts for around $400,000 in revenue.

It sounds like that was resolved.

So when was it resolved, and will there be any impact in the current third quarter that we're in?

It was resolved in the first week of July, and we've not been in backorder. 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. The impact was primarily in heart failure and cardiac surgery, simply because we were 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.

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?

Well, I think it is all three. I think pediatrics, we continue to add children's hospitals as customers as they adopt the aqueducts to take care of these small babies that have kidney issues or are not functioning properly. We're growing in cardiac surgery, you know, critical care primarily in cardiac surgery where physicians 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 $1,639 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 I think we're going to see a lot of growth there just as hospitals take advantage of this increased reimbursement.

Okay, great. Thanks so much. I'll hop back in the queue.

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.

Well, I'd like to thank all of our New Ellis employees, stockholders, physicians, nurses, patients, and healthcare workers for your continued support. Thank you, and that's it for today.

this does conclude today's program thank you for your participation you may disconnect at any time and have a wonderful rest of your day