[Management View]
Rockwell Medical's management emphasized their strategic priorities for 2025, including securing long-term contracts, optimizing organizational structure, and addressing revenue gaps due to the loss of their largest customer. They highlighted the stability of gross margins and improved cash position as key metrics.

[Outlook]
Management reiterated their performance guidance for 2025, projecting net sales between $65 million and $70 million, gross margins of 16%-18%, and adjusted EBITDA ranging from negative $500,000 to positive $500,000. Future plans include expanding into the Western U.S. market and negotiating new long-term supply contracts.

[Financial Performance]
Rockwell Medical reported a 38% YoY decline in net sales to $16.1 million, primarily due to the transition of their largest customer to a new supplier. Gross profit decreased by 45% YoY to $2.5 million. Adjusted EBITDA improved QoQ from negative $400,000 in Q1 2025 to negative $200,000 in Q2 2025.

[Q&A Highlights]
Question 1: Thanks very much for taking my questions. I just wanted to ask about your expansion plans in the Western United States and if you can provide us with any additional granularity regarding how those initiatives are proceeding and when we might see additional customer acquisition in those territories?
Answer: Yes. Thanks, Ram, for the question. So, we continue to believe the West is a significant opportunity for Rockwell as there is only one provider of concentrates within that marketplace and we believe it represents an approximate $100 million opportunity. Our focus right now has been not only in sort of working through this transition period but also lining up larger customers for that expansion. I think we'll be able to give greater visibility towards that as we get later into the year and some of the discussions that we have ongoing now with DaVita, Fresenius, and others begin to play out. But it is still our intent and it's still our belief that does represent a large opportunity for us and we should be able to give more clarity at that point.

Question 2: The second question I wanted to ask pertains to the negotiations you continue to have with your largest customer. I was wondering if you could give us some sense of what the open questions or key parameters are around potentially reaching a new deal with this customer. If this might ultimately take the form of a long-term agreement like the ones you have in place with the majority of your other customers now. And if by the time we get to the end of those negotiations, such an agreement might be reached in time to have a meaningful upside impact on your 2025 revenue guidance? Thank you.
Answer: So our discussions continue in earnest with DaVita. As I think everyone knows, DaVita had alerted us at the beginning of the year that they were going to begin to transition away with a goal to move away from Rockwell by the middle of the year. DaVita continues to be a purchaser of products from Rockwell beyond that point. It is clear that will continue through the remainder of the year. We are working with DaVita now on putting in place a long-term supply arrangement. Rockwell is not in the business of single small projects of supply in an effort to fill gaps or to supplement other suppliers. We are in the business of putting in place long-term supply arrangements. That message has been communicated, and we feel optimistic that we will come out of those discussions with a long-term supply agreement. That I think will certainly ideally impact financials towards the end of the year, but will certainly impact our financials going forward. I think it's also fair to say that we are working with two other incredibly large suppliers, one being the largest dialysis provider in the world, on a supply arrangement that if completed would have a meaningful impact on fourth-quarter financials. So we've got a number of I think really great opportunities and that is a result of the fact that Rockwell continues, despite the changes in the marketplace, to be a reliable consistent supplier of products that are safe, that are of the highest quality, and the marketplace knows that.

Question 3: And just two other very quick things. Firstly, with respect to the available cash on hand, can you give us a sense of how you're thinking about prioritization with respect to allocation of capital? In particular, how you look at the partitioning of capital allocation between debt pay down, debt repayment and investment into new customer acquisition activities? And also, if you can give us a sense of given the shift towards ensuring that you have long-term relationships and long-term agreements in place with your key customers, how that might translate into greater predictability of revenue in 2026? Thank you.
Answer: Yes. So as far as capital allocation, right now the primary focus is the use of that capital in continuing to invest in capital equipment that allows us to further automate our manufacturing processes and reduce the cost of manufacturing our products. That is exclusively where our resources are being focused, all in an effort to be able to make our products more efficiently. We've obviously modeled out the next five years and certainly believe we've got enough resources and based on the performance of the business to have cash sufficient to satisfy our debt obligation and our lenders certainly firmly believe that as well. So but as far as allocation right now, it's primarily in capital equipment and customer, new customer acquisition. As far as your second question, the number one objective for this organization is to create a reliable and reproducible business that is consistently performing and generating positive cash flow and profitability. All of the arrangements that we've established with our customers, which is a change in direction as we've mentioned previously from not but a couple of years ago is to continue to create that reliable revenue source and that reliable performance of our business. Had we not had the change in our largest customer, I think we were well on our way to doing that. And I think you can look historically over the last 2.5, three years and seen a very consistently reliable growing revenue base. With this change, it has certainly altered that for the period. We have now gone through that transition. We've restabilized the base and are now positioned for further growth to, I would say, get back to growing at a steady and consistent level, but with a highly reliable and reproducible revenue stream.

Question 4: Thank you.
Answer: Our next question comes from Jeremy Pearlman from Maxim Group. Please go ahead. Your line is open.

Question 5: Thank you. Good morning. Just the first question related to gross margins. You were able to keep them relatively flat quarter over quarter even though revenue declined. Maybe just talk a little about what actions you're taking and what's going behind that to keep these gross margins stable.
Answer: Thanks, Jeremy. So we've right-sized the organization really at the beginning of towards the end of Q1 and the beginning of Q2. We've had some staff reductions as it relates to operations, you know, to further decline, you know, in line with essentially our new revenue base. We've also invested in some new equipment, which has increased our efficiency, which is also helping, and we're expecting to see more results better results from that in the future.

Question 6: Yes. And I might also add to Jesse's comments. As we've said previously, the gross margin and profit we were making on our largest customer was not a significant piece driving our overall business, right? That has proven itself out by the fact that revenue has been reduced as a result of them moving away, and it hasn't ultimately significantly affected our gross margin. So I think that's consistent with what Jesse has said, this is another factor here. I think looking forward, I think we are in an incredibly good position, and we've already begun to see even this month a tick up in our gross margin and gross profit. And I think that's as a result of the changes that Jesse just outlined that we are making. So I think we're well-positioned as we go through the second half of the year to be able to maximize that even further.

Question 7: Okay. Understood. Great. And maybe also, I know, you know, prior to when you had the largest customer on board fully, there was a high customer concentration risk that has how much has that been mitigated now that, you know, that contract technically ended at the middle of this year? Or is there still some concentration risk? Are there still some major customers that make up the bulk of the revenue, or has that really been, you know, spread out?
Answer: I'll say it's been spread out. So, back in this time last year, DaVita represented about 40 or 45% of our revenue base. Now they're down to 10%. The other we have two other larger large customers, but they're both around, I would say, 10% to 12% of our revenue. So that concentration risk has gone way down.

Question 8: Yeah. And I think to follow on from that, I mean, we knew when we started this about three years ago that, you know, one of the major risks within this business was so much of our business was concentrated with a single customer. You know, we've worked continuously to diversify that by adding new customers, by completing the acquisition of Metivators, by doing a number of other things to try to dilute that. The work that we completed in an effort to do that, I think, is what creates the base that allows us to go through that transition of losing our largest customer, right, while still being able to maintain a sizable business. Had that occurred three years ago, I don't think we would be sitting in this position. So, all of the work that we've done has been essentially to address that, right? The fact that we continue to exist and continue to be able to grow this business in a meaningful way, I think speaks to all of the things that we've done. But as Jesse points out, we are not going to find ourselves in that position again going forward.

Question 9: Okay. Great. And then just last question. You know, in April, one of your competitors had a voluntary recall of contaminated product. Have you been able to, I mean, I know to, you know, utilize that to any advantage when you're negotiating with customers since then? I mean, it's been four months now.
Answer: Yes. It's a great question. Yes. Unfortunately, the organization that our largest customer shifted towards did have a significant issue in the manufacturing of their liquid products. As you pointed out, there was a significant recall of all of their liquid products. Unfortunately, there was contamination associated with the products that led to not only serious health consequences to patients but apparently according to what we learned in the Federal Register actually unfortunately killed the patient. So we are obviously working quite closely with them to supplement their supply as well as working with our largest customer to make sure that there is continuous supply of liquid both acid and bicarbonate products in an effort to maintain patient care and the ability of patients to continue to access dialysis treatments.

Question 10: Okay. Great. Thank you so much for taking my questions. Have a nice day.
Answer: Thanks, Jeremy.

[Sentiment Analysis]
The tone of the analysts was inquisitive and focused on understanding the company's strategic direction and operational adjustments. Management's responses were optimistic and confident, emphasizing stability and future growth opportunities.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 | QoQ Change |
|-----------------------|---------------|---------------|----------------|
| Net Sales | $16.1 million | $25.8 million | -38% |
| Gross Profit | $2.5 million | $4.6 million | -45% |
| Adjusted EBITDA | -$200,000 | $1.4 million | -114% |
| Cash Position | $18.4 million | $17.3 million | +6% |

[Risks and Concerns]
The primary risks highlighted include revenue decline due to customer transition, gross profit pressure, and increased net loss. Customer concentration risk has been significantly mitigated, but the company remains exposed to market competition and operational challenges.

[Final Takeaway]
Rockwell Medical is navigating a challenging transition period marked by significant revenue decline due to the loss of its largest customer. However, the company has managed to stabilize gross margins and improve adjusted EBITDA QoQ through strategic cost control measures and long-term contracts. Management remains optimistic about future growth opportunities, particularly in the Western U.S. market, and is actively negotiating new supply agreements that could positively impact financials later in the year. Despite current headwinds, Rockwell Medical's focus on operational efficiency and customer retention positions it well for steady growth and revenue predictability in the coming years.