• Revenue: $1.9 million, a 2% increase year-over-year.

• Pediatric Revenue Growth: 40% increase, driven by a 54% rise in consumable utilization.

• Critical Care Revenue: Flat, with a 9% increase in consumable sales.

• Heart Failure Revenue: Decreased by 38%, due to lower utilization and console sales.

• Gross Margin: Improved to 64.1% from 58.4% in the prior year.

• Operating Expenses: $5.9 million, down from $6.9 million year-over-year.

• Operating Loss: Reduced to $4.7 million from $5.8 million in the prior year.

• Net Loss: $3.8 million, or $0.6 per share, improved from a net loss of $6.5 million, or $5.76 per share.

• Cash and Cash Equivalents: Ended the quarter with $1.4 million.

• Public Offering: Closed with gross proceeds of $2.7 million.

• Warning! GuruFocus has detected 5 Warning Signs with NUWE.

Release Date: May 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Nuwellis Inc reported a revenue of $1.9 million for Q1 2024, marking a 2% increase year-over-year, driven by an 11% increase in consumable utilization.

• The pediatric customer category showed significant growth with a 40% increase in revenue, driven by a 54% increase in consumable utilization.

• Gross margin improved to 64.1% in Q1 2024 from 58.4% in the same period last year, primarily due to higher manufacturing volumes of consumables.

• Operating expenses decreased by approximately $1 million compared to Q1 2023, as a result of cost-saving measures implemented in the second half of 2023.

• Nuwellis Inc has no debt on the balance sheet and successfully closed an underwritten public offering with gross proceeds of $2.7 million.

Negative Points

• Heart failure revenue decreased by 38% due to lower utilization and console sales.

• First quarter capital sales were lower than expected, continuing a trend of unpredictability in capital sales cycles at hospital accounts.

• Selling, general, and administrative expenses, although reduced, still represent a significant cost at $4.6 million for the quarter.

• The company reported a net loss of $3.8 million for Q1 2024, indicating ongoing challenges in achieving profitability.

• Nuwellis Inc ended the quarter with $1.4 million in cash and cash equivalents, which may pose challenges in sustaining operations without additional funding.

Q & A Highlights

Q: Can you provide an update on the C-store distribution agreement, including training for salespeople and expectations for sales? A: Nestor Jaramillo, President and CEO of Nuwellis, explained that training for clinical education specialists has begun, targeting initially five centers. The company expects SeaStar clinical personnel to be heavily involved in these initial sites. The cross-selling opportunities with Quallaby One are significant, especially when combined with upcoming pediatric dedicated devices, which could greatly improve outcomes for children.

Q: What are the expected consumable generation and factors determining sales from capital equipment sales? A: Jaramillo noted that consumable use per console varies by hospital and is dependent on the extent of therapy prescription across different units. Some hospitals treat numerous patients, leading to high utilization of consoles, while others with fewer consoles treat fewer patients. The key driver is the prescription rate of the therapy by doctors.

Q: What strategies are contributing to the anticipated 50% reduction in costs this year? A: Jaramillo mentioned that cost reductions are primarily due to scaling back on the use of consultants, particularly in software development for the pediatric device VBN. Other strategic initiatives have not been affected, allowing for significant cost savings while continuing essential projects.

Q: What is the anticipated cash burn rate following recent financing, and what are the key milestones for the near future? A: Jaramillo stated that the recent financing should sustain operations until early fall. Key milestones include commercializing Quelimmune, continuing the DaVita pilot, and potential changes in reimbursement codes. Success in these areas will position the company for further financing if necessary.

Q: How do capital equipment sales impact overall financial performance, especially given the current economic climate? A: Jaramillo acknowledged that capital equipment sales have been inconsistent, similar to industry trends post-pandemic. He compared the situation to other companies like GE, noting challenges due to capital constraints at hospitals. However, he remains optimistic about improvements in sales through the year.

Q: Can you discuss the financial results for Q1 2024 in more detail? A: CFO Robert Scott highlighted a revenue of $1.9 million, a 2% growth driven by an 11% increase in consumables utilization. Gross margin improved to 64.1% due to higher manufacturing volumes. Operating expenses decreased by $1 million due to early implementation of cost-saving measures, leading to an improved operating loss of $4.7 million compared to the previous year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.