Rockwell Medical's Q3 2025 Earnings Call: Contradictions in Customer Contract Resolution, Financial Guidance, and 2025 Revenue Outlook

Date of Call: November 12, 2025

Financials Results

• Revenue: $15.9M for Q3 2025, in line with Q2, down 44% YOY vs $28.3M in Q3 2024; $50.9M for 9 months, down 34% YOY vs $76.8M
• Gross Margin: 14% in Q3 2025, down from 16% in Q2 2025 and 22% in Q2 2024; 18% in Q3 2025 excluding restructuring; 9-month margin 15% vs 18% prior-year

Guidance:

• Confident in meeting full-year guidance; achieved positive adjusted EBITDA in Q3 and tracking to year guidance.
• Adjusted gross margin within guidance range (16%–18%); 18% excl. restructuring in Q3.
• Expect resolution with the largest customer this quarter.
• Will provide 2026 guidance early next year with Q4 results.
• Using increased cash (~$23.7M) to pursue acquisitions and growth investments.
• Consolidated manufacturing/facility closures to reduce costs with additional impact in Q4.
• Prioritizing higher‑margin growth in bicarbonate cartridge and at‑home dialysis; expanding into West Coast.

Business Commentary:

* Revenue and Customer Transition: - Rockwell Medical's net sales were $15.9 million in Q3 2025, reflecting a 44% decrease compared to the same period in 2024. - The decline was driven by the transition of the company's largest customer to another supplier.

• Profitability Improvement:
• 
• The company reported profitability on an adjusted EBITDA basis for Q3.

• This improvement was attributed to strategic initiatives and new customer relationships beginning to generate positive momentum.

• Contract Portfolio Strengthening:

• Over 80% of Rockwell Medical's customers operate under long-term agreements.

• This provides stability and revenue visibility, positioning the company well for future growth.

• New Business Development:

• The company signed new long-term product purchasing agreements with several university medical centers, kidney centers, and hospital systems.

• These agreements, along with potential acquisitions, are expected to contribute to revenue growth in 2026 and beyond.

• Gross Margin Stability:

• Rockwell Medical's adjusted gross margin remained consistent within the guidance range of 16% to 18%.
• This stability is a result of the quality of the customer base and the value proposition delivered in the hemodialysis concentrates market.

Sentiment Analysis:

Overall Tone: Neutral

• Management emphasized progress and confidence: "we were profitable on an adjusted EBITDA basis for the third quarter" and "confidence in our ability to achieve our full year guidance targets." Offsetting this, results show material deterioration: "net sales... represent a 44% decrease" and gross profit down 64% YOY. The tone combines operational optimism with clear near-term revenue pressures.

Q&A:

• Question from Raghuram Selvaraju (H.C. Wainwright & Co, LLC): When do you expect the situation with your former largest customer to be fully resolved; will a final decision be taken before year-end or will you continue providing services into 2026?
  Response: Expect resolution this quarter; currently in contract discussions and will discuss shortly.

• Question from Raghuram Selvaraju (H.C. Wainwright & Co, LLC): When might you provide forward revenue guidance for 2026, and what business development activities will you pursue given your balance sheet strength?
  Response: Plan to provide 2026 guidance early next year with Q4 results; actively pursuing acquisitions using the strengthened cash balance.

• Question from Raghuram Selvaraju (H.C. Wainwright & Co, LLC): What are the key near- and medium-term prospects for the bicarbonate disposables business?
  Response: Bicarbonate cartridge is a higher‑margin product with early customer adoption and meaningful growth potential across the existing customer base.

• Question from Nicholas Sherwood (Maxim Group LLC): How are you balancing organizational restructuring while ensuring investments in the business (hires vs acquisitions vs internal investments)?
  Response: We've reallocated resources—rightsizing operations while shifting priorities and resources toward growth opportunities; restructuring largely being completed by year‑end.

• Question from Nicholas Sherwood (Maxim Group LLC): Where do you see the biggest opportunities to improve gross margin (materials, labor, distribution, packaging)?
  Response: Near term: labor‑cost efficiencies; longer term: reductions in materials and distribution costs.

• Question from Nicholas Sherwood (Maxim Group LLC): Can you provide background on the facility closure referenced in the adjusted EBITDA reconciliation?
  Response: Closed/trimmed one facility as lease expired and consolidated manufacturing into existing sites to reduce expenses, with effects in Q3 and more in Q4.

• Question from Anthony Vendetti (Maxim Group LLC): Update on West Coast expansion and the home dialysis business?
  Response: Expanding West Coast customer base and may add a local facility if critical mass; at‑home business is currently small but growing with a new, higher‑margin configuration gaining traction.

• Question from Anthony Vendetti (Maxim Group LLC): What percent of your business is at‑home today?
  Response: Currently single‑digit percent of sales; company expects the at‑home market to be roughly 10%–15% in the near term.

Contradiction Point 1

Contract Resolution with Largest Customer

It involves the expected timeline and resolution of a contract with a significant customer, which could impact financial projections and business strategies.

When do you expect resolution of your former largest customer issue? - Raghuram Selvaraju(H.C. Wainwright & Co, LLC, Research Division)

2025Q3: We expect that to resolve this quarter. - Mark Strobeck(CEO)

What are the open questions or key parameters for a potential new deal with your largest customer? What impact would a new agreement have on your 2025 revenue guidance? - Raghuram Selvaraju(H.C. Wainwright & Co, LLC, Research Division)

2025Q2: Discussions with DaVita are ongoing. - Mark Strobeck(CEO)

Contradiction Point 2

Financial Guidance and Business Development Activities

It involves whether financial guidance and business development activities can be provided for the upcoming year, which is crucial for investor expectations.

When will you be able to provide forward revenue guidance for the full year 2026? - Raghuram Selvaraju(H.C. Wainwright & Co, LLC, Research Division)

2025Q3: We are in discussions with multiple companies around acquisitions of their business and customer base, and assuming those continue to progress, we'll be able to announce the impact of those shortly. - Mark Strobeck(CEO)

How are you balancing capital allocation between debt repayment and new customer acquisition investments? How will the transition to long-term key customer agreements enhance 2026 revenue predictability? - Raghuram Selvaraju(H.C. Wainwright & Co, LLC, Research Division)

2025Q2: We are not going to give 2025 guidance outside of what we have already given in fiscal year 2025. So revenue is $405 million to $425 million, adjusted EBITDA is $100 million to $120 million, gross margin is 62% to 65%, and adjusted net income is $55 million to $75 million. - Jesse Neri(CFO)

Contradiction Point 3

Customer Revenue Impact and Recovery

It pertains to the company's expectations regarding the impact of losing a major customer and the timeline for recovering from that loss, which could significantly affect revenue projections and investor confidence.

When do you expect the situation with your former largest customer to be fully resolved? - Raghuram Selvaraju(H.C. Wainwright & Co, LLC)

2025Q3: We expect that to resolve this quarter. We are currently in contract discussions with them, and we expect to be able to discuss that shortly. - Mark Strobeck(CEO)

What potential outcomes might result from negotiations with your largest historical customer? What guidance can you provide on revenue growth trajectory for the rest of 2025? - Ram Selvaraju(H.C. Wainwright)

2025Q1: Revenue guidance is on track, and Q2 is expected to be the low point with potential improvement thereafter - Mark Strobeck(CEO)

Contradiction Point 4

Growth Opportunities and Revenue Guidance

It involves differing statements about the company's growth opportunities and their impact on revenue guidance, which are crucial for investor expectations.

When can you provide forward revenue guidance for the full year 2026? What business development activities might you consider given your current balance sheet strength? - Raghuram Selvaraju(H.C. Wainwright & Co, LLC)

2025Q3: Typically, we provide 2026 guidance early in the year. So we expect to continue to do that. We anticipate providing visibility into the company's performance in 2026 with our fourth quarter earnings release. - Mark Strobeck(CEO)

What potential outcomes might result from negotiations with your largest historical customer? What is the expected revenue growth direction for the rest of 2025? - Ram Selvaraju(H.C. Wainwright)

2025Q1: It's still early to provide definitive guidance. - Jesse Neri(CFO)

Contradiction Point 5

Impact of Largest Customer Transition on 2025 Revenue and Gross Margins

It affects the company's financial performance expectations, which are critical for investor assessments and strategic decision-making.

When do you expect the situation with your former largest customer to be fully resolved—before year-end or into 2026? - Raghuram Selvaraju (H.C. Wainwright & Co)

2025Q3: Assuming the transition from our largest customer and the facility closure, we expect revenue to be between $60 million and $65 million for the third quarter and between $235 million and $240 million for the full year. - Jesse Neri(CFO)

What revenue will the largest customer generate in 2025, and what are expectations for future agreements? - Brandon Folkes (Rodman & Renshaw)

2024Q4: Our 2025 revenue guidance range calls for $65 million to $70 million and the fiscal year 2025 of $240 million to $245 million. - Jesse Neri(CFO)