Nephros, Inc. (NEPH) Earnings Call Transcript & Summary

Good morning, everyone. We are about to get started in our virtual investor conference. I'm joined here with Judy Krandel, CFO. I'm Robert Banks, CEO of Nephros. We are having a great amount of people still joining in. Attendance is really high. So we're just going to give this a few more seconds before we get kicked off. So this is really exciting, Judy.

It's -- the day has arrived. We look forward to sharing more about Nephros today.

So I really do thank everybody for joining, especially our investors, analysts and those who are just wanting to learn more about Nephros. And on behalf of the entire team, we're just really excited to have everybody here. I want to extend a warm welcome to everybody who's joining us. And we're going to spend about 90 minutes or so just sharing more Nephros, what we do and giving everyone a chance to get to know us better. During this session, you'll hear about updates on growth strategies, financial performance, where we're going in the future, if there's a live Q&A and just lots, lots and lots of to learn about Nephros. We'll be talking about a couple of new exciting things that we're doing here as well and just stay tuned. So just thank you again for your interest. Dina is going to be moderating for us in the background. And just I think we're about ready to get started. So with that being said, we just opened up. We have some remarks at our previous quarter we're going to share with you. So have a listen and then we'll be back with you shortly after that. [Presentation]

Hello. I'm Robert Banks, President and CEO of Nephros. Thank you for taking the time to learn more about who we are and where we're headed. Nephros was founded over 2 decades ago. We have a single powerful mission to improve the human relationship with water. From our origins developing filtration technologies for dialysis, we've evolved into a company that helps to protect lives from patient care to commercial applications in both programmatic and emergency response settings. We have recently been expanding into many additional non-health care-related applications, which we will also highlight. Today, we deliver advanced water filtration technologies that remove bacteria, viruses and endotoxins, right at the point of use, where people interact most directly with water. Our products are used in hospitals, labs, office buildings, airports and correctional facilities. We excel at providing solutions at times of crisis when clean water access becomes a matter of survival. Waterborne infections are an often overlooked threat in health care and public infrastructure. At Nephros, we tackle that head on by working with our customers, to create simple, scalable and rigorous solutions to help reduce the risk of infection and contamination. In the wake of increasing regulatory scrutiny and public awareness, water safety is not just a concern, it's responsibility. That's where we come in. Why now? Why Nephros? Nephros is in a category all its own. We're small enough to be nimble yet established enough to deliver. Our products are used daily in thousands of facilities across the country. And we're not just providing water filters, we're creating systems, partnerships and peace of mind through guaranteed protection. What makes us different is not only what we do but how we do it. We focus on high-impact applications where our technology helps prevent infections, protect patients and enable compliance with some of the most demanding health care and safety guidelines and standards. Since I joined Nephros, we've sharpened our strategy and broadened our impact. We've entered new markets with high flow filtration solutions, introduced next-generation point-of-use filters for commercial and health care environments and built out emergency response capabilities that allow us to serve communities during water crisis. We're growing our base of active customer sites, focusing on high retention, programmatic revenue and scaling responsibly with operational discipline, but more than anything, we're staying true to the values that have carried Nephros forward for over 20 years. Our leadership team and the broader Nephros team is the engine behind our growth and resilience. What we share is not just technical skill, but a deep alignment on values, a bias for action and relentless focus on doing things the right way. As we close, Nephros is a focused, values-driven company, tackling a vital global challenge, how to ensure safe water wherever it matters most. If you're looking for an investment that delivers meaningful impact, technical excellence and long-term value, we believe Nephros is a company worth watching. Thank you again for your interest, and we look forward to building the future of water safety together.

My name is Judy Krandel and I'm the CFO of Nephros. Now for those who don't know me, my background is very similar to yours. I spent many years on the buy side as an investor in small public companies. Ten years ago, I went corporate and have been the CFO of a few public companies. I've also been on several public company Boards. I joined Nephros 18 months ago and have been very busy helping the team to improve our financial operations and controls as well as focusing on growth initiatives for our company. We have a terrific accounting team led by our controller, Judy Mazini. She and her team help make our timely financial reporting possible. Our revenue is derived primarily by the sale of our filters with a small part of revenue from the sale of components and services to support the installation and use of our filters. Now filter prices range from $60 to $300. They're either sold individually or as part of a kit with components. The majority of our filters are FDA approved as medical products and sold to hospitals, dialysis equipment manufacturers and to a smaller extent, other health care service providers. We also have a small part of our business where we sell non-FDA-approved filters to other commercial entities such as restaurants, hotels, airports, government entities, et cetera. In total, we sell to over 1,600 active customers and focus both on growing our customer numbers as well as increasing sales to existing customers. Now we focus on 2 types of sales, programmatic and emergency response. But programmatic, we mean customers who replace filters on a regular basis as the filters pass their expiration date. The goal is to have customers agree to be in a regular program with us with automatic shipments at the time of expiration. Emergency response business reflects onetime sales to an entity with an unexpected outbreak of bacteria such as Legionella. They must immediately address this issue and typically need filters sent out within 24 hours. Now this is a very lucrative business, but unpredictable and lumpy. Just as background for those newer to our story, we reported 2024 revenues of $14.2 million and net income of $74,000. Our revenue was approximately flat with 2023 as we showed nice growth in our programmatic business that was offset by a decline in our emergency response business. We had gross margins of a very healthy 62%. And we used approximately $500,000 in cash from operations, primarily from an increase in inventory. In the first quarter of 2025, we had revenue of $4.9 million, an increase of 38% from the first quarter of 2024. This was our highest quarterly revenue, and we had nice growth in both programmatic and emergency response business. Now we did get the benefit of some customers buying earlier in the year as well as unusually high emergency response business, but we are quite pleased with the results. Our gross margins improved to 65%, reflecting the mix of products sold in the quarter, a small price increase taken in February 2025 as well as reduced reserves and write-offs. Net income, adjusted EBITDA and cash flow from operations were all nicely positive. As of March 31, 2025, we had cash of $4.1 million, and we are debt-free. We have a very simple capital structure. We have 10.6 million shares outstanding with approximately 1.6 million employee stock options. Our growth strategy includes both internal growth as well as external growth. And we are looking to supplement our internal growth efforts through our sales force and our distributor network with things like strategic partnerships, mergers and acquisitions. We look to partner with other companies in complementary businesses in the clean water industry. Our goal is to grow our revenue and cash flows as we build a larger presence in the industry.

Hello, everyone. I'm Brianne McGuire, Director of Business Development here at Nephros. I appreciate the chance to share how our team is driving measurable strategic growth by sharpening our focus to identify white space, seize opportunity and communicate effectively with key stakeholders. Since stepping into this role in late summer of 2024, I've worked to unify our sales and business development efforts, connecting market insight with execution, aligning our commercial priorities and strengthening the way we deliver and communicate value across every channel. As announced in our May 8 press release, Nephros posted record Q1 revenue, the highest in our history. Both core engines of our infection control business delivered our programmatic partnerships with health care facilities and our emergency response support for facilities in crisis. Behind that record-setting quarter is an integrated model. It's driven by strategy, messaging and execution. So let's start by talking about strategy. We've expanded our commercial vision with purpose. In addition to deepening our presence in health care, we've moved into high-potential verticals where our infection control solutions address critical often overlooked challenges. This includes regulated manufacturing, sterile processing, aviation and disaster preparedness. Some of these areas are already producing results and others represent strategic groundwork we've been intentional about laying. For example, our HydraGuard 20-inch filter was launched with targeted positioning for sterile processing with additional relevance for labs and manufacturing facilities. In sterile processing specifically, our work translating AAMI ST108 into clear, actionable practices for partners and customers has been instrumental. Our education first approach is unlocking long-term value for facilities, navigating regulatory pressure and quality risk. Our newly launched S100 in-line micro filter is opening doors in decentralized and mobile environments where traditional filter installation may not be feasible, whether supporting emergency eyewash stations, residential fixtures, mobile medical units or recreational vehicles, this product enables comprehensive bacterial remediation, even in low pressure conditions. Disaster preparedness has also become a meaningful driver. While we've long supported water safety emergencies like oil water advisories and pathogen outbreaks, we've now expanded into broader disaster response. Our ability to provide immediate infection control support following hurricanes Milton and Helene demonstrated the real-world value of being a ready and proven partner and that's opened new doors for long-term preparedness planning. We're also gaining traction in the aviation. Following the federal GSA mandate requiring Legionella testing at all federally owned or leased buildings. We responded quickly when an airport detected contamination in its water system. That onetime emergency support has since evolved into a major programmatic contract for ongoing control across drinking fountains, bottle fillers and ice machines. These are the opportunities that come from understanding the problem, recognizing the white space and positioning Nephros where others aren't even looking but should be. Our strategy is to lead with relevance, deliver with execution and reinforce value through trust. That's how we grow. And this brings me to messaging, another core part of my role. I lead our efforts in defining how we talk about our products. Our value propositions, product positioning, target markets and most importantly, why water safety matters, whether developing partner-facing tools, equipping our sales team with deep knowledge of industry drivers, or representing Nephros at national events, such as AIHA Connect and [ ASHAI ] Innovation, I ensure our voice is clear, credible and customer centered, but message without execution doesn't deliver. Our sales team is lean, focused and driving revenues through value-based selling. Over the past year, we've tightened our pipeline discipline, improved CRM usage and forecasting accuracy and aligned sales activities to priority markets. We've also made space for creativity, testing new vertical approaches, expanding outreach channels and listening closely to what our prospects are really asking for. A key example is our recent public webinar on ASHRAE 514 where more than 200 people from numerous industries registered and showed up with deep engagement and thoughtful questions throughout the event. The results continued progress in our core markets, early traction in new ones and a greater sense of readiness to respond, especially in times of crisis. So what's next? We continue pursuing disciplined expansion into government support, sterile processing, manufacturing and mobile environments. We continue refining our value story to make complex solutions simple, and we remain focused on execution, building strong partnerships supporting sales performance and staying close to customer needs. Thank you.

I'm Vashone Thomas, and I serve as the Vice President of Quality, Regulatory and Human Resources at Nephros. I'm here because I'm incredibly passionate about building organizations that are not only compliant and efficient, but also resilient, ethical and scalable. I believe that when QA, quality assurance, RA, regulatory affairs and HR, human resources, are done right. They don't just support the business. They protect and accelerate it. Let me begin with my role in quality and regulatory. At Nephros, product quality and patient safety are nonnegotiable. We operate under certified ISO 13485 quality management system and participate in MDSAP which means we meet the regulatory requirements of the FDA, Health Canada and [ Visa ] in Brazil and other markets as well. We ensure our products consistently meet high standards through robust design controls rigorous validation, supplier oversight and multiple quality checkpoints before anything reaches our customers. Now as you know, things can go wrong in any industry. The real value of quality assurance is how quickly and effectively you respond. That's why we built a strong complaint handling and [ capital ] system. We monitor real-time customer feedback, track nonconformities and use KPIs to stay ahead of issues before they become costly problems. We're also deeply committed to risk-based metrics. Formal risk assessments aligned with ISO 14971 are embedded throughout our product life cycle. From FMEAs to internal audits to supplier reviews we proactively identify potential failures and build in safeguards to mitigate them. This protects both patients and the business from unexpected disruptions. Now let's talk efficiency. A lot of people think that compliance slows down innovation. At Nephros, we take the opposite approach. Our QA team is involved early in the R&D phase to align regulatory strategy with business priorities. This means we can move quickly without cutting corners, especially important as we expand into new markets and innovate in water filtration technology. We've also invested in digital systems like our EQMS, electronic quality management system to scale with us, whether it's documented controls, training or approvals, our infrastructure is designed to grow with the business while staying compliant. So how do we stay current through ongoing audits, regulatory monitoring and external training. Compliance is not a onetime event. It's an ongoing discipline and our team is deeply committed to continuing to improve. Now on to human resources because none of this works without our people. Our HR strategy is laser focused on finding and keeping the right talent. In a regulated industry, expertise is everything. We recruit with intention, prioritizing both technical skills and cultural fit, and we retain our people through professional development, communication and mission-driven environment. We also believe in alignment. Our compensation and incentive structures are tied directly to performance, quality, innovation and customer satisfaction. This ensures everyone from leadership to frontline employees is rolling in the same direction. As we grow, our lean but agile structure allows us to scale without losing our core values. We built a strong leadership pipeline, cross-functional training and succession plans. So we're always ready for what's next. From a compliance standpoint, our HR department ensures we meet labor laws and employment standards across all jurisdictions we operate in, including the United States, Canada and Brazil, monitoring key HR metrics like turnover, training completion and engagement to proactively manage workforce health and catch issues before they escalate. We take burnout seriously, and we actively support work-life balance, PTO use in internal communication to keep morale high. In summary, QA, RA and HR, while sometimes considered back office functions are not only that. They are strategic drivers of value, reputation and sustainable growth. At Nephros, we protect what matters most, our people, our products and our promise to our customers. Now let's talk about logistics team at Nephros. Our logistics function plays a critical role in enabling scalable, efficient and cost-effective growth. We continuously monitor and optimize operations to ensure reliability and performance, tracking key metrics such as our 97.4% on-time delivery rate and 98% order accuracy with an average order turnaround of under 24 hours. Ongoing system enhancements, process improvements and employee training, help us reduce errors and drive operational efficiency. Our logistics strategy is also built for scale. We are investing in automation, EDI integrations and handheld technologies to maintain high service levels without proportionately increasing head count. These tools enhance order accuracy, speed and adaptability, positioning us to handle 2x to 5x growth. Risk mitigation is critical to our approach. We maintain strategic safety stock, regularly access key suppliers and uphold rigorous quality and compliance standards. Ultimately, our logistics infrastructure is designed to scale efficiently, preserve profitability and deliver a consistently reliable customer experience, critical components of long-term value creation for our business.

Hi. I'm Devorah Serkin, the Senior Director of Revenue Operations. I have been with Nephros since 2022. When I was looking for my next professional opportunity, it was important to me to find a company that was making a positive impact on the world. Nephros with its commitment to improving our relationship with water was the perfect fit. You might not be familiar with the term revenue operations. But at its core, we focus on optimizing how the company generates and sustains its revenue, all while ensuring that we are aligned with our customer needs and business objectives. Or in other words, revenue operations bridges the gap between sales, marketing and the overall revenue strategy of the company. At Nephros, revenue operations is made up of 2 closely knit teams, sales, operations and marketing. Sales operations focuses on ensuring that our sales team is equipped with the right tools, data and insights to drive success. This includes driving regular reporting, data analysis and administrating salesforce.com. Sales operations guides the team on how to effectively leverage salesforce.com to manage sales pipelines and customer data as well as continuously optimizes the platform to unlock the full potential of our data, allowing the sales team to make data-driven decisions and focus their efforts on what matters most. Through data analysis, we can test hypotheses, get to the root cause of what is driving our sales. Other types of analysis includes research of new sites that are placing purchases and tracking account sales to ensure retention. We share data with our distributor partners so that we can strengthen our relationship and move forward with our shared goals and support them in serving our customers. Marketing, on the other hand, is all about creating and amplifying messages that resonate with our customers and prospects. The marketing team works closely with sales operations to ensure that we're aligned on lead generation, product launches and external communications. We leverage a variety of channels to engage customers and prospects. Our goal is to increase brand awareness, create educational content and build a solid foundation of trust with our audience. Another important step we've taken to strengthen our communication strategy is the introduction of regular general newsletters to all our contacts. These newsletters allow us to engage with our audience more frequently, providing them with valuable updates, industry insights and relevant content. This initiative has significantly improved our ability to stay connected with customers, partners and prospects reinforcing, again, our position as a trusted source of information. The enhanced communication helps build deeper relationships and ensures that we remain top of mind for our stakeholders. Revenue operations at Nephros is continually looking to improve our methods and adapt to the changes in our business needs so that we can better serve our customers and strengthen our position in the market. Together, these 2 teams create a powerful engine that drives growth and it's this collaboration that fuels our success.

Hello. I am Michael Milman, Vice President of R&D and Manufacturing at Nephros. I've always been passionate about using technology to solve meaningful problems. And at Nephros, I get to do just that, leading incredible teams focused on innovation and impact. In my role, I oversee research, development and commercialization of both medical and commercial products. Our goal is to deliver solutions that not only perform but truly improve people's lives. Whether it's improving water quality, supporting patient care or enhancing safety, we're united by a shared commitment in making a real difference through innovative filtration technologies. Our engineering teams are at the forefront of this mission, developing scalable, high-performance solutions that address critical needs and support long-term growth. Our development strategy focuses on solving real-world problems with products driven by commitment to quality, innovation and performance. We built solutions that are designed to scale, drive adoption and fuel sustainable growth. Let's talk about where products have been successful to date. Our solutions like the DSU-H, S100 or HydraGuard help mitigate the risk of waterborne pathogens. Within hospitals and medical facilities, they support water management plans by delivering proven performance of critical control points from showers and sinks to vital medical equipment. In dialysis centers and equipment our EndoPur DSU or SSU filters play a vital role in removing endotoxins and biological contaminants from water and dialysis fluid directly impacting patient health. For commercial applications, our filters improve water quality and taste by targeting contaminants like rust, scale, lead or chloramine. They also reduce equipment maintenance and downtime in beverage and dispensing systems. We're developing solutions to help our customers overcome their most pressing challenges from agent infrastructure and evolving regulatory environment to performance and reliability in complex operations. Our engineering approach ensures these needs are addressed today. And as new pain points emerge, our solutions evolve in step with them. Our vision is to lead the market with scalable, high-performance filtration technologies that evolve alongside our current and new market demands. We're continuously exploring not only technological advancements, but also how our products can solve critical challenges across areas like the manufacturing landscape, including food and beverage processing, pharmaceutical and medical device production, electronics and consumer goods. Our development and execution approach balances speed with precision. Our cross-functional teams collaborate and streamline, build, test and release cycles while continuously meeting the industry's highest standards. Our diverse teams bring a wide range of perspectives, allowing us to think creatively and act decisively. This nimble structure empowers us to innovate quickly without ever compromising on quality or reliability. For example, we recently identified a specific need amongst customers operating specialty equipment, where traditional filters couldn't maintain flow without compromising performance. In response, we got straight to work on the new micro filter configuration. From identifying the need to launching the product, our teams with the help of our manufacturing partners moved swiftly from concept to commercialization in months, not years by thinking outside the box and adopting our current technology without ever sacrificing performance or quality. That's the kind of agility and market alignment that defines our development approach. What sets Nephros apart is their ability to partner directly with our customers, often in real time to fine tune solutions to their unique operational needs. This hands-on approach not only accelerates development but ensures each product integrates seamlessly into its environment. We also collaborate with companies building equipment with integrated purification systems. By joining early in the design process, we help our partners incorporate high-performance filtration while ensuring smooth system integration, both functionally and from a regulatory standpoint. That means we're not just a product supplier we're a true engineering partner. We ensure the filtration technology aligns with the broader system supporting long-term success. Our support does not end at product launch through sustaining engineering and proactive support our teams work closely with the customers to implement upgrades, resolve issues and drive continuous improvement. Our partners value that we stay engaged, even helping troubleshoot water-related challenges that fall outside of our products. For us, customer success is a shared goal. This mindset has built long-term trusted relationships and a number of OEM partnerships, setting a foundation for scalable growth. We measure success through product adoption, reliability and the value we deliver in the field. We love hearing from our customers that our products are the ones they can always trust and turn to in solving their key pain points, whether it's ensuring that the water is pathogen-free or their filters are able to stand the test of time, and they're still running at 6 months as compared to the previous 2-week solution. Risk management is embedded into our engineering culture. From early design stages to post-market surveillance, we proactively address potential issues to ensure product integrity and customer trust. We apply structure testing, real-time field feedback and ongoing validation to stay ahead of potential challenges before they become problems. At Nephros, innovation is not just about building products. It's about building trust. Through disciplined engineering and bold vision, we deliver water filtration solutions that shape the future of water quality and help protect what matters most.

Hi. I'm Alfred Vargas, Director of Service at Nephros. We know that water safety isn't just a priority. It is a responsibility. I have been with the company for 6.5 years. Our focus is strategically growing our team's organization with the higher standard and operational performance. We provide professional installation and replacement for Nephros in pressure control and commercial water filters. Every system we deploy is designed to mitigate risk, maintain regulatory compliance and keep water system running effectively no matter the complexity of the facility. Why does that matter? Waterborne pathogens are invisible threats. That's why our service team is trained to handle complex plumbing, better facility infrastructure and involving compliance requirements. We don't just install filters, we implement a full protection strategy. Our installation and replacement program supports installation on the following: ice machines, showers, sinks, bottle fillers. Whether you need a onetime as per support or a multiyear commitment plan, we make it easy, first-time installation might even qualify for complementary service. Just reach out to learn more. Recently, a major health care system in the Northeast entrusted us to implement our [indiscernible] filters installation across their facilities. By partnering with our service team, they achieved rapid compliance and reduce internal workflow and set the foundation for system water safety. Our service program helps drive customer retention, net revenue growth and operational scalability without increasing overhead. We are not just a filter company. We are a partner in your infection control and compliance strategy.

Thank you. That was a pretty awesome display of everything that Nephros has to offer and lots of great words from our talented leadership staff. Before we get into Q&A, I'd like to introduce a video from our salesperson, Nick. We have 5 very talented people handling sales in our regions. Each one is bringing their own set of expertise that makes them uniquely qualified to win in the areas of their focus. For example, we have Jim covering the Northeast, Kelly is covering the south. [ Nick ], who you're going to hear from next, covers the Midwest. And Shane covers the western region of the United States. We have Stacy, who handles dialysis opportunities nationally. Together, the team brings over 50 years of sales experience to the table, that's pretty powerful when it comes to building that trust that we heard about in the video that our customers really, really care about in value. So now let's get a word from [ Nick ], Midwest regional sales manager as he articulates some of what makes the Nephros difference when it comes to emergency response. [Presentation]

I'd like to share a real example that demonstrates our expertise and speed when it comes to water safety and emergency response. We know water emergencies in health care aren't rare. They happen fast, they're unpredictable, and the consequences are serious. When a facility suddenly can't trust its water, everything is at risk, and hygiene, patient care and even surgeries can be delayed. That's why speed, coordination and reliability are everything. A few months ago, late on a Friday afternoon, a large health care facility in the Midwest contacted me in an urgent situation. They needed 1,200 filters immediately. That's not a small order. But they were in an active emergency and couldn't wait until Monday. They had already lined up third-party plumbers for the weekend to begin installations as soon as the product were to arrive. Every hour mattered. In less than 24 hours, every 1 of those 1,200 filters was at their loading dock. From the moment the call came in, the entire Nephros team sprang into action, customer service processed the emergency request, operations prioritized the fulfillment and our warehouse team executed flawlessly even over the weekend. This rapid response didn't just check a box, it directly protected patients. It meant no one had to be relocated. It meant nurses and doctors could wash their hands safely. It meant the facility didn't have to fall back on bottled water or halt procedures. That's the level of urgency and responsibility we bring to the table. What makes me proud to work at Nephros is not just that we provide infection control filtration, it's that we live and breathe the mission behind it.

Good. So Robert, I have to say we always have known, but it's nice to share that we are really more than just a filter distribution company.

That's right. That was really impressive. All the different things that we do, especially with the emergency response, I don't know any companies that can respond that quickly with that level of expertise.

So that concludes kind of our video of comments about the presentation. So now we're going to turn to the most important part, in my opinion, the Q&A. So I really want to make sure that everyone knows how to ask a question. They can ask a question in chat. I believe they can raise their hand and ask live. I'm not sure if that's enabled, but probably the best way is just to go to the meeting chat in this team session and type your question in that panel there. And then we'll be able to see that and answer that, and Dina will help moderate that. In the meantime, we did get a number of questions that came through ahead of the call today, and we'll start going through some of those while we wait for other calls to queue up. Okay. First one comes in, looks like it says, what's your growth strategy for the next 12 to 24 months? That's a common question I get from different investors and people that want to know how we're going to grow and not only that, the success we've had that you talked about in the first quarter or 2, can we sustain that? So the strategy has always been to kind of land new accounts and then expand within that account. And we've been executing that on that quite well, especially in the past year or 2. What we're now experiencing is land, expand and retain. So not just win the business, but make sure that they are changing out the filters every 6 months. And that's not always been easy because emergencies happen, staffs get short. So it's been tough to really get our customers to comply all the time. But it helps when we explain to them why it matters, why the FDA requires 6 months and how you're not protecting yourself anymore if you don't follow the instructions as stated by the manufacturer. So another thing that we've done to help really comply with that is launched a filter tracking app. And that's really a tool for us internally to let customers know that it's time to change your filter that things have expired, and that's been pretty successful as we start to roll that out. We've got some internal staff really focused on expired. We call our expired filters so that our sales team knows that you did this 6 months ago, time to change it or this 30-day filter is expiring. So really, the growth for the future and how we plan to expand in the next 12 to 24 months is expanding where we are, but also implementing other capabilities such as our service department. You saw on the end of that video, where we showed our service band and our technician coming back from a job. That has been such a powerful tool in the past few months, and we plan to expand those capabilities. Being able to go out and help the customer who doesn't have the staff to change out the filters and make sure everything is cleaned up and working properly. Also being able to just remind them that, hey, we'll take care of that for you or better yet, let us get you a contract. So that you don't have to worry about that at all. So in addition to kind of expanding existing capabilities, it's also going into new areas. Brianne talked about ST108 and scale processing. We've also launched the new S100 in-line filter, which gives us capabilities in higher flow microbiological filtration areas, things like eyewash stations, emergency showers, recreational vehicles. all kinds of new places that we couldn't go before. So all that is going to be tools that we use going forward to really help expand and grow in the next 12 to 24 months, but a great question. Okay, Dina says, how do we expect this -- do we expect to see cash flow positive? Judy, I will turn that one over to you.

Okay. Terrific question. We're very excited to have turned cash flow positive and clearly, it's a focus and a strategy of ours to grow carefully, but within the compounds of the ability to stay cash flow positive. So of course, this is dependent on sales and sales growth. And we are adding resources as we grow, but we are monitoring the expense of new resources as long as it's covered by sales. So there'll be some quarters that sales might be lumpy or different, and we don't quite stay cash flow positive, but the goal is we've turned the corner, we want to continue to do so. Now I do want to remind our investors and analysts that we have things like we buy inventory, that can be lumpy. Timing of shipments, timing of receiving inventory, and that can certainly affect our balance sheet and cash flow from a short-term perspective. Things when we collect receivables, when we pay payables. So the balance sheet items will move along and can affect quarter-to-quarter. But over the course of time, we hope and plan to stay cash flow positive. And if sales continue to grow, we will grow resources carefully, but to maintain that profitability.

Just to comment, the team, especially the team has done a great job in really monitoring that and helping us understand where we can go, what areas we add. And one of the parts that we've really, I think, mastered well last year was getting the house in order. So that we are operating efficiently. And that wasn't easy. And I think that we've -- like you said, turned that corner and looking forward to now just compounding more income with the sales, and it feels really good. I think it's -- things are working really well. Okay. Next question. What are your primary growth drivers over the next 1 to 3 years? Okay. Good question. I touched on that a little bit in that first opening question. But I think one of the areas that we're really going to accelerate growth is to expand into new markets. As the new regulations come out that were mentioned previously, still processing, and I think more importantly is non-patient care applications. When you think about where we were traditionally, hospitals, there's only a few thousand hospitals, and we know where they all are in the U.S. It's a pretty finite number. So the TAM isn't as big or might not be as vast as you think of all the filtration opportunities. But as we add products to our portfolio, as we add expertise to our sales force and just align better with supporting other markets, this nonpatient care space is really important for us. These are places that care about infection control, care about pathogens, but may not be in the hospital setting that we traditionally would go to. Those new capabilities also come with some new challenges. We have to augment our capabilities to add sales installation and change out -- filter change out. So that type of capability we didn't always look to maximize in the past. So by adding staff in those areas, building expertise, introducing more robust installation instructions, things like that are really helping us to more penetrate some of these other areas. But in addition, that's not going to do it alone. We've been pretty public about our efforts to seek out other partners in M&A. And I think that, that's going to be another way that we grow. If, for example, we want to go into a space that we have no expertise or no sales force, if we were to get the partner who does have capabilities to penetrate that area, we'd be able to accelerate a lot faster. So that's something that Judy's been focused on. I think we've been very active and very public about that. And I think that should be very exciting for our investors. Okay. Just checking the chat. Just a reminder, we do have the ability to ask questions live. So please feel free to type questions in the Q&A. And I think that Dina has got another one that came in pre for us to look at. Are there any -- are there plans for geographic expansions or entering new markets? Okay. So the new markets question, we've kind of hit on a couple of times. But the geographic expansion, I will touch on that. We are very opportunistic about the geographies where we penetrate. Outside of United States, places like Canada or even Brazil, those are areas where we can grow to expand that all-important TAM that we talked about earlier, but the problem is we don't necessarily have the infrastructure. So we've always relied on partners to penetrate into geographies outside of where our core markets are located. There is still plenty of opportunity to grow for quite some time. and low-hanging fruit within the space in the United States. So we're handling what's the easiest first, mastering that, capturing that, getting our fair market share and continuing to look opportunistic about areas outside of that geography going forward. So very, very good question. Okay. It looks like we've got a question from [ Unker ]. Why don't you get yourself unmute and go and ask that, if possible. I'm not sure if [ Unker ] can unmute himself or not if you're able to. Okay. Yes. Says that only Dina can unmute. So [ Unker ], if you want to type your question -- I see it now on the chat. Do you expect to increase the size of your sales team? Really good question, [ Unker ]. Remember, Judy just talked about how we're going to grow and grow cash flow positive and maintain profitability. What we've realized in the past year, especially after Q1, we absolutely needed to increase the size of our sales team. and not just sales team, but also the internal resources that support the sales team. So with each one of those transactions where we have to deliver, there's a whole plethora of people in the background who are required to make that happen. So we've introduced a new model last year, and we tried it out in the West, and it's just worked extremely well. It's the junior sales associate or regional sales associate model, where we have someone working with our regional sales manager that can take care of the, I guess, customers that we typically have and even grow within those accounts. So we're going to be actively adding people to do that exact same thing. As long as we're able to support and deliver, I think we're doing great with getting those new accounts. That's one of the reasons you see the active customer count increasing. And we just have to make sure that we do resource the sales team properly to keep up with it. Right now, I will say that we are probably behind in adding enough salespeople to keep up. So we're actively looking right now to try to increase that support. But really, really good question. Okay. Next question came in. Thanks, Dina for feeding those to me. Can you break down growth by product line? Okay. So as we think about how we're growing. And by product line, I'm not sure if this is referring to product SKUs or maybe applications. So I'll kind of cover it in both ways, just so I make sure I cover that question what it means. When we talk about dialysis, for example, where Nephros kind of got its origin from and if you look at the root word nephrology. Dialysis, since we've added Stacy, really key dialysis expert in the industry has been growing quite nicely. We've been taking care of our existing partners, growing within existing partners and even have a couple of new exciting projects in the pipeline. So that product line and this product to support dialysis, I do expect to continue to grow. And that's really, really good considering the market and how some of our, I guess, partners may or may not be growing as fast. So doing really well there. Our traditional, what we call hospital filter or infection control filter product line, that's our bread and butter. That's where we get -- most of our growth comes from. It happens, it's the recurring sales. It's every 6 months, it's every 30 days. And it's not quite a recurring sale, but it's put -- you put the filter in place. It expires in 6 months, you change it out. One of our keys is to make sure that we follow up and keep those filter changeouts happening when they're supposed to happen. And we tend to keep customers for a very long time. Our retention is very high. And there's a reason for that as we continue to deliver value for them. So that does do what we're looking for. So growth in that product line has continued to accelerate. We're not seeing quite the growth, maybe not what we were expecting and may not be going forward, but we're definitely still trying is in the commercial product line. And some of the reasons for that, there are a lot of people who are offering commercial base filtration. And our differentiation becomes a little less clear when you have such a large market. So we've really been trying to figure out ways to penetrate that market, get partners that have the relationships and look at creative ways. And I've got some meetings with some people coming up here on ways that we can try to tackle that market. So those are really the 3 main areas of 3 main product lines. Our core 5-nanometer filter product line remains dominant in its differentiation. So that's exciting. And the more we can get those in line installs, the better off we are when it comes to that programmatic recurring revenue. So that's how we expect to maintain growth, and it's been working out pretty well. What changes have the leadership team made recently to drive results? That's a good question. When you think about some of the results we've been getting over the past year or 2, it's lumpy. And a lot of it has to do with emergency response. You can't always control when there's a hurricane or when there's an outbreak, but we do stand ready to reply. So when you peel back that and look at what has been growing, it's that core that programmatic business. And we've made changes specifically to protect and grow that core. Those are things that we've done, like really focusing on this, taking care of our existing customers and making sure that they reorder filters when they're supposed to on a regular basis. So we added the sales associate model, which I discussed a little bit, but mainly that's to bolster the expertise and the touch in the area. The field has been leading discussions on things like ASHRAE and sterile processing, and we're going to look for more of that. As we penetrate and start to just share what is important and how customers can comply. And I think as we filter focus our change more on filter change-outs and focus ourselves on becoming industry experts, we're able to help people understand how to meet some of those regulations and how to comply. So we have also restructured to add a business development leader. So by Brianne McGuire's position, you saw her talk earlier. Also please go check her out. There's a bunch of webinars and things. Most of it, you can find communicated on LinkedIn. It's a great place to find some of the content. But by becoming industry leaders that really is ways that our leadership team is sharing their expertise and what they do with by creating value with our customers. So those are some of the changes that we've made from a leadership perspective as well as driving some of these results. That's been very exciting. Yes. Great. Just a reminder, go ahead and type questions in the chat if you need them or want them. They're always exciting. It looks like Dina just send me another one. How does Nephros differentiate itself from competitors? The age-old question of product differentiation. It's interesting because one of the things that kicked off this whole series of virtual investor conference was that to dispel the idea that we are just a filter distribution company. As you can see by some of the capabilities that we showed earlier, the lab where the people, the emergency response, the expertise, 50 years of sales experience, all that are ways that we differentiate ourselves from the competition. And that leads to our retention. And we enjoy that, and we really take care of that. But helping customers to execute on their, I guess, water management plans and find and mitigating some problems when they have them, that's really what's different from us. We're not just a part number and a catalog that you order and you never hear from us. We really want our FDA Class II cleared medical devices to perform and cause those headaches that you're having to go away. And that differentiation, having a 5-nanometer [ pore ] size filter really is something, I think, that sets us apart from everyone else. And that's something that we kind of find ourselves putting in different applications, different filter container packages and how we maintain that differentiation from someone just offering microbiological filtration. As long as we're able to have that conversation and really get to the point of solving that need, handling viruses and endotoxins, there isn't much out there that can do what we can do, and that's what's got us and me so excited about our growth in the future and how we stay differentiated. Okay. The question coming from Ralph. Is it possible for you to elaborate a bit more on new areas you're working on are entering? Are these markets in the shorter-term picture or the question is cut off here for me. I want to take the question, and I'll run the space on the chart here. So let me get the rest of it. Possible if you elaborate a bit more specifically on new areas you are working on or entering. Are these markets in shorter-term picture or longer-term picture for Nephros. You touched about Nephros' ability in the microplastics area. Are we doing this on our own or with a partner or what inroads, if any, have we made? Okay. So good questions. Do you want to touch on the partnership one when I get there in a second.

Sure.

Okay. So the new areas we're working on. I've mentioned sterile processing. I've mentioned, some of the areas as far as labs, showers, emergency eyewash. If you think about -- when you -- I don't know if you've ever worked in a factory setting, especially through handling chemicals, there's emergency eyewash stations around or these showers. You walk up to it, you pull the shower and outcome is murky black dark water. That you're not sure if you're better off taking a shower or just letting the chemical burn you. By putting some filtration on there, we're really aiming to provide a solution that makes people more confident that they can use our filter in those applications. That's something we hadn't done before. So more specific on some of these other areas, we're looking at partnerships as we talked about earlier, and I'll let Judy say, she can't say a lot, but I'll let you talk a little bit about some of those partnerships. But in areas like recreational vehicles, or if we talk about PFAS, forever chemicals or even in plastic microplastics, we're now touching on a certain type of customer base that is -- often has a lot of questions and needs a lot of customer support. And we don't always have that capability. We're a small team, a very efficient team. We are very expert based. So if it's high-volume questions when serving residential markets or other places, although we might have a solution that works extremely well, we may struggle to deploy that. So that's one of the reasons I think, for us to really grow and move this need. We have to look more at M&A. Would you agree?

Yes. No, Robert, I definitely would agree. And that -- and partnerships in and of itself can just be a business arrangement with another company that can take our products and our claims, and we are working very hard to validate all the claims and things that we could do, so people understand the capabilities of our filters. But how do we get into markets that we're really not established in? So we had a commercial partnership. We broadened it. We can have other commercial partnerships. And some of what we do in infection control is something that would resonate with non-FDA potential customers, commercial businesses, residential businesses. But we don't have the wherewithal to build our own distribution force to tackle those. So we are looking for partners to, a, just take our distribution to their markets and potentially, they can help us even service selectively in areas that we can't yet reach to service those markets. And additionally, there might be some joint product development between what a partner has with their capabilities and what we provide in infection control or sterilization. And potentially, there might be some new products combining 2 technologies to go after markets that we can't reach. So that's really the exciting thing to create stair-step growth for the company that we continue to work on.

And every company that you are talking to, it's always going to be something that's accretive and help build us the cliche 1 plus 1 equals 3. I'm really excited about the opportunities there. I mean the reason I joined Nephros was because of this technology and the differentiation that we have to offer. So I think if we find a partner that can help us scale that out faster and to more places and broader reach is going to be a bit more exciting. So great question. Okay. Who is our -- before I go to this, I actually want to go back to Ralph's question just to make sure I answered it. You touched on Nephros' microplastics were doing. This one, okay, we did touch on that. Got it. Okay. Who is your customer base? Is it mostly hospitals? Good question. Like I said in the beginning or I said earlier, one of the reasons we were having this discussion was we're not just a hospital distribution company. And I really want to focus on that. Although we have tremendous expertise in hospitals, that's not all these filters are good for, and that's not all the areas that we serve, and that's not all the areas of expertise where we can kind of deploy our technology. Patient care is a better application for understanding where we are going out and selling and you think why? Well, patients are people who had surgery or burns or recoveries or cancer treatment, their immune systems are compromised. They're much more susceptible to be hurt by pathogens in the water. So they're an obvious place to start, and you find a lot of those people in hospitals. That's not the only place you find them. Lots of people in areas of these small clinics around people recovering from other issues. And if you think about people in large office buildings or correctional facilities or airports. All over the place, you're going to find people that are compromised in some regards. And as long as we can talk to the person who would be responsible should someone get injured, we usually have a very good conversation about how to help them mitigate their risks. The last thing you really want someone to do is they get sick and you had and knew about technology to fix it, and you didn't take action. So having that discussion, talking about water management safety plans is really, really important. And up until now, the discussion has usually focused on water quality. You want the water to taste good, smell good, be clear. But all of the things, the viruses and toxins, endotoxins, they're not always presenting an odor or something. They're definitely not something you can see. They don't necessarily make the water smell bad. So changing the discussion to water safety has been what we've been incredibly successful at doing is talking more about how you make the water free of viruses, endotoxin, bacteria. And with our filtration devices, you can make that claim. And that's really the whole value-add story that we offer and bring to the table. Okay. See a question from the chat. Robert, you mentioned in a couple of earnings calls that you plan to grow beyond health care. I'd appreciate if you can break down and talk about the process and some opportunities so far beyond health care. On the call, you mentioned about the airport customer. Okay. And that was part 1. Part 2 is New Jersey has had one of the stringent Legionella water safety bill. Being a New Jersey-based company, has that regulation been of the assistance and increase in sales even beyond health care? Okay. Great question. All right. So let's start with the earnings call and mentioning about other customers that we talked about. We just did mention one. One of the -- unfortunately, the nature of our business, customers that have had a problem and someone getting injured from Legionella or someone having a bacteria outbreak don't necessarily want their name and location broadcast on our website about how we've helped save or recovered and clean up their system. So we do still struggle with getting the names of the places out not because we don't know them, but just because of just confidentiality with our clients. But a major airport we've been working with quite closely. It's been expanding into a couple of other airports. And that's exciting. When you think about the terminals and TSA and all the people that consume water, how our filtration would help to prevent and make the water bacteria virus free. Other areas that you might consider large office buildings. We picked up a couple in Manhattan right in our backyard. Lots of places where there's large groups of people, thinking about correctional facilities, schools, any place where you can find maybe systems where people would be consuming and you want to protect them from pathogens in the water. So all those customers make great people that we talk to. We do -- would love to get to the point where we are doing residential. We just don't have an infrastructure yet to be able to manage that. So we're figuring out ways to tackle that, and maybe it's going to be through our partner. So that would be pretty exciting. But yes, so that's the part 1 of your question. Part 2, New Jersey and the stringent water bills. Just like ASHRAE and ST108, all the other bills out there. Anytime you do one of these bills or have one of these regulations or suggestions come up, it does take a little while for compliance piece of that to happen. We do get calls often. Our sales person in the Northeast is fielding a ton of those calls. And us being in close proximity allows us to support those customers very well and even drive the filtration solutions to them often. Part of the reason we've been expanding our service in this region is because of the demand, and we're being deployed quite a bit. So it is an exciting opportunity for us. I do expect that to continue to grow in the Jersey area. But as regulations and things take hold, we're standing ready to be able to comply and meet the customers' needs. A lot of the initial discussions are just about education. Here's what happened. Here's what I tested and I've gotten, how do I fix it? So there's just a lot of just talk about putting a plan together and how they respond. And we've got a team led by a number of the regional sales managers and what Brianne has been doing has been really effective in making sure that we can respond to those needs. So -- and I also wanted to kind of give a shout out and a comment to our investors that have been sending us information. They've been getting lots of questions like, hey, I'm working in this building in this space. Hey check on this? I know this friend on the cruise ship and that being sent our way gets funneled to our sales teams, and they follow up with every single one of those. So your community has also been playing a part in helping us to expand and touch new areas outside of the hospital and outside of just patient care in general. So pretty exciting for us. Thanks for that question, [ Unker ]. Next question, how fast can you deploy in an emergency? Good question. You heard [ Nick ] talk about that a little bit in the previous e-mail. One of the things that really just stunned me when I started here, Judy, was how quickly we can respond. I mean right now, it's in the afternoon time on the East Coast, if someone called us right now and said, I've got a problem. I need some filters, I am in Ohio. We could have them filters from our morning at 10:00 a.m. or 8 a.m. or soon as we can put them in a courier. We have a -- we've intentionally had a pretty -- maintain a pretty high level of readiness, stocking, especially when it comes to emergency response, because when we have a problem, they call and it needs one to respond right away. If you don't have it, they're calling the next person, you don't get a do-over. The operations team is just exceptional. They -- we draw from that strategic inventory. We have the products on hand. People will come in nights and weekends, place orders, enter orders. Just a great team all around whenever that does happen. And if someone is not available, another person raises her hand and steps in. So we can deploy in an emergency extremely fast and I think, our customers every single time are amazed and delighted at how quickly we do. So much so that they've become just used to it and expect it from us, which is a good thing because we tend to turn those customers into programmatic customers, which is the ongoing revenue that we talked about earlier. Okay. Next question. How do you attract and retain top talent? So I'm assuming this refers to kind of the technical and operational and sales piece. Retaining talent is tough in an environment where they have so many options. And my team is really smart, and they know their stuff. So I mentioned that combined, they've got 50 years of experience, but we have a high retention rate that I'm proud of here. We maintain a positive work environment. I think you heard Vashone talk about that in the video earlier. The leadership team that creates trust with the people that they have directly reporting to them, but we're a small team. We're just over 30 and there's a lot to do. So I think every day is something interesting and exciting. It's always new. And that's a -- it keeps it fun, it can be stressful. We've done things like employee enrichment series. We do quarterly meetings where we kind of give a brief with everybody, and we have an anonymous annual survey which has actually led to a number of other events that we do in response to those surveys. And I think last year's annual survey was pretty high marks. So I was quite pleased with that. So we continue to listen to the people that work here and that really are the ones delivering the value and try to accommodate wherever or whenever possible. I think that the more we can do with that, the better off we'll be as a company overall. Okay. Are there any new product innovations in the pipeline that you can share? So there is a large pipeline of products that we have only lacked time to get to. And when we talk about what we've launched recently, the S100 in line, the 20-inch HydraGuard, those are great products that can already expand us into new areas. My engineering team now is currently -- spends a lot of time supporting those new product launches in sustaining products that are out there, handling any complaints that might come in. So we do buy their time quite a bit. I will say that we've recently added a couple of people to the department as we ramp up some of those expertise just to get that pipeline moving faster. I'd like to turn out more products that are new, but I want to make sure that we're doing and delivering with the field wins, really that what the customers need to help them grow in their businesses. So when we look at the new products, we've got PFAS coming, looking to figure out how to launch those capabilities in a way that's consistent with the quality and the validation that we commit to as a company. Microplastics we already have that capability. We've proven to ourselves that it works. We're really trying to formalize that offering, so that's something that we can sell in the field. But it does come back to how we will deploy a product that might largely be residential. So when we think about our partners and who we are looking to get arrangements with, we have those opportunities in mind and who can help us scale those out to make some meaningful penetration to the marketplace. So really excited about some of the new products that are on the horizon and how they're going to make a difference going forward for Nephros. Okay. What percentage of revenue comes from recurring customers or contracts. Good question. So we talked about that on some of our quarterly calls or meetings, but I want to maybe turn it over to Judy to kind of address that a little bit.

Of course, Robert has spent a fair amount of time talking about what's new and what's coming. But let's step back a little bit and make sure you understand what we're selling today and how we look at our business. So we have talked a lot about what we call recurring or programmatic. Now not -- when you think about recurring, you want to assume it's an automatic, it expires, you ship new filters. It continues to -- that customer continues to go on, on a timely basis. That is our goal. Our goal is to get more customers under almost a subscription service. Internally, we talked about filter as a service, that there's an expiration date, you need to replace them automatically. Some customers are on longer-term contracts. Others just come to us and say it's time to replace the filters. As we mentioned, our retention rate is very high. So we think of all of our business that's not emergency response as recurring and aspirationally, everyone will get continually recurring very consistently. And that tends to run anywhere from 85% to 95% of our business, and it really just depends on the quarter. The emergency response business, which is lumpier and more opportunistic, again, that comes in when the need is there. We've had sort of some average sort of 15% a year comes in emergency response, but it can change. We've had quarters as high as 20%. We've had quarters as low as hardly there, 3%. So that's the way to think about our business. We hope to continue to add more emergency response, but our main goal is to take that customer and turn them into a regular programmatic recurring customer, which by far is the bulk of our sales.

Absolutely. I totally agree with that answer. And I think that as we look at different ways that we expand more into that programmatic business, I think that's really been our focus. That's really where we've been adding resources and making sure that we keep what we've got and even expand into those existing accounts. Just a reminder that you can ask questions in the chat. We've been running through a lot of these and lots of good questions coming in from the attendees. So please keep them coming. See, how do you respond to shifting needs in the market? Well, that's a really good question. The market needs do change. Regulations change, focuses change, administrations change. We really try to meet the needs of our customers and provide value. It's important that we kind of see around the corner and stay ahead of some of the trends. So that our products are on the shelf and ready to sell and that we're in the pipeline, making sure we've been developing on what's coming. It's important to also realize that we have a pretty long supply chain. It takes a lot to get the products cleared and to get the one on the shelf. So that we have to think very far in advance to be able to meet the needs of this changing market. So as the needs shift, one of the ways that we do this is to take a look at the market in segment. Instead of trying to be all things to all people, figure out where we can provide the most market or most value to the market. where our solutions are best matched with our customers and where we get that -- where they get the highest value from the technology that we offer in our capabilities. So if you've got a group of people that have a similar buying criteria, maybe it's people that all want to prevent infection control, you can then start to bucketize where are the people that care about infection control. They're not just in hospitals, they're also in nursing homes. They're also in maybe cancer recovery units or a dialysis clinic and everybody else who has compromised immune system patients. So that's how we will take a look at in shift needs by focusing on the buying criteria or the need of that customer and then deploying our materials and filters in that area. I will say that our field sales team has a tremendous pulse on what's happening. There are tons of local events. Local APIC, [ Hashi ] meetings, really finding out what the industry experts are talking about. I also attend and listen to all the buzz around PFAS and figure out what is a problem or a challenge it's coming so that we can then position ourselves to be able to meet that challenge. So that's been exciting. That's one of the ways we keep up with some of these shifts. So yes, that's a great question. Next question is in the chat here. What is the CAGR of recurring revenues in the last 5 years or so. Question about CAGR. So well, I probably have to refer back to some of our financials there. But I don't know if you want to take that.

Well, we had years of larger growth and smaller growth, but we've really sort of looking back, it's been probably more like high single digits in the recurring nature of the business with some exceptions. And we aspire to at least achieve those goals going forward. Obviously, we'd love to grow double digits, and there are times that we certainly will, and we did in the first quarter. But over the long term, we'd be very happy with sort of high single digits to low double digits that we've seen with opportunities to expand faster through partnerships and other relationships.

And certainly, that 5-year window is a pretty big window, and the business has changed a lot in the last 2 years. So I'd be interested to see how that CAGR increases as some of the new strategies are continuing to be executed. So it's exciting. All right. This looks like the last question I see and I'm going to go ahead and tackle it unless more pop up in the chat. How do customers know when to call you? Okay. So that's a good question. Emergency response is one of the typical ways. But a lot of times, customers don't exactly know who to call when there is an emergency. So the first thing they do is they ask a friend. They typically phone someone at a different facility or they call water consultant or someone who did their testing. And they ask them, we have this problem. We had this positive test, what do we do? And often, they will recommend Nephros. So hey, Nephros was over here and did this job, they showed up the next day or same day and performed incredibly. So by far, our new customers, the method of them reaching us is through word of mouth or referral from someone who's used us before. We also do things like we'll do some cold calling and direct outreach. Doesn't tend to be as successful because no one thinks they have a problem until they have a problem. We do have a fair amount of customers who seek out and want to be compliant with some of the guidelines, and they want to help setting up water management safety plans. So that's when we can deploy some of our experts and they can help set them up, forming a team, understanding what to do in case of emergency response, and that's usually a very great conversation if we get to the point when we're talking about emergency response plan. So those are just a few of the ways. I'm sure there's a ton more out that my sales team would be able to share and tell you about as well, and feel free, please, to reach out to them. They love to talk to you about what we can do and how they might be able to help what you're doing. And so yes, it's a great group to talk to. We did just have another question come in. Ralph, you talked about initial business from prisons, airports, RVs and cruise ships. What have you learned from trying to enter these new areas? And are you trying to grow them on your own? And which of these are you most optimistic about? Are there other industrial markets you are trying to enter? Okay. So -- and there's another follow-up question to that. Are you still trying to grow the beverage area? Or have you put that on the back burner? Okay. So yes, we have talked about some of these other areas. And reason why those areas are important is they also experience needs of infection control or pathogen control in their water. So we feel we can make an impact. When they have an outbreak when there's a problem in the prison. It's very difficult to move inmates and to spread that throughout the population, really causes a significant, I guess, harm. Not only that, a lot of these prisons are privately operated now, so they lose money. I hate to think about it that way, but the monetization of prisoners. But we stand ready. Whenever you do have potential for pathogen outbreak. So the -- since we try to enter these new markets, -- so what we've done is trying to align some of our messaging and also our product features to meet the needs, whether it be flow rate or size, compact sizes or adapters, maybe they're synchronized, they don't have enough clearance. So we've come up with lots of different accessories, install kits. Actually, I think you might have seen that be one of our press releases last year. To enable us to meet the needs in areas where it would be challenging before, where everything was one-off. Now we've kind of standardized a lot of the installation to help. And the sales team is capable of doing it direct and on their own. We do very much nurture the relationships with our partners. Our partners already have I guess, feet on the ground, they're already talking with a lot of these entities and customers. So we're leveraging that. In addition, they come in and offer other services as well. So it's a really a symbiotic relationship, how our partnerships grow with us, and we plan to do more of that. As we are letting them know what areas we're focusing on, they in turn go out and feed that -- those leads back to us as well. Having just 5 people to cover such a large geographical area such as U.S. is nearly impossible. We could only do it through partners with partners, and we've been quite successful at that lately and want to continue to nurture those channels.

And to touch on the beverage point. We certainly -- we still have a partnership with the company that was trying to reach beverage companies, restaurants, hotels, et cetera. That hasn't ended and that hasn't stopped. We no longer have an exclusive relationship with them. So we have the opportunity to work with others to go after those markets. But certainly, we have not walked away from that market.

Yes. And We do think that Donastar is well aligned with Nephros' values, and we value them as a partner. And we'll continue to work with them as well as explore other things just like Judy said. So just -- I did want to make sure that we don't think that commercial is going to be the end all be all for Nephros' growth. We're not stopping there. We are taking our highly differentiated products and launching those into other areas as well as being opportunistic and growing where possible with our commercial product line as well. So beverage is an area that's just a pure number of opportunities is huge. But like I said, there's a lot of players in that space. So it makes the competition and competing there much, much more difficult. As far as I see, I don't see any other immediate questions. So I'm just going to kind of stall a little bit, give anybody 1 last second to -- here's one. What is the bottleneck to growth sales and partnerships? What is the bottleneck to growth sales and partnerships? Okay. I think we've been growing quite a bit lately. So I'm not necessarily sure I'd say bottleneck. But if I want to accelerate that more, especially with some of our partnerships, really, we have to figure out ways to enable them to reach more people. Really, it's about conversations. It's hundreds if not thousands of little conversations we're having with people about why this is important? It is getting the word out about why you care about pathogens in your water, our webinars, our presence in trade shows, some of the things that we're doing in some of the other social media platforms, are really how we're trying to accelerate that growth. But in an industry, I think, we're growing quite well compared to the industry, and we are continuing to leverage where we are successful so to get our name out there more to create more opportunities where people will share, especially if we get more traction with the products that we just launched, it's opening up areas we hadn't touched before. So that's giving our partners more opportunity to launch and deploy Nephros products as well. So as we expand the team, right now, I think, a lot of it is they're limited by time. So we're expanding that sales associate model. We're looking to hire in those areas. And that's a good place to be where we are just really grow and able to support that growth with new sales that in turn makes -- still remain financially in great shape as well. So yes, it's -- I don't know if you have anything add to that, but I think...

No, I think you've covered a lot of ground, and we touched on so much about Nephros. We always want to let you know we are accessible. You know how to find us. We're open to conversations, one-on-one. We will be responsive as quickly as we can, given the other requirements of our job. But this is just the beginning of educating people on Nephros. So please reach out with further questions.

Well said, Judy, Perfect. And just to recap, I'm really excited about the new product launches, the S100 in line, the 20-inch HydraGuard. I'm also excited about free kits and other ways in enabling those products to be deployed. The new areas and applications as far as outside of patient care are just opening up a lot of world and space to us. The very exciting capability with service, that's just something we hadn't had before. And now we've got an opportunity to deploy and install these filters in places where we've been restricted by maybe staff on the ground or expertise or just the willingness to tear something out and put something else back in. We take away all that pain and headache. So service is going to be a big complement to some of the new products I talked about going forward. And when we layer in things like the app that's allowing us to track filters when they're installed, know when it's time to change them out, layer in now the field. Sales associates who are closer to the ground, being able to talk and touch people, keep those expanding with those existing accounts. It's just incredible what Nephros has to offer. It's really an exciting place where we're expecting just to do a lot more of what we're doing today. It's just great technology. We're just very proud of it. So yes, I think I don't see any other questions. So please give us some feedback, if you like this format and want to hear more about this. It's just -- it's really, I think, impressive that this team comes together and offers so much. And I think this might be a medium for us to get the word out. And so the investors understand more of what we have to offer and how Nephros is way more than a hospital filter distribution company. So I'm excited. Thank you for joining.

Yes. Thank you. Have a great rest of your day.

Okay. This concludes the event. Thanks.