NEPH Quick Update - $NEPH
Quick update after Q1 2024
*Disclosure: I own shares in NEPH. I am not a professional. Please do your own due diligence.
Price: $2.36 USD
MC: 24.7 million
EV: 22.8 million
1 year performance: +87%
NEPH reported a week ago. I am finally getting around to putting my thoughts out there. Results were a bit behind my expectations and the stock was up/down%. The stock seems to have settled around $2. There are some random days with lots of volume.
Quarter Recap
Revenue of 3.5 million vs 3.7 million last year.
Last year had a large amount of emergency orders.
Programmatic (recurring) revenue was up 12%.
EBITDA of -95k vs +147k last year.
Gross margin at 62.1% vs 57.1% last year.
They are going to roll out an online tracker for customers to keep track of the filters they need to service.
Call Notes
New online tracker for filter servicing.
20-40% of customers aren’t changing the filters out when required.
The online tracker is in beta testing now.
They mentioned that they are investigating how to utilize their filters for microplastics.
They are still evaluating and researching at this point.
Looking to do some additional focus on cross selling once they have a presence in a facility.
Sounds like they are expecting to grow programmatic revenue double digits.
Being disciplined about adding headcount. The CEO mentioned thinking in terms or ROI for adding headcount.
New facility should reduce some logistical friction but didn’t sound like much in hard cost savings.
They didn’t give an exact number but retention rate is in the mid 90s.
Valuation
Since they are not consistently EBITDA positive, all trailing and near term multiples are based off revenue or gross profit. Trading at about 1.6x EV/Revenue and 2.6x EV/Gross Profit.
Closing Thoughts
The NEPH team continues to execute. I was happy to see the growth in programmatic sales. The filter tracker sounds like a low risk high upside win for the business. They already landed the client, so really they are just making sure they aren’t leaving anything on the table.
I am not sure if/when exactly we will get materially above EBITDA positive. I am happy with them to keep cash burn around break even at this growth rate, especially if gross margins can stay around this level. I am a little concerned as they filed a prospectus subsequent to the Q1 2024 results.
Also the CEO recently purchased 50,000 shares. Always a positive sign.
You can see them present at the Planet Microcap Showcase Vegas recently.
Thanks for reading.
Dean
* long NEPH