Good day and welcome to the Nuwellis Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to turn the conference over to Vivian Cervantes, Investor Relations. Please go ahead.

Thank you, operator. Thank you everyone for joining us in today's conference call to discuss Nuwellis' corporate developments and financial results for the third quarter ended September 30, 2022. In addition to myself, with us today are Nestor Jaramillo, Nuwellis' President and CEO; and Lynn Blake, CFO. At 8:00 Eastern this morning, Nuwellis released financial results for the quarter ended September 30, 2022. If you have not received Nuwellis' earnings release, please visit the Investors page on the company's website. During this conference call, the company will make forward-looking statements. Except for historical information mentioned during this conference call, statements made by the management of Nuwellis are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that are based on management's beliefs, assumptions, expectations and information currently available to management. Those risks include but are not limited to, risks associated with the possibility that the company may be unable to grow revenue in future quarters, that the company may not be able to commercialize its products successfully, the possibility that it may be unable to raise the funds necessary for the company's anticipated operations and the other risk factors described under the caption of Risk Factors and elsewhere in the company's filings with the SEC. The company believes that these forward-looking statements are reasonable as of today's date. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. By providing this information, the company undertakes no obligation to update or revise any projections or forward-looking statements, whether because of new information, new developments or other circumstances that might subsequently arise. You should review the cautionary statements and discussions of risk factors included in the company's press release issued today, the company's latest 10-K, the subsequent reports as well as its other filings with the SEC under the titles Risk Factors or Cautionary Statements related to forward-looking statements for additional discussion of risk factors that could cause actual results to differ materially from management's current expectations. Those discussions regarding risk factors as well as the discussion of forward-looking statements in such sections are incorporated by reference in this call and are readily available on the company's website. With that said, I would like to turn the call over to Nestor.

Thank you, Vivan and good morning, everyone. Welcome to Nuwellis third quarter 2022 earnings call. First, I'd like to start this call by welcoming our new Chief Financial Officer, Lynn Blake, who started in this position on October 19th. I'm confident that Lynn will be an asset to the Nuwellis team and create significant value for all the stakeholders of the company. And on behalf of the Nuwellis team, I would also like to thank George Montague for his significant contributions to Nuwellis. George will be missed. On today's call, I would like to provide an overview of our third quarter performance and give an update on our strategic initiatives. Lynn will then provide detailed financial results followed by my closing remarks before opening the call up for questions. During the third quarter, we achieved double-digit year-over-year revenue growth and gained significant momentum on our key strategic initiatives. Our goal of making the Aquadex system the standard of care for restoring fluid balance remains with clear focused on executing our strategic initiative, which include to build out our clinical education team and continue rollout of our focused sales strategy. Penetration of our ambulatory clinical treating heart failure patients, continued development of clinical data supporting the Aquadex systems, clinical and economic value, and a steady progress on our new product pipeline such as our product, our pediatric continuous renal replacement therapy device. In my following remarks, I will provide an update on each of these initiatives. Before doing so, I would like to thank the entire new well team you make possible everything that we do, and without your hard work and dedication to our mission, we will not be at this exciting point of growth. Turning, turning now to our quarterly results. Revenue for the third quarter of 2022 was…

Thank you, Nestor, and good morning, everyone. I'm happy to be speaking with you today on my first earnings call as Nuwellis' Chief Financial Officer. Since joining the company last month, I've been working closely with the team to better understand the business end market and I can confidently say I see tremendous growth potential for this company. I'm looking forward to updating you on our progress for many quarters to come. Now turning to the Q3 financial results, revenue for the third quarter was $2.1 million representing 11% year over year growth and a 7% sequential decrease from the second quarter. We were pleased with the strength in our pediatric segment, which grew 106% over the prior year, validating that our commitment and investment in this patient population is paying off. This growth was partially offset by a 9% year over year decrease in our critical care customer segment. Our heart failure segment was roughly flat compared to the third quarter of 2021. Gross margin was 61% for the third quarter, an increase of 53 basis points compared to gross margin of 60.4% in the prior year quarter. Our reported gross margin includes margin from our capital console products and disposable circuit products. Continued increase in utilization by our existing and growing installed base of customers will represent a tailwind to gross margin over future periods given the higher margin rate on our disposables. Selling, general and administrative expenses were $4.3 million in the third quarter. Relative to the third quarter of 2021, SG&A expenses decreased by approximately $400,000 or 8% year-over-year and were roughly flat sequentially. The year-over-year decrease reflects both our previously communicated commitment to conserve capital given the challenging macroeconomic environment, as well as the fact that we had a number of open positions in the…

Thank you, Lynn. As discussed earlier, we are encouraged by key milestones achieved in the quarter and remain focused on executing on our strategic initiatives. We're committed to growing our commercial operations, including the expansion of clinical education specialist additions to our product portfolio and building our body of clinical evidence. Further progress on this collective objectives will not only help Nuwellis win new business, increase penetration in existing accounts and fuel a steady growth, but also enable us to achieve our vision of making the Aquadex treatment the standard of care for fluid overload. I would like to conclude by thanking all stakeholders, employees of Nuwellis and healthcare workers in the field. Without your support, we would not be able to achieve the key advances in the treatment of patients suffering from fluid overload. I would now like to open the call for questions.

We will now begin the question-and-answer session. [Operator instructions] And our first question will come from Jeffery Cohen with Ladenburg Thalmann. Please go ahead.

So I guess firstly, can we talk about the placements and the consoles? It looks like you've done quite well recently on new accounts and consoles place, but we're just trying to get a better understanding of the growth and what's driving it and where is it coming from? Is it coming from the new placements and their utilization, or are you getting any traction from accounts which are being reactivated as well? Mm-Hmm.

Good question, Jeff. The growth in the console is coming from two areas. One is opening new accounts and the second one is in our existing accounts. The customers are starting to expand the utilization of Aquadex in other specialty units requiring additional consoles. Many of them are also upgrading to the smart flow from their flex flows. So those are the two, three areas where the increase sales or console is coming.

Okay, got it. And then could you talk a little bit about FTEs [ph] and new hires and how that relates generally speaking to OpEx levels? Does it feel like this is a good level where you're at now from Q3 to carry forward into the short term or medium term, or would you expect more ads there on the on the FTEs?

Yes, as Lynn mentioned, in the third quarter, we have some openings in the field but we feel that now we have all territories fully staffed with the exception of one, which we are right now in the process of recruiting an account manager. But in terms of CES', we have every territory fully staffed with our clinical specialist.

Okay, got it. And could you talk about the trial a little bit, this HF trial, it looks like you've got four or five centers open now, enrolling, I know that the expectation is 372. Could you give us an update on how many IRBs are out there and enrolment data if you could?

Yes we have approximately five sites right now enrolling patients. We have started the process and also calibrating the protocol. As you know, this is a new study for us and we are calibrating the inclusion and exclusion criteria to make some slightly modifications to make sure that we enrol in the right amount of patients and the right type of patients. So it's going well. Jeff, it's going well. We're very pleased with the progress that we have made.

Okay, got it. And then one more for us on the clinical side, as far as heart failure and cabbage, are you seeing utilization prior to procedures or is the vast majority postprocedure?

The vast majority is post procedures. We have accounts that are starting to use the Aquadex in transplant patients and in that patient population, they are using it pre-transplant and post-transplant, and the pre-transplant is used to tune the patient as physicians call it, but after the transplant is primarily to remove the additional fluid that is infused in the patients during the transplantation.

Okay, got it. That's helpful. Thanks for taking our questions and congrats Lynn on joining.

Our next question will come from Thomas McDevin, Apologies, Thomas is just disconnected. Our next question will come from Brooks O'Neil with Lake Street Capital Markets. Please go ahead.

Hi, this is Charlie Montang for Brooks O'Neill. Just a couple quick questions for me. This is kind of a two part question, but given the significant risks to hospitals and others from hospital readmissions as well as clinical risks to patients from heart failure and other conditions, kind of, why do you think it's taking so long to gain acceptance of your ultra-filtration products now?

Well the main reason has been the lack of direct clinical evidence to support the reduction in readmissions and hospitalization. In the past, most of the clinical studies that we have -- that we have so far on the therapy have signaled benefits and improvements using the Aquadex, but with the avoid heart failure, the new data proves that indeed there is a significant benefits, statistical superior benefit, as you say of using the Aquadex and removing fluid overload especially in heart failure patients that are unresponsive to direct. So I believe that now that we have the clinical evidence, we will see an increase in cells.

Could I just add Charlie, Nestor in addition to the clinical evidence that we can now demonstrate, maybe touch on the healthcare economic benefits that we're beginning to lay out for the decision makers, administrators in the hospitals?

That is a good point. We have been showing performance to hospitals about the risk, the financial risk that they have with the unreimbursed readmissions, and it's getting a lot of positive response from the administration of hospitals.

Okay, great. Thank you for that explanation. That actually answers both of my questions. So that's it for me. Thank you guys.

[Operator instructions] As there are no more questions, this concludes our question-and-answer session. I would like to turn the conference back over to CEO, Nestor Jaramillo for any closing remarks.

Thank you very much everyone for joining our third quarter 2022 earnings call, and I wish you a happy day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.