Q1 2022 Senestech Inc Earnings Call
Good afternoon, and welcome to the <unk> Tech reports first quarter fiscal year 2022 financial result.
All participants will be in a listen only mode should you need assistance. Please signal, especially with my Christmas Dorky, followed by zero. After today's presentation, there will be an opportunity to ask questions. We ask a question you May Press Star then one.
Please note that this event is being recorded.
Ill turn the conference over to Robert Blum with Lytham Partners. Please go ahead Sir.
Alright, Thank you very much cole and thank you all for joining us today as I mentioned to discuss enough Teck's first quarter 2020 to financial results for the period ended March 31, 2022 with us on the call today, Mr. Ken Siegel, the company's Chief Executive Officer, Mr. Tom Chesterman, the company's Chief Financial Officer.
You can close enough to stay his prepared remarks, we will open the call for a question and answer session.
Before we begin with prepared remarks, we submit for the record the following statement statements.
Statements made by the management team of <unk>. During the course of this conference call may contain forward looking statements within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act 1934, as amended and such forward looking statements are made pursuant to the safe Harbor provisions of the private <unk>.
<unk> Litigation Reform Act of 1995 forward looking statements describe future expectations plans results or strategies and are generally preceded by words, such as may future plan or planned will or should expected anticipates draft eventually or projected.
Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances events or results to differ materially from those projected in the forward looking statements, including the risks that actual results may differ materially from those projected in the forward looking statements as a result of various factors and other risks identified in our filings with the securities.
<unk> Commission.
All forward looking statements contained during this conference call speak only as of the date in which they were made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward looking statements whether as the result of the receipt of new information the occurrence of future events or otherwise so with that said, let me turn the call over to Ken.
Segal Ken Please proceed.
Thanks Robert.
Good afternoon, and thank all of you for joining us today.
As you saw on the press release, we started 2022, where we left off in 2021.
Other quarter of record profit product sales.
Which more than doubled from the same quarter last year.
We have now had nine consecutive quarters of annual quarterly revenue growth.
Eight of those two X or greater since I took over as CEO .
Importantly, the monthly sequential trends in the first quarter show continued acceleration of growth in our E Commerce business.
With sales in the month of March more than 80% compared to February .
There are a number of reasons why we think this enhanced ramp is occurring which I'll get into momentarily.
But needless to say, we think it bodes well for a continuation of the recent sales growth trends.
The other key development. This month is the launch of our novel elevate based system with contract test.
Or what were generally calling elevate which will begin shipping next week.
We discussed during our March conference call. The approval. We had recently received from the EPA and are excited to announce today a formal commercial launch of the system.
I believe the introduction of elevate will be a defining moment, where innovation enables us to accelerate our penetration into a number of key markets, particularly agriculture.
I'll spend a few moments later in the call talking through our commercialization approach as I believe elevate has the capability to be a game changer for us in this market.
So with those general highlights a strong sales acceleration and new product introductions, let's dive into a few more specifics.
As I mentioned sales for the quarter were up 122% compared to the year ago first quarter and up sequentially by 15%.
This was a new quarterly product sales record for sonesta.
We continue to significantly ramp up our customer acquisition efforts led by our operation Rat race campaign.
It has helped to drive a 438% increase in active customers. During Q1 2022 compared to two two compared to Q1 2021.
And up 46% sequentially compared to the year end numbers.
As we stated in the past we are taking a very analytical approach to our marketing efforts to ensure we are driving down our customer acquisition costs and increasing the lifetime value of our customers.
<unk>, we are still very early in the maturation cycle of this product launch we expect to see some significant leverage to both of these data points in the future.
We're also making continued improvements in our overall sales and marketing approach, including the pick up of some significant press coverage that has driven customers to our website.
For instance in March we saw a nice spike in the state of Maine due to press coverage that we received there.
The article in the bank or daily news titled Rat birth control could combat annoying rodent infestations highlighted the benefits of Contra pests, and we saw an increase in orders from the region.
Similarly, we were featured in the San Francisco Chronicle, two weeks ago and saw an immediate tick up in our e-commerce business in Northern California.
And while the E Commerce pickups are encouraging we believe they were also an early indicator of growing pull through demand is end user customer awareness begins to drive purchases by T M P's and distributors.
We're also expanding our digital marketing approach nationally compared to the regional approach we've taken thus far.
Initial results are very encouraging.
Generally when you increase the geographic scope and spend at the campaign you see a decrease in engagement and a higher bounce rate as you dial in your targeting defined your customers.
Ours remain flat.
And that's a strong sign that we have a broader customer base than we may have originally anticipate it.
It also clearly indicated that our product is relevant to a wider segment of the pest control market and it's not just attractive in areas that have restricted rodenticide use like California.
And now with the launch of elevate we're adding industry specific targeting to our digital footprint through trade publications through associations and through targeted search.
We're launching our first large scale exposure to food processing and storage as well as the broader agricultural space and we're increasing our visibility with T M P's.
Further in March we went live with our Instagram shopping experience.
Customers can now learn and shop inside the social platform keeping them captive at a time of interest versus relying on them to search for us on the web.
Also we recently added a pop up on our contract that store dot com to buying now which has assisted in generating additional sales cut.
Customers can now begin ordering contract test with a single click rather than scroll through multiple pages.
To further enhance the customer experience, we will be launching a new E. Commerce site later this month.
Still called contract that store Dot com.
But with a new look and feel to better match, our successful campaign aesthetics.
The team has done a great job on the E Commerce front as we continue to hit new monthly goals for a number of customers as well as number of subscriptions.
March in particular was a record month for subscription revenue with minimal churn.
And we believe this will increasingly become a more and more important part of the business going forward.
A metric we are keeping a close eye on.
From a market vertical standpoint, we continued to see strong adoption by zoos and sanctuaries, which accounted for about 18% of our first quarter sales.
One very influential customer in this space the Miami Zoo has credited the use of Contra pest.
To enable them to finally gain control of their raw pipe rat population around their aviary.
Resulting in the recent birth of chicks to birds that hadn't reproduced in over three years.
To build off this momentum.
On April one we launched a new contract program, specifically designed to target the zoos and sanctuaries vertical and designed to help with the initial cost of a contract first appointment.
As I've stated in the past secondary exposure from poisons has become a growing concern in these types of environments, where non target animals or wildlife reside.
I believe we are increasingly being recognized among influencers within this segment is ideal for addressing the concerns of rat infestations.
Both contract tests effectiveness, and the lessened risk to non target and predatory animals.
As I touched on a moment ago. We're also starting to see P. M P growth begin to accelerate.
During the quarter Pmt's accounted for about 16% of our sales.
Our awareness campaigns are generating pull through demand from end user customers as well as interest from P. M P's, who have challenging accounts and are looking for contract passed as a solution.
We have new customers, taking our product to zoos grain facilities correctional facilities animal rescue facilities in residential areas just to name a few.
There's pressure on the use of second generation anticoagulants continues to grow.
We're also seeing interest from P. M. P is looking for new solutions as their normal Goto products are being challenged.
<unk> has also generated inquiries from P. M p's battling roof rats, who are eager for a new tool in the fight and we're anticipating expanding sales in the poultry and agricultural markets as the product begins to ship next week.
As I mentioned in March we're now seeing growing interest from major P. M p's, including some of the largest players that were previously committed to their old solutions and we're now working on product demonstrations with them in real world situations. We.
We believe this will lead to adoption as the results are verified in the next few months.
Okay.
I touched on this a bit during the March call, but since they were first quarter events I believe it bears repeating that on the government front, we've announced a number of key deployments in various locations.
Clearly more and more cities counties and government customers are recognizing the growing success of contract pass through various media reports and our sales and marketing efforts.
These positive deployments and the media coverage around them are having a bit of a clustering effect.
For instance, following the recent successful deployments in Newton, Massachusetts in Hartford, Connecticut.
We now have a growing number of governmental entities and communities in new England, reaching out for additional information.
The same is occurring around Columbus, Ohio, San Francisco and elsewhere.
We're continuing to work hard to convert these inquiries into paying customers.
Yeah.
Also during the first quarter, where.
Where California based sales were approximately 23% of our overall product sales.
Los Angeles County specified the use of fertility control and one of their request for proposal.
Given California's move away from second generation anti Coagulants pursuant to the ecosystems Protection Act.
We expect this trend will continue in future Rfps.
And as I've stated in the past is the only EPA registered product available for fertility control in male and female rats.
Puts contra passed in an excellent position further.
Further penetration of the government market.
Okay.
Before I turn the call over to Tom to review the financials in a bit more detail. Let me just explain let me just expand upon the elevate system and how we're approaching the commercialization efforts for this new product.
Well our experience with agricultural applications demonstrates the app demonstrates the efficacy and economic value of Contra pets.
Our customers had been requesting an additional abating option target rats were they often live spin.
Specifically in rafters and other above ground locations.
In response to this feedback we developed elevate.
The novel suspended bait station, we created is easily accessible by rats, but out.
Out of the way of people pets livestock food stores etcetera.
And we're particularly excited about the use of the elevate system to control roof racks.
Given the frequent difficulty of deploying traditional rodenticides and the areas they inhabit.
In preparation for the EPA submission for elevate we conducted extensive trials to prove the effectiveness of the system.
This real World study information is critical as we've discussed in other market verticals and it should aid in providing potential customers the necessary data to make informed purchasing decisions and ultimately accelerate adoption of the elevate system.
It's important to note that elevate with its suspended base station.
As revolutionary within the pest control industry.
There simply is no other effective product on the market like it expressly designed for above ground deployment for the control of roof racks.
The industry is typically utilize traditional bait boxes to deliver pesticides and other products.
And the design of the system is such that it permits easy drop in and replacement of new eight ounce bottles of contract test.
Reducing both servicing time and cost.
We filed for patent protection for the system in April and recognition of both its uniqueness and its effectiveness.
As I stated on last quarter's call following the <unk> approval, we needed individuals' state registrations.
<unk> is now available in 48 states and the district of Columbia, with the remaining states, Oregon, and California, requiring a little bit of additional time to review submissions.
At the end of the day, we believe elevate is a critical tool that allows for contract pets potentially explosive growth in the agricultural segment.
We will be shipping the product next week and I look forward to providing updates on the progress for this product on our next call.
So to summarize with growing market awareness and adoption for contract test, which is highlighted by record quarterly sales.
Coupled with the introduction of the elevate system, we're off to a strong start on 2022.
I believe contract past it is the right product for pest control with significant growth potential based on its efficacy.
Higher metal and regulatory requirements as well as social trends.
And while we look forward to continuation of the recent trends in the quarters to come [laughter] excuse me, we have in place the necessary elements to accelerate growth even more.
And with that let me turn it over to Tom for information on the financials.
Thank you Ken.
As a reminder to our investors. The press release is available on our website in the Investor Relations section.
Further we expect to file our 10-Q tomorrow.
So we will I will just touch on some of the high points right now.
Revenue for the first quarter was approximately 195000 compared to approximately 88000 in the first quarter of 2020, an increase of 122%.
This is the ninth consecutive quarter of growth with each of those quarters, representing a doubling or more of revenue.
We believe this trend will continue and even accelerate with the launch of the elevate based system.
Gross profit for the first quarter was approximately 90000 or 46% of total revenue.
<unk> to approximately 38000 or 43% of total revenue in the first quarter of 2020.
Our progress on gross margins continue as we seek to bring the cost of manufacturing.
Below 50%.
Net loss for the quarter was $2 3 million compared with a net loss of $1 8 million for the first quarter of last year.
Adjusted EBITDA loss, which is a non-GAAP measure of operating performance for the first quarter.
Was $2 million compared to $1 $6 million in the first quarter of last year.
We are continuing to invest in revenue generation.
Although we carefully monitor the specific programs for efficacy and cost effectiveness in.
Main strict control over other aspects of the business.
Yeah.
In the second quarter for example, we have restructured our pricing and incentives across the board.
We would therefore expect adjusted EBITDA loss to continue.
Many of our current pace.
Cash at the end of 2021 was approximately when.
In the quarter was approximately $7 2 million.
With continued discipline this cash would be sufficient to fuel our growth strategy for the rest of the year.
That said as mentioned previously we have filed an S. Three for a renewal of our shelf capacity, which expired earlier last year.
As shelf or an S. Three is an FCC provision to register a new issue shares without having to sell the offering at once.
But instead offer portions of the issue selectively over a three year period.
That is our intent to be selective about capital raises balancing the need for resources with shareholder interests.
Yeah.
With that let me open the call to questions. Paul could you. Please open it up.
Yeah.
We will now begin the question and answer session to ask a question you May Press Star then one on your touch tone.
If youre using a speakerphone please pick up your handset before pressing the key.
So the draw your question. Please press Star then two.
And at this time, we will pause for the great question.
And our first question today will come from Tucker Andersen with above all advisory. Please go ahead.
Good afternoon.
Hi, Good afternoon, Hi, two questions.
First.
If you are successful congratulations on the progress you've made both on the sales front and more important element because I like you I'm excited about that if you are successful when your sales continue to ramp at this pace and perhaps even if we're all fortunate and do what we hoped accelerate are there any constraints.
On the production capacity for the prospect.
Notice you have a fair amount of inventory, but I don't know why that is finished goods inventory or or whether there would be more pricing as soon that needs to be done, but just and in a world where supply chain constraints seem to be continuing to hurt people. I was just wondering if there would be any you would encounter.
Okay.
Tom why don't you take that since it all rolls up to here.
Yeah. So we have all along.
Stockpiling the raw materials that are hard to source quickly. So we have a quite a sufficient stockpile.
Stockpile of or two actives for example.
The other things that are necessary to meet demand.
We have a pretty carefully structured the supply chain. So that we can meet a surge in demand whether it be for.
Traditional contrast tank or 48 system. So we really don't see any constraints at this point for the on the supply chain.
Great Fantastic. The other question is a general question that you touched upon in your in your final comments and that is the cash burn versus say for instance, the cash available and our U S. As you understand we're in a much different market, which is much much less forgiving of companies who are funding growth.
While they remain unprofitable and while you have sufficient cash for a reasonable period of time, you, obviously want to keep a cushion.
So and and it clearly at these prices issuance of common stock would be incredibly dilutive to current stockholders. So I'm just wondering how you balance all of these factors and if there are other methods of financing you're thinking about that sort of thing.
Well I think that the appeal, we we certainly do not want to be.
Raising.
Money at these prices it any more than we absolutely have to and we don't have to immediately got a good cash.
Fly now and certainly through to the end of the year.
That said, you're right, we do need to be very vigilant and very careful about opportunistically accessing the capital markets.
That's why we have an S. Three in place that allows us to.
Opportunistically move as the stock moves.
We also have a number of them once and we've been fairly successful in the past.
At either inducing or finding.
Binding.
People exercising of warrants ACH.
During the year, so that would be another area, which would be certainly it is dilutive, but the warrant overhang. There's also a concern for a lot of investors. So perhaps there's not as much of a.
Any issue with that.
Okay.
Yeah Yeah.
Congratulations on your progress and I hope maybe the next time I get to your area of Tech combined say in a while.
Good luck on your continued progress, especially with all of it.
Thank you Mike will definitely be keeping you posted.
Yeah.
And it appears there are there further questions. So this will conclude our question and answer session I'd like to turn the conference back over to management for any closing remarks.
Great. Thanks cool.
Again.
Good quarter for us as we see we continue to.
The revenue ramp that we've been talking about for a couple of quarters.
It's Tom and I, both said, we think there is.
Hopefully more to that to come in the near future. We are extraordinarily excited about elevate.
Again, it starts shipping next week.
The materials are all in supply we're ready to go.
And look forward to updating you on that as well as a bunch of other things that we have in the pipeline as soon as we can but again. Thank you for your attention.
And I look forward to talking to you next quarter if not before.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Yeah.
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