Q3 2022 Sonendo Inc Earnings Call
And reform Act of 1095.
Any statements contained in this call that relate to expectations or predictions of future events results or per firm or performance are forward looking statements.
All forward looking statements, including those relating to our operating trends and future financial performance the impact of COVID-19 on our business.
Expense management expectations for hiring growth in our organization market opportunity revenue guidance.
Commercial expansion and product pipeline development are.
Upon our current estimates and various assumptions these.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward looking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 23rd 2022, and available on Edgar and in our other public reports.
Filed periodically with the SEC.
This conference call contains time sensitive information and is accurate only as of the live broadcast on November 19, 2022 and Endo.
Disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
With that I will now turn the call over to Bjorn.
Hey, Thanks, Lisa Good afternoon, everyone and thank you for joining us for today's call I will provide opening comments and a business update followed by Mike who will provide additional detail regarding our quarterly results and guidance for the remainder of the year before opening the call to Q&A.
So endo had a strong third quarter marked by continued revenue growth significant product announcements and a notable financing.
We were pleased with our performance, especially in light of the anticipation that Q3 and the second half of 2022, Mike proved to be sluggish based upon macroeconomic headwinds.
On a high level of our operating performance was strong.
Revenue for the third quarter of 2022 was $9 $8 million.
Representing growth of 25% over the same period last year.
We were pleased to see continued performance in our procedure utilization rates equating to approximately 72000 procedures across our installed base for the quarter.
Coupled with a price increase that was effective July one this equates to roughly a 30% increase in consumable revenue compared to the third quarter of last year.
In the third quarter, we sold 38, gentlemen consoles compared to 29 in the prior year period.
Both rate of approximately 30% year over year.
As of September 30th gentle waves ending installed base was approximately 935 units compared to approximately 766 units on September 32021.
This quarter. We also closed the 63 million follow on financing with new and existing investors.
Earlier in the quarter, we drew down $10 million of available debt.
Additional funds will grant us more financial flexibility to execute on our strategy as we seek to fulfill our mission of saving teeth improving lives.
Overall Q3 was a quarter during which we achieved milestones that we believe will serve as a positive inflection point for <unk> as we continue to build a business.
Before diving into further business updates I'd like to address the current macro environment trends, we see within the med tech sector and their potential impact on our business.
The supply chain headwinds, we experienced in the first half of this year have eased in Q3 and now were internal teams continue to monitor the potential for further disruptions.
In response to these challenges we implemented some design changes during the full commercial launch of clean flow to allow for greater stability throughout the supply chain, including a new packaging design.
However, our gross margins in Q3 came in less than we had originally anticipated.
During the quarter, we incurred certain costs that will expand upon later in our financial section as well as compression of pricing for our prior generation console.
The negative impacts were partially offset by price increases forever.
For Cedar instruments that became effective July one.
Mike will provide more detail on gross margin trends during the financial review.
We have also observed that the placement of capital equipment has been mixed across the med tech sector, primarily due to inflationary pressures.
Headlines threatening a weakening economy.
And while we are closely tracking expenditure trends in the dental market, we still expect system placements to be stronger in the fourth quarter as compared to the third.
This has historically been the case due to year end tax incentives and buying practices of.
Of our customers.
And finally, as we've previously communicated and consistently observed in years prior to Covid we.
We saw a moderate seasonal slowdown a procedure utilization during the summer months of this year.
We believe this was caused by longer than average vacations.
The part of both practitioners and patients.
Given that it was the first summer since 2019 that many took extended vacations.
But again this was a trend observed throughout the med tech sector, and we expect utilization to pick up in Q4.
Which when paired with anticipated capital placements at the end of the year should translate to a successful year end.
In summary, we are encouraged by our Q3 utilization and Theyre looking forward to a strong finish to 2022 for both consoles and procedure instruments.
Turning to some recent business updates rich thrill to have announced the release of the <unk> system.
On October 18th we announced the launch of our next generation in General <unk> console, which received a great reception been showcased at Endo Com. So then those second annual ended after conference on innovation.
We're very excited about the G four system and what it offers.
Building upon the foundation of general moves broad spectrum acoustic energy and advanced fluid dynamics <unk> has the ability to improve workflow efficiency across the office and will cut down on system preparation time for support staff.
Key features of the gentlemen, G. Four system include one an improved user interface with auditory cues to multi operatory connectivity.
Three battery backup and for increased fluid capacity, enabling up to six procedures.
Ultimately the console has the ability to elevate patient care practice efficiency and become the centerpiece of the ended optic office.
The introduction of the <unk> four system comes just six months after the commercial launch of the clean for procedure instruments back in April .
And is indicative of <unk> commitment to innovation and endodontics.
The system is already in the hands of several doctors and the feedback we're receiving is really exciting.
As an example.
<unk> had one doctor share that their staff of stage one hour per day by converting to the <unk> system.
<unk> represents a significant move forward in creating a platform for the <unk> procedure to become the standard of care for root canal therapy and Tuesday.
We look forward to providing more updates on future calls.
As for clean flow, we're seeing successful adoption trends since we initially introduced it to the market in the spring.
While we were ahead of internal estimates for converting doctors to clean flow.
Maintaining a pace to have full conversion within 24 months of launch.
As a reminder, converting users to clean flow procedure instruments represents a margin inflection point for the business.
As we scale clean flow and convert users to the new technology.
We anticipate margins will improve due to fewer components ease of assembly and benefits of scale.
Okay.
In addition to hosting Entercom in October <unk> was honored to sponsored the inaugural women in Endodontics summit.
This conference held in Tucson, Arizona was a two day event, providing educational opportunities and highlighting nationally recognized women in the field.
We were proud to be involved as we recognize the significance was supported growth and leadership opportunities for women.
In the industry and is further evidence of how we are supporting the industry across technology service and education.
Turning to our commercial strategy.
We've been pleased with the positive impact, resulting from the bifurcation of our consumable and capital sales teams.
As a reminder, we significantly expanded the size of our consumable rep team at the end of 2021 and preparation for the launch of clean flow and.
And to adjust for the delegation of account management responsibilities.
In Q3, our consumable team sold over 72000 procedure instruments clinical education has been a critical component of this sales team strategy. In addition to training practitioners to efficiently incorporate the device into their practices.
We believe this hands on approach will best emphasized the benefits of our technology and maximize the opportunity for increased practice volumes.
The shift towards a bifurcated sales force has also benefited our capital sales team as these reps at previously spent as much as 50% of their time servicing existing accounts we will.
Already begun to see increased lead generation and pipeline opportunities for this newly focused sales team and in Q3, we placed 38 systems. Despite some of the macro headwinds outlined earlier in my remarks.
Additionally, this team is well situated to expand our focus to include general dentists, who performed a large share of their own root canal procedures.
We believe the fourth quarter will provide a chance to further realize the synergies as the team focuses on supporting practitioners in placing capital orders at the end of the year.
We will continue to drive execution of these two teams into 2023.
Additionally in July we were pleased to announce the appointment of drag Lindbergh as Vice President of sales North America.
<unk> continues to scale and further establish a leadership position in the <unk> market Joanne leads the sales team and overseas sales strategy in the U S and Canada.
He has already made an impact within the sales organization as she brings significant experience with increasing scale operational leadership.
<unk> higher is representative of our continued focus on sales expansion and execution.
In the third quarter. We also conducted a consumer survey of 500 individuals which concluded that over 67% of respondents are terrified of getting a root canal procedure.
And more than 80% for nervous anxious are scared about undergoing treatment.
This shows the significant need to bring <unk> therapy into the 20 <unk> century.
We believe that <unk> procedure will define.
Defined root canal therapy.
With a minimally invasive process that preserves two structure and promotes pain free fast healing.
We have compelling data consumer driven acceptance and revolutionary technology, we're excited about <unk> future.
We had an encouraging third quarter and have committed the necessary resources to invest in our commercial infrastructure and continued innovation.
With the launch of clean flow in the spring and the recent release of the next generation <unk> four console, we know our technology is well positioned to support doctors and expanding their practices and improving the patient experience.
This unique value proposition will allow us to capture a significant share of the almost $2 billion <unk> market in the U S and Canada.
And we're looking forward to the next phase of our growth.
With that I'll turn the call over to Michael What's Sandoz Chief Financial Officer.
Mike.
Thanks, Dan as previously mentioned <unk> total revenue for the third quarter 2022 was $9 8 million.
Compared to $7 9 million for the third quarter of 2021.
An increase of 25%.
Growth in the quarter was primarily driven by increased procedural instrument sales increased general console sales and strong <unk> software sales growth.
In the third quarter generally console revenue was $2 $1 million compared to $1 $8 million in the third quarter of 2021.
Gentlemen, console average selling prices in the quarter were roughly $55000.
Likely below our second quarter of 2022.
The reduction in ASP is largely attributable to incentives provided on our existing Gen III console and anticipation of the Q4 launch of the Gen four console.
Turning to procedure instruments Pi revenue was $4 8 million compared.
Compared to $3 7 million in the third quarter of 2021.
An increase of approximately 30%.
<unk> revenue growth was driven primarily by the generally increased installed base.
Procedure instruments sold.
And an approximately 10% increase in average selling prices compared to the prior year period.
Procedure instruments sold in the quarter totaled approximately $72.
Total software revenue for the third quarter was $2 $1 million compared to $1 7 million in the third quarter of 2021, an increase of 21%.
The increase was primarily driven by continued momentum with large group practices looking to standardize across their enterprise.
Total other product related revenue was $900000 in the quarter.
Gross margin for the third quarter of 2022 was 24% compared to 26% in the third quarter of 2021.
Our gross margin results were in line with the first half of 2022, we felt short of our expectations due to the aforementioned reduction in console pricing.
Higher than expected Gen three console service costs.
Securing gen III console components and lower volumes with some partial offset by favorable higher procedure instrument pricing.
Total operating expenses in the third quarter of 2022 was $16 9 million compared.
Compared to $13 1 million from the same period at the prior year.
The increase was driven primarily by higher personnel expenses relating to our commercial expansion.
As well as higher general and administrative costs, primarily legal and accounting associated with operating as a public company.
Loss from operations was $14 6 million in the third quarter of 2022 compared to $11 $1 million in the third quarter of 2021.
Net loss was $15 5 million for the third.
Quarter, two two compared to $12 7 million in the third quarter of 2021.
Our cash and cash equivalents and short term investments as of September 32022 were approximately $105 6 million.
Long term borrowings totaled $40 million.
Net proceeds from the recent closing of a private placement totaling $59 million.
Moving to our financial guidance.
For 2022, we are reiterating our annual revenue to be in the range of 45% to $42 $5 million.
Representing year over year annual growth between 22 and 28%.
This implies revenue of $11, one to $13 1 billion in the fourth quarter.
Moving down the income statement.
We expect fourth quarter gross margins to be approximately 25% to 28% for reasons previously noted.
The benefit of cost reductions for clean flow will begin having a meaningful impact in early 2023, as we move to higher volumes and improved production processes.
At this point I'd like to open up the call for questions.
Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind just first off on the budget.
When <unk> asked a question. Please ensure your devices on mute locally.
Our first question today comes from Jon Block from Stifel. Your line is open.
Great guys. Thanks, Good afternoon, maybe the first one.
Bug or beyond the 55000 for the causes for the quarter I think that's down roughly 8% from the <unk> levels I just wanted to make sure I am clear is this sort of like a one timer as you transition to the <unk> console, how do we think about that console ASP going forward does it go back to the 60 K.
I think you were in one H 'twenty two does it even go higher or are you taking price.
Upon the rollout of <unk>, let me maybe pause there and then I can ask my follow up.
Hey, John it's Mike So.
Speaking about <unk> pricing, we need to put in the context of <unk>, which we just launched so we're expecting <unk> to have an eye or higher asps. So we've priced that console.
At a list price approximately 20000 more.
In the current G III version.
The two consoles to still play out in the market and we look at G. III to probably maintain its price point that we ended Q3 at going forward, John maybe just a quick follow up here.
Myself this is bjorn.
A slight reduction in <unk>.
Asps on the G III.
Effectively dropped pending the G four launch wishes.
Common dynamic that sometimes happens when you launch.
New capital equipment in the Med Tech.
Sector.
Okay, So maybe just to tack onto that and sorry.
Additional clarification, but G. III is still going to be on the market that might run around the 55000 ASP realize what do you expect the realized ASP to be of <unk> four and then maybe to just push you. How do you. How do you think that split works going forward between the two different offerings that will be in the market.
So John it's Mike.
To talk about G. Four we're getting positive feedback today from customers and.
We're introducing this price differential that I, just mentioned and people who are very receptive to the technology upgrade that it provides will provide.
Then opportunity to see a more efficient operatory.
And also improved user interface and functionality.
No.
We're not.
Ready yet to provide ASP net guidance I think on <unk>, four but suffice it to say that we're expecting a positive from Q3.
I don't know if you wanted to.
The other thing I'd just add is that.
As we're thinking about both <unk> and <unk> four in the market right. So we have flexibility in our inventory levels to support a couple of different scenarios here.
But as we go out and sell.
G. Four system, we will obviously be leading with Vg for.
<unk> is the significantly improved console and I think.
What we will be leading off with <unk>.
But we are also keeping this.
The opportunity open for customers that for different reasons will want to purchase the <unk> system, they will be able to do that.
For some time.
Okay understood and maybe just a follow up question is around.
Around gross margin and maybe just to push you guys. So the first is it looks like the exit will now be 25% to 28% GM for <unk> previously it was in the low thirty's.
Mike what do we do we just sort of like Ron whatever our I'll speak for myself whatever my trajectory was from the 31 exit and for Q is it the same trajectory do you make up any ground off of a lower exit in <unk> and then just to push you guys can you just be a little bit more detail like what change.
From when you.
Guided last quarter, where you thought you would have some solid sequential improvement I know you've called out <unk>, three a little bit, but I mean.
Clearly you knew that was in the Hopper what was coming there. So maybe talk about what was the incremental negative surprise that led to the shortfall for <unk> and then help us with the trajectory of the ramp into 2023 around Gms. Thanks, guys.
Sure John So I'll take the first half of the question.
To expand on it so when we look at how we were thinking about Q3, one of the opportunities that presented itself was just around how.
Some inventory that came in from some.
Replacement components on our install base.
And they came in due to certain timing that we had associated with some supply chain challenges that were early in the year and we thought it was best to roll those out starting in Q3 working through in Q4 and get that behind us in 2022. So we took that opportunity to do it in Q3. It also.
In order to execute that effectively over Q3 and Q4, we use a third party service provider.
We already used today, but we use them at a higher level to do that for us. So when we look at the service cost that was something that.
We think it's better for us to take into 2022 and put those placements.
And before we exit the year.
When you look at also at Q4 moving into Q4 our guidance.
It is still sound, we expect Q3 exit to still be stronger than Q4.
The dynamic that I just mentioned around the ASP.
And also the continued surface cost into Q4, and then also there is another factor where we had produced.
Clean flow.
<unk>.
At lower quantities in Q3, and we're going to work through that inventory through the first half of Q4. So.
As we exited Q4 call. It December we expect back to be that place, where we originally guided the exit to be but for the overall quarter.
He is out to 25% to 28% so.
So maybe just to build a little bit on what Mike is saying here. So the key difference here John is that.
Effectively it's related to supply chain right that some of these supply chain as some of these parts.
We need to maintain some of our consoles did not come in.
As projected and hence we have to come back and actually.
Come back to these units in the field, but.
Having said that we're still very optimistic about the margin inflection points that we have here coming in the business going forward at today, we have we.
We have trained more than 500 doctors in the field on clean flow and as we've talked about before clean flow is the key margin inflection point for the business, we're going to continue obviously future aggressively trained doctors going forward, but.
We are ahead quite significantly ahead.
Plans to train doctors in the field.
But even though we're ahead right now we're consuming the earlier clean flow procedure instrument that we made we had higher cost parts.
But at this point in time on our manufacturing floor, we're now manufacturing clean flow with production malls and significantly lower part prices and as as.
As we consume these higher cost clean flow procedure instruments, we should start seeing the benefits of a higher contribution margin of clean flow.
<unk>.
And towards the very end of Q4 and into 2023. So we should be then seeing sequential margin growth.
Quarter by quarter Nextera is as we continue to push for <unk>.
Understood helpful color. Thanks, guys.
Thank you John .
We announcements at Jason Bednar from Piper Sandler Your line is open.
Hey, Thanks, good afternoon, congrats on another solid quarter here really appreciate all the color on G. Four I'm going to start off your buildup of Jon Block's question there.
You've got the 20 K higher on the ASP.
Can you talk about the Cogs in the system.
I don't know if you can speak to anything on margins with that system relative to G. III.
Maybe the new G III margins given the lower price point, just how did those those two stack up.
<unk> four be nicely above that in Q3, when we start thinking about.
Margins going forward.
And then can you talk about how youre planning to handle upgrades or trade ins of old units is that something that you're planning to run a formal program to incentivize adoption of G. Four or is that not part of the the plan here.
Hi, Jason it's Mike So I'll start.
The answers is talking about the gross margins on the consoles. So.
Right now when we look at G. Four compared to <unk> three we look at Q4 to be in line with where <unk> was.
Call It Q2 at that prior price point.
Going forward at least now as we launch moving forward, we expect it to have higher margins and.
Better overall service profile.
Over the years, but initially we will start at <unk>.
Equally to the G III ones.
And second part of your question just talk about the upgrade program, we are offering a limited.
Upgrade program to our existing users, but what we're seeing is that.
Really a lot of customers see the benefits and they want to incorporate this into their practice.
Including their existing console as well so right now we're not looking at a significant upward program overall and we're not expecting.
Our existing users to take the upgrade to step.
At least in the early periods of Gen. Four over time, we expect everyone of course to move to Gen. Four.
We're also building on Mike's answer here.
To Mike's point, we're not anticipating a higher number of upgrades in Q4, we have the opportunity we see that as a big opportunity to go out and talk to our existing customers.
But our focus is going to be to drive new new system sales.
That would obviously be better than the other longer term horizon for the business and then we will be.
Adding.
Doing upgrades.
Especially as we continue to go forward here, but our focus will be to drive new system sales.
Okay, Alright very helpful.
And then maybe one on the capital equipment environment here.
You mentioned some longer sales cycles that are unfolding.
Definitely not ultimately surprising just given the environment. We're in I guess I'm not sure if the prospect of a new console.
The market led to any purchase delays at the time during the third quarter.
I'm curious if you think beyond the presence or the.
G four coming played a role in some of those sales dynamics.
During <unk>, but then also how you see the capital environment, playing out real time, because again you do have the macro that's a little bit uncertain, but you also have the benefit of launching an entirely new council. So I guess just curious how you see things playing out your year end I think the commentary was some better better equipment sales versus <unk>, but then we think.
How should we be thinking about that as well as we look ahead to 'twenty three.
Yes, Jason good good questions and.
There is always that risk right, when you're introducing new capital equipment that.
It will somehow leak and some some consoles there will be some delays in console sales because of that which is one of the reasons why we're happy that we were able to actually exceed our numbers here in Q3.
We look for into the.
As we look towards the end of the year here.
We continue to see strong demand for general <unk>, we continue to have a very robust pipeline.
But just like we talked about in our prior call conversion cycles, we feel are longer in the current macro environment because of higher interest rates and the financial uncertainty and so forth.
Having said that though we still believe that Q4 will be stronger than Q3 because of.
Tax and economic incentives here towards.
Towards towards the end of the year and in General I would also say just add on and say that obviously this is taking our console platform to create an entirely new level. So this sets us up very well.
But just for Q4, but us we also look into 2023.
Alright, thanks, so much I'll hop back in queue.
Thank you Jason.
Our next question comes from Nathan Rich from Goldman Sachs. Your line is open.
Hi, good afternoon. Thanks for the question.
Maybe pivoting over to what Youre seeing from a utilization standpoint.
It sounds like you expect utilization to pick up in the fourth quarter, just curious how the cadence played out.
In the third quarter I think July had been pretty strong.
How did the August and September trend and I guess, how do you feel about kind of visibility for <unk> in terms of the level of utilization that.
Youre seeing and I'll maybe start there.
Follow up.
Yes. Good question. So there is a.
Lot of different things different dynamics there. It's one of the things we've talked about in our prepared remarks is that.
We.
There was a softening in utilization because of summer to summer holidays, we think that because of the Covid dynamics. There was a lot of doctors and also <unk>.
Patients that haven't taken vacations for a long time, and hence took longer vacations.
So thats why we believe we saw a slightly soft.
Software dynamic.
To your point July versus August and September we did see a slightly lower utilization in July .
Especially around the July .
Holidays.
As we look here in <unk>.
October .
Over seems to be seems.
It seems to be tracking well in general what we're seeing is that.
Our utilization is.
It's just really mirrors the overall demand in the endodontics market. So as total number of procedures in the Endodontics goes up then.
But we see that being mirrored in our procedures.
We're also very happy from a revenue perspective in Q3, we had our highest consumable revenue ever.
Which is.
Even though we had a slightly lighter.
Slightly lighter utilization in the summer months because of the summer summer holidays.
Yes.
Great.
And then if I could ask one on the outlook for capital equipment, maybe just a little bit more specifically to <unk>.
I think looking back at last year.
Fourth quarter accounted for 35% to 40% of system placements for the year is that the type of seasonality that you would expect this year and could you maybe comment on the demand that youre seeing on the capital equipment side coming out of Endo com.
And what type of I guess I don't know if coverage is the right way to think about it but do you have for the fourth quarter based on the demand that you've seen out of that event. Thank you.
Yes.
Yes, So endo Colin was a great conference for us.
Continued.
Conference that continues to grow which continues to be an exciting place, where we can showcase gentlemen technologies both on the console side and on the consumable side. So it was an exciting exciting start for <unk> for the quarter.
And then like we talked about a little earlier here to demand in the pipeline.
As strong.
<unk>.
The only the <unk>.
Only variability right.
Time that it takes to close some of these different.
Different consoles.
But Q4 like Youre alluding to has always been a strong quarter for us and we believe that it will also be a strong quarter.
This year.
If you look at the range that we talked about.
<unk> range that we talked about in our prepared remarks from $45 to $42 five for this year, but the variability of that range is effectively the it's really a function of the console sales.
We see here in Q4.
That's helpful. Thank you.
We now turn to Michael Cherny from Bank of America. Your line is open.
Hi, good afternoon, and thanks for taking the question maybe.
Maybe if I can go kind of reverse order on the console side, you talked about the dynamics of that.
I think Mike you had mentioned some of the cost dynamics of filling in servicing <unk> threes and some demand <unk>. How do you think about the go forward in the event that we do have some type of economic sensitivity.
Is there a.
Either an opportunity or a need to have some type of bifurcated product base or is that not something that youre considering at this point in time.
G III dynamic will be a one off in nature.
Yeah.
So Michael I, just want to make sure I understand your question. So when you look at how we're planning about <unk> three and <unk>. Four we think that there is a near term opportunity to sell both consoles over the coming quarters.
III G. Four rather still uses the same foundational technology the same <unk> the same.
Same procedural fluids, so people arent, having to necessarily switch their consumable profile for that.
And Theres a lot of customers of course in our pipeline that we introduced G. III too that we think will cycle through over the coming quarters as well so what we see in the foreseeable future is still a two pronged approach having G III and G. Four continue to play in the marketplace.
Just to add on and give a little bit further color there Michael.
I do believe that we will we should end up for this one console platform now and we will eventually retire selling.
The G G III system.
I think a general rate is if we look on angi for just taking this technology to to the next level and tourism, enabling practice sufficiency doctors can do multiple procedures across multiple consoles battery backup. They can do there's more fluid capacity to do more procedures.
<unk> improved screening et cetera et cetera. So.
So just taking this console platform to the next level.
I think that if you look in the endodontics practice, how much time and how many benefits come out of implementing at <unk>.
Console.
We do believe that.
We should be able to.
Maintain that higher ASP and there should be no reason why over time that doctors.
Our original procedure shouldn't.
Shouldnt.
Step up and buy that slightly more.
Higher ASP.
<unk> four system.
Yeah.
Got it I think all my other questions are answered I'm. Good for now thank you.
Thank you Michael.
We tend to Evan <unk> from Morgan Stanley Your line is open.
Great. Thank the bifurcation of the sales force strategy progressing relative to your expectations at this point and how do we think about the traction there and any metrics you can give us around productivity.
But we should expect into 2023 as you think about Avnet carrying sales force and are you where you need to be from the boys.
Perspective, particularly as we start thinking about 2023.
Yeah. Thanks Erin.
So commenting first on the bifurcation.
We're happy with us having bifurcated the sales team.
We hired most of our team in Q4 of 'twenty one the first half of this year.
22 has been spent to trading.
The capital sales reps and the consumable reps.
Looking at maybe specifically or what.
What the team has done we have now the last year, we have installed the consumable team in particular has helped install or the 200 units.
We are also like we talked about help convert more than 500 users to clean <unk> includes trading those doctors on clean flow.
Which means that more than 50% of our user base have not been trained on clean flow.
Couldn't have done this without having done that bifurcation and out having those consumable reps.
And we did this while setting a record revenue for consumables in Q3, So we're happy with the progress of the team.
Now what we need to do going forward, we need to wrap up converting the remaining doctors to clean flow.
And allowed the team to focus on driving utilization. So the key if you look at this from a.
Consumable Rep perspective, the key different.
Metrics that will be closely monitoring right is how many doctors that we're training on clean flow and how we are helping drive utilization.
In the field when it comes to.
<unk>.
Sales reps going forward sales force, rather I think thats whats your question was.
As part of building scale in the sales organization, we've hired like we've talked about in our prepared remarks, we've hired a VP of sales.
That will help coordinate activities both across the capital and the consumable team.
We're not expecting any meaningful increase to the sales force here in Q Q4, but as we look into next year. We think there is an opportunity to slightly expand our team of specialists as far as thinking about also start selling into to the GP side side of this.
Okay. That's helpful.
And can you talk about the go to market strategy, having both kind of feels like the G. III energy for how does that work and then when the G III efficiently rollout.
So erinn, we will continue to lead with.
Going forward, we will be leading all sales activities with G. Four we believe it's a better system and we believe that.
We will we will be selling we do believe that some customers for different various reasons.
Continue to by G. III for some time because of either a price differential or.
Or.
Just like any other med tech or.
Smartphone et cetera. So.
The older system.
But so the strategy to continue to push push that out we will.
We'll be really all about selling selling the G. G. Four system, what's the second part of your question Erinn did I missed the second part.
Just on the when do you expect Q3 <unk>.
Like when does that end just as we think about like pricing dynamic.
So I can take that.
Alright so.
When we think about <unk> four so.
How long we keep G. III is going to be largely dependent just on.
Really letting the market play that out early on.
For Q1, and Q2 of 2023, but as <unk> indicated we don't anticipate having achieved three <unk> system in the out years.
Okay got it thank you.
Thank you Aaron.
This concludes our Q&A I'll now hand over to <unk>, President and CEO for final remarks.
Well. Thank you operator, we appreciate everyone spending time with us today.
Mike and I look forward to meeting many of you as we go forward both at future Investor conferences and also for individual meetings have a great day.
Today's call is now concluded. Thank you for your participation you may now disconnect your lines.
Okay.