Q3 2022 Senestech Inc Earnings Call

Good day and welcome to the stomach Tech incorporated reports third quarter of 2022 financial results Conference call.

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I would now like to turn the conference over to Robert Blum with <unk> Partners. Please go ahead.

Alright, Thank you very much Betsy and thank you all for joining us today to discuss <unk> third quarter 2020 to financial results for the period ended September 30th 2022.

With us on the call today are Ken Siegel, Chief Executive Officer, Joel for wind, the company's incoming Chief Executive Officer, and Tom Chesterman, The company's Chief Financial Officer.

At the conclusion of today's prepared remarks, we will open the call for a question and answer session.

We begin with prepared remarks, we submit for the record the following statement.

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 of 1934 as amended and such forward looking statements are made pursuant to the safe.

Harbor provisions of the private Securities 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 drag.

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.

<unk> identified.

Fillings with the Securities Exchange Commission all forward looking statements contained during this conference call speak only as of the date on 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.

Future events or otherwise.

With that said, let me turn the call over to Ken Siegel Ken. Please proceed.

Thanks Robert.

Good morning, everyone and thank you all for joining us today.

I'm pleased we got a chance to talk with you today as we report another quarter of strong revenue growth.

But also on my retirement from the company at the end of the year.

And the appointment of Joel Fruin, as our new Chief Executive Officer.

Over the past three and a half years, it's been my objective as CEO to lay the groundwork for the successful commercialization of contract cost.

And I think we've achieved that goal.

When I took over we are a science led organization with no commercial experience.

Prior to my taking over as the company embarked on its initial commercialization efforts.

Itself constantly pivoting from a distributor led model to a pnp led model.

To a replacement for Rodenticides model to a green model doing animal friendly model with many iterations in between.

In certain instances it had chosen to fight the industry that we would depend on for a long term success.

And that last point is one I will come back to in a moment because it leads us to joel's appointment.

We also didn't have the data to show how contract that's worked in real world situations or to demonstrate both its long term efficacy and cost effectiveness.

We have since completed the necessary long term studies and field work required by how high value customers, particularly within agricultural and urban setting.

As I mentioned, a moment ago, we didn't truly have a commercialization strategy and we certainly didn't have any ecommerce platform.

Since then we have launched a highly effective e-commerce platform that allows us to sell directly to customers.

This has the dual effect of providing better service to customers and also providing some price discipline in the market.

Further through our collaboration or through the collaboration of some incredible people within the organization.

<unk> and launched our own award winning operation Rat race campaign.

Which has driven strong increases in traffic.

So today about 50% of our sales are derived from the ecommerce platform.

That's my conversations with customers in the early days were occurring it was obvious that we needed to create a delivery system that allowed for above ground deployment of contract test for use in the agricultural segment and for the control of roof racks and response, we created elevated there is simply no other product on the market quite like it.

And I believe it will be a key driver to the future success of the company.

Prior to coming on board, we also had the opportunity or actually the propensity to chase shiny objects.

Over the past few years, we've streamlined our sales and marketing efforts to address key market verticals in which we have the greatest opportunity for success include.

Including zoos and sanctuaries municipalities and agriculture.

We've made great progress in each of these areas with key deployments in each.

We've also focused our research development and attainable near term product equipment.

But coming back to the beginning perhaps one of the most important things we needed to accomplish was to repair our relationship with the pest management and strict.

From a positioning standpoint, we recognize that attempting to position contract past as an exclusive solution to pest control with.

It was alienating our potential P M P customers and other major players in the industry.

Because sustainable control requires the use of multiple pest management tools.

We've since emphasize the important role that Contra Paas can play as part of an integrated pest management or IPM solution.

It can dramatically improve the effectiveness of other tools and generate sustained results.

And because country passed as a contraceptive and not a sterilant P.

A&P as can improve their business models by providing a long term solution.

Naples dam to substantially reduce their servicing costs.

And just the past year, we have started working more closely with PMT.

Such as rent it killed term index.

Massey services in Africa.

We're now offering contract past as part of integrated Pest management.

As well as continuing our joint development efforts with leaf attack.

With our e-commerce platform, showing strength and growth Pamela.

I will hit on all the numbers in a moment, but we did have a 173% increase year over year from our E Commerce platform.

Our next focus area needs to be on further penetrating the pest management professional vertical.

And Thats, where Joel comes out.

I'll, let him expand a bit on his background, but I think as a company we have tremendous opportunity to now take contract past. The next level given the groundwork that has been laid over the past few years.

Clearly this is bittersweet for me.

They really enjoyed the opportunity work to work with such amazing people and.

And interact with many of your investors.

I truly believe contract past is an industry changing product.

And set against the world backdrop of sustainability.

Has the potential to reduce the tremendous infrastructure costs caused by rats.

The destruction of the global food supply that is lost every year to infestations.

The diseases that are spread through rats, which propose which pose a dangerous risk to public health and safety.

And the reduction of poisons from the environment.

Impacts wildlife and humans alike.

I will continue through the end of the year as an executive member of the board of directors.

Aiding Joel in the transition.

I. Thank all of you for the opportunity to be CEO . These last three and a half years.

Look forward to the tremendous future I believe is ahead for the company.

And with that let me turn it over to Joel for Joel.

Ken. Thank you very much I am extremely excited and honored to lead the NASDAQ going forward.

As Ken mentioned Contra past isn't effective sustainable and Earth friendly tool that has the ability to revenue revolutionize the way pest management is conducted.

Simply is no other product in the world like Contra past and that is where I think the true opportunity lives.

My background is anchored with 15 years of executive leadership in the vector and pest management industries.

It was the vice President and general manager of Clark, Environmental a leading vector and pest management products and services company.

Clark I bring extensive expertise in the development and manufacturing of EPA registered chemical control products <unk>.

Commercialization and sale of those products.

And leading large sales and service organizations.

My primary skill set though it's always been on growth initiatives are to grow the topline how to grow the bottom line and how to grow the organization I've had successes in a variety of industries and will now focus on how best to profitably grow so that's that.

In conclusion, I have always had a passion and commitment to sustainable effective solutions to vector in pest control challenges and.

And Contrapose fits right in with that passion I provided an exciting sustainable solution for management of animal Paas Standalone or IPM program.

Very excited about this with that let me turn it over to Tom Chesterman.

Thank you Joel let me add my welcome and excitement to have you join the team here at the NASDAQ.

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 later today, so I'll just touch on some of the high points right now.

Revenue during Q3 was approximately $250000 compared to approximately $183000 in Q3 of 2021, an increase of 36%.

Please note, though that the year ago period had approximately 24000 in grant revenue. So excluding grant revenue product sales increased 57% compared to last year.

The real driver of growth.

Was our e-commerce platform, where sales increased 173% compared to the year ago period and represent more than 50% of all sales during the quarter.

The e-commerce growth is being driven by the marketing initiatives, including the award winning operation Rat race campaign, which is driving consistent increases in traffic as well as increased website functionality.

We also saw continued traction within our zoos and sanctuaries market vertical with sales up 32% year over year and the launch of elevate helped drive a 27% year over year increase in our agribusiness vertical as well as new and existing customers add the system to their pest management programs.

As mentioned in the press release sales.

Sales were impacted during the quarter by the outbreak of avian influenza or bird flu, which has impact poultry operators across the U S and thus delayed expected deployments with certain customers during the quarter.

While the bird flu has impacted poultry farms, we did have success in other agribusiness areas, where we recently deployed contract such as in our first pork protein production facility.

Gross profit during the quarter was approximately 122000 or 52% of total revenue compared to approximately 77000 or 48% of total revenue in Q3.

Our gross margin is trending well and in line with expectations. Our goal is to continue to be at or above 50%.

Net loss during Q3 22 was.

$2 $6 million compared with a net loss of $2 3 million for Q3 2021.

Adjusted EBITDA loss, which is a non-GAAP measure of operating performance for.

For Q3 was $2 5 million compared to two point.

<unk> million dollars in Q3 2021.

Cash at the end of September 22 was approximately.

$2.8 million.

With continued fiscal discipline this cash should be sufficient to fuel our growth strategy for the rest of the year.

I should note that we have filed a registration statement on form S. One for an offering of approximately $8 million and we also have an S. Three shelf registration available to us.

On August 26, we announced the distribution of series C preferred stock to holders of our common stock.

This was a mechanism to make sure that our shareholders have a representative way of expressing their will pure and simple.

Various regulations, sometimes make that difficult and especially difficult when as a retail stock the stockholders are diverse and do not always vote their shares.

The preferred emphasizes the votes that are cast pro or con. So then statutory minimums can be reached and a shareholder decision can be made.

In connection with that on October 12, we held a special meeting of stockholders, whereby our stockholders approved a reverse stock split.

The outstanding shares of our common stock by a ratio of not less than one for five and not more than one for 20 chairs with the exact ratio to be set at a whole number within this range by our board of directors units sole discretion.

This was done primarily to ensure that we meet nasdaq's bid price deficiency.

I want to conclude by expressing my appreciation to Ken for the country for his contributions to sonesta.

Likewise I believe we have made tremendous progress over the past three years, which has resulted in a 13 fold increase in revenue compared to the quarter when Ken assumed the role of CEO , but more importantly, I believe we have a tremendous foundation in place to build a truly great company going forward.

Thank you Ken.

With that let me open the call to questions.

Yeah.

We will now begin the question and answer session.

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At this time, we will pause momentarily to assemble our roster.

The first question today comes from Amit Dayal with H C. Wainwright. Please go ahead.

Thank you and good morning, everyone.

Ken.

Okay.

Okay.

Okay.

Oh.

Okay.

Okay.

Charles.

Yeah.

Yeah.

Your line is open I believe you might have some connection issue.

Can you guys I'm sorry.

Hello.

Yeah.

Yes sure.

Go ahead Amit.

Hey, sorry, Jimmy.

Now we can yes, there you are.

Okay.

Good luck to Ken on the next phase of his career and congrats to John on the new appointment.

I just wanted to start with you know just this.

Bird food.

The impact on the quarter.

Any color on how this could have been viewer marketing for cigarettes.

Because of this you probably didn't come.

It seems this quarter.

Yes, I am sorry, you broke up again, there could you repeat the question.

And it appears we have lost connection with Amit.

If I could jump in here, Tom It's Robert I think he was a disc.

Discussing our the bird flu and just you know any sort of discussion surrounding that perhaps if that could be expanded upon.

Yeah.

Yes.

Firstly.

Many have read in the paper was hitting the avian industry across the nation are starting on the east moving towards the West we did have.

A slowdown in that our existing customers to continue to order from us, but we were not allowed onto the property of any of the.

Farms, if you will.

So we really were not able to do.

<unk>.

Any sort of marketing sales activity out to new customers until they were able to open up the farm gates and let let people in.

That has now began to abate and we've actually seen strong pick up in that area.

As we begin to as particularly as elevate.

It gets introduced to that industry.

Ken anything more you want to add to that.

Yeah.

Yes, Thanks, Todd So one of the one of the bigger issues as we learned in talking to the pest management.

Professionals that service that industry is essentially.

With the flu as Tom points out that the farms essentially locked down.

And sole focus was really on dealing with the outbreak.

Critical issues of whether to call their flocks.

There was a significant effort there so really any effort other than directly related.

Dealing with influenza essentially stopped.

And so what we're expecting now is is too.

As the flu abates are the things that they had really neglected.

During the crisis will now come back and accelerate so pest control, which was largely.

The list for the past several months should become a critical consideration for them going forward.

Okay, great. Thank you for for addressing that operator.

This concludes our question and answer session I would like to turn the conference back over to management for any closing remark.

Yes. This is Joel and I think in closing thank you for your attention and as I mentioned, we are entering a new phase of <unk> growth and I am excited to be part of it and to be sharing with you all today.

Good day.

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