SANUWAVE Health Inc. Financial and Business Update Conference Call

You.

update conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kevin Richardson, Chief Executive Officer. Thank you, sir. You may begin.

Thank you, Christine. Welcome to SaniWave's first quarter 2023 earnings call.

The Form 10Q was filed with the SEC Thursday night, our earnings release was issued this morning, and our updated investor presentation was made available on our website in the investor section.

Please refer to that during the presentation.

Joining me on the call today are Tony Reno, our CFO , and Tim Hendricks, our Executive Vice President of Wound Care Sales.

After the presentation, we will open the call to Q&A.

Let me begin with the forward-looking statement. This call may contain forward-looking statements such as statements relating to financial results and plans for future business development activities. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company's ability to control.

Actual results may differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update any forward-looking statement.

With that out of the way, 2023 is off to a positive start. This quarter revenue recorded mid-teens growth driven by demand in consumables and systems.

We began 2023 first quarter up 18% compared to our guidance of 14 to 20% which was issued on our last conference call.

Demand for our products remains robust.

As we discussed on our last conference call, we are still working through supply chain issues, as currently demand is far as stripping supply. We are on track to receive over 400 devices, and we are still working through supply chain issues.

this year which compares to 217 sold last year.

This is not to say we will sell all 400, but as we work our way through the year, the supply chain issues will abate and we will hopefully be able to balance supply and demand.

This demand was evident at the three conferences we participated in recently.

at Leaders in Wound Care held in New Orleans, Dr. Johnson, a relatively new user of Ultramiss, presented as clinical findings to the invite-only crowd.

at Symposium of Advanced Wound Care, SAUSI,

We had six posters presented and finally in Milan at the European Moon Management Association meeting, two of our KOLs, Dr. Meyer and Dr. Cassino, presented their various use cases for the product. From these events we can safely say over 20 new accounts with purchasing interests were added to our pipeline.

This demand will be fulfilled later in the year when the supply issues mentioned earlier abate.

demand will be fulfilled later in the year when the supply issues mentioned earlier abate. Get into the details of the quarter.

Revenue continued mid-teens growth in Q1 2023 despite the challenges we faced with our supply chain.

Units shipped achieved the highest level for the first quarter in company history. And importantly, the number of treatments reached 43,000.

was a record as well as the continued adoption of ultramissed grows.

Gross margins were down in Q1 as compared to the prior year due to cost increases year over year associated with the servicing of refurbished equipment and it's part of our push to get more product out to market.

Management continues to have tight management of our supply chain.

pushes for higher pricing of our products, and continues to execute a host of projects internally, all focused on automation and driving costs lower.

Operating expenses increase year over year even though headcount was down. The largest driver of the increase is from professional fees, particularly year-end audit, being higher in Q1 2023 as compared to Q1 2022.

management plans to continue to focus on leveraging the existing infrastructure as we grow and gain operating leverage to achieve profitable growth.

Let me turn the call over to Tony Reno to walk through the numbers. She will pass it back to me to review more of the update slides. Then Tim, our Head of Sales, will speak and I will conclude with our near-term outlook. Tony? No...

Thank you, Kevin.

Q1 revenues for the three months ending March 31st, 2023, amounted to $3.8 million, an increase of 18% over the same period last year, and in line with the guidance of 14 to 20% provided prior. Q2 revenues for the three months ending March 31st, 2023, amounted to $3.8 million, an increase

Rose marks decreased year over year.

reaching 67% of revenue for the three months ended March 31, 2023 versus 72% for Q1 of 2022. Operating expenses for the three months ended March 31, 2021.

2020-2023 totalled 4.5 million.

This is an increase of 4.7% versus prior year three month period. This is due to an increase in general administrative expenses incurred in Q1 2023.

However, operating expenses decrease as a percentage of revenue and then show the effectiveness of the cost and expense management initiatives.

Operating loss remains flat year over year, three-month period.

Manurex continues to execute on its financial strategy to improve profitability and manage operating expense.

Total current assets amount to $4.5 million as of March 31, 2023 versus $6.6 million as of December 31, 2022. Cash totals $1.1 million as of March 31.

In May 2023, the company closed an additional private placement with proceeds receiving totaling $1.2 million to support operations.

We thank you for your continued support of Saniway, and I'm transferring back to Kevin. Kevin?...

Thank you, Toni.

Next on the call will be Tim Hendricks. Tim joined us in January from Vyram healthcare.

He has been in the wound care industry for 20 plus years with experience at firms like Smith & Nephew and Osiris and he got his early start at Boston Scientific.

We are very pleased to have Tim on board. Tim?

Thank you, Kevin. Good morning. It's a pleasure to join this call, and I'm happy to share my perspective since I joined the organization not quite four months ago when I was asked to come in and lead our US wound sales efforts. I first came to Sanuave with the exciting prospect of two devices that I knew had a great reputation in the marketplace for clinical efficacy but also reimbursement possibilities.

The number one thing I can share with you months later is that my enthusiasm is only heightened by the reality that we are uniquely positioned with our products that you don't often see in the medical device space.

Too often, products are in a crowded marketplace where the devices or products are commoditized, and it's all about pricing and Me Too efficacy.

Speaking to Ultramyst in particular, it really is unique and offers a one-two punch of a long history of strong clinical data and feedback that is very positive, but now strong reimbursement in multiple places of service.

Simple fact is we are not able to meet the strong demand right now. This is a great problem to have that speaks to the opportunity to treat a great number of patients with our unique modality.

Simple fact is we are not able to meet the strong demand right now. This is a great problem to have that speaks to the opportunity to treat a great number of patients with our unique modality. I will turn the call back over to Kevin.

Thank you, Tim. Before we go to Q&A, I wanted to provide some guidance on Q2.

And for those following along, this is page six on the investor deck from our website.

We currently anticipate revenue to grow 15 to 25 percent in Q2. The gating item governing net growth will be housed smoothly the supply rolls in during the remainder of May and June .

As we have mentioned earlier, demand is and has not been our issue. The issue is supply. And we have all eyes in the company focused on initiatives to address and fix that issue. So we have sustainable supply stream through the remainder of 23 and into 2024. We have also asked when we will be more active on the investor relations front.

The answer is soon, but we have been in somewhat of a quiet period through the first part of the year as the Q4 report is almost...

the same time that the Q1 quiet period begins. We plan to attend some investor conference over the next few quarters and work with our new investor relations group on a clear communications plan with that regard.

We have wonderful products, passionate, dedicated team members, and demand far exceeding supply. We should be able to achieve record revenue growth and profitability in 2023.

Finally, I want to thank our employees for driving our success.

shareholders who have invested in us, has allowed us to ramp the product, and most importantly, meet our mission, which is about saving limbs and saving lives through healing wounds. With that, I'll open the call to questions. Christine?

Thank you. We will now be conducting a question and answer session.

If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Once again, if you would like to ask a question, press star 1 on your telephone keypad.

One moment please while we poll for questions.

Thank.

Thank you. Our first question comes from the line of Setian Xia, a private investor. Please proceed with your question.

Hey Kevin and team, how are you guys doing?

Hey Kevin and team how are you guys doing? Great. Thank you Sachin. How are you doing?

Good, good. I have a couple questions. First, for Tim, congratulations for joining the team. You had mentioned that you are seeing good reimbursement in multiple places of service. Can you expand on that? What does that mean exactly?

And sure, and hi, thanks for the question.

in my experience with a device that has strong reimbursement or reimbursement in different places of service.

you'll find that it's reimbursed maybe in a hospital and maybe another setting. But what we're finding now is that...

Ultramis has had reimbursement in the hospital setting, in the wound care and inpatient setting. And it has very strong reimbursement in the private office, which is in Medicare designated as place of service 11. But our fastest growing channels are from home health, where there is a growing number of...

Wound care based mobile practices, treating patients in their home, that's place of service 12. Assisted living facilities, which is place of service 13.

And nursing homes are quickly becoming our number one channel because they're seeing the results not only just reimbursement, but more importantly what alternates can do for chronic wounds, but also for deep tissue injuries. So the ability to clinically work and see and have reasonable reimbursement in five places of service is very dynamic and that gives us multiple channels to go after.

Okay, that's great. And then for you, Kevin, just a quick question. In terms of the supply constraints that you guys are facing, is that something that we should anticipate as a year-long, like, is it going to be prolonged, like, is it going to continue for a while? David?

Is it certain products within the mix that are... The supply constraint is within, like is it for Dermapace versus Ultramist, or is it a combination...

Cool.

Yes, so I –

The supply constraints are primarily around Ultramis, and it was the line that produced it was, you know, not producing it for a period of time, and the restart of that line has taken longer to get all the kinks worked out and make sure we have high-quality product coming to us.

on a consistent basis. And we're getting close to the point where I'm comfortable and confident that we have the supply we need on a weekly basis. We're not there yet. It will hopefully not be a year-long thing. I can't imagine that happening. It appears that we're getting close to the point where we'll...

And just to clarify, based on your projections guidance for the next quarter, did investors assume with some level of confidence that going forward, you'll sort of be at a break even to profitability at this point, or is that still a little bit too...

I don't know how to answer that question. No, no, it's a good question, Sachin. Our goal this year is we've got to get to profitable growth. We can't rely on going back to the markets. We have to get to that point. For us, as you can see on page six in the slide deck, our break even is about $1.8 million a month.

when we have gross margins of 75%. And we're close, that's about 25 plus or minus systems gets us to that level. And right now we're tracking close to that. And once the supply is there.

The demand is there. I mean, there's a backlog of a host of...

customers that are just waiting for product right now. And so getting to that breakeven point once we have that supply constraint fixed won't be an issue and we should be able to hop over into the profitable section.

Okay, that's great. And then one last thing. In terms of the operating costs, you had mentioned the increase that was due to professional services. Is that sort of a one-time hit that we shouldn't anticipate going forward?

You know, I'll let Toni address that, you know, we're still year-end. Yes. Go ahead, Toni. Thank you. Yes, in other words, I can address that, Kevin. So yes, it's more like one time because during that quarter, we had a number of SEC initiatives.

We filed the S1 SS amendment. We also got back on the OTC QB and we got back uplisted. So these kind of singular and unique events were driving some of the professional service costs during the quarter. We don't expect them to be.

coming back, but I would also like to mention that overall operating expenses are going, have been increasing much slower to a 4.7% compared to revenue, so it really shows the effectiveness of our cost control initiatives that we started last year. Back to you Kevin.

Great. Thanks for watching. Yep, that was great. Thank you very much. Yep. A final reminder, if you would like to ask a question, press star 1 on your telephone keypad. We'll take a moment just to repoll for any additional questions.

recording of this live for the next few weeks we'll also try to get it on the website so you can re-listen to it if you want. Our next update it will be for Q2 and hopefully we'll see some people at some investor conferences moving forward. Thank you and have a good day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.