Q2 2023 SenesTech Inc Earnings Call
No succession.
Good afternoon, everyone and welcome to the Eastern Aztec incorporate Inc. Reports second quarter fiscal year 2023 financial results Conference call.
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And at this time I'd like to turn the floor over to Robert Blum with Lytham partners. Sir. Please go ahead.
Alright, thanks, so much Jamie Thank you for joining us today to discuss Nasdaq's second quarter 2023 financial results for the period ended June 30th 2023 with US on the call today are Joel French the company's Chief Executive Officer, and Tom Chesterman, The company's Chief Financial Officer. After you conclude.
At today's 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 made by the management team of NASDAQ. 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 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.
Page 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 may differ materially from those projected in forward looking statements.
As a result of various factors and other risks identified in our filings with Securities and 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.
<unk> 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 with that said, let me turn the call over to Joel French Chief Executive Officer. So NASDAQ Joel. Please proceed.
Yeah.
Good afternoon, everyone. Thank you all for joining us today.
We are pleased with the progress we've made across the enterprise during Q2.
During the quarter, we continued to grow our revenue and customer base with record quarterly revenues up 31% sequentially.
We also made significant progress, reducing our adjusted EBITDA loss, which was the best it has been in two years as we brought efficiencies to many aspects of the organization and we set in place key initiatives, which are now showing results.
Growth has since accelerated into the third quarter with July 2023 monthly sales growing 126% compared to the year ago period.
Driven by the initiatives, we have undertaken to drive sales improve product quality.
<unk> product options growth is clearly accelerating.
While growth is important profitable growth is paramount, especially in today's market. We have put in place key initiatives for both our field sales and e-commerce channels to improve the return on our sales and marketing investments.
Within our field sales operation, we have redeployed and refocused our direct sales efforts to enhance our customer acquisition capabilities. While also putting sales reps closer to the customers to focus on the numerous large opportunities that are available for our unique fertility control product.
Further we have also expanded our field sales organization each deployed by geography with leadership in both the eastern and western half of the U S.
This strong regional focus on new customer acquisition through an expanded commercial team and new depths of vertical industry knowledge to get in front of decision makers is all designed to tighten the sales cycle and ultimately drive revenue.
Evidence here is the significant increases we are seeing within the government vertical driven by deployments in California, and new England, and our experience that customers in the government sector require a long sell a longer sales cycle, but are very sticky once they are on board.
Our traction within zoos and animals thinks whereas continues in contra pest is now a major IDM component in four out of the top 10 zoos in the U S and accounts for 14% of our revenues.
In the agribusiness vertical we initiated shipments to major companies in grain and poultry, it's clear that road and population control is becoming an increasingly important focus for pest management professionals in this vertical, especially where the risk of exposure to lethal rodenticides is critical.
On the ecommerce side, we have reconfigured our marketing spend and have added additional products and options to our E. Commerce site, such as the 12 month prepay subscription for e-commerce customers along with convenience items July was our largest ecommerce revenue month of the year.
All of these initiatives to increase sales penetration are translating to the income statement a quick look at the second quarter results will show that we decreased our SG&A by more than $500000, but saw an increase in revenue with this improved our ROI being demonstrated coupled with the strong growth out of the chute and the <unk>.
Third quarter. It is clear our initiatives are taking hold.
In addition to our domestic selling efforts. We also commenced our international expansion, having entered into an agreement with P. E. S of South Africa for the commercialization of controversy into South Africa.
We were introduced to South Africa and P. S by the South African National Council of S. P. C as who are continuing and continuing to advise us and who clearly articulated their support for fertility control and contra pest in particular.
They have committed to recommend contra pest to private and state entity entities and to assist with regulatory issues.
We also announced entry into a distribution agreement with pest terminators, the Maldives for the deployment of Contra pest into their country.
First terminators as part of a multinational pest control organization the potential expansion of the agreement throughout the region as contemplated in the agreement.
Terminators has secured import approval in this place their order for their first deployment of over 150 stations, which we are shipping. This week. They have subsequently placed another order due to their demand projections and the interest in our new product options.
Well I am certainly pleased with the growth we are seeing especially in the first half of the third quarter. We all know that the objective here is to steepen. The curve one of the ways. We plan to do that is to continue expanding our product options for consumers.
To that end, we recently launched a new delivery system for controversy the isolate based system, which has an integrated tank trade unit designed for ease abuse catering to both professionals and the do it yourself market.
It is important to note that the design of the isolate based system comes directly from customer requests.
Wanted to maintain the efficacy of contra pest, but make the deployment and servicing quicker and easier.
The design combines a tank and tray into one unit and the deployment and setup is done through a simple placement and Peel off seal with users showing up to an 80% reduction in time and effort.
We believe the introduction of isolate should further accelerate the adoption of contra passed by both professionals and do it yourself.
We are accepting orders for isolate delivery starting next week and we have over 1500 isolate preorders and we expect delivery of orders before the end of the month.
Taking a step back when we first introduced contra person, we needed to convince the pest control market of two things.
One the value of fertility control as a means of population control and two the applicability of our liquid bait into their procedures.
At this point there is growing acceptance of fertility control as part of integrated pest management.
And there's still resistance.
From pest management companies to alter their established practices of utilizing non liquid products.
To address this resistance we are in the final stages of releasing a soft based formulation, which provides the unique attributes of proven fertility control and then industry familiar softbank format demanded by many including Big box retailers key e-commerce channels, and leading industry pest management.
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When I first took over as CEO Oddsson NASDAQ Softbank was one of the key items I quickly identify it as a need for us to steepen the curve I believe its introduction in the coming months will be transformative to our business, we expect to be announcing some exciting news on this topic soon but.
But let me state. This we expect to have this on the market by the fourth quarter.
Finally on the last imperative to make better products I mentioned the last quarter.
This last quarter, but when I took over as CEO during the third quarter last year, our customer complaints peaked at 35 complaints per month.
Not that high but we were doing and we were doing inadequate.
Adequate job, but I knew we could improve it.
During the second quarter, even amidst higher volumes, our complaints average less than five per month.
Concurrent with the introduction of isolation, we have implemented an enhanced formulation of contra pest that should improve product quality and a wider variety of environmental conditions.
I believe we have made great strides in the area of continuous improvement.
But as I have stated since I took over as CEO . This is a results business, we know that we need to steepen the adoption curve of Contra pest. We spent the first part of the year building the base and now we are seeing rapid growth, we all know what's going to get better and better.
With that overview, let me turn it over to Tom to review the financials Tom.
Thank you Joel 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, either later today or early tomorrow. So I will just touch on some of the high points right now.
Revenue during the second quarter was a new new.
At a high of $305000 compared with 277000 in Q2 of 2022, an increase of 10%.
Sequentially revenue was up 31% compared to Q1 2023 sale.
Sales growth during the second quarter was led by growth in the government vertical driven by deployments in California, and new England as well as continued traction within zoos animal sanctuaries.
As Joel mentioned in July 2023 sales were up 126% compared to the year ago period.
Growth is accelerating as our initiatives put in place in the first half of the year take hold.
Gross profit during the second quarter was approximately 142000 or 46% of total revenue.
<unk> to approximately 136000 or 49% of total revenue in Q2 of last year.
Excluding costs related to the introduction of the enhanced formulation and the isolate system mentioned by Joel <unk>.
Estimate the gross profit would have been in excess of 50%.
Net loss during the Q2 2023 was $2 million compared to a net loss of 2.2 dollars 6 million.
6 million for Q2 of 2022.
Adjusted EBITDA loss, which is a non-GAAP measure of operating performance for Q2, 2023 was $1 7 million compared to $2 3 million in Q2 of 2022.
Our current goal has been to take a million dollars out of the annual cash expenses, and we're well underway to achieving that goal.
Look back and can recall when the company was burning well over $10 million in cash annually.
We brought that down to a run rate of under $8 million cash burn annually, all while growing the business, introducing new products and expanding our reach.
Cash at the end of 2023 was $2 $2 million.
As I'm sure you all are aware.
Filed an S. One with the SEC to raise a little over $7 million and our goal is to raise enough cash to confidently execute our commercial plans, including the launch sulfate for a year or more.
With that let me turn it back over to Joel <unk> for any closing market remarks, and then we'll take your questions Joel.
Thanks, Tom before we turn it over to any potential questions. I think it's important to know what a significant opportunity we have to create something truly special that's in that study. We are addressing one of the world's old oldest and most challenging problems rodent control through a completely different way than has ever been done before by addressing the root cause of the prop.
Reproduction, we've all heard the statistics of how to bring ramps given sufficient food water and harborage can produce up to 15000 descendants and their lifetime. This is a truly incredible statistic that cannot be ignored.
The existing solutions effectiveness poisons are limited by the rats reproduction rate resistance and a version as well as the enhanced social and political limitations on the use of poison.
This community is increasingly look to deploy sustainable effective solutions Contra pest fits right in with that objective.
Products that can be a paradigm changing don't come along very often but when they do.
They have an opportunity to change the way things have been done for generations.
I believe contra pests is that type of product and I believe we have that type of opportunity. This is why I joined the company.
I. Thank you all for your continued support and with that operator, let me now turn it over for any questions.
Ladies and gentlemen at this time, we'll begin our question and answer session.
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Once again that is star and then wanted to join the question queue.
Our first question today comes from Amit Dayal from H C. Wainwright. Please go ahead with your question.
Thank you good afternoon, everyone.
With respect to the soft with lunch you know in the fourth quarter can you talk a little bit about distribution strategy for this you know what channels are you going to use our regional customers.
Yeah, absolutely. So we're really excited about the launch we think that Softbank has been a product that's been out there than in other solid base that are through the retail channels are for consumer use as well as through the pest management professional channels. So.
We're really going to focus on.
A big box retail launch plan as well as the pest management professional plan and of course, the international distributors that we have set up an addition to.
Still are relying on our field salespeople to be in touch with the end users and users to pull that through.
Okay. Thank you and then.
In relation to the S. One filing.
And one thing sparkling.
Launch.
Softbank.
The timing was.
Can you provide any color on you know how you are going to manage the financing needs.
The next two quarters.
Yeah, Unfortunately, with the pending S. One we cannot comment on timing.
That's not allowed as we understand the rules from the SEC, so, but we do intend to access the capital markets I mean, that's that's our obvious.
Of choice at this point I would note. There are also warrants outstanding we've always sought to see if we can get financing from the warrants in fact, some of them will be expiring soon so hopefully we can make them oh induce them to.
Exercise as appropriate.
And the last one.
With respect to the sales mix it looks like the government side. You know you guys are doing pretty well.
You have a user base with zoos and those types of customers as well you know how long we're bringing other other customers like you know maybe.
Bombs et cetera is that in the pipeline can you talk a little bit about you know pipeline for sort of non government type customers.
Yeah. The the most exciting part of our business I believe is on the agriculture side, we're seeing increased business in the poultry and green sectors aside.
I had mentioned earlier, we have some great expertise in that area and our field sales team who have come over from that vertical.
And we are expanding that on a daily basis, we're starting to see good Reorders are one example is from a large grain export company.
Starting to see more and more reorders from them as well as our one of our leading customers. This year is a poultry house that has had three different reorders now so very excited about that.
Alright, guys Thats all I have thank you so much.
Once again, if you would like to ask a question. Please press star and one our next question comes from Tucker Andersen from above all advisors. Please go ahead with your question.
Hello draw one Tom and congratulations on the progress you have made I guess my first question is sort of a follow up on the last question and that is.
How can you achieve.
Chief more rapid mindshare among potential customers avoid I agree with your jaw was it is a paradigm shift and paradigm shifts as you know proceed slowly until suddenly that gained a critical mass.
Yeah.
Absolutely and I think that's one of the things that we're seeing is that where we're out there we're doing the field work that's necessary of working with the customers doing the field tests and once you start seeing the field test have success. Then you start seeing the business start to flow. So I think that's one of the reasons that we've had.
Success in the zoos and sanctuaries, we got out there we did the legwork, we showed them that it worked.
And then you start seeing the repeat orders come in so with the expertise that we've added and our field sales team as I mentioned on the agriculture side, but also on the pest management professional side.
What we're doing is really focusing on the pest management professional side, both in the smaller companies as well as the larger companies and we've got some really exciting discussions that are taking place with some of the larger companies, especially as it relates to our sulfate introduction.
And the fact that you now have some.
Customers it appear very satisfied in certain markets like the zoom market and poultry market in the grain market does the fact that you have reference accounts really help your salesmen as they go and try to get new accounts.
It absolutely does you know one of the things that are that we face on a daily basis. As you know no one wants them that they have a RAF problem. So once we once we get past that and we're allowed to use.
Use them as a reference what we've seen is that that accelerates the activity in that vertical and.
We've got some really good field trials going on right now both with our liquid product and with our soft based product and.
As I mentioned, we expect to have some.
Really good news to report in September .
Well, we're looking forward to it.
The last question would be sort of sort of as you penetrate the municipal market and.
Softbank market comes on it seems to me sort of obvious that in large municipalities, especially there should be.
And obviously between what the municipality is doing and the fact that homeowners and office one office buildings and things like that should be made aware of these products.
Is there any sort of been educational program developed that would that would link the rollout and the municipalities with the education of the other potential buyers in the markets.
You know how the the one that comes to mind that we use as a reference point is Los Angeles County, we started out there doing some field trials started doing some projects next thing you know the county is actually specifying the product into their request for proposal.
And they were getting a lot of questions about well why don't we just use poisonous instead and they said no. What we want is we want to have.
Fertility control so that we can reduce the population which is the first step to a successful.
Program to.
Face up to what is happening out there and then once that started happening.
Being used on more projects, they're starting to do some outreach programs to different communities H O ways.
Property management companies about here's something that you should look at doing because it's effective and it really is a sustainable product and reduces the reliance on lethal poison. So we're really getting.
Some good traction there you know the other one is Santa Clara County, Northern California, and Santa Clara County did their field work said. This is the product we won and now youre seeing it going into cities, who are using it the cities are putting at articles into newspapers about what they're doing and offering outreach to the.
Consumers in the homeowners. So we're starting to see that that traction that you've mentioned and I. Appreciate your observation on that take.
Take hold and as we start getting into other areas.
Areas, such as Boston and some of the larger cities, we're starting to see that there as well. So that's a real exciting component of it yeah and as I said it seems to me. It really is time perfectly for your introduction of a soft right in terms of ease of handling and that sort of stuff. My last question is is it is an optimistic.
That is if if the progress you've seen in especially the acceleration of the progress you've seen in July and earlier early August and yourselves sort of expands exponentially.
Is your logistical system in place to handle success.
Yeah, I think that's a great question and it's one that we certainly hope is going to come to ask but yes, you can handle that.
One of the things that occasionally people ask us why do you have such a high burn rate well one of the reasons, we have that as we have the infrastructure to grow very rapidly.
In terms of manufacturing in terms of logistics. So yes, we are planning for that we are we are expecting that to occur.
Exponential is exactly what we what we hope for.
As I said, congratulations I'm I'm, perhaps reaching a tipping point.
Thank you we appreciate that.
Yes.
And ladies and gentlemen at this time, we will be ending today's question and answer session I'd like to turn the floor back over to management for any closing remarks.
Thank you all for attending today, we enjoy these are quarterly get Togethers and keep you posted on our progress and we're looking for really big things in the third quarter here. Thank you.
Okay.
And with that ladies and gentlemen will be concluding today's conference call and presentation. We thank you for joining you may now disconnect your lines.