Q3 2023 Sonendo Inc Earnings Call
Hello, and welcome to Houston, and does that quarter earnings conference call.
Speaker 1: Hello and welcome to San Ando's third quarter earnings conference call. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session at the end of today's call. As a reminder, this call has been recorded for replay purposes. I would now like to turn the call over to Louisa Smith from a Gil Martin group for a few introductory comments.
All participants are in a listen only mode.
We will be facilitating a question and answer session at the end of today's call.
Oh My God this cool if FEMA for replay purposes.
I would now like to turn the Kuwait Louisa Smith from Gilmartin group for a few introductory comments.
Thanks, operator, good afternoon, and thank you for participating in today's call joining me pension vendo or be Orenburg time, President and CEO and Michael Watts CFO.
Speaker 2: Thanks, operator. Good afternoon, and thank you for participating in today's call. Joining me from Sanando are Bjorn Burkheim, President and CEO , and Michael Watts, CSO.
Speaker 2: Earlier today, S&D released financial results for the quarter-ended September 30, 2020.
Earlier today, and Endo released financial results for the quarter ended September 32023, a copy of the press release is available on the company's website.
Speaker 2: Copy of the press release is available on the company's website.
Speaker 2: Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meeting of federal security blogs, which are made pursuant to the safe harbor provisions of the Private Security's litigation reform act of 1995.
Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities laws.
Made pursuant to the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker 2: Any statements made on this call that relate to expectations or predictions of future events, results or performance are forward looking.
Any statements made on this call that relate to expectations or predictions of future events results or performance are forward looking statements.
Speaker 2: All four are looking statements, including those relating to our operating trends and future financial performance, the impact of COVID-19 on our business.
All forward looking statements, including those relating to our operating trends and future financial performance the.
The impact of COVID-19 on our business expense management.
Speaker 2: expense management, expectations for hiring, growth in our organization, market opportunity, revenue guidance, commercial expansion, and product pipeline development are based on our current estimates and various.
Expectations for hiring growth in our organization market opportunity revenue guidance commercial expansion and product pipeline development are based on our current estimates and various assumptions.
Speaker 2: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these boards. Looking.
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.
Speaker 2: According links you should not place undue reliance on me.
Speaker 2: For a list and descriptions of the risk and uncertainties associated with our business, please refer to the Risk Factor section of our most recent annual report on form 10K, filed March 8, 2023 with the Securities and Exchange Commission and available on Edgar and in other public reports filed periodically with the F.
For a list and descriptions 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 March eight 2023.
Securities and Exchange Commission and available on Edgar and in other our other public reports filed periodically with the SEC.
Speaker 2: This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 8, 2020.
This conference call contains time sensitive information and is accurate only as of the live broadcast on November eight 2023. So.
Speaker 2: Sinindo discrooms any intention or obligation except is required by law to update or revise any financial projections or forward looking statement, whether because of new information, future events, or otherwise. And with that, I will now turn the call. And I will now turn the call.
<unk> 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.
And with that I will now turn the call over to be on.
Speaker 3: Thanks, Luizzo. Good afternoon, everyone, and thank you for joining us today.
Thanks, Luisa and good afternoon, everyone and thank you for joining us today.
Speaker 3: For this call, I will start with some commentary about third quarter performance. This is highlights and a forward looking strategy before turning the call over to Mike to provide additional detail regarding financial results. We will finish with Q&A.
For this call I will start with some commentary about third quarter performance business highlights and our forward looking strategy before before turning the call over to Mike to provide additional detail regarding financial results, we will finish with Q&A.
Speaker 3: The third quarter saw steady capital placements and revenues in line with our initial estimates to a link 10.4 million and representing growth of 6% year over year.
Third quarter saw steady capital placements and revenues in line with our initial estimates totaling $10 4 million and representing growth of 6% year over year.
Speaker 3: Procedure Instrument revenue grew 7% year-to-5.1 million in the third quarter.
The Cedar instruments revenue grew 7% year over year to $5 1 million in the third quarter call.
Speaker 3: Console revenue growth was in line with the prior year totaling 2.1 million for the third quarter of 2020.
<unk> revenue growth was in line with the prior year totaling $2 1 million for the third quarter of 2023.
Speaker 3: As we have seen in prior years, our annual sales cadence for 2023 is shaping up to be reflective of the seasonality we specifically encounter.
As we have seen in prior years, our annual sales cadence for 2023 is shaping up to be reflective of the seasonality we typically encounter.
Speaker 3: The first and third quarters are generally later in console placements than Q2 and Q4, attributable to buying patterns common in Medtech, catalog groups.
The first and third quarters are generally lighter in console placements in Q2, and Q4 attributable to buying patterns common in med Tech capital equipment.
Speaker 3: The third quarter of 2023 was no different. We saw lingering macroeconomic pressures in addition to the typical effects of extended vacation schedules and summer slowdown.
The third quarter of 2023 was no different we saw lingering macroeconomic pressures. In addition to the typical effects of extended vacation schedules and summer slowdowns. However.
Speaker 3: However, unlike previous years, we experienced a slowing of utilization and consumable sales in the latter part of the quarter.
However, unlike previous years, we experienced a slowing of utilization in consumable sales in the latter part of the quarter.
Speaker 3: Consumable sales often rebound from the summer seasonality, but this September proved to be lighter in terms of volume.
Consumable sales often rebound from the summer seasonality with <unk>.
September proved to be lighter in terms of volumes.
Speaker 3: As we have visibility to procedures at the practice level, we believe the decline was experienced broadly across many of our endodontist customers, not just a reduction in talent-wave procedures.
As we have visibility to procedures at the practice level. We believe the decline was experienced broadly across many of our ended office customers not just the reduction in gentleman with procedures.
Speaker 3: Many of our doctors reported that decline in patient numbers as was seen in other areas of the dental mark.
Many of our doctors reported a decline in patient numbers <unk> seen in other areas of the dental market.
Speaker 3: As we move into Q4, we're seeing procedures stabilized from the Q3 exit, but we will continue to monitor demand. While the majority of endodontic procedures are non-elective, there remains a certain number that are asymptomatic, which may result in patients delaying treatment and ultimately a shift in patient volume.
As we move into Q4, we're seeing procedures stabilized from the Q3 exit, but we will continue to monitor demand wild.
While the majority of endodontics procedures are non elective there remains a certain number that are asymptomatic, which may result in patients delaying treatment and ultimately a shift in patient volumes.
Speaker 3: In relation to console placement trends, we continue to see a lightning sales cycle and therefore have implemented new programs to counter these effects that I'll expand upon later.
In relation to console placement trends, we continue to see a lengthening sales cycles, and therefore have implemented new programs to counter these effects that will expand upon later.
Speaker 3: Despite these dynamics, we were pleased with general solid sales figures and remain optimistic about continuous adoption of the gentleman.
Despite these dynamics, we were pleased with general solid sales figures and remain optimistic about continued adoption of the gentleman that procedure.
Going forward, we're committed to three fundamental pillars to drive some of the success simply stated those are one growing topline revenue to improving margin profiles and three prioritizing cash preservation.
Speaker 3: Going forward, we're committed to three fundamental pillars to drive Sunendo's success.
Speaker 3: Slipple stated, those are one, growing top line revenue, two, improving margin profile, and three, prioritizing cash preservation.
Speaker 3: I'd like to spend a moment to detail our initiatives as they relate to each of these three pillars and the internal steps we've taken to ensure we execute against our plans for the remainder of the year and into 2024.
I'd like to spend a moment to detail our initiatives as it relates to each of these three pillars and the internal steps we've taken to ensure we execute against our plans for the remainder of the year and into 2024.
Speaker 3: As for revenue growth, we recently announced expansion into the DSO channel and the signing of partnership agreements with two specialist DSO groups.
As for revenue growth, we recently announced expansion into the DSO channel and the signing of partnership agreements with two specialists DSO groups.
Speaker 3: DSOs represents an important segment within the industry, and these partnership agreements will greatly expand access to the general made procedure in endodontic offices nationwide.
Dsos represents an important segment within the industry and these partnership agreements will greatly expand access to the gentleman a procedure and ended Arctic offices nationwide.
Speaker 3: For example, these two agreements now enable us to sell into nearly 200 new target accounts.
For example, these two agreements now enable us to sell into nearly 200, new target accounts outs.
Speaker 3: Outside of the DSO strategy, we've begun a limited trial or evaluation program for practitioners to fully experience the Gelerate technology in their offices at no initial upfront cost.
Outside of the DSO strategy, we've begun a limited trial or evaluation program for practitioners to fully experienced the jelly technology in their offices, but no initial upfront cost.
This allows doctors understaffed to realized firsthand the clinical practice and patient benefits for the <unk> system before committing to a purchase.
Speaker 3: Over still in the early stages of this initiative, we're noting significant interest and positive impact on moving customers through the funnel more rapidly.
While we're still in the early stages of this initiative, we're noting significant interest and positive impact on moving customers through the funnel more rapidly.
Speaker 3: We believe the continuance of these trial periods will build upon momentum in our sales pipeline and serve as important catalysts to shorten the selling cycle and the go-forward basis.
We believe the continuance of these trial periods will build upon momentum in our sales pipeline and serve.
Important catalysts to shortened to selling cycle on a go forward basis.
Speaker 3: Turning to Utilization and Consumable Revenue, we have a recent announcement regarding clean flow clearance for interior procedures.
Turning to utilization and consumables revenue with our recent announcements regarding clean flow clearance for interior procedures.
Speaker 3: and important improvements with our Gen 2 version, we believe the improved clinical workflow enhances the already significant benefits of the genomic.
And important of improvements with our Gen. Two version, we believe the improved clinical workflow and enhance the already significant benefits of the gentlemen procedure.
Speaker 3: With one procedure instrument, we have simplified our training program to ensure customer success from the start.
We had one procedure instruments, we have simplified our training programs to ensure customer success from the start.
Speaker 3: With regards to margin improvement, we continue to focus on two drivers.
With regards to margin improvement, we continue to focus on two drivers first accelerating our path to full conversion to the clean for a procedure estimate, which we anticipate being essentially complete as we enter 2024.
Speaker 3: First, accelerating our path to full conversion to the clean flow procedure instrument, which we anticipate being essentially complete as we enter 2024. Second, we completed a transition to in-house G4 assembly that have now manufactured over 100 consoles in our facility.
Second we completed the transition to in House G for Assembly.
Manufactured over 100 consoles and our facilities.
Speaker 3: Enabling us to leverage our existing capabilities as we scale our...
Enabling us to leverage our existing capabilities as we scale our business combined.
Speaker 3: Combined, these initiatives provide us much more control in future cost reductions, including gaining economies of scale, simplifying the product portfolio, and achieving supply chain consolidation, all of which ultimately results in higher contribution.
Combined these initiatives provide us much more control and future cost reductions, including gaining economies of scale simplifying the product portfolio and achieving supply chain consolidation all of which ultimately results in higher contribution margins.
Speaker 3: Moving to cash preservation, Sunanda remains committed to responsible and measured spending to retain a healthy balance.
Moving to cash preservation cement remains committed to responsible and measured spending to retain a healthy balance sheet in the third quarter, we were able to reduce quarterly operating cash burn by nearly 30% sequentially from Q2 and 35% year over year.
Speaker 3: In the third quarter, we were able to reduce quarterly operating cash burned by nearly 30% sequentially from Q2 and 35% year over year.
Speaker 3: We will continue to make necessary adjustments to right-size the business without compromising long-term growth opportunities.
We will continue to make necessary adjustments to right size the business without compromising long term growth opportunities.
Speaker 3: Earlier this week, we completed a reduction force that, combined with reductions announced earlier in the year, will conserve approximately $6 to $8 million in the next 12 months and allow the company to leverage operational efficiencies in a more meaningful way.
Earlier this week, we completed a reduction in force that combined with reductions announced earlier in the year, we will conserve approximately $6 million to $8 million in the next 12 months and allow the company to leverage operational efficiencies in a more meaningful way.
Speaker 3: While these decisions are never easy or taken lightly, we believe they are appropriate in this environment. Our customers will not be
While these decisions are never easy or taken likely we believe they are appropriate in this environment.
Our customers will not be impacted by any of these changes.
Lastly, we are thrilled to announce the submission of our 500 10-K application to the FDA for the use of the <unk> system for cavity indications a future application beyond our current market of <unk> therapy, and one that will significantly increase our total addressable market.
Speaker 3: future application beyond our current market of Ruchinau therapy and one that will significantly increase our total addressable market.
This is a significant step forward in solving to CK and millions of patients worldwide.
Speaker 3: This is a significant step forward in solving tooth decay in millions of patients worldwide.
Speaker 3: At the same time, we don't want to get ahead of ourselves in terms of quantifying this opportunity or even the timeline in which we might see the revenue pull-through with respect to the application of our technology for cavity.
At the same time, we don't want to get ahead of ourselves in terms of quantifying this opportunity or even the timeline in which we might see the revenue pull through with respect to the application of our technology for cavity indication.
Speaker 3: Needless to say, we remain incredibly optimistic about our long-term growth opportunities and the sustainable platform we're building to capitalize on the potential that exists within the endodontic and broader than...
Needless to say, we remain incredibly optimistic about our long term growth opportunities and a sustainable platform, we're building to capitalize on the potential.
First within the end of the optic and broader dental market.
I will now turn the call over to Michael What's so Mendez Chief Financial Officer, and then return for some closing comments after the question and answer session.
Speaker 3: I will now turn a call over to Michael Watts, so then this Chief Financial Officer, and then return for some closing comments after a question and answer session. Mike.
Mike.
Speaker 4: Thanks, Bill. As previously stated, Sinendor Total Revenue for the third quarter 2023 was $10.4 million compared to $9.8 million.
As previously stated <unk>.
Total revenue for the third quarter, 2023 was $10 4 million compared to $9 8 million.
Speaker 4: for the third quarter of 2022, and increases 6%.
For the third quarter of 2022, an increase of 6%.
Speaker 4: Q3 product statement quotes was 5% versus the prior year, given by PI revenue increase. PI revenue... 5% versus the prior year, given by PI revenue increase.
Q3 product segment growth was 5% versus the prior year driven by revenue increase.
<unk> revenue was $5 $1 million.
Speaker 4: They had a 4.89 dollars in the third quarter of 2022, an increase of approximately seven
Compared to $4 8 million in the third quarter of 2022, an increase of approximately 7%.
Speaker 4: PI revenue growth was given primarily by an increase in procedure instrument pricing of approximately 11% offset by the client and unit PI sold of approximately 4% for reasons given previously addressed.
Revenue growth was driven primarily by an increase in procedure instrument pricing of approximately 11% offset by a decline in unit pie sold of approximately 4% for reasons previously addressed total pie sold in the quarter was approximately 69000.
Speaker 4: Total PI sold in a quarter was a part of $169,000.
Speaker 4: In the third quarter, General White Consul Revenue was $2.1 million. In line, we're compared with $2.1 million in the third quarter of 2020.
In the third quarter generated console revenue was $2 1 million in line when compared with $2 $1 million in the third quarter of 2022.
Speaker 4: The average selling price for the General Wave Console was just under $60,000 in the third quarter of 2020.
The average selling price for the <unk> console, which just under $60000 in the third quarter of 2023.
Speaker 4: We place 37 consoles in Q3 with one Gen 3 trade-in, resulting in a net change of install base at 30.
We placed 37 consoles in Q3 with one Gen III trade in resulting in a net change of installed base at 36.
Speaker 4: And saw base as of September 30th, 2023 was 1,070.
Our install base as of September 32023 was 1076.
Speaker 4: Total other products related revenue was $900,000 in the course.
Other product related revenue was $900000 in the quarter.
Speaker 4: Total software revenue for the third quarter was $2.2 million compared to $2.1 million in the third quarter of 2022 and increase of 9%.
Total software revenue for the third quarter was $2 2 million compared to $2 $1 million from the third quarter of 2022, an increase of 9%.
Speaker 4: Software growth continues to be driven by an increase in revenue relating to DSOs, as well as recurring revenue increases to existing cuts.
Software growth continues to be driven by an increase in revenue related to dsos as well as recurring revenue increases to existing customers.
Speaker 4: Before moving to margin and operating expenses, I would like to explain in a parametriarch taken in the third quarter.
Before moving to margin and operating expenses I would like to explain an impairment charge taken in the third quarter.
Speaker 4: A recent decline in our market capitalization triggered us to perform in term long-lived assets in goodwill impairment tests.
A recent decline in our market capitalization triggered us to perform an interim long lived assets and goodwill impairment test.
Speaker 4: As a result, we recorded a non-tashen payment charge of $1 million related to the intangible F.
As a result, we recorded a noncash impairment charge of $1 million related to the intangible asset and.
Speaker 4: In $2.3 million, we let it to fix the assets of our product statement.
And $2 $3 million related to fixed assets of our product segments.
Of these impairment charges $1 3 million is recorded in cost of sales and the remainder in operating expenses.
Speaker 4: $1.3 million is recorded in class of sales and the remainder in operating.
Speaker 4: Note again, the impairment charge is a non-cash item in that the impairment charge is different from the inventory charges that were reported in the second quarter of 2023. There was no impairment.
But again the impairment charge is a noncash item and not the impairment charge is different from the inventory charges that we reported in the second quarter of 2023.
There's no impairment charge and the software segment.
Speaker 4: Gross margin for the third quarter of 2023 was 24%.
Gross margin for the third quarter of 2023 was 24%.
Speaker 4: Scrooving the Q3 impairment charge gross margin for the third quarter of 2023 would have been 36%. Which is a significant improvement from 24% in the same period of the prior year and reflects our commitment to improve profitability.
Excluding the Q3 impairment charge gross margin for the third quarter of 2023.
36%, which is a significant improvement from 24% in the same period of the prior year and reflects our commitment to improve profitability.
Speaker 4: We continue to show improvement in clean slow adoption at approximately 70% for the quarter, and in-house assembly of the G4 console and other operating efficiencies providing sustained margin improvement.
We can continue to show improvement and clean slow adoption approximately 70% for the quarter and in House Assembly of the G. Four console and other operating efficiencies providing sustained margin improvement.
Speaker 4: Total operating expenses in the third quarter of 2023 were 18.5 million dollars compared to 16.9 million dollars in the same period of the price.
Total operating expenses in the third quarter of 2023, or $18 5 million compared to $16 $9 million in the same period of the prior year.
Speaker 4: Increases were driven primarily by a $2.1 million payment charge mentioned above. Higher general and administrative cost within the stock base compensation and legal expenses. And higher sales and marketing expenses related to increased revenues offset partially by lower R&D.
Increases were driven primarily by a $2 $1 million impairment charge mentioned above.
General and administrative costs related to stock based compensation and legal expenses and higher sales and marketing expenses related to increased revenues offset partially by lower R&D spending.
Loss from operations was $16 $1 million in the third quarter of 2023 compared to $14 6 million in the third quarter of 2022.
Speaker 4: Loss from operations was $16.1 million in the third quarter of 2023 compared to $14.6 million in the third quarter of 2020.
Speaker 4: Net loss was $17 million for the third quarter of 2023, but they had to $15.5 million in the third quarter of 2020.
Net loss was $17 million for the third quarter of 2023 compared to $15 $5 million in the third.
Quarter of 2022.
Speaker 4: Our cash and cash equivalents and short-term investments as of September 30, 2023, were approximately $55.9 million, while our gross term loan remains at $40 million.
Our cash and cash equivalents and short term investments as of September 32023, or approximately $55 9 million.
Gross term loan remained at $40 million.
As for our 2023 financial guidance as.
Speaker 4: As we move to close our 2023, we are revising our expectation of a four year 2023 net revenue to be approximately $44 million dollars.
As we move to close our 2023.
We are revising our expectation of a full year 2023, net revenue to be approximately $44 million.
Speaker 4: This is reflective of the lower end of our previous guidance and considers recent macro trends and expectations regarding primarily lower placements of capital equipment and related consumable revenue. Commensurate with the industry at large. At this point,
This is reflective of the lower end of our previous guidance and considers recent macro trends and expectations regarding primarily lower placements of capital equipment and related consumable revenue commensurate with the industry at launch.
At this point I'd like to open up the call for questions.
Speaker 1: If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to retract your question, please press star followed by 2.
Thank you if you would like to ask a question. Please press star one on your telephone.
Pat if you would like to retract your question. Please press star followed by <unk>.
Speaker 1: Aunty Anna Edgy
On the pad pass your question. Please ensure your phone is on mute lately.
Speaker 1: And our first question goes quem? bragg phew double
And our first question Jon Block Stifel. John. Please go ahead your line is open.
Speaker 5: great hey guys this is Tom Stephanon Prajohn thanks for taking the questions I'll start with where you left off Mike just on guidance you reiterated the 44 to 46 million I think on the pre-announcement last month
Great Hey, guys. This is Tom Stefan on for John Thanks for taking the questions.
I'll start with.
Where you left off Mike just on guidance.
Reiterated the $44 million to $46 million I think on the pre announcement last month.
Speaker 5: but it has come down slightly now, Mikey gave some color but
But it has come down slightly now Mike you gave some color but.
Speaker 5: Maybe if you guys can just elaborate a bit more on, you know...
Maybe if you guys can just elaborate a bit more on <unk>.
Speaker 5: What, over the last month changed a bit? You know, it sounds like maybe it was more capital, but any comments there would be a...
Over the last months changed a bit.
It sounds like maybe it was more capital, but any comments there would be helpful.
Speaker 4: Yeah, hi Tom. So the guidance that we wanted to place out there has a level of conservatism dialed into it now given what we know nearly halfway through the quarter. So we had good placement, solid placement in Q3. We've had some good traction on the programs that Fort Bjorn mentioned earlier in the call. But at this point we just feel it's appropriate to make sure that we communicate a forecast that this week in dial in appropriately.
Yes, Hi, Tom.
The guidance that we wanted to place out there.
Has a level of conservatism dialed until it now given what we know nearly halfway through the quarter. So we had.
Good placement solid placements in Q3.
Had some good traction on the programs that John mentioned.
Earlier in the call, but at this point, we just feel it's appropriate to make sure that we communicate our forecast that the streak in Thailand appropriately and.
Speaker 3: And at the same time, same time, I would also just iterate that.
And at the same time same time, Tom I would also just iterate that.
Speaker 3: You know, we're really excited about some of the new programs that we're putting in place. We recognize the macro environment that we are in.
We're really excited about some of the new programs that we're putting in place we were.
Recognize the macro environment that we're in.
Speaker 3: and it is imperative to us and combat on us to find
It is imperative to us.
But on us to find new and different programs to really drive sales in this environment.
Speaker 3: You know, new and different programs to really drive sales in this environment. And that's why I'm really excited about what the opportunities for this trial can bring and also what the DSO opportunity can bring on top of the other tools that we have in our, our mentoring.
We're really excited about what the opportunities for this trial can bring and also what the DSO opportunity can bring on top of the other tools that we have in our Ontario.
Got it that makes sense and then I wanted to ask about the gross margins.
Speaker 5: Got it, that makes sense. And then I want to ask about the gross margins, you know, continue to put up some solid numbers there. Mike, any color you could maybe give on kind of the near to intermediate term, you guys obviously have a lot of initiatives around efficiencies that I think can drive a good margin expansion, but any high level comments about 2024 and what you think that could look like.
Continue to put up some solid numbers there Mike any color you could maybe give on kind of near to intermediate term.
Obviously have a lot of initiatives around efficiencies that.
I think can drive good margin expansion, but any high level comments about 2024, and what you think that could look like thanks.
Speaker 4: So I think if we just start with Q4 and will be communicated before with that for the remainder of 2023 would be in the mid-30s. And that's pretty much where we came out if you've screwed the one-touch charge. And when we go back to the reasons for that, it's around the clean pool conversion.
Yes, so I think if we just start with Q4 and will be communicated before.
Is that for the remainder of 2023 would be in the mid Thirty's and Thats pretty much where we came out if you exclude the one time charge.
And when we go back to the reasons for that.
The clean full conversion.
Speaker 4: that we showed good progress on Q3 and we continue to show good progress on Q4 and what related to that
We showed good progress on in Q3, and we continue to show good progress in Q4.
And related to that is as we move out of molar and the APM to nearly 100% clean flow we start the year of 2024 and that position so clean flow will be.
Speaker 4: is as we move out of molar and BAPM to nearly 100% clean flow.
Speaker 4: We stopped the year 2024 in that position. So, ClaimFlo will be now a leading driver of contribution margin for consumables, of course.
Our leading driver of contribution margin for consumables of course, and then when you look at the console production. The <unk> insourcing that was substantially completed in Q2 end of Q2 early Q3, and we're starting to see positive leverage and benefits from that program as well so moving into.
Speaker 4: And then when you look at the console production, the G4 En sourcing, that was substantially completed in Q2, end of Q2, early Q3.
Speaker 4: and we're starting to see positive leverage and benefits from that program as well. So moving into 2024, we have a single PI.
2024, we have a single pie around clean flow and a single console around <unk> four system and we think those are going to be good drivers to move us north.
Speaker 4: around clean flow and a single console around G-forces.
In excess of 40%.
2024 without trying to get into specific guidance. There I think we feel comfortable with those numbers.
Makes sense. Thanks.
Thank you Tom.
Thank you and our next question will go to Jason Bednar with Piper Sandler Jason. Please go ahead. Your line is open.
Speaker 1: Thank you and our next question, go to Jason Lebedner of Piper Sandler. Jason, please go ahead, your line is open.
Speaker 5: Good afternoon. They're sticking the question sorry for the background noise here in an airport, but maybe if I get started building off Tom's question, you know, there on the on the guide.
Hey, good afternoon. Thanks for taking the question sorry for any background noise here in an airport, but maybe if I could start building off Toms question.
They're on the on the guide.
Speaker 6: for implied guys for fourth quarter. If this is gonna be a bit of a softer than normal fourth quarter on the capital side, then what a lot of us are probably thinking.
For implied guide for fourth quarter. This is going to be a bit of a softer than normal fourth quarter on the capital side than what a lot of us are probably thinking despite this being traditionally a seasonally stronger quarter for capital to end. The year can you help with what that means when we think about the exit rate in the 24 win.
Speaker 6: despite this being, you know, traditionally a season of stronger quarters for capital to end the year. But can you help with what that means when we think about the exit rate in the 24 when
Speaker 6: You know, capital sales tend to be lighter in the front half versus the back half, definitely in first quarter. And then relatedly, are the lengthening sales cycles that you mentioned, are those attributable to both endos and GPs, or are you seeing it more concentrated in the particular?
Capital sales tend to be lighter than the front half versus the back half definitely in first quarter.
And then Relatedly are the lengthening sales cycles that you mentioned are those attributable to both and dosing GPS or are you seeing it more concentrated in a particular group.
Speaker 3: Yeah, so Jason, maybe I'll start off by saying that the Q4 is still going to be our strongest quarter.
Yes, so Jason maybe I'll start off by saying that Q4 is still going to be our strongest quarter.
Speaker 3: point one. Like Mike said, we are dialing a level of conservativeism in this because of the environment changing on us.
One.
Like Mike said, we're dialing in level of conservativism in this because of the environment changing on us.
Speaker 3: You know, and I think everyone are appreciating not across MedTech and across the healthcare spectrum right now. We are still very, very much believing, obviously we're believing in what we're doing here. And I think this program that we are putting in place, especially around the trial and around the DSO opportunity here, those will really help drive a lot of upside to the business.
And I think everyone are appreciating not across med tech and across the.
The health care spectrum right now.
We are still very very much believing obviously, we're believing in what we're doing here and I think thats programs that we're putting in place, especially around the trial.
And around the DSO opportunity here.
Those will really help drive.
A lot of upside of the business.
Speaker 3: So point one, there's a level of conservatism dial-in in numbers for Q4. We're gonna continue to drive growth in as we go into 2024. And that's what we obviously aspire to be. We aspire to be a growth company and it's incumbent enough to really drive the growth engine in this environment. As for regards to the lengthening
So 0.1, there is some level of conservatism dial in numbers for Q4, we're going to continue to drive growth.
As we go into 2024.
What we obviously aspire to be required to be a growth company and it is incumbent on us to really drive.
The growth engine in this environment.
That's right in regards to the lengthening.
Speaker 3: Cell cycle here, you know, again, that's what we that's one of the things that we're solving for with the trial program We have a lot of customers very interesting in our technology that are in the late stage funnel
Sales cycle here again, that's what we that's one of the things that we're solving for with the trial program. We have a lot of customers are very interested in our technology that are in the late stage funnel.
Speaker 3: And in this environment, we're looking at a couple of different tools to really drive them to kind of move them into
And in this environment, we're looking at a couple of different tools to really drive them to kind of move them into.
Speaker 3: buying this technology and this is where trials can really help us.
Bought buying this technology and this is where this is where trials can really.
Really help us.
Speaker 3: You know, it's just maybe just commenting briefly on the trial here.
And just maybe just commenting briefly on the trial here.
This is sick.
Speaker 3: What we're seeing across here is that this is really a program to really help drive and help us so much.
With receiving across here is that this is.
Really a program it really helped drive.
And help us sell more consoles.
Speaker 3: And we have already had a lot of examples here, but this can be very successful.
We have already had a lot of examples here, where this can be very successful.
Speaker 3: One anecdotal example, for example, is that we had one doctor trial the console and because he liked it so much, it ended up being a multi-unit cell.
One anecdotal example for example is that.
We had one doctor trial the console because you liked it so much is done the being a multi unit so.
Speaker 3: where the doctor didn't just want to standardize all his offices, but he also wanted to standardize all his chairs to to to general ways. So that is an example of the tools that we're using in this environment. And I think that we can be very, very effective at really, you know, helping us drive sales rep productivity and really, you know, drive, drive this going forward.
Where the Doctor didn't just want to standardize all his offices, but he also wanted to standardize office chairs to gentle waves. So so that is an example of the tools that we're using in this environment and I think that if we can be very very effective.
Really.
Helping us drive sales rep productivity and really.
Drive this going forward so.
Speaker 3: You know, with all of this, I'm very excited about the opportunities to grow this business.
With all of this we're very excited about the opportunities to grow this business.
Speaker 3: So again, so this is like we said, this is a level of conservatism that we're dialing into the fourth quarter.
So again. So this is like we said this is a level of conservativism that we're dialing into the fourth quarter.
Speaker 6: Okay, that's helpful, dear. And thanks. And then maybe shifting over to the volume point. Those obviously seem to me also a little bit lighter. You mentioned some deferrals that might be taking place in the patient's side. Do you think the volume is your scene of reflective of what's occurring in the market? Do you have a sense if lower procedure volume that you're seeing are...
Okay. That's helpful. Thanks, and then.
Maybe shifting over to the volume point.
<unk>, obviously seen also a little bit lighter you mentioned, some deferrals that might be taking place in the patient side do you think the volumes you're seeing are reflective of whats occurring in the market.
Do you have a sense if lower procedure volumes that youre seeing are consistent with filed base root canals or are doctors getting maybe more cost sensitive than on the margin shifting away from clean flow Pi.
Speaker 6: file-based root canals or our doctor is getting maybe more cost sensitive than on the margin shifting away from clean flow PIs and over to file just to save some dollars.
Over to file just to save some dollars.
Speaker 3: Yeah, Jason, so substantially the simple answer is this is I think affecting everyone across the endodontic space. This is not just us.
Yes, Jason so substantially the simple answer is this is I think affecting everyone across the endodontics space. This is not just us. So some of the trends that we're seeing are reflective are happening across the entire endodontics space. So maybe I should give you a little bit more color here. So.
Speaker 3: So that some of the trends that we're seeing are reflective and are happening across the entire endodontic space. So maybe that should give you a little bit more color here. So what we're seeing is that some of our doctors are seeing less patients as patient wallings in Q3. And I would like to talk about in our prepared remarks.
So what we're seeing is that some of our doctors are seeing less patients patient volumes in Q3.
And I was like we talked about.
In our prepared remarks this happened.
Speaker 3: This happened probably more during the last month of the quarter. It's not universal across all practices, but we've definitely observed it in some of the practices.
Probably more during the last month of the quarter.
Not universal across all practices.
But we've definitely observed at.
Some of the practices.
Speaker 3: And we think what's happening here is that, no small portion, not a large portion, but a small portion of root canal procedures are elective in nature. The majority of them, like we've talked about before, are non-elective, but some of them are asymptomatic. They are elective in nature, and that's what some customers are choosing to delay. But the other small element that we saw is that,
And we.
We think what's happening here is that no small portion not a large portion, but a small portion of root canal procedures are elective in nature. The majority of them, we've talked about before our non elective, but some of them are asymptomatic they are <unk>.
Elective in nature, and that's what some customers are choosing to.
Delay in the deal.
Other small element that we saw is that.
Speaker 3: in the low volume group. And as you remember, we have three, we have a couple of different pricing tiers.
In the low volume group and as you remember we have three we have a couple of different pricing tiers. So in our low volume group, we saw that which are.
Speaker 3: So in our volume group, we saw that which are the ones that saw the highest price increase in the beginning of this year, this is where we saw a slight reduction in our utilization. Except for that, the dynamics that we're seeing are effectively happening across, at least to our knowledge, is happening across the entire endodontic industry.
The once they saw the highest price increase in the beginning of this year. This is where we saw a slight reduction in our utilization except for that.
The dynamics that we're seeing are effectively happening across at least to our knowledge. This is happening across the entire endodontics industry.
Speaker 4: So just to say that on to that as well. So we know who those low volume customers are and we have the opportunity now to go back to them and show them the full benefits of general way. So that's our next step here and something that's ongoing and active with our consumable sales.
So just just to add on to that as well. So we know very helpful. Those are low volume customers are and.
We have the opportunity now to go back to them and show them. The full benefits of generally so that's our next step here and something Thats ongoing.
And active with our consumable sales team.
Speaker 6: Okay, very helpful with it. Maybe one last one to squeeze in here. I wanted to ask on your debt covenants. I think you have some minimum revenue covenants out there that you need to clear these admittedly are looking a little difficult by the middle part of next year just given where revenues may be expected to end this year. Can you talk about your plans to address these covenants with your lender? Are there any early discussions on removing or reducing these covenants?
Okay very helpful. Maybe one last one to squeeze in here I wanted to ask on your debt covenants.
I think you have some minimum revenue covenants out there that you need to clear.
These are admittedly are looking a little difficult by the middle part of next year, just given where revenues may be expected to end this year.
Can you talk about your plans to address these covenants with your lender has there been any early discussions on removing or reducing these covenants.
Speaker 4: So without getting into specifics, we are of course discussing and have ongoing discussions with perceptive who holds our debt and continuing to just evaluate different scenarios as well there, but we've always had a good relationship with them, we expect that to continue moving forward.
So without getting into specifics we are of course.
Discussing.
And have ongoing discussions with them.
With perceptive, who holds our debt and.
To just evaluate.
Uh huh.
The different scenarios as well there, but we've always had a good relationship with and we expect that to continue going forward.
Okay. Thanks, guys.
Thank you.
Thank you and as a reminder, if you would like to ask a question. Please press star followed by one on the turbine keypad. If you would like to attract your question. Please press star followed by team.
Speaker 1: Thank you and as a reminder, if you would like to ask a question, please press staff, fill it by one on the television keypad. If you would like to retract your question, please press staff, fill it by two.
Speaker 1: And our next question is who Erin at Wright of Morgan Stanley , Erin at Please Go Headlining to Open.
And our next question does your Erin Wright of Morgan Stanley. Please go ahead. Your line is open.
Speaker 7: Hi everybody, this is Justin Wang on for Aaron. Thank you for the questions. Can you provide some more color regarding the reductions and force in November ? Specifically to what extent does this impact the sales force and how does this affect the ability to drive pop line? Additionally, are there any other areas of cuts? And I have a follow-up.
Hi, everybody. This is Justin Wang on for Erin. Thank you for the question.
Can you provide some more color regarding the reductions in force in November.
Typically to what extent does this impact the sales force and how does that affect the ability to drive topline. Additionally are there any other areas with cut and I have a follow up thank you.
Speaker 3: Yeah, I just, the simple answer is that we don't believe this is not going to impact our ability to to road a top line. It's also not going to impact our customers in any way.
Yes, Hi, Justin.
Yes.
The simple answer is that we don't believe this is not going to impact our ability to grow the topline. It's also not going to impact our customers in any way.
Speaker 3: Let me just give you a little bit more color dough to kind of put these cuts into perspectives. Now, from where we are right now, there are a number of projects around the organization that are complete. They're done.
Let me just give you a little bit more color do to kind of put these cuts in two perspectives.
From where we are right now there are a number of projects around the organization that are complete they are done.
Speaker 3: An example of that is development of the G4, that's substantially open. Development of the second generation cleanser, substantially all done.
An example of that is developed them to the G. Four that's substantially all of it.
<unk> development of the second generation clean flow substantially all done.
Speaker 3: We're also getting much more efficient on different areas around the organization, like manufacturing operations, operations, et cetera. So because of that, because there are some of these areas that are complete, we can now stop. And there's something about starting a project, but it's also important to talk about stopping a project.
We're also getting much more efficient on different areas around the organization like manufacturing operations operations et cetera, So because of that because there are some of these areas that are complete we can now stop and there is something about starting a project, but it's also important to talk about stopping.
And project.
Speaker 3: Second, the other thing that we've done during this reduction force, we have now an opportunity to reallocate resources around the organization. That's another thing that we've...
Second the other thing that we've done during this reduction for US we have not had an opportunity to reallocate resources around the organization.
And the other thing that we've done but ultimately at the end of the day with all of this this is really all about us doing more with less.
Speaker 3: But ultimately at the end of the day with all this, this is really all about us doing more with less. That's never easy, but that's something that we need to be all over and that's something that, you know, the team and the organization here has responded very well to this. And everyone are on board with this and that's exactly what we're gonna do from an execution perspective going forward.
Never easy, but thats something that we need to be.
All over and Thats something that.
The team and the organization has responded very well to this and everyone on board with Us and that's exactly what we're going to do from an execution perspective going forward.
Speaker 3: But we'll then emphasize this. We are still absolutely focused on commercial. We aspire to be a growth company, but we're at the same time. We're gonna balance growth and cash. But we're also at the same time. We're going to manage, and we're going to fund key critical initiatives like cavities that we're really excited about.
But well emphasize this we are still absolutely focus on commercial we aspire to be a growth company.
But at the same time, we were going to balanced growth and cash.
But we're also at the same time, we're going to manage we're going.
To fund key critical initiatives like cavities that we're really excited about that.
Speaker 3: you know, can really provide an inflection point for us going forward. You know, we've been through a pandemic. We know how to make cuts like this. We've done it before where we learned a lot. But, you know, I think this is true.
It can really provide an inflection point for us.
Going going forward.
We've been through a pandemic, we know how to.
Big cuts like this we've done it before we learned a lot.
But.
I think this is the right step.
Speaker 3: for us at this time to allow us to be good stewards or cash and but at the same time to getting back to the core elements of your question we're going to still continue to grow the company and growing top line.
For us at this time to allow us to be good stewards of our cash and but at the same time to getting back to the core elements of your question.
We're going to still continue to grow the company and growing top line and.
Speaker 3: And this will not impact customers in any way.
And this will not impact customers in anyway.
Speaker 7: Thanks, that's very helpful. Additionally, you've taken the good amount of price during the year. So I was wondering if you can help us understand what's in store for 2024 regarding price. And also on that vein, any practitioner pushback on price that we should be aware of. Thank you very much.
Thanks, that's very helpful. Additionally, you've taken a good amount of price during the year. So I was wondering if you can help us understand what's in store for 2024 regarding price.
And also on that vein.
Practitioner pushback on price that we should be aware of thank you very much.
Yes.
Speaker 4: So Justin, I'll pick the first half of it's Mike. So for 2024 guidance, we're not at this time ready to get a specifics on 2024. We have, of course, put the pricing, tiers in place in February . And for the most part, people understand our principles behind that. Customers understand.
Justin I'll take the first half it's Mike So for 2020 for guidance.
We're not.
At this time ready to give specifics on 2024.
We have of course put the pricing tiers in place in February and for the most part people understand our principles behind that customers understand the value that we bring to the procedure and overall to their practice and how we can help them achieve.
Speaker 4: the value that we bring to the procedure and overall to their practice and how we can help them achieve.
Speaker 4: positive results through Gen.Wave both clinically and financially.
Positive results through generally both clinically and.
Financially.
Speaker 4: So with that in mind, we think price is a level that is appropriate for us to continue to evaluate.
So with that in mind.
We think price as a lever that.
It's appropriate for us to continue to evaluate.
Speaker 4: I think the second half of your question just talked about certain customers and you know Björn mentioned it a moment ago, just about the customers at the highest tier. And we continue to work with them. We think that this practice is out there that are utilizing GenoWave as an adjunct.
I think the second half of your question just talked about certain customers in Europe.
You mentioned it a moment ago, just about the customers at the highest tier and we're continuing to work with them. We think that those practices out there that are using utilizing general length as an adjunct to look now on therapy, and we think we can help them incorporate more fully into their practice and realize the full benefits of general ways not only for.
Speaker 4: to root canal therapy and we think we can help them incorporate more fully into their practice and realize the full benefits of general ways, not only for the patient having lower pain, but also the practitioner having more efficiencies and better clinical work flow.
The patient, having lower pain, but also the practitioner, having more efficiencies and better clinical workflow.
Speaker 4: So with those two things in mind, it just goes back to the value that we bring overall with the geno wave to the Rukinau therapy.
So with those two things in mind. It just goes back to the value that we bring overall with the channel with to the root Canal therapy.
Thank you appreciate it.
Thanks, Justin.
Yes.
Speaker 1: Thank you and as a spy or a minder if you would like to ask a question, please press star, fill it by one on a telephone keypad or portage a name.
Thank you and as a final reminder, if you'd like to ask a question. Please press star followed by one on this lesson keypad, where pool, so just a moment.
Thank you. It appears we have no further questions I'll now hand back to beyond for any closing comments.
Speaker 1: Thank you. It appears we have no further questions and I hand back to beyond for any closing questions.
Thank you operator to conclude today's call, we'd just like to reiterate our commitment to cement those fundamentals and the opportunity ahead of us to drive market adoption and revolutionize dental care.
Speaker 3: Thank you operator. To conclude today's call, we would just like to reiterate our commitment to Sinendo's fundamentals and the opportunity ahead of us to drive market adoption and revolutionize dental care. We are incredibly excited about the future of the company. We look forward to providing additional details at future events. We appreciate everyone's time today and thank you for your interest in Sinendo. Have a great evening.
We're incredibly excited about the future of the company, we look forward to providing additional details to the future events. We appreciate everyone's time today and thank you for your interest in <unk> have a great evening.
Thank you. This now concludes today's call. Thank you all for joining you may now disconnect your lines.
Speaker 1: Thank you, this lovely Tuesday's call. Thank you for joining, you may now disconnect your lights.
Speaker 8: The.
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