Q3 2024 SANUWAVE Health Inc Earnings Call
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Unknown Attendee: Good day everyone and welcome to today's SANUWAVE Announces Highest Quarterly Revenues in Company History Q3 2024 Results. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star two. Please note this call is being recorded and I will be standing by if you should need any assistance.
Speaker Change: Good day, everyone and welcome to today's Sanya wave announced its highest quarterly revenues in company history Q3, 'twenty 'twenty four results at this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session.
Speaker Change: N.
Speaker Change: You May register to ask a question at any time by pressing the star and one on your telephone keypad you may withdraw yourself from the queue by pressing star. Two. Please note. This call is being recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mark.
Morgan Frank: It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of SANUWAVE. Thank you very much. So welcome everyone to SANUWAVE's third quarter 2024 earnings call. As many of you saw our Form 10-Q was filed with the SEC last night, our earnings release was issued this morning, and our updated corporate presentation was made available on our website in the investor section. You can please refer to these during Joining me today is Peter Sorensen, our CFO, and after the presentation, we will open the call up for Q&A.
Speaker Change: Frank <unk>, chairman and CEO of Sony wave.
Mark Frank: Thank you very much.
Speaker Change: Welcome everyone to third.
Speaker Change: Third quarter 2024 earnings call.
Our Form 10-Q.
Speaker Change: It was filed with the SEC last night or regionally.
Speaker Change: Morning Ann.
Speaker Change: Our updated corporate presentation was made available on our website.
Section.
Please refer to these journey.
Speaker Change: Patient joining me today is Chris Johnson, our CFO.
Speaker Change: Okay.
Speaker Change: I'll open the call up for.
Speaker Change: Or do you have that.
Morgan Frank: Let me kick off with the always scintillating forward-looking statements disclaimer. This call may contain forward-looking statements, such as statements relating to future financial results, production expectations, and plans for future business development activities. Investors are cautioned that any such forward-looking statements are not guaranteed to future performance and involve risks and uncertainties, many of which are beyond the company's ability to assess. Description of these risks and uncertainties and other factors that could affect our financial results is included in our SEC filings. Actual results may differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update any forward-looking statements.
Speaker Change: Let me kick off with the always scintillating forward looking statements disclaimer.
Speaker Change: This call may contain forward looking statements such as statements relating to future financial results production expectations and plans for future business development activities and 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.
Speaker Change: Some of these risks uncertainties and other factors that could affect our financial results is included.
Speaker Change: Filings actual results may differ materially from those projected in forward looking statements company undertakes no obligation to update any forward statements.
Morgan Frank: As a reminder, our discussion today will include non-GAAP numbers. Reconciliations between our GAAP and non-GAAP results can be found in our recently filed TANQQ for the quarter ended September 30th, 2024.
Speaker Change: As a reminder, our discussion today will include non-GAAP numbers reconciliations between our GAAP and <unk>.
So it can be found in our recently filed 10-Q for the quarter ended September.
Four.
Morgan Frank: Okay, so with that out of the way, let's get the good stuff. Last conference call, we spoke about our revenue growth rates in 50 Sustainable and guided to above trend growth of 65 to 75 per Q3. We're extremely pleased to have meaningfully exceeded that guidance, posting revenue to the quarter of $9.4 million, by far the best quarter in the company's history, and an increase of 89% versus the same quarter last year, and 31% sequentially from Q2 2021. Obscator revenue, which was approximately 58% of our revenue in the quarter, grew 75% from a year ago, and 14% sequentially versus Q2.
Speaker Change: Okay, so with that the way.
Speaker Change: That's good.
Speaker Change: Last conference call, we spoke about our.
Revenue growth rates.
Speaker Change: Stable.
Speaker Change: Above trend growth.
Speaker Change: 75 for Q3.
Speaker Change: We're extremely pleased to have meaningfully exceeded that guidance posting revenue each quarter from Q.
Speaker Change: 4 million by far the best quarter in company history.
89% versus the same quarter last year, and 31% sequentially from Q2 2024.
Speaker Change: Operating revenue, which was approximately 58% of our revenue in the quarter grew 75% from a year ago, and 14% sequentially versus Q2, and this consumables revenue alone.
Morgan Frank: And this consumables revenue alone actually exceeded the full Q3 revenues for 2023, which is a promising time for us, given that we fundamentally view ourselves as being in the consumables. Ultimate system sales for the quarter was a big swing factor with 144% growth year-on-year. and 74% growth from Q2 as our ongoing mantra of rapid profitable growth that I've been so fond of repeating on prior calls continue to play out and we saw a rise in our gross margins to 75.5%, saw $2 million of operating profit and $2.1 million of adjusted EBITDA in the quarter. Company also turned the corner on being cash generated for Q3 as a whole even after cash futures out.
Speaker Change: Q3 revenues for 2023, which is a promising sign for us given that we fundamentally view ourselves.
Speaker Change: Symbols business.
Speaker Change: Ultimate system sales for the quarter.
The big swing factor with 144% growth year on year and.
Speaker Change: 74% growth from Q2.
Matt: Our ongoing me Matt.
Matt: Our ongoing mantra of rapid profitable growth.
Matt: So fondly repeating on prior calls continue to play out and we saw a rise in our gross margins to 75.5% too.
Matt: $2 million of operating profit and $2 1 million adjusted EBITDA in the quarter.
Speaker Change: The company also turned the corner on being cash generating for Q3 as a whole even after cash numbers Scott.
Morgan Frank: You can get more detail here from the Earnings Callback and from our website or our institution filings. So, all in all, there's certainly a significant number of steps in the right direction for the company. And as many of you likely saw, we took some further steps on October 18th. Financial Post this set of transactions, the company repaid certain debt and regained compliance with the covenants of our remaining loans. It is no longer in forbearance on any of our obligations. This has greatly simplified and stabilized the company's capital structure as a part of our efforts to create a simple, investable structure conducive to allowing us both to grow and thrive and to be valued for our business rather than our cash stack.
Speaker Change: You can get more detail here from the earnings call back in from our website or our filings so all in all.
Speaker Change: We felt like a significant number of steps in the right direction for the company.
Speaker Change: Many of you likely saw we picked some further steps on October 18th to reverse split the stock effect of note and warrant exchange in a variety of warrant exercises and close to $10 3 million dollar type deal funded by several new as well as secondly existing investors.
Speaker Change: <unk> posted a set of transactions the company repaid certain debt and regain compliance with the covenants all of our remaining so there is no longer in forbearance on any of our obligations. This has greatly simplified and stabilized the company's capital structure. That's a part of our efforts to create a simple and festival structure can do.
Speaker Change: Two allowing us both to grow and thrive and the value for our business rather than our cap stack.
Morgan Frank: On the business side, Q3 obviously came in ahead of plan.
Speaker Change: On the business side Q3, obviously came in ahead of plan.
Morgan Frank: This underlines one of the challenges we're facing and forecasting at the moment, which is that, which is what we're really internally referring to as a sort of pigs and pythons problem. As we've discussed on prior calls, companies are beginning to engage with a much larger, more sophisticated sort of customer. Obviously, this is a fantastic opportunity for us, and it's precisely the sort of thing that we'll be doing as we seek to transition to being, I guess, kind of a small business being a medium-sized one. But it's also going to make revenue, especially systems revenue, a bit trickier to predict in the near term.
Speaker Change: This underlying that's one of the challenges we're facing in forecasting at the moment, which is that.
We feel we're really internally referred to as the sort of pace in Python problem.
Speaker Change: As we've discussed on prior calls companies beginning to engage with a much larger more sophisticated customer obviously, there's a fantastic opportunity for us and it is precisely the sort of thing.
Speaker Change: Doing as we seek to transition from being I guess kind of a small business being a medium sized one.
Speaker Change: But it's also going to make revenue, especially systems revenue a bit trickier.
Speaker Change: Near term applicator revenue tends to be much more linear and therefore easier to forecast.
Morgan Frank: Applicator revenue tends to be much more linear and therefore easier to forecast because it's simply a function of how many systems you have in the field, how many patients they treat. and the applicator pricing. But system sales, especially with bigger customers, tend to have a less linear aspect. And I think as Q3 shows, the pigs can sometimes make quite a lump as they pass through the python. Selling 124 systems in one quarter versus 55 in the prior year and 72 last quarter was a real breakout for the company. But you know, as much as we'd like to, this is a difficult outcome to draw trend lines to infinity from.
Speaker Change: It's simply a function of how many systems you have in the field, how many patients they treat per week.
Speaker Change: Let me ask you had a pricing but system sales, especially with bigger customers tend to have a less linear aspect and I think this Q3 chose.
Speaker Change: You can sometimes make quite a lump as they pass through the Python 724 systems in one quarter versus 55 in the prior year and 72 last quarter whats the real breakout for the company, but as much as we'd like to you. This is a difficult outcome could draw trend lines to infinity problem, we expect it will become.
Morgan Frank: We expect it will become a bit easier to forecast this as we go forward and we get more customers into the adoption stage and laws of averages and large numbers start to work for us. But in the near term, you know, it's going to be a little lumpy. And though, obviously, sometimes lumpy can be good.
A bit easier to forecast this as we go forward, we get more customers into the adoption stage.
Speaker Change: Those are averages in large numbers start to work for us.
Speaker Change: But in the near term, it's going to be a little lumpy and bill obviously, sometimes lumpy can forget so with that I will truly over to Peter to run through the numbers in some more detail and then I'll take the steam up a bit again speak about guidance.
Morgan Frank: So with that, I will turn it over to Peter to run through the numbers in some more detail, and then I'll pick this theme up a bit again as we speak.
Peter Sorensen: Thank you, Morgan. While reiterating what was previously said, it was another exciting quarter for SANUWAVE as we achieved all-time record high quarterly revenues, including year-over-year growth of almost 90% and strong subcontract growth of over 30% from last quarter's previous all-time record quarter. We also increased our gross margins both year-over-year and sequentially, and we continue to execute on our goal of rapid, profitable growth.
Speaker Change: Thank you Morgan Oh, reiterating what was previously said it was another exciting quarter for standing wave as we achieved all time record high quarterly revenues, including year over year growth of almost 90% and strong sequential growth of over 30% from last quarters previous all time record quarter. We also increased our gross margins both year over year and sequentially and we continued to execute on our goal of.
Speaker Change: Rapid profitable growth so with that let's take a look at the numbers revenue for the three months ended September 30 of 2024 totaled $9 $4 million, an increase of 89% as compared to $5 million for the same period of 2023. This growth is greater than the previous guidance of 65% to 75% increase gross.
Peter Sorensen: So with that, let's take a look at the numbers. Revenue for the three months ended September 30th, 2024, totaled $9.4 million, an increase of 89% as compared to $5 million for the same period of 2023. This growth is greater than the previous guidance of a 65% to 75% increase. Gross margin as a percentage of revenue amounted to 75.5% for the three months ended September 30, 2024, versus 71.5% for the same period last year, an increase of over 400 basis points, which is mainly due to completing a line transfer at a new contract manufacturer, as well as positive pricing impacts compared to the same period last year.
Speaker Change: Gross margin as a percentage of revenue amounted to 75, 5% for the three months ended September 32024 versus 71, 5% for the same period last year, an increase of over 400 basis points, which is mainly due to completing a line transfer at a new contract manufacturer as well as positive pricing impacts compared to the same period last year.
Peter Sorensen: For the three months ended September 30, 2024, operating income totaled $2 million, which is an improvement of $2.5 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and manage spend effectively. Operating expenses for the three months ended September 30, 2024 amounted to $5.1 million compared to $4.1 million for the three months ended September 30, 2023. An increase of $1 million, which was mainly driven by increased selling Net loss for the three months ended September 30, 2024, was $20.7 million, compared to a net loss of $23.7 million for the same period in 2020.
Speaker Change: Three months ended September 32024, operating income totaled $2 million, which is an improvement of $2 $5 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth in managed spend effectively.
Speaker Change: Operating expenses for the three months ended September 32024 amounted to $5 1 million compared to $4 1 million for the three months ended September 32023, an increase of $1 million, which was mainly driven by increased selling expenses.
Speaker Change: Net loss for the three months ended September 32024 was $27 million compared to a net loss of $23 $7 million for the same period in 2023 the.
Peter Sorensen: The decrease in net loss was primarily due to a change in the fair value of derivative liabilities and an increase in operating costs. Adjusted EBITDA for the three months ended September 30, 2024 was $2.1 million versus a negative $264,000 for the same period last year, an improvement of $2.4 million. SANUWAVE continues to execute its financial strategy to improve operational profitability and manage operations.
Speaker Change: The decrease in net loss was primarily due to a change in the fair value of derivative liabilities and an increase in operating income adjust.
Speaker Change: Adjusted EBITDA for the three months ended September 32024 was $2 $1 million versus a negative $264000 for the same period last year, an improvement of $2 $4 million.
Speaker Change: Danny wave continues to execute its financial strategy to improve operational profitability and manage operating expenses as previously discussed but the subsequent event of the note and warrant exchange, we're thrilled to be moving on from most of the derivative liability that was previously clouded our bottomline results.
Peter Sorensen: As previously discussed with the subsequent event of the Knowton-Warren exchange, we are thrilled to be moving on from most of the derivative liability that has previously clouded our bottom line results. Total current assets amounted to $9.9 million as of September 30, 2024 versus $9.8 million as of December 31, 2023. Cash total $3.3 million as of September 30, 2024.
Speaker Change: Total current assets amounted to $9 $9 million as of September 32024 versus $9 $8 million as of December 31, 2023 cash totaled $3 $3 million as of September 32024.
Peter Sorensen: We thank you for the continued support of SANUWAVE, and I'll now transfer the call back to Moritz.
Speaker Change: We thank you for the continued support of say anyway, and I'll now transfer the call back to Morgan.
Morgan Frank: Thanks, Peter.
Speaker Change: Thanks Peter.
Morgan Frank: So moving on to guidance, as you saw in our press release, we're guiding to 9.7 to 10.5 million in revenue for Q4, which would represent roughly 40-50% growth from what was another sort of pig-throw-python quarter last year in Q4, when we had our first full quarter without supply constraints on our ultimate system. Catching up on that. Q4 2023 was up over 40% sequentially from Q3 of last year, so it's a bit more difficult of a quarter to comp against, but obviously this guidance takes us up to revenue estimates in excess of $32 million for 2024 as a whole, which is a bit ahead of our previous guidance and would put us at a 50% or 57% year-on-year growth rate.
Morgan: So moving on to guidance as you likely saw in our press release, we are guiding to $9 seven to $10 5 million in revenue for Q4, which would represent roughly 40% 50% growth.
Morgan: From what was another sort of picture Python quarter last year in Q4.
Morgan: We had our first full quarter without supply constraints on ultra system.
Morgan: We were catching up on backlog Q.
Morgan: Q4, 2023 was up over 40% sequentially from Q3 of last year, so it's bit more difficult quarter to comp against but obviously this guidance takes us up to revenue estimate.
Morgan: In excess of $32 million or 2024, as a whole which is a bit ahead of our previous guidance and would put us at a 50% or 57% year on year growth rate.
Morgan Frank: The company has also been looking at requirements to uplist to NASDAQ and currently believes that it will be able to do so using the market value standard, presuming it is able to sustain a $4 bid price and a $75 million market cap for 90 trading days. Yesterday made 15 days so far, not that we're counting anything.
Morgan: The company has also been looking at requirements to uplifting to NASDAQ and currently believes it will be able to do so you're seeing with the market.
Morgan: Standard presuming it is able to sustain a $4 bid price and $75 million market cap 490 trading days.
Morgan: Yesterday made 15 days so far.
Morgan: Our accounting.
Morgan Frank: So again, I really just want to close by reiterating that we're building for the long term here and that we're very excited by the progress we've made and remain hungry for more. I would like to thank the whole SANUWAVE team for their extraordinary efforts here at NASDAQ.
Morgan: So.
Speaker Change: Again, I would really just close by reiterating that we are building for long term here and that we're very excited by the progress made we remain hungry for more I would like to thank the whole <unk> team for their extraordinary efforts here.
Morgan Frank: Let's remind everyone that as our internal mantra is the reward for good work is more work that there's going to be plenty more opportunity to come so With that, I will open the call up for questions, operator.
Speaker Change: To remind everyone that our internal mantra is the reward for good work, it's more works that theres going to be claimed bar opportunity. So.
Speaker Change: With that I will open the call.
Speaker Change: Call up for questions.
Speaker Change: Operator.
Unknown Attendee: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question.
Speaker Change: At this time, if you'd like to ask a question. Please press the star and one on your telephone keypad you may remove yourself from the queue at any time by pressing star team. Once again that is star one to ask a question, we will pause for a moment until now.
Unknown Attendee: We will pause for a moment to allow questions to queue.
Speaker Change: Questions to queue.
Alex Silverman: And we'll take our first question from Alex Silverman with AWM Investments. Your line is open. Hey, good morning. Congratulations. Hey, thanks for calling. I'm curious, a couple questions.
Speaker Change: And we'll take our first question from Alex Silverman with a W and investments your line is open.
Alex Silverman: Hey, good morning congratulations.
Speaker Change: Hey, thanks for calling in.
Morgan Frank: Can you spend a little bit of time talking about the Your process of moving to a new manufacturer, both for systems as well as disposables, and where you are in that process. Sure, so on the system side, we successfully completed the transition to two new contract manufacturers that we are using to manufacture the Ultimis system now. We're now up and running there and are getting systems in at a kind of 25 to 30 a week cadence, so that seems to be going very well. Applicator side, we have been working through a minor redesign on the product that would remove a couple of ultraviolet cure adhesive steps in the production process.
Speaker Change: I'm curious, a couple questions. Can you spend a little bit of time talking about the
Speaker Change: The kind of 25 to 30, a week cadence so that seems to be going very well.
Speaker Change: The applicator side, we have been working through a minor a redesign of a product that would remove a couple of ultra Violet sure you said steps in the crushing.
Speaker Change: Process.
Morgan Frank: Once we have that design nailed down, we're looking to go and cut new, larger holes. that we can use and we're hoping to have, you know, kind of I think at this point, probably sometime in Q2 next year have the Second source stood up on applicators with the new Our goal is to maintain multiple sourcing on these so that there's no single source. That makes perfect sense.
Speaker Change: Once we have that design.
Speaker Change: Nailed down we're looking to go and cut new larger molds.
Speaker Change: But we can use and we're hoping to have kind of.
I think at this point probably sometime in Q2 next year have you.
Second source stood up on applicators within Yucatan.
Great and.
Speaker Change: Alright, though our goal our goal is to maintain multiple sources. So that there's no single point of failure.
Speaker Change: It makes perfect sense.
Morgan Frank: Um, you know, given I assume your systems are, are a FIFO accounting, how many of this quarter's systems were on the new more profitable manufacturing, as opposed to the less, you know, the lower margin prior? I'll take that one Morgan, it was just a few at a time. Yeah, I'll take that. So just a few at the end of the quarter, as these new contract manufacturers got set up near the end of the Q3. And we still had leftover inventory from our previous ones. So in Q4, we'll start to see another uptick in our gross margin as our COGS comes down on those systems. Got it, got it.
Speaker Change: Given I assume your systems are or a phy, our FIFO accounting.
Speaker Change: How many of this quarter's systems were on the new more profitable manufacturing as opposed to the the west.
Speaker Change: Lower margin prior.
Speaker Change: I'll take that one Morgan you up here.
Speaker Change: You ought to feel better.
Speaker Change: Yeah, I'll take that so I was just a few at the end of the quarter.
Speaker Change: New contract manufacturers got stood up near the end of the Q3.
Speaker Change: And we still have leftover inventory from our previous ones. So in Q4, we will start to see another uptick.
Speaker Change: And our gross margin is that Cogs comes down on those systems.
Speaker Change: Got it got it so those sort of be a step function on the margin on systems Q3 to Q4, and then starting in 2025, a step function on the applicators.
Morgan Frank: So there will sort of be a step function on the margin on systems Q3 to Q4, and then starting in 2025, a step function on the applicators. Correct. Okay. Helpful.
Speaker Change: Correct.
Speaker Change: Okay helpful.
Morgan Frank: And then in terms of the 124 systems, you know, that you sold in the quarter, which is kind of mind boggling. Can you walk through how many of those are to the, quote unquote, more sophisticated, bigger customers, and how many of those are to the mom and pop? Well, that's so... Yeah, I guess it's it was a little tricky to sort of to break it down that way. I mean, what we can say is, you know, we've had a couple new customers that have been, you know, that started to ramp aggressively in Q3. and that, you know, between a couple of large customers, they were, you know, they were a very significant effect on the quarter.
Speaker Change: And then in terms of the 124 systems.
<unk> sold in the quarter, which is kind of mind boggling.
Speaker Change: Can you walk through how many of those are to the quote unquote more sophisticated bigger customers and how many of those are to the mom and pop.
Speaker Change: Well Buffalo.
Speaker Change: Yes, I guess, it's a little tricky to sort of break it down that way I mean, what we can say is we've had a couple new customers that have been.
Speaker Change: Sorry to ramp up aggressively.
Speaker Change: Q3.
Speaker Change: And is that between a couple of large customers they were.
Speaker Change: They were a very significant effect on the quarter.
Morgan Frank: Okay, I think we're sort of trying to stay away from like, you know, revealing data about our customers and like who's buying how much what.
Speaker Change: Okay.
Speaker Change: So just trying to stay away from like revealing data about our customers' likelihood to buy.
Speaker Change: How much what.
Morgan Frank: And if you could spend a moment on a new customer pipeline and sort of what you're seeing out there. Yeah, I mean, the top of our funnel right now is... It's exciting. It's the best we've ever seen it, but it's also a little different than anything we've seen before where these are bigger customers, they're more sophisticated, they're potentially much bigger buyers of product. They also tend to take, if you're going to buy a hundred systems, you think about it very differently than if you're going to buy two. We're still sort of learning what it takes to move these guys through the funnel.
Speaker Change: And if you could spend a moment on.
Speaker Change: Our new customer pipeline.
Speaker Change: Sort of what Youre seeing out there.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: The top of our funnel right now is.
Speaker Change: Yeah.
Speaker Change: Exciting.
Speaker Change: It's the best we've ever seen it but it's also a little different than anything we've seen before where you.
Speaker Change: These are these are bigger customers there, they're more sophisticated they're potentially much bigger buyers product either.
Speaker Change: They also tend to.
Speaker Change: If you're going to buy.
Speaker Change: And if you think about it very differently than if you're going to buy too.
Speaker Change: And so.
Speaker Change: We're still sort of learning what it takes to move these guys through the funnel.
Morgan Frank: You know, the speed at which they move, but it will. We're very excited about what we're seeing. It's, you know, I think over the next, over the next several quarters, it really feels like we could be turning. Got it.
Speaker Change: The speed at which they move but.
Speaker Change: We're very excited about what we're seeing.
Speaker Change: I think over the next over the next couple of quarters.
Speaker Change: It really feels like point you'd be turning a corner here.
Speaker Change: Got it very helpful. Thank you I appreciate the help.
Morgan Frank: Very helpful. Thank you. Appreciate the Thank you.
Speaker Change: Thank you we'll take our next question from Christopher Davis with founding asset MGMT. Your line is open.
Christopher Davis: We'll take our next question from Christopher Davis with Founding Asset MGMT. Your line is open. Thank you. So, Morgan and team, congratulations. University of Michigan. Thanks, I really appreciate it.
Thank you so Morgan and team congratulations on executing frankly, as efficient and comprehensive turnaround as I've ever seen so Rudy.
Are we appreciate it.
Morgan Frank: So maybe fill in a little bit of the profile over the next year of op-eds for us, and maybe Sure, thanks. So, we started this year with, I believe, three salespeople. There's actually been some turnover in the salesforce since then. I believe we're now at nine and should be at eleven by kind of the middle of this month. So that's, uh, obviously we're starting to get some, we're starting to get some traction there and we're increasingly focusing on how to get, you know, more deeply involved with some of the bigger, more sophisticated customers.
Speaker Change: So maybe fill in a little bit.
Speaker Change: File over the next year of <unk>.
Speaker Change: Thanks for for US and maybe also talk about numbers of salespeople. What you had four quarters ago. What you intend to have what you have now and what you have what you may have.
Next year.
Speaker Change: Sure. Thanks, so thank you.
Speaker Change: Started this year with <unk>.
Speaker Change: <unk> <unk> salespeople.
Speaker Change: There's actually been some turnover in the sales force.
Speaker Change: I believe we're now at nine and should be at 11 by the middle of this month.
Speaker Change: So that's obviously, we're starting to get to we're starting to get some traction there and we are in.
Speaker Change: Increasingly focusing on how to get more deeply involved with some of the bigger and more sophisticated customers.
Morgan Frank: Um, from an operating expense standpoint, Obviously, adding headcount does add to OpEx, we don't expect it to be anything like proportional You know, our Q2 number had some... You know, had some expense reversals back out on a gap basis, you know, this quarter had Q3 had some expenses in it associated with The transaction that we consummated is... October with some of the proxies with the non-recurring engineering expense associated with Standing up the new production lines, and so I think, in spite of having added a fair bit of headcount, I think it's reasonable to assume that operating expenses in Q4 are going to be about flat in dollar terms with Q3.
Speaker Change: From an operating expense standpoint.
Speaker Change: Obviously.
Speaker Change: Adding adding head count does add to Opex, we don't expect it to be.
Speaker Change: Anything like proportional.
Our Q2 number had some.
Speaker Change: You had some expense reversals back out on a GAAP basis. This quarter had Q3 had some expenses.
Speaker Change: Associated with it.
Speaker Change: The transaction that we consummated.
Speaker Change: Yeah.
Speaker Change: October with some of the processes with yes.
Speaker Change: Nonrecurring sharing expense associated with.
Speaker Change: Standing up the new production lines and so I think.
Speaker Change: In spite of having added a fair bit of head count.
I think it's reasonable to assume that operating expenses in Q4, although it should be about flat in dollar terms with Q3.
Morgan Frank: And, you know, there should be some, you know, there should be some modest growth. across 2025. Some of the swing factors will include things like weather and to what extent we're going to pursue some additional clinical study. But overall, I think, you know, using a dollar value for Q4, pretty similar to what we experienced in Q3, is a reasonable assumption.
And there should be some yes, there should be some modest growth.
Speaker Change: Across 2025, some of the swing factors to include things like whether and to what extent, we're going to pursue some additional clinical study.
Speaker Change: But overall I think using that dollar value for Q4 pretty similar to what we experienced in Q3, that's a reasonable assumption.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Nathaniel Hurst: Thank you. We'll take our next question from Nathaniel Hurst, Private Investor. Your line is open. Good morning. Morgan, just a couple of quick questions if you don't mind. Looking here, page 12 and 13 of your 10-Q that you guys filed last night, sections 7 and 8. going senior secured debts in the fault of 26, just over 26 million and a promissory note payable with 1.3 million in the fault. Just looking to see when those might be getting cleaned up, if you will. Sure.
Speaker Change: Thank you we'll take our next question from Daniel Herz Private Investor Your line is open.
Daniel Herz: Good morning.
Speaker Change: Morgan just a couple of quick questions. If you don't mind.
Speaker Change: Looking here page 12.
12, and 13 of your 10-Q that you guys filed last night.
Speaker Change: Sections, seven and eight.
Speaker Change: Going.
Speaker Change: Secured debt in the halt of 26, just over $26 million.
Speaker Change: And a promissory note payable.
Speaker Change: One 3 million in default.
Speaker Change: Just looking to see win.
Speaker Change: Those might be getting.
Speaker Change: Cleaned up if you will.
Speaker Change: Sure. So the $1 $3 million note has already been repaid as of this time and there is no longer an obligation of the company.
Morgan Frank: So the $1.3 million note has already been repaid as of this time and is no longer an obligation of the company. and the default on the LH expansion that was associated with non-compliance with a minimum cash covenant. of five million dollars and that that covenant has also now been met so at this time we are no longer in default or in forbearance on any of our data. Okay, beautiful. And Paige. 16. The breakdown of US revenue and international revenue. Obviously, you guys have done a tremendous job of growing revenue here in the US. International side, however, seems a little sluggish, if not meandering.
Speaker Change: And.
Speaker Change: Yes.
Speaker Change: Fault on the La <unk> expansion that was associated with non compliance with a minimum cash covenant.
Speaker Change: Of $5 million and that.
Speaker Change: <unk>.
Speaker Change: Also now been met.
Speaker Change: At this time, we are no longer in default or forbearance on any of our debt obligations.
Speaker Change: Okay beautiful.
Speaker Change: And page.
Speaker Change: 16.
Speaker Change: The breakdown of U S revenue and international revenue, obviously, you guys have done a tremendous job of growing revenue here in the U S.
Speaker Change: International side however.
Speaker Change: It seems a little.
Speaker Change: Sluggish if not meandering.
Morgan Frank: I know you guys are focused on the US side. Any comment on the international side? The international sales were predominantly or I think exclusively actually associated with The Dermapace and Profile product line. And so, you know, the company's primary focus at the moment remains Ultramists in the U.S. and so given that ultramists Cleared for use in places like the EU, where it's just that's not going to be a focus in the near term. Like the opportunity in the US is so large that we really, we've chosen to focus there and really don't want to. The dog that chases one bunny and comes home fed rather than trying to chase two and coming home.
Speaker Change: I know you guys are focused on the U S side.
Speaker Change: Any comment on the international Plaza.
I mean, the international sales were predominant in the year I think exclusively actually associated with.
Speaker Change: The German pace and profile product lines.
Speaker Change: The company's primary focus at the moment remains.
Speaker Change: In the U S and so given that openness.
Speaker Change: Cleared for use in places like the EU.
Speaker Change: It's just that's not going to be a focus in the near term, but the opportunity in the U S is so large that we really we have chosen to focus there and really still want to be.
Speaker Change: The dog that chases one body and comes home fed rather than price. It takes two in Hungary.
Speaker Change: I agree.
Morgan Frank: Okay, and last question, the bottom of page 25 and the top of page 26, it says the company has still identified the following material weaknesses. It lists three of them. And then it says, as a result, management concluded that its internal control over reporting was not effective as of September 30th of this year. Any, any ideas on that? Well, obviously it's not uncommon for companies our size to have various forms of material weaknesses in their reporting. It's something that we have chosen to focus on internally. We're now, we've hired a full-time employee. The entire job is to remedy.
Speaker Change: Okay and.
Speaker Change: Last question page.
Speaker Change: Bottom of page 25 on the top of page 26.
Speaker Change: Instead the company is still identified the following material weaknesses at list three of them and then it says as a result management concluded that its internal control over over reporting was not effective as of September 30 of next year.
Speaker Change: Any.
Any any ideas on that.
Speaker Change: Well.
Speaker Change: Obviously, it's not it's not uncommon for companies our size to have.
Speaker Change: Various forums.
Speaker Change: Material weaknesses in our reporting.
Speaker Change: Something that we have chosen to focus on internally.
Speaker Change: Now we've hired a full time employee whose entire job is to remedy.
Morgan Frank: Reporting Issues. She reports both directly to Peter, our CFO, and to the Audit Committee on our board. So, these are issues that we believe are well within our remit to remediate.
Speaker Change: Reporting issues.
Speaker Change: She reports both directly to Peter our CFO and to the audit Committee on our board. So these are these are issues that we believe are well within our remit to remediate that we're currently.
Speaker Change: Yeah.
Unknown Attendee: Thank you very much. Thank you. And once again, if you would like to ask a question, please press star one.
Speaker Change: Thank you very much.
Speaker Change: Thank you and once again, if you'd like to ask a question. Please press star one will.
John Lundy: We'll take our next question from John Lundy, Private Investor, your line is open. Visit sanuwave.com How soon do you expect to be cash flow positive? And if it's not in the near future, is there gonna be more debt? How are you gonna handle that?
Speaker Change: We'll take our next question from John London, Private Investor Your line is open.
Speaker Change: Uh huh.
Speaker Change: How soon do you expect to be cash flow positive and if it's not in the near future.
Speaker Change: Is it going to be more debt, how do you going to handle that thank you.
Morgan Frank: Thank you. Well, as we mentioned on the call earlier, the company was cash generated. And you expect that to continue? I think we haven't given any, we haven't given any guidance there, but I think, you know, based on the, based on what we've said about operating expense and about expected revenue levels for Q4, you can probably do some reasonably good math.
Speaker Change: Well as we mentioned on the call.
Speaker Change: Earlier, the company was cash generated in Q3.
Speaker Change: And you expect that to continue.
Speaker Change: I think we haven't given any we havent given any guidance there, but I think.
Speaker Change: Based on the based on what we've said about operating expense.
You'd rather be levels for Q4.
Speaker Change: You can probably do some reasonably good Matt.
Morgan Frank: Okay, thank you.
Speaker Change: Okay. Thank you.
Morgan Frank: Thank you.
Speaker Change: Thank you we'll take our next question from Ian Cassel with IFC Ann Your line is open.
Ian Castle: We'll take our next question from Ian Castle with ISCM. Your line is open. Hi Morgan, congratulations on the quarter.
Speaker Change: Hi, Morgan congratulations on the quarter.
Morgan Frank: I had a question about the clinical studies or validation studies that you may be working on now or may be working on in the future. I was just curious if you're, quite honestly, if you're working on any more, or do you see the need to do additional ones to get further penetration in the market? Um, yeah, thanks, Ian. I don't know that it's so much a function of... penetration in the market in There's a fair bit of data out on Ultimist and we have a lot of, we have a fair number of users out now that have history using the product and there's a general sense of, people have had good experiences with it.
Speaker Change: I had a question about the clinical studies or validation studies that you may be working on now or may be working on in the future. I was just curious if you are quite honestly, if youre working on anymore or do you see the need do additional ones to get further penetration in the market.
Speaker Change: Yeah. Thanks, Ian I don't know that its so much a function of.
Speaker Change: Penetration in the market.
Speaker Change: In that.
Speaker Change: There's a fair bit of data out of this and we have a lot of.
Speaker Change: We have a fair number of users out now that have.
Speaker Change: History, using the product there is a general sense of your people have had good experiences with it.
Morgan Frank: The question becomes, one, how do we bolster our claims using real world data? This is obviously something that both CMS and insurers have. becoming increasingly interested in is, you know, do post approval studies show us that your product is working out in the field. We have Some users that have repositories of data and are very interested in working with us on this. And so I suspect we'll certainly be pulling together some data along those lines over the next year.
Speaker Change: Question becomes one how do we bolster our claims you're seeing real world data because this is obviously something that both.
Speaker Change: CMS insurers.
Speaker Change: Become increasingly interested in is.
Speaker Change: Do post approval studies show us that your product is working out in the field.
Speaker Change: Have.
Some users that have.
Speaker Change: A repository of data and are very.
Speaker Change: Very interested in working with us on this and so I suspect.
Speaker Change: We'll certainly be pulling together some data along those lines over the next year.
Morgan Frank: The question of prospective studies then becomes an issue of, is there something else we might want to be able to pursue and be able to make claims about? We have a couple of things in mind, I'm not sure this is really the place to discuss them, but there are a couple of prospective studies that we think could be managed fairly easily and that might yield some data that's useful. Okay, thank you.
Speaker Change: Question. The prospective study then becomes an issue.
Speaker Change: Is there something else, we might want to be able to pursue.
And be able to make a claim about.
Speaker Change: We have a couple of things in mind I'm not sure. If this is really the place to start but.
Speaker Change: Yes.
Speaker Change: There are a couple of prospective studies that we think could be.
Speaker Change: Bag fairly easily.
Speaker Change: And my yields data that could be really beneficial to us.
Speaker Change: Okay. Thank you.
Unknown Attendee: And it appears that we have no further questions at this time.
And it appears that we have no further questions. At this time I will now turn the program back over to our presenters for any additional or closing remarks.
Morgan Frank: I will now turn the program back over to our presenters for any additional or closing remarks. Great. Well, thank you all for participating in the call. And thanks for the attention. Thanks for the questions. We will speak to you next quarter.
Speaker Change: Okay.
Speaker Change: Great well, thank you all for participating in the call.
Thanks for the attention thanks for the questions and.
Speaker Change: We will be.
Speaker Change: You next quarter.
Unknown Attendee: That concludes today's teleconference. Thank you for your participation. You may now disconnect.
That concludes today's teleconference. Thank you for your participation you may now disconnect.
Speaker Change: [music].
Unknown Attendee: Moral of the Story Facebook.com Twitter.com Facebook.com Southern Illinois Hospital, Je Europe, Ann Arbor, Onshawa, California
Speaker Change: Uh huh.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].