Q4 2024 SANUWAVE Health Inc Earnings Call

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Unknown Attendee: Please stand by, your program is about to begin, if you need audio assistance during today's program, please press star zero.

Speaker Change: Good day, everyone and welcome to today's send you wave earnings call. 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 registered to ask a question at any time by pressing the Star then the one key on your telephone keypad, you may withdraw yourself into the queue by pressing the star.

Unknown Attendee: Good day everyone and welcome to today's SANUWAVE earnings call.

Unknown Attendee: 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 then the 1 key on your telephone keypad. You may withdraw yourself from the queue by pressing the star 2 key.

Speaker Change: Chutki. Please note today's conference is being recorded I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Morgan, Frank <unk>, Chairman and CEO of <unk>.

Unknown Attendee: Please note today's conference is being recorded. I will be standing by if you should need any assistance.

Morgan Frank: It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of SANUWAVE. SANUWAVE Health Good day everyone and welcome to today's conference. It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of SANUWAVE.

Speaker Change: Thanks Margo.

Morgan Frank: Thank you, Margot. Good morning, everyone. Welcome to SANUWAVE's fourth quarter and full year 2024 earnings call. Our Form 10-K was filed with the SEC last night. Our earnings release was issued this morning and our updated presentation was made available on the website in our investor section. You can please refer to that during the presentation.

Speaker Change: Good morning, everyone welcome to <unk> fourth quarter and full year 2024 earnings call.

Speaker Change: Our Form 10-K was filed with the SEC last night our earnings release was issued this morning, and our updated presentation was made available on the website in our investors section. Please refer that during your presentation. Joining me on this call is Peter Sorensen, our CFO and after the presentation.

Peter Sorensen: Joining me on this call is Peter Sorensen, our CFO.

Morgan Frank: And after the presentation, we'll open the call up to Q&A. So let me begin with the obligatory forward-looking statement. This call may contain forward-looking statements such as statements relating to future financial results and 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 control. Description of these risks and uncertainties and other factors that could affect our financial results is included in our SEC filings and actual results may differ materially from those projected in the forward-looking statements.

Speaker Change: I will open the call up to Q&A. So let me begin with the obligatory forward looking statements.

Speaker Change: This call may contain forward looking statements such as statements relating to future financial results and production expectations and plans for future business development activities investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties many of which are beyond the company's ability to control.

Speaker Change: These risks and uncertainties and other factors that could affect our financial results is included in our filings and actual results may differ materially from those projected in the forward looking statements.

Morgan Frank: The company undertakes no obligation to update any forward-looking statements.

Speaker Change: The company undertakes no obligation to update any forward looking statements.

Morgan Frank: Okay, as a reminder today, our discussion will include non-GAAP numbers. Reconciliations between our GAAP and our non-GAAP results can be found in our recently filed 10-K for the year ended December 31st, 2024.

Speaker Change: Okay.

Speaker Change: Binder today, our discussion will include non-GAAP numbers reconciliations between our GAAP and our non-GAAP results can be found in our recently filed 10-K for the year ended December 31st 2024.

Morgan Frank: Okay, with that out of the way, let's get to good stuff. So, last conference call, we spoke about pigs and pythons and how engaging with larger and more sophisticated customers who were capable of purchasing large boluses of products and having profound effect on our quarterly numbers was going to be one of the key characteristics of our revenue stream going forward. Q3, as I think many of you noticed, was definitely a pig quarter. Q4 gives us a chance to look at what a non-lumpy, sort of non-pig quarter looks like as we had no outsized orders in the quarter, nor any customers exceeding 7% of sales.

Speaker Change: Okay with that out of the way, let's get the good stuff. So last conference call, we spoke about pigs, and pythons and how engaging with larger and more sophisticated customers who were capable of purchasing large bolus of products and haven't found effect on.

Speaker Change: On a quarterly numbers was going to be one of the key characteristics of our revenue stream going forward Q3, as I think many of you noticed was.

Speaker Change: Absolutely a pegged quarter Q4 gives us a chance to look at what a non lumpy you serve non pegged at quarter. It looks like as we had no outsized orders in the quarter, nor any customers exceeding 7% of sales. We are pleased to come in around the high end of our quarterly guidance and slightly above our guidance for the full year.

Morgan Frank: We're pleased to have come in around the high end of our quarterly guidance and slightly above our guidance for the full year and have set yet another record revenue for revenue and systems in the quarter. Breaking into eight figures at 10.3 million was a meaningful milestone for the company, and it was the result of strong growth in both our systems and our consumables. We sold 135 Ultimis systems in the quarter, outpacing even the 124 pig quarter from Q3 and far exceeding the 79 that we placed in Q4 of 2023. That's 71% growth in systems sold year over year.

Speaker Change: And if you stay yet another for yet another record revenue for our revenue in systems in the quarter breaking into eight figures at $10 3 million bus meaningful milestone for the company.

Speaker Change: And it was the result of strong growth in both our systems and our consumables, we sold 135 ultimate systems in the quarter outpacing even the 124 pigs quarter from Q3 and far exceeding the 79 that we placed in Q4 of 2023 that 71% growth in systems sold year over year.

Morgan Frank: We ended 2024 with 1,047 systems in the field, up from 647 at the end of 2023. Applicator sales in Q4 were $5.9 million, up 68% from Q4 2023, and up 11% sequentially from Q3. They constituted 58% of our overall revenue in the quarter, in line with our 55% to 65% target for consumable sales, and we're really excited to be performing on model there and with reasonable predictability. Benefits from scale, from new manufacturing agreements, and from price discipline have resulted in increased gross margins that have reached 77.9% in the quarter. This extra margin and our focus on cost controls led to expansion in operating and adjusted EBITDA margins for the quarter, and the company was, the second quarter in a row, cash generative from operations.

Speaker Change: We ended 2024 with 1047 systems in the field up from 647 at the end of 2023 apps.

Speaker Change: Applicator sales in Q4 were $5 9 million up 68% from Q4, 2023 and up 11% sequentially from Q3.

Speaker Change: Hey constituted 58% of our overall revenue in the quarter in line with our 55% to 65% target for consumable sales.

Speaker Change: And we're really excited to be performing on model, there and with reasonable predictability benefits from scale.

Speaker Change: New manufacturing agreements and from price discipline have resulted in <unk>.

Speaker Change: Increased gross margins that are reached 77, 9% in the quarter.

Speaker Change: This extra margin and our focus on cost controls led to expansion in operating and adjusted EBITDA margins for the quarter and the company was second quarter in a row cash generative from operations.

Morgan Frank: Even after making its cash interest payments.

Speaker Change: Even after making its cash interest payments. So in the last several months have really been a pivotal time for <unk>.

Morgan Frank: So the last several months have really been a pivotal time for SANUWAVE. And what has come to be internally referred to as shock and awe Friday last October 18th, represented a major step in simplifying our cap structure by exchanging our convertible notes and warrants, rationalizing our share price through a reverse split, strengthening our balance sheet with a $10.3 million pipe transaction. We paid off Some of our non-compliant debt, we also paid down a $2.8 million revenue factoring facility to zero by the end of Q4. This set the stage for the company to uplist to NASDAQ, which occurred on March 7th of this year, and represents a major step toward our long-cherished goal of becoming a company that can be valued for the quality of its business instead of the complexities of its cash flow.

Speaker Change: And what has come to be internally referred to as shocking off Friday last October 18th.

Speaker Change: Represented a major step in simplifying our cost structure by exchanging our convertible notes and warrants rationalizing our share price through a reverse split strengthening our balance sheet with a $10 $3 million pipe transaction, we paid off.

Speaker Change: Some of our Noncompliant debt, we also paid down a $2.8 million revenue factoring facility to zero by the end of Q4. This set the stage for the company to uplift to NASDAQ, which occurred on March 7th of this year and represents a major step toward our long cherished goal.

Speaker Change: Becoming a company that can be valued for the quality of its business instead of the complexities in its cost structure.

Speaker Change: So now to walk you through some further financials and to help you assess this alleged quality of our business.

Peter Sorensen: Now, to walk you through some further financials and to help you assess this alleged quality of our business, I will hand you over to Peter Sorensen, our CFO. Again, achieving 10% sequential growth from last quarter's previous record, as well as strong year-over-year growth at 47%. In addition to top line expansion, we also saw continued improvement in gross margins both year over year and sequentially, reinforcing the strength of our business. we continue to execute on our goal of rapid profitable growth.

Speaker Change: I'll hand, you over to Peter Sorensen, our CFO.

Peter Sorensen: Again, achieving 10% sequential growth from last quarters previous record as well as strong year over year growth of 47%.

Peter Sorensen: In addition to top line expansion. We also saw continued improvement in gross margins both year over year and sequentially reinforcing the strength of our business model. We continue to execute on our goal of rapid profitable growth with that let's take a closer look at the numbers.

Peter Sorensen: With that, let's take a closer look at the numbers. Revenue for the three months ended December 31, 2024 totaled $10.3 million, an increase of 47% as compared to $7 million for the same period. This growth is in line with their previous guidance of 40 to 50%. Gross margin as a percentage of revenue amounted to 77.9% for the three months ended December 31st, 2024 versus 69.1% for the same period last year. For the three months ended December 31st, 2024, operating income totaled $2.5 million, which is an improvement of $1.5 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and managed spend effect.

Peter Sorensen: Revenue for the three months ended December 31, 2024 totaled $10 $3 million, an increase of 47% as compared to $7 million for the same period of 2023. This growth is in line with this guidance of 40% to 50%.

Peter Sorensen: Gross margin as a percentage of revenue amounted to 77, 9% for the three months ended December 31, 2024 versus 69, 1% for the same period last year.

Peter Sorensen: For the three months ended December 31, 2024, operating income totaled $2 $5 million, which is an improvement of $1 $5 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and manage spend effectively.

Peter Sorensen: Operating expenses for the three months ended December 31st, 2024 amounted to $5.5 million compared to $3.8 million for the same period last year, an increase of $1.7 million. This change was largely driven by an increase in non-cash expense of stock comp. of $1.5 million as we granted stock options to our employees and board of directors for the first time in over six years.

Peter Sorensen: Operating expenses for the three months ended December 31, 2024 amounted to $5 5 million compared to $3 8 million for the same period last year, an increase of $1 $7 million. This change was largely driven by an increase in noncash expense of stock comp.

Peter Sorensen: Of $1 $5 million as we granted stock options to our employees and board of directors for the first time in over six years.

Peter Sorensen: Net loss for the three months ended December 31, 2024 was $12 7 million compared to net income of $18 $2 million for the same period in 2023. The decrease in net income was primarily due to a change in the fair value of derivative liabilities, which was a $23 million gain in 2023 versus a $13 $3 million loss in 2002.

Peter Sorensen: Net loss for the three months ended December 31st, 2024 was $12.7 million compared to net income of $18.2 million for the same period in 2023. The decrease in net income was primarily due to a change in the fair value of derivatives. which was a $20.3 million gain in 2023 versus a $13.3 million loss in 2020. Most of the derivative tail wagging should be behind us in future quarters as part of the note and Warren exchange that Morgan alluded to that we completed in Q4 2020. EBITDA for the three months ended December 31st, 2024 was negative $9.7 million.

Peter Sorensen: For most of the derivative airway can should be behind us in future quarters as part of the notes and warrant exchange that Morgan alluded to that we completed in Q4 of 2024.

Peter Sorensen: EBITDA for the three months ended December 31, 2024 was negative $9 7 million. However, adjusted EBITDA for the three months ended December 31, 2024 was a positive $3 7 million versus zero point $7 million for the same period last year, an improvement of $3 million year over year.

Peter Sorensen: However, adjusted EBITDA for the three months ended December 31st, 2024 was a positive $3.7 million versus $0.7 million for the same period last year, an improvement of $3 million.

Peter Sorensen: We'd like to take a moment to walk through the bridge from Evita to Adjusted Evita this quarter, particularly to highlight several non-cash infrequent items related to cap table restructuring and cleanup activities completed in October. First, consistent with our historical practice, we adjusted EBITDA for the non-cash change in fair value of derivative liabilities, primarily related to the quarterly value. This adjustment reflects the impact of warrants that were exchanged for common stock in October. Additionally, we adjusted for a non-cash gain recognized from the conversion of principal and interest associated with our convertible notes, which were also exchanged for common stock.

Peter Sorensen: We'd like to take a moment to walk through the bridge from EBITDA to adjusted EBITDA. This quarter particular to highlight several noncash infrequent items related to cap table restructuring and cleanup activities completed in October 2024.

Peter Sorensen: First consistent with our historical practice, we adjusted EBITDA for the noncash change in fair value of derivative liabilities, primarily related to the quarterly valuation of warrants. This adjustment reflects the impact of warrants that were exchanged for common stock in October.

Peter Sorensen: We adjusted for a noncash gain recognized from the conversion of principal and interest associated with our convertible notes, which were also exchanged for common stock.

Peter Sorensen: Again, resulted from our stock price being below the no conversion price at the time of exchange, $12 per share versus the $15. We further adjusted EBITDA for legal settlement and severance expense totaling $156,000 during the fourth quarter. And finally, we adjusted EBITDA to exclude stock-based compensation, which is a non-cash expense. This adjustment was partially offset by the release of certain historical accruals following our Board of Directors' decision to remove their previously accrued cash compensation. Going forward, the Board of Directors compensation will be paid in stock options as opposed to cash. As previously discussed with our operating expenses, we are pleased to be able to grant stock options to our employees and board of directors in Q4 for the first time in over 60 years.

Peter Sorensen: Again resulted from our stock price being below the note conversion price at the time of exchange $12 per share versus a 15 dollar issuance price.

Peter Sorensen: We further adjusted EBITDA for a legal settlement and severance expense totaling $156000 during the fourth quarter and finally, we adjusted EBITDA to exclude stock based compensation, which is a noncash expense. This adjustment was partially offset by the release of certain historical accruals. Following our board of directors decision to remove their previously accrued cash compensation going forward the border.

Peter Sorensen: Vectors compensation will be paid in stock options as opposed to cash.

Peter Sorensen: Previously discussed with our operating expenses, we are pleased to be able to grant stock options to our employees and board of directors in Q4 for the first time in over six years.

Peter Sorensen: A detailed reconciliation and further breakdown of adjusted EBITDA can be found in our recently filed 10-K and accompanying press release. We remain focused on executing our financial strategy, driving operational profitability, and maintaining discipline management of operations. Total current assets amounted to $18.4 million as of December 31st, 2024, versus $9.8 million as of December 31st, 2023. Cash totaled $10.2 million as of December 31st, 2024.

Peter Sorensen: A detailed reconciliation and further break down of adjusted EBITDA can be found in our recently filed 10-K and accompanying press release.

Peter Sorensen: We remain focused on executing our financial strategy driving operational profitability and maintaining disciplined management of operating expenses totaled.

Peter Sorensen: Total current assets amounted to $18 $4 million as of December 31, 2024 versus $9 $8 million as of December 31, 2023 cash totaled $10 $2 million as of December 31, 2024.

Peter Sorensen: We appreciate the continuous support of SANUWAVE through this transformative past year and look forward to building on this momentum in 2025.

Martin: We appreciate the continued support of staying away through this transformative past year and look forward to building on this momentum in 2025 with that I will turn the call back over to Martin.

Morgan Frank: With that, I'll turn the call back over to Morgan.

Martin: Thanks Peter.

Morgan Frank: Thanks, Peter. So moving on to guidance, as you likely saw in our press release, we're guiding to 8.4 to 9 million in revenue for Q1, which would represent 45 to 55% growth from Q1 of 2024. You know, Q1 is always a somewhat seasonally slower period for medical device, including both systems and consumables as both budgets reset and so the customer deductible. You know, we're expecting a slightly smaller drop on a percentage basis versus Q4 than the drop that occurred in Q1 of 2024 as compared to Q4 of 2023. But alas, Q1 seasonality remains a fact of life in Lifesci.

Martin: Moving on to guidance.

Martin: Like we saw in our press release, we're guiding to $8.4 million to $9 million in revenue for Q1.

Martin: Which would represent 45% to 55% growth from Q1 of 2020 for Q1 is always a somewhat seasonally slower period for medical device, including both systems and consumables as both budgets reset and set of customer deductibles.

Martin: We're expecting a slightly smaller drop on a percentage basis versus Q4, then the drop that occurred in Q1 of 2024 as compared to Q4 of 2023.

Martin: But alas Q1 seasonality remains a fact of life and lifestyle. So for the year, we're initiating guidance of.

Morgan Frank: So for the year, we're initiating guidance of 48 to 50 million in revenues representing a 50% year-on-year growth rate, plus or minus 3%. We feel good about our opportunity, about our sales funnel, and about our sales and productions teams and their ability to generate and meet demand.

Martin: 48 to 50 million in revenues, representing a 50% year on year growth rate plus or minus 3%.

We feel good about our opportunity about our sales funnel and about our sales and production teams and their ability to generate and meet demand.

Morgan Frank: I mean, it's sort of wild to me that it's already been 22 months for me here as CEO. I guess time flies when you're having fun, and it really does seem like we're getting the good part here. I just want to reemphasize that none of this just happens. Companies exist downstream of their culture, and I could not be more proud or grateful to the team at SANUWAVE. And as ever, our highest reward for good work is more work, so we keep at it. And we look forward to speaking to you again soon about our further progress.

Martin: It's sort of a while to me that's already been.

Martin: 22 months for me here as CEO, I guess time flies when you're having fun and it really does seem like we're getting a good part here.

Martin: Just want to reemphasize that none of this just happens.

Martin: <unk> exists downstream, if their culture and I could not be more proud and grateful to the team at <unk>.

Martin: And as ever our highest reward for good work, it's more work so a where are you.

Martin: Keep at it and we look forward to speaking to you again soon about our further progress and with that.

Unknown Attendee: And with that, let's open the call up to questions. Margot, if you could begin to queue them up. Thank you very much. At this time, if you'd like to ask a question, please press the star 1 on your telephone keypad. You may move yourself from the queue at any time by pressing star 2. And once again, that is star 1 for a question.

Martin: Let's open the call up to questions.

Martin: Margaret you could begin to queue them up thank.

Thank you very much at this time, if you'd like to ask a question. Please press the star one on your telephone keypad, you may move yourself from the queue at any time by pressing star two and once again that is star one for a question. We will take our first question from Chris <unk> with <unk> capital. Please go ahead.

Unknown Attendee: We'll take our first question from Chris Flam with Tall Pines Capital. Please go ahead. Thanks, guys. Great year. I noticed you hired a new salesman.

Martin: Okay.

Speaker Change: Thanks, guys great year.

Chris: I noticed you hired hey, Chris Good morning sales in.

Morgan Frank: Good morning. I noticed you guys hired a new head of sales back in in January. Can you walk us through what's changing versus last year and how it's going so far? Yeah, good question. So. I mean, we started 2024 with, you know, two salespeople. We ended the year with nine.

Speaker Change: Good morning I.

Speaker Change: I noticed you guys hired a new head of sales back in in January can you walk us through what's changing versus last year and how it's going so far.

Speaker Change: Sure Yeah. Good question so.

Speaker Change: I mean, we started 2024.

Speaker Change: If you two salespeople are we ended the year with nine.

Morgan Frank: and we will likely end Q3 also with about nine, but three of them will be different than the nine that we ended Q4 with. Ultimately, sort of the change in strategy is reflective of kind of the change in the perception of the best way to sell and market this product. Like we have moved to a deeper, more sort of consultative sale where we're going past sort of the easy economics of engaging with customers and trying to find ways to build long-term partnerships where we're built into their treatment plans, their therapy plans, even their patient enrollment guidelines.

Speaker Change: And we will likely end Q3 also with about nine but three of them will be different than the nine that we ended Q4 with.

Speaker Change: Ultimately sort of the change in strategy is reflective of kind of the or changing the perception of the best weight salad market. This product, but we have moved to a to a deeper more sort of consultative sale, where we're going.

Speaker Change: <unk> sort of easy economics of engaging with customers and trying to find ways to build long term partnerships, where we are built to you know were built in to their treatment plans their therapy plans, even their patient enrollment guidelines and so mistakes.

Morgan Frank: And so this takes a different kind of sale. It tends to come more from the top down. We're starting to engage with, because we've discussed some substantially larger customers. And so we've changed the sales force and the head of sales.

Speaker Change: It just takes a different kind of sale it tends to come more from the top down you were starting to engage with because we've discussed some substantially larger customers and so we've we've changed the sales force and the sale and the the head of sales.

Morgan Frank: As a way to reflect that, we're really excited about hiring Tim Wern. He is, I'm not sure if you're aware, he's the, so Tim was the number two for our board member, Jeff Blizzard, when Jeff was the head of sales at Obviomed. And so, these are sort of the two guys that took that company from 15 million to 400 million.

Speaker Change: As a way to reflect that we're really excited about hiring Tim worn he is I'm not sure if you're aware he's the so Tim was the number two for our board member Jeff Blizzard when Jeff was the head of sales at <unk>.

Speaker Change: And so these are these just sort of the two guys that took that company from 15 million to $400 million.

Unknown Attendee: And so, he came highly recommended and we're really excited to get the band back together again with those two. Great, thanks.

Speaker Change: And so she came highly recommended and where we're really excited to get the band back together again with those two.

Speaker Change: Great. Thanks.

Speaker Change: And our next question comes from Carl Byrnes with Northland Capital markets. Please go ahead.

Unknown Attendee: And our next question comes from Carl Burns with Northland Capital Markets. Please go ahead. Thanks for the question and congratulations on the quarter and the progress. You noted in your prepared comments that no customer represented more than 7% of revenue.

Speaker Change: Thanks for the question and congratulations on the quarter and the progress you know what.

Charles: Charles Good morning.

Speaker Change: Hey, Thanks, good morning to you as well.

Speaker Change: What is it in your prepared comments that no customer represented more than 7% of revenue and I'm wondering with the 135 Ultra mist placements are installed in the fourth quarter, how you might characterize them. These placements with respect to large multi order entry enterprise type accounts or small kind of 112.

Morgan Frank: And I'm wondering with the 135 Ultramist placements or installs in the fourth quarter, how you might characterize these placements with respect to large multi-order enterprise type accounts or small 1-2 system order accounts. And the same with respect to your outlook for 2025. And this is obviously as you move to a larger customer focus. So it's. So, it's going to be a mix. And I think, you know, as we sort of think about planning for our base business, you know, we're assuming sort of an ongoing pace of smaller sales of ongoing uptake from our existing customers.

Speaker Change: System order counts and the same with respect to your outlook for 2025 and this is obviously as you move to <unk>.

Speaker Change: Larger customer focus thanks.

Speaker Change: Okay.

Speaker Change: No.

Speaker Change: The answer to that question gets a little bit complex.

Speaker Change: Yeah, we certainly sold a number of ones and twos in the quarter.

Speaker Change: We were excited to see a substantial number of new customers in the quarter. We're also excited to see some of our existing customers growing their businesses substantially.

Speaker Change: We had one significant size customer in the quarter come back in order I believe almost 20 systems.

Speaker Change: So.

Speaker Change: It's gonna be a mix and I think as we sort of think about planning for our base business, we're assuming sort of an ongoing pace of smaller sales of ongoing uptake from our existing customers and we're sort of looking at you know the really big potential sales that might be out there.

Morgan Frank: And we're sort of looking at, you know, the really big potential sales that might be out there as upside. You know, it's still early for us in terms of getting the with exactly how some of these bigger customers are going to want to roll out, whether they want to, whether they want to do things all at once, whether they want to do things on a more measured pace. And so, you know, I think it's difficult to give too much guidance about that. But, you know, what we are gearing up for internally is to be able to take yes for an answer in a situation like that, where We're trying to build up our inventory of systems quite substantially.

Speaker Change: As upside.

Speaker Change: Still it's still early for us in terms of getting to grips with exactly how some of these bigger customers are going to want to roll out whether they want to whether they want to do things all at once whether they want to do things on a more on a more measured pace and so.

Speaker Change: I think it's difficult to give too much guidance about that but.

Speaker Change: What we are gearing up for internally is to be able to take yes for an answer in a situation like that where.

Speaker Change: We're trying to build or we're trying to build up our inventory of systems quite substantially.

Morgan Frank: We're currently manufacturing Ultimis systems at a pace of about 25 a week, and we're working to be able to double that on 60 days of notice. That's sort of the challenge I've given to the ops team is if we need to double that, let's be able to do it in 60 days, and I think we're starting to get close to being ready to do that. or at least able to do that is probably a better way to describe that. Great, thanks. That's very helpful. And, and, you know, with respect to larger customers, I mean, with with You know, essentially, you know, 20, 20 plus placement orders.

Speaker Change: We're currently manufacturing ultra mist systems at a pace of about 25 a week.

Speaker Change: And we'll we're working we're working to be able to double that on 60 on 60 days of notice that's sort of the challenge I've given to the ops team is we need to if we need to double that let's be able to do it in 60 days and I think we're starting to get close to being ready to do that.

Speaker Change: Or at least stable and you're able to do that this is probably a better way to describe that.

Speaker Change: Great. Thanks, that's very helpful and you know with respect to the larger customers I mean with.

Speaker Change: With.

Speaker Change: Actually you know 20.

Speaker Change: 20, plus placement orders is there any way that you can manage that so there is not a lumpy scenarios.

Morgan Frank: Is there any way that you can manage that? So there's not, you know, lumpy scenarios in any particular quarter. Well, I mean, I'm not I guess I'm not entirely sure what you mean by manage it just from a standpoint of, you know, if somebody wants to put getting systems in the field is obviously our goal and systems in the field generate consumables. And so, you know, from our standpoint, we're always sort of excited to do that earlier. and you know to get to get more patients under care. Got it. That totally makes sense. Thanks so much and congrats again.

Speaker Change: Any particular quarter.

Speaker Change: Well I mean, I'm not I guess I'm not entirely sure what you mean by it manage it just from a standpoint of.

Speaker Change: If somebody wants to put getting systems in the field is obviously, our goal and systems in the field generate consumables and so from our standpoint.

Speaker Change: We're always sort of excited to do that earlier.

Speaker Change: And to get to get more patients under care.

Speaker Change: So I think it is going to continue to be a.

Speaker Change: When we when we give guidance I think we sort of like to talk about what we think the base rate of the business likely is.

Speaker Change: And this is what we plan to you know you don't want to build your business on the assumption that there's going to be a that's going to be a pig through the Python every quarter.

Speaker Change: But I think when they come we want to be able to move with them quite rapidly.

Speaker Change: Got it that totally makes sense. Thanks, so much and congrats again.

Operator: Thanks, Thank you and we'll next go to Ian Cassel with IFC M. Please go ahead.

Unknown Attendee: Thank you.

Unknown Attendee: And we'll next go to Ian Castle with IFCM. Please go ahead. Hey, Ian. Morning.

Martin: Hi, Martin Congrats Hey, Ian good morning.

Morgan Frank: I was wondering if you could provide some color on advanced Library Studies, and also maybe perhaps new studies to potentially open up. Uh, yeah, sure. It's good. That's a good question.

Ian Cassel: Thanks, I was wondering if you could provide some color on advancing additional confirmatory studies studies and also maybe perhaps new studies to potentially open up more use cases for ultra mist.

Speaker Change: Yes sure. It's good it's a good question.

Morgan Frank: I guess we're looking at it a couple of ways, you know, obviously, with the company now on sort of sounder financial footing, you know, it's great to be able to start to think about these things. Again, we've started some more concerted outreach with I think we'll, a couple of our customers have some very significant repositories of data. And so I think a couple of the, at least one or two will likely have. Papers, posters at SAWC this year, one I know of that has an interest that actually has an interesting new application of the product.

Speaker Change: I guess, we're looking at it a couple of ways.

Speaker Change: Obviously with the company now on sort of sounder financial footing, it's great to be able to start to think about these things again.

Speaker Change: We've started some more concerted outreach with.

Speaker Change: Some of our Kols with some of the researchers who have done some studies in the past I think will a couple of our customers have some very significant repository of data.

Speaker Change: And so I think a couple of at least one or two will likely have.

Speaker Change: <unk>.

Speaker Change: Papers posters at CWC. This year, one I know of that has an interest that actually is an interesting new.

Speaker Change: Application of the product I don't want to get into too much detail and steal their thunder, but we're excited about that the as we go back and look but those are those obviously would tend to be retrospective data analyses I think as we go forward and say okay. What.

Morgan Frank: I don't want to get into too much detail and steal their thunder, but we're excited about that.

Morgan Frank: The as we go back and look, you know, but those those obviously would tend to be retrospective data analyses. I think as we go forward and say, okay, what You know, what prospective studies would we want to do going forward? You know, there are a number that have been interesting to us, particularly several that were done in the past, showed really promising results, but that were simply underpowered. We had some study, we had a study in, it's up on our website, we had a study in 2015 on the split thickness donor sites that result from skin grafts, and despite only having 27 people in the study, it hit statistical significance on, you know, time to re-epithelialization, first time to no drainage, and very nearly hit StatSig on, Wound recurrence at six weeks and you know that's a big deal because these split thickness wounds are they're really painful and they have a nasty tendency to come back.

Speaker Change: What prospective studies.

Speaker Change: Would we want to do going forward there.

Speaker Change: There are a number that have been interesting to us, particularly several that were done in the past showed really promising results, but that were simply underpowered.

Speaker Change: Had we had we had some study we had a study in <unk>, it's up on our web site study in 2015 on the split thickness donor sites that result from skin grafts.

Speaker Change: Despite only having 27 people in the study.

Speaker Change: Hit statistical significance on you know time to Reepithelialization time to time first time to new drainage.

Speaker Change: I'm very nearly hit stat Sig on.

Speaker Change:

Speaker Change: Wound recurrence at six weeks and that's a big deal because the split thickness wounds are they're really painful and they have a nasty tendency to come back.

Morgan Frank: You know the recurrence rate at six weeks under standard of care was 45% and the recurrence rate at six weeks under Ultramyst was 8% and so you know to only kind of hit a 06 p value there was obviously it's disappointing but I think it really was just a fun. I mean if we can replicate that with a larger study size that is if that's sufficiently powered you know that seems like a really interesting application and I think that you know there are a number of other places we could take that sort of that sort of idea.

Speaker Change: The recurrence rate at six weeks understanding of care was 45% and the recurrence rate at six week kind of ultra mist was 8%.

Speaker Change: And so you know to only kind of hit a six P value. There was obviously, it's disappointing, but I think it really was just a farm if we can replicate that with a larger study size that is.

Speaker Change: Sufficiently powered.

Speaker Change: That seems like a really interesting application and I think that there are.

Speaker Change: There are a number of other places we could take that sort of that sort of idea.

Morgan Frank: Recurrence rates are a big cost. They're a big fear in things like diabetic foot ulcers like there are lots of places where it stands to reason that we could have a useful effect on recurrence rates. I think getting into the clinic and trying to validate it could get pretty interesting.

Speaker Change: Where current rates are a big cost there, they're a big fear in things like diabetic foot ulcers like there are lots of places where it stands to reason that we could have a useful effect on recurrence rates I think getting into the clinic and trying to validate it could get pretty interesting. So.

Morgan Frank: So you know stay tuned on that. I think over the next over the next quarter or two we should start to get we should start to get some concrete plans in motion. It's great to hear. Thanks for the call.

Speaker Change: Ah you stay tuned on that I think over the next over the next quarter or two we should start to get.

Speaker Change: We should start to get some concrete plans in motion.

Speaker Change: Great to hear thanks for the color.

Speaker Change: Thank you and at this time, we have no further questions I'd like to turn the call back over to Morgan Frank for any final or closing remarks.

Unknown Attendee: Thank you and at this time we have no further questions.

Morgan Frank: I'd like to turn the call back over to Morgan Frank for any final or closing remarks. Well, thank you guys. I appreciate everyone attending this morning and have a great Friday.

Speaker Change: Yeah.

Morgan Frank: Well. Thank you guys I appreciate everyone attending this morning and have a great Friday.

Speaker Change: Yeah.

Unknown Attendee: Thank you, ladies and gentlemen, that does conclude today's program. Thank you for your participation. You may disconnect at any time.

Speaker Change: Thank you and ladies and gentlemen that does conclude today's program. Thank you for your participation you may disconnect at any time.

Speaker Change: Okay.

Speaker Change: Uh huh.

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Speaker Change: Okay.

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Speaker Change: [music].

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Unknown Attendee: EEEEEEEEEEEEEbbebbbbbbbbb

Speaker Change: Okay.

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