Q1 2025 SenesTech Inc Earnings Call
Good afternoon, and welcome to the Sonesta Tech first quarter fiscal year, 'twenty 25 financial results Conference call.
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Speaker Change: I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.
Speaker Change: Alright, thanks, so much and thank you all for joining us today to discuss the Nasdaq's first quarter 2025 financial results for the period ended March 31, 2025 with US on the call today are Joe front, the company's Chief Executive Officer, and Tom Chesterman, The company's Chief Financial Officer, as the operator indicated that the.
Speaker Change: Today's prepared remarks, we will open the call for a question and answer session.
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Speaker Change: Before we begin with prepared remarks, we submit for the record the following statement.
Speaker Change: Statements made by the management team of <unk>. During the course of this conference call may contain forward looking statements within the meaning of section 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act 1934, as amended and such forward looking statements are made pursuant to the safe Harbor provisions of.
Speaker Change: or generally preceded by words such as May, Future, Plan or Plan, Will or Should, expected into spates that draft eventually or projected.
Speaker Change: Listeners are caution that such statements are subject to a multitude of risks and uncertainties.
Speaker Change: They could cause future circumstance events or results to differ materially from those project in the forward-looking statements.
Speaker Change: including the risk that actual results may differ materially from those projected in the forward-looking statements, as the results of various factors and other risks identified in the company's filings with the Security and Exchange Commission.
Speaker Change: All for looking statements contained during this conference call speak only of the date which they are made and are based on management's assumptions and estimates as of such date.
Speaker Change: The company does not undertake any obligation to publicly update any forward-looking statements, whether as the result of the receipt of new information, the occurrence of future events or otherwise. All right, with that said, let me turn the call over to Joel Fruendt, Chief Executive Officer Joel, please proceed.
Joel Fruendt: Thank you, Robert, and good afternoon, everyone. Thank you all for joining us today for our first quarter 2025 conference call.
Joel Fruendt: As you all can see from the press release, we continue to make remarkable strides transitioning and expanding customers towards our high margin evolved product line, including both our red and most products.
Joel Fruendt: During the quarter evolved revenue grew 40% compared to the year ago period driven by success in our e-commerce platforms, improved adoption by pest management professionals, and deployments in major U.S. cities.
Joel Fruendt: Perhaps more important, though, is that gross margins increased to nearly 65% during Q1 compared to just 33% last year, resulting in gross profit dollars increasing by an impressive 132%.
Joel Fruendt: Evolve continues to change the game for Senestech and evolve this change in the game in major US cities.
Joel Fruendt: as we see deployments wrapping significantly across the United States. After the quarter closed we announced deployment of Evolve Red in the Wicker Park Bucktown Special Service area of Chicago.
Joel Fruendt: The New Deployment in Wicker Park has crew's installing bait boxes with evolve rats and alleys behind several major thoroughfares in the Chicago neighborhoods.
Joel Fruendt: As many of you have seen, the deployment has garnered extensive media coverage and we actually have a dedicated informational website for the residents and business owners to see where deployments have occurred.
Joel Fruendt: Visit our website at www.evallofrotonbirthcontrol.com, backslash, wicker park, to see our interactive map.
Joel Fruendt: Also, in April , we began deployment in New York City following the approval in September of last year by the City Council to launch a rat contraceptive pilot program. Our team was in New York two weeks ago supporting the initial deployment, and it is going very well.
Joel Fruendt: Beyond New York and Chicago, we have also received orders from the City of Baltimore, Los Angeles County, many in the Boston area in Walker Show, Wisconsin.
Joel Fruendt: Expanded deployments in these municipalities should be key contributors to growth for us going forward.
Thank you.
Joel Fruendt: Finally, a major development, our pest control partner Pestech just started a large deployment in San Francisco. Our team was out there recently to help with the deployment, and it is a substantial opportunity.
Joel Fruendt: We are just now turning a quarter on these large municipal opportunities and it's very exciting news for us.
Joel Fruendt: Beyond the municipal deployments, we also continue to gain significant traction through our e-commerce platforms.
Joel Fruendt: In just the past 12 months, we have expanded our e-commerce presence from selling exclusively on our Senestech family of websites to offer an Evolve on Amazon.com, Walmart.com, go to www.entractorsplay.com
Joel Fruendt: During Q1, e-commerce, German sales have increased by more than 107% due to these added locations.
Joel Fruendt: Enhanced website functionality on our own websites as well as targeted marketing strategies.
Joel Fruendt: Evolves improved form factor, economical price point, proven efficacy, and lengthy shelf life have allowed for this to be much more conducive to e-commerce compared to our historical country-pest product line.
Joel Fruendt: As our Presidents continues to expand, we will see e-commerce continues substantially grow moving forward. With strong growth and municipal deployments,
Joel Fruendt: R.E. Commerce and International Markets during Q1, which we expect to continue in the future. Another key driver we expect to contribute to growth later this year is our international operations.
Joel Fruendt: We believe we are tracking for a strong second half of the year with Shipments Plan for a number of new countries.
Joel Fruendt: To date, we have signed agreements for distribution of revolving 12 separate countries and territories, having just signed exclusive agreements in Indonesia and the Philippines.
Joel Fruendt: Approval and commercial product shipments have occurred in Hong Kong, the United Arab Emirates.
Joel Fruendt: The Maldives and the Netherlands. We expect reorders for these in the coming quarters as well.
Joel Fruendt: Additionally, we have deployments expected for later this year in key markets including Australia and New Zealand following expected regulatory approvals there.
Joel Fruendt: With strong progress, while strong progress has been made in municipal e-commerce and internationally, one area where we're not gaining as much progress as quickly as I hope is brick and mortar retail. The process is link feed.
Joel Fruendt: To achieve shelf space, and often, such as the case with Walmart, they want to see how your product performs online before committing to placing it in the store. So growth in e-commerce can actually be the proof point for brick and mortar retails in some ways.
Joel Fruendt: Progress is being made though. With Ace Hardware, we began selling to individual stores. Recently though, we have been getting orders from their regional service centers, also known as distribution centers.
Joel Fruendt: Intended for sale in an eighth network. We are also getting orders from retailers' warehouses for use in the warehouses themselves.
Joel Fruendt: Let me come back to the topic of gross margins and gross profit dollars.
Joel Fruendt: As I mentioned at the beginning, our business has been truly transformed by Eval. Evalb inherently carries gross margins higher than contrapests, which has dramatically increased our blended margins to a new record of 65% during the current quarter.
Joel Fruendt: with a focus on achieving profitability. This is a key component.
Joel Fruendt: and beyond the gross margin and profit improvements we continue to improve our overall operational efficiencies.
Joel Fruendt: As we announced in March, we have implemented additional initiatives designed to further reduce expenses by $2 million on an annualized basis.
Joel Fruendt: As the initiatives were implemented in late March, the financial improvement should be more evident during the quarters to come.
Joel Fruendt: These new savings, coupled with the higher gross margins from Revolve, are anticipated to reduce the revenue threshold for cash flow breakeven to $7 million annually compared to $12 million historically.
Joel Fruendt: Quick differently, we need revenue just over $1.5 million quarterly to reach break even. A few large municipal or international orders coupled with the continued growth we have seen in e-commerce certainly puts that within our site.
Joel Fruendt: With that, let me turn the call over to Tom to expand on the front, to find answers in more detail. I will then wrap up with a few comments before turning it over to questions. Tom?
Tom Chesterman: Thank you, Joel. Let me take a moment to expand on the numbers in the press release and a few of the points Joel mentioned in his earlier remarks. On the revenue line, total revenue for the first quarter was $485,000, which was an increase of 17% from Q1 of last year.
Tom Chesterman: Ricky and down further, the ball revenue increased 40% and accounted for 79% of our first quarter sales.
Tom Chesterman: Contropest, which we have de-emphasized in recent quarters as we focus on our higher margin of all product, decreased to approximately 40% and accounted for 21% of our Q1 sales.
Tom Chesterman: By the way, we do not expect contrapass to go away. There are still a number of loyal contrapass customers, and there are still a couple of states where a law is not yet approved.
Tom Chesterman: Looking at it from a vertical breakdown, E-commerce is clearly our largest contributor coming in at 61% of our overall Q1 sales. Overall, E-commerce was up 107% compared to Q1 last year. [inaudible]
Tom Chesterman: Amazon is going well and is the predominant e-commerce channel right now.
Tom Chesterman: Municipal sales, while still a relatively small percentage of total sales, saw a 7-fold increase from the year ago quarter. As Joel touched on with new deployments in Chicago and New York and others in Q2, we think we can continue to grow this market vertical.
Tom Chesterman: We did not recognize any international sales during Q1 as we await follow-on orders from a few markets which ordered at the end of last year.
Tom Chesterman: As a reference point, we had more than $50,000 in international shipments in Q4.
Tom Chesterman: And as Joel mentioned, we have a few potential significant orders pending regulatory approval, which we expect will be key drivers for us later this year.
Tom Chesterman: Other contributors during due one were in the areas of agribusiness, commercial, test management professionals, zoos and sanctuaries, and a small amount for brick and mortar retail locations so far.
Tom Chesterman: Turning gross margin in gross profits as a whole, for the first quarter, gross margins were 64.5% compared to 32.5% in Q1 of last year.
Tom Chesterman: Looking at it sequentially, Gross margins also improved compared to 60.9% in Q1 of last year. So you can see we are continually improving our Gross margins.
Tom Chesterman: Looking at it from a gross profit dollar perspective, gross profit was $313,000 compared to $135,000 in last year's Q1, up 132 percent.
Tom Chesterman: It also was up sequentially. The driver here is evolved, which has higher margins than
Tom Chesterman: For the mention last quarter, we're also increasing production capacity to meet future demand. We have now officially moved into our newer larger facility in the Phoenix area that will allow us to meet the next five years of increasing demand without dramatically increasing our facility costs.
Tom Chesterman: On the OPEC line, operating expenses were basically flat from a year ago quarter, but up slightly from Q4. As we announced in March, we implemented a new series of optimization initiatives to further reduce expenses, which included severance costs for those individuals whose decisions were eliminated.
Tom Chesterman: These initiatives included the pausing of new product development to focus exclusively on the commercialization and growth of the valve wrap and a valve mouse.
Tom Chesterman: Bringing marketing, regulatory and intellectual property functions in-house to reduce reliance on external consultants.
Tom Chesterman: and optimizing our direct sales efforts, shifting to a focus on high-value customer acquisition in key customer segments and commission only models.
Tom Chesterman: The benefit of these initiatives should be evident in the quarters to come on the operating expense line.
Tom Chesterman: All told, these sayings, coupled with the higher gross margins and operating efficiencies gained on the manufacturing, are expected to move a cashflow breakeven level to a little over $1.5 million per quarter.
Tom Chesterman: As we continue to move closer to that inflection point, that many companies and investors are looking for.
Tom Chesterman: There's still execution work to be done, but the pathway is clear.
Tom Chesterman: On the balance sheet, we completed a strategic financing during Q1 through a warrant repricing at the market that raised a million dollars.
Tom Chesterman: The warrant inducement also included the issuance of $490 of short-term warrants.
Tom Chesterman: We had great success with once historically raising capital with less dilution than fully marketed public offerings.
priced out the money instead of at a discount.
Tom Chesterman: We're also able to bring an approximate $1 million through the use of our ATM.
Tom Chesterman: We continue to have capacity under the ATM and we just followed a renewal S3 last week to covered as is required periodically.
with the true financial results.
Tom Chesterman: Coupled with the short term warrants as a potential source of cash, along with the additional capacity in our ATM, we believe we will not have to go back to the markets with a larger underwritten topic offering in the near future.
Let me turn the call back over to Joel. Go.
Thanks, Tom.
Tom Chesterman: So just a couple of closing comments. We have now completed nine consecutive full quarters of year-over-year revenue growth since I took over as CEO in 2022.
Tom Chesterman: The launch of Rebalt has changed the game for us not only from a revenue perspective, but also from a gross proper perspective as you can see.
Tom Chesterman: The gross profit during the first quarter was the highest in the company's history, which when coupled with operating optimization initiatives we touched on, puts us on a pathway to achieve our goal of profitability.
Tom Chesterman: Beyond the numbers, as they take a step back, I see more clearly today than at any point since I took over the opportunity we have to revolutionize the way the pest control industry has dealt with robins.
Tom Chesterman: and the municipalities are increasingly understanding the need as you can see from deployments in some of the largest cities.
Tom Chesterman: in the country. And to be clear, these are very small areas being deployed at the moment. With potential expansion of these across entire cities, this could lead to millions of dollars in opportunity for Senestech going forward.
Tom Chesterman: The opportunity doesn't stop in municipal applications, agriculture is a huge opportunity, both Semestic and International.
Tom Chesterman: Zoos and other animal sanctuaries where you cannot easily deploy poisons are a huge opportunity for us.
Tom Chesterman: Residential applications, especially in large apartment complexes, is a huge opportunity for us.
Tom Chesterman: Commercial buildings and warehouses are also a huge opportunity for us.
and we are just beginning to penetrate these areas.
Tom Chesterman: I believe we will gain significant traction in each of these areas shortly.
Tom Chesterman: To get to the long term, we need to execute in the near term and that is our focus.
Be effective, you are efficient.
Tom Chesterman: I am pleased with the recent financial results and activities accomplished to expand adoption moving forward.
Tom Chesterman: As always, I thank you all for your interest in Senestech.
Tom Chesterman: And with that, I'm happy to open the call to questions. Operator
Tom Chesterman: We will now begin the question and answer session. To ask a question, you may press star than one on your telephone keypad.
Tom Chesterman: To a draw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
Speaker Change: Showing those questions, this concludes our question and answer session. I would like to turn the conference back over to Joel Fruendt for any closing remarks.
Joel Fruendt: Thank you, and thank you all for being here. We appreciate your support.
Joel Fruendt: We are an exciting time as our company is now moving into marketplaces that are substantially large that are showing a great acceptance for our evolved product line and we look forward to success in the near term and the long term. Thank you.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: [music].