Q1 2025 SANUWAVE Health Inc Earnings Call
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Speaker Change: Good day, everyone and welcome to today's send your 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.
Speaker Change: Please note today's call will be recorded and I will be standing by should you need any assistance.
Speaker Change: It is now my pleasure to turn the conference over to Chairman and CEO of see Anyways Morgan Frank. Please go ahead.
Speaker Change: Thank you welcome everyone to Sandy waves first quarter 2025 earnings call as many of you probably noticed the Form 10-Q as filed with the SEC last night.
Speaker Change: And our earnings release was issued this morning, along with an updated presentation, which was made available on our website at the investors section you can please refer to that during this presentation.
Speaker Change: It really is useful promise.
Speaker Change: Okay. So join me on the call today.
Speaker Change: Peter Sorensen, our CFO and after the presentation, we will open the call up to Q&A.
Speaker Change: Let me begin with the forward looking statements and other disclosures. 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 guarantees of future performance and involve risks and uncertainties many of which are beyond.
Speaker Change: The company's ability to control it.
Speaker Change: These risks and uncertainties and other factors that could affect our financial results is included in our filings actual results may differ materially from those projected in forward looking statements. The company undertakes no obligation to update any forward looking statement certain percentage as discussed in this call are calculated from the underlying a whole dollar amounts and therefore.
Speaker Change: Not be recalculate from the rounded numbers used for disclosure purposes.
Speaker Change: 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 10-Q for the period ended March 31 2025.
Speaker Change: Okay, Thus prefaced, let's get the interesting part so.
Speaker Change: Q1 was a strong start to the year coming in ahead of expectations and obviously, we're very pleased to put up a 61% year on year growth comp.
Speaker Change: In a quarter in which we hired a new head of sales and worked through some associated sales force restructuring.
Speaker Change: Placing 98, new ultimate systems in Q1 represented a 128% increase from system sales at 43 in Q1 of last year and we did this without any unusually large orders in the quarter and with no customer representing more than fixed as a percentage of our overall revenue.
Speaker Change: I mean, frankly, the quarter came in a bit stronger than we expected but yeah.
Speaker Change: Never bad thing to get a good start to the year, especially in Q1, but she is typically quieter times seasonally for sandy way even for medical device.
Speaker Change: In general, we got going with a number of new customers in the quarter some of whom we believe have excellent potential for follow on business and gross.
Speaker Change: We ended the quarter with 1100 and 45 systems in the field 429 of which have been placed in the trailing 12 months.
Speaker Change: Moving onto applicators sales in the quarter were $5 8 million versus $4 1 million last Q1. This was down very slightly from Q4, which is not unexpected and it's actually a pretty typical pattern.
Speaker Change: One that was swamped by other factors last Q1, and so perhaps once a little bit of explanation patients see their out of pocket Maximums reset every January and that's it.
Speaker Change: It's quite common to see people delay treatment in Q1, and once they start having to pay out of pocket again.
Speaker Change: Tends to lead to a bit of reduced usage in Q1 until it starts to catch up in Q2.
Speaker Change: And later in the year.
Speaker Change: Applicators constituted 62% of our revenues in Q1, which is toward the high end, but within our 55% to 65% target.
Speaker Change: Gross margins increased for the quarter versus Q4, as a result of strong systems pricing and efficiencies with our contract manufacturers. We started cutting steel on our new four cavity applicator molds back in January and we are on schedule to complete its qualification.
Speaker Change: And have a production commercial product.
Speaker Change: In Q4 of this year.
Speaker Change: Both ensure additional capacity and lower production costs for our consumers.
Speaker Change: So as soon as seen from our balance sheet, we used Q1 to build up inventory on both ultra mist systems, and a applicators as well and we also took the opportunity to stockpile a number of longer lead time components to enable more rapid production ramp up if needed.
Speaker Change: Doing this both because having lots of a razor blades on hand is never a bad thing for those in the res business and.
Speaker Change: In support of our elephant hunting aspiration toward.
Speaker Change: We're engaging with larger customers.
Speaker Change: We ultimately having systems on hand to enable us to really just take yes for an answer on a large order is never a bad thing and for the first time since I've been CEO, we're really at a quite comfortable inventory level and.
Speaker Change: To be honest it feel comfortable so.
Speaker Change: Okay.
Speaker Change: Especially during such uncertain economic and trade conditions.
Speaker Change: We feel really good about our supply chain and our manufacturing and as of right now we do not anticipate any material cost.
Speaker Change: Availability or margin issues, resulting from the current tariff situation our production is domestic and.
And we are well set up for parts and benefiting from economies of scale.
Speaker Change: I'm just as a note of housekeeping our up listing to NASDAQ. This quarter was great step for us, but it also came with a $295000 listing fee, which affected our operating profit or EBITDA and our adjusted EBITDA figures.
Speaker Change: Obviously, we hope not to have that recur next quarter.
Speaker Change: So with that I will turn it over to Peter Sorensen, our CFO, who can walk you through the rest of our financials.
Yeah.
Speaker Change: Thank you Morgan Q1 was an excellent quarter for staying with marked by record breaking Q1 revenues and a robust 61% year over year growth beyond our top line performance. We also delivered meaningful improvement in gross margin both compared to the same period last year and sequentially underscoring the strength and scalability of our business model. These results reflect our continued.
Speaker Change: Focus on driving rapid profitable growth, let's now take a closer look at the financials.
Speaker Change: Revenue for the three months ended March 31, 2025 totaled $9 $3 million, an increase of 51% as compared to $5 8 million for the same period of 2020 for this growth exceeded the top end of our previous guidance of $45 to 55%.
Gross margin as a percentage of revenue amounted to 79% for the three months ended March 31, 2025 versus 72, 6% for the same period last year. This represents an increase of over 640 basis points, which can be attributed to reduce costs and ultimate system production and a strategic focus on pricing for ultra mist systems and applicators.
Speaker Change: For the three months ended March 31, 2025, operating income totaled $1 million, which is an improvement of $2 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and manage spend effectively.
Speaker Change: Operating expenses for the three months ended March 31, 2025 amounted to $6 $4 million compared to $5 $3 million for the same period last year, an increase of $1 $1 million. This change was largely driven by an increase in noncash stock based compensation expense of $1 million versus Q1 of 'twenty 'twenty, four and which there was no stock comp expense.
Speaker Change: And as Morgan mentioned, we had a $295000 NASDAQ uplift expense in the quarter.
Speaker Change: Net loss for the three months ended March 31, 2025 was $5 $7 million compared to a net loss of $4 $5 million for the same period in 2024. The increase in net loss was primarily driven by higher noncash and infrequent expenses, including stock based compensation expense and changes in the fair value of derivative liabilities, which resulted in a $4 $9 million.
Speaker Change: This quarter versus $2 $5 million in Q1 of 2024.
Speaker Change: Additionally, in Q1 2024, we recognized $2 $5 million in other income related to a patent license agreement, which did not recur this year.
Speaker Change: These impacts were partially offset by lower interest expense in Q1 2025, primarily due to the conversion of our outstanding notes into common stock in Q4 of 2024 as part of the note and warrant exchange EBITDA.
Speaker Change: EBITDA for the three months ended March 31, 2025 was negative $3 $6 million. However, adjusted EBITDA was a positive $2 $3 million versus negative $59000 from the same period last year, an improvement of $2 $4 million year over year.
Speaker Change: Total current assets amounted to $18 $8 million as of March 31st 2025 versus $18 $4 million as of December 31, 2024 cash totaled $8 $5 million as of March 31st 2025, We're grateful for the continued support of our stakeholders Q1, 2025 marks a strong start to the year and we're excited to build on this moment.
As we execute on our growth strategy with that I'll turn the call back over to Martin.
Martin: Thanks Peter.
Speaker Change: Moving back to God moving onto guidance as we stated in our press release, we are guiding to you tend to Kevin.
Speaker Change: $10 7 million in Q2 revenues.
Speaker Change: 40% to 50% year on year growth.
Speaker Change: Q1 was a bit ahead of plan and so we're essentially adopting guidance of on plan for mid year in keeping with our annual guidance target of 47% to 53% for the full year 2025.
Speaker Change: As described on our Q4 call.
Speaker Change: So on a personal note I mean, the third week of May we will Mark my two year anniversary as CEO at anyways.
Speaker Change: Time really does fly when you're having fun.
Speaker Change: We've built a great team and a great culture, and I remain immensely proud and grateful for all the folks who followed me out under the ledge here and.
Speaker Change: Even more grateful for the job they did of getting us back in.
Speaker Change: The whole team knows what's coming next.
Speaker Change: Because it's how we always end things here the highest reward for good work. It's more work now go into some more work.
Speaker Change: So thanks to everyone and with that I will open up to.
Speaker Change: Questions.
Speaker Change: At this time, if you would like to ask a question. Please press the star and one on your telephone keypad you may withdraw yourself from the queue at any time by pressing star two.
Speaker Change: Once again that is star one.
Speaker Change: We'll pause a moment to allow questions to queue.
Speaker Change: Yeah.
Speaker Change: And once more that is star one.
Speaker Change: And we'll take a question from Carl Byrnes with Northland Capital markets. Your line is open.
Carl Byrnes: Thanks for the question and congratulations on the quarter I'm wondering if you can quantify that in terms of system placements.
From.
Carl Byrnes: What you might categorize as smaller customers and larger customers.
Carl Byrnes: And then how.
Carl Byrnes: That might look going forward. Thanks, so much.
Speaker Change: Thanks, Paul.
Carl Byrnes: Good day or good to catch up so.
Speaker Change: That's one of those questions that sounds really simple on the surface, but actually get sort of basically complicated as you try to delineate it and answer it.
Speaker Change: So for example, we have a number of customers who are substantial chains of nursing homes or long term care facilities.
Speaker Change: And each get sold each locale each location gets sold individually they tend to have their own administrators their own clinical therapy teams, who do who make their own decisions and so kind of whether you whether you cast each of those individual sales as being a part of a larger customer.
Speaker Change: Or being Ace a onesie small customer has some pretty significant impact on how we look at that I mean, ultimately if we grouped those large groups as.
Speaker Change: Single entities, which I think probably makes the most sense.
Speaker Change: Then we had 58 new customers in Q1.
Speaker Change: As we start to look at who are.
Speaker Change: Really big and who are you know and who are relatively small you. That's another question that gets it.
Speaker Change: It gets tricky to define just around the fact that some of these customers are growing very rapidly and so you know a customer that may be.
Speaker Change: Five to 10 range now could be at the 40 or 50 range by the end of the year and so it's really more a function.
Speaker Change: How you how we view our ability to grow with that customer going forward and so.
Speaker Change: No that I really have like a.
Speaker Change: Solid answer for you in terms of like bigger versus smaller, but hopefully that sort of helps in terms of how to think about it.
Speaker Change: Yeah.
Speaker Change: No. It definitely does and then just a follow up on that.
Speaker Change: Typically what are you seeing in terms of time to.
Speaker Change: Sales from the initiation of a conversation too.
Speaker Change: Getting a purchase order in place thanks.
Speaker Change: We're seeing a remarkably wide range.
Speaker Change: Sort of the honest answer I mean, we get we get inbounds to our corporate E Mail that say hi, I'm interested in your product and you know can you can you give me a price quote out of your system.
Speaker Change: And those can those.
Speaker Change: Often closing a couple of days.
Speaker Change: We have other larger customers, where the negotiations tend to take longer and are ongoing I think the answer is sort of anywhere between a couple of days in several months.
Speaker Change: So the bigger customers tend to get bigger in the capital outlay gets larger.
Speaker Change: The timeframes tend to stretch.
Speaker Change: Yeah for sure. Thanks, that's very helpful. Thank you so much and congrats again on the quarter.
Speaker Change: Okay.
Speaker Change: And once more that is star and one we will pause a moment.
Speaker Change: Okay.
Speaker Change: And well move next to Albert concert with Kestrel. Your line is open.
Speaker Change: Thank you congratulations Morgan.
Speaker Change: Very impressive execution two quick questions. One can you just address the debt.
Speaker Change: And what Youre seeing in the landscape with regards to that I feel like that's the one last piece of the puzzle.
Speaker Change: We'd love your color on I mean to them.
Speaker Change: Great to see you out there telling the story at different conferences like Roth and back as anything in the next three or four months. So we should put in our calendar, Tennessee. Thank you.
Speaker Change: Sure Let me, let me start with the second question first.
Speaker Change: Yeah, we're starting to look at some.
Speaker Change: Other.
Speaker Change: Conferences and sort of non deal road show activities for later in the year, we don't have anything definitive at this time so.
Speaker Change: Keep you well.
We'll keep you posted as that evolves.
Speaker Change: Moving to moving to that yeah.
Speaker Change: Sure maybe you've noticed.
Speaker Change: Our debt as our debt is not cheap we are.
Speaker Change: We're certainly we're certainly looking at.
Speaker Change: Refi opportunities.
Speaker Change: It would be pretty.
Speaker Change: Premature for us to really say anything definitive, but I suspect as you.
Speaker Change: You can imagine this is a topic that is front of mind for us and where we are.
Speaker Change: We are exploring a number of opportunities and feel pretty good about our feel pretty good about the likelihood we can do something to improve our interest rate.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And we will take our next question from Christopher Davis with standing asset management. Your line is open.
Christopher Davis: Thank you Morgan and again congratulations.
Christopher Davis: So a question looking at the slide deck, a slide four so the market opportunity, where where are you getting success within those segments on the on the total addressable market.
Speaker Change: Do you do we know accurately exactly what kind of wounds.
Speaker Change: This is being used on mainly and the success rate of different kinds of wounds potentially.
Speaker Change: Yeah.
Speaker Change: Yes so.
Speaker Change: That's the actual.
Speaker Change: As we're not the ones, providing the service right, we don't actually get a ton of visibility into.
Speaker Change: What our practitioners are specifically treating right I mean, there's I mean, there's a whole set of HIPAA rules around that where.
Speaker Change: The patient records are private and so we we can see we talk to our providers, we get a sense of what they're doing.
Speaker Change: We get a sense of when Theyre, finding interesting applications and new things and we're sort of trying to help each of our providers understand the interesting things that others have discovered but we don't actually have any really miss.
Speaker Change: Visibility through just say.
Speaker Change: There were this many diabetic foot ulcers. There were this many venous leg ulcers. There were there were this many deep tissue injuries Burns.
Speaker Change: Don't have it's just not data that we have access to.
Speaker Change: It's all because it particularly.
Speaker Change: It's all it's all billed under the same code.
Speaker Change: Okay.
Speaker Change: A follow up question if I may.
Speaker Change: Any developments regarding any kind of patent decision assertion.
Speaker Change: Suits or engagements.
Speaker Change: It may.
Speaker Change: And that happened or may be likely.
Speaker Change:
Speaker Change: Yes, obviously, given the given the nature of our agreements, they're all have to be a little careful.
Speaker Change: Ultimately.
Speaker Change: I mean as you know we.
Speaker Change: We entered into and intellectual property.
Speaker Change: Assertion agreement with.
Speaker Change: And outside of assertion firm last year, they paid us $2 $5 million to buy effectively and option under which they can pay us mid single digit million.
Speaker Change: Hey man.
Speaker Change: Take the patents down into a special purpose vehicle and go commence assertion.
Speaker Change: The event that that is successful will share we will share profits in the backend.
Speaker Change: Right.
Speaker Change: She actually sort of speak to the tangible process. There is a little bit it's difficult because it's both private and because it's a matter that's functionally out of our control.
Speaker Change: I can say, we're very happy with our partner, we think they are making great progress and I just don't know that I can really say anything more specific at this time.
Speaker Change: Fair enough. Thank you.
Speaker Change: Well move next to Ian Cassel with IFC M. Your line is open.
Ian Cassel: Congratulations and Morgan to you and the team there it's incredible turnaround over the last two years and congrats on the two year anniversary.
Ian Cassel: I was wondering if you could give us some insight now with Tim joined the team I know, it's only been a couple of months, but is there any maybe insight into maybe news the new sales strategy may not be the right way to phrase it but the evolving sales strategy, there and how youre doing things different now versus six months ago.
Ian Cassel: Sure I mean, yeah.
Ian Cassel: Essentially we're pursuing we're pursuing the sale strategy that.
Ian Cassel: We've been that we've been pursuing and then I guess really through most of the latter half of last year like it's been a we've been looking Q.
Ian Cassel: Engage with larger customers at a higher level.
Ian Cassel: We have been looking for a more sort of senior and seasoned.
Ian Cassel: Sales executive in the team people who are.
Ian Cassel: So if you use the industry parlance more accustomed to selling in the carpeted parts of the facility and the parts that are title.
Ian Cassel: And it's been.
Ian Cassel: It's been really interesting to start to see how differently.
Ian Cassel:
Ian Cassel: Folks who have a lot of med device experience.
Ian Cassel: Perhaps not wound are approaching this and I think we're.
Ian Cassel: We're really starting to build some very interesting momentum.
Ian Cassel: <unk>.
Ian Cassel: I mean, the strategy really remains the same right. There are a lot of nursing homes in skilled nursing facilities with with with whom.
Ian Cassel: I think there is a real confluence of interests and we're engaged it makes a lot of sense, especially those who tend to have their own clinics.
Ian Cassel: Clinical groups right.
The counterpoint to that is that obviously, the mobile and home health care space is also a very rapidly growing opportunity in this market and so.
Ian Cassel: That's a that's a group we're also making sort of strong outreach is into and I think.
Ian Cassel: Along with doctors' offices and hospitals like we're really at this point you where.
Ian Cassel: We're probably just starting to push kind of like 1% market penetration.
Ian Cassel: So.
It feels like we have it feels like we have it's really about kind of focusing on what to prioritize whats chase.
Ian Cassel: Thank you.
Speaker Change: And it does appear that there are no further questions at this time I would like to turn it back to management for any additional or closing remarks.
Ian Cassel: Yeah.
Ian Cassel: Well, thanks for coming everyone and.
Ian Cassel: I appreciate the ongoing interest and support.
Ian Cassel: And we'll speak to you next quarter, thanks very much.
Ian Cassel: This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful afternoon.
Ian Cassel: [music].
Ian Cassel: Yeah.
Ian Cassel: Okay.
Ian Cassel: [music].
Ian Cassel: Okay.
Ian Cassel: Okay.
Ian Cassel: [music].
Ian Cassel: