Q2 2025 SANUWAVE Health Inc Earnings Call
Speaker #3: Good day, yone, and welcome to the SANUWAVE Q2 earnings call. At this time, all participants are on a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session.
Speaker #3: 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 and two.
Speaker #3: Please note this call may be recorded, and I will be standing by if you should need assistance. It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of SANUWAVE.
Speaker #3: Please go ahead.
Speaker #4: Thank you. Thank you very much. Good morning and welcome to SANUWAVE's second quarter 2025 earnings call. Our Form 10-Q was filed with the SEC last night, and our earnings release was issued this morning along with our dated presentation, which was made available on our website in the investor section.
Speaker #4: It's useful to refer to this during the presentation really does provide some useful information I promise. So joining me on the call this morning is Peter Sorensen, our CFO.
Speaker #4: And after the presentation, we will open the call up to Q&A. Let me begin with everybody's favorite: forward-looking statements and other disclosures. This call may contain forward-looking statements, such as statements referring to our future financial results, production expectations, and plans for future business development activities.
Speaker #4: 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 #4: A description of these risks and uncertainties and other factors that could affect our financial results is included in ur SEC filings. Actual results may differ materially from those projected in the forward-looking statements.
Speaker #4: The company undertakes no obligation to update any forward-looking statements. Certain percentages discussed in this call are calculated from the underlying whole dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes.
Speaker #4: As an investor, 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 June 30, 2025.
Speaker #4: All right. So now we are absolved of any potential sins of prognostication, let's get the good bits. Q2 was another strong performance for SANUWAVE, up 42% year-on-year on the top line.
Speaker #4: And bringing us to a 51% year-on-year increase for the first six months of 2025. We sold 116 Altimus systems in Q2, a 61% increase versus a year ago.
Speaker #4: And at 18% increase from Q1 this took us to 1,261 systems in the field, 473 or 38% of which have been sold in the last 12 months.
Speaker #4: Applicator revenue was $6.4 million for the quarter, representing 63% of our overall revenues. Like last quarter, it was toward the high end of our 55% to 65% target range.
Speaker #4: Grew 37% from the same quarter last year and a bit over 10% sequentially from last quarter. Our tone of business and customer adoption remains good and customer concentration dropped slightly in the quarter.
Speaker #4: With only one quarter exceeding with only one customer exceeding 5% of revenues and that customer just barely doing so. Gross margins remain strong at 78.3%, up 510 basis points from a year ago.
Speaker #4: Though down slightly from Q1 predominantly as a result of the engineering costs associated with standing up our second source of applicator production. We remain on track to commence commercial production of this new, more manufacturable applicator design in Q4 of this year and continue to believe that the four-cavity molds and removal of UV cure adhesive steps will both provide us with ample applicator capacity for the foreseeable future.
Speaker #4: And reduce our consumables production costs. As our production is all domestic, we continue to anticipate no material effects from tariffs or trade disruptions. So, all in all, it's been a really productive first half of 2025.
Speaker #4: And the company's just starting to chew up ground. You know, we've described Q1 and Q2 as sort of the period of mass of max disruption as we've made some very ant changes to our sales leadership, sales force, our commercial ops, and our commercial strategy.
Speaker #4: You know, internally, we've been using the metaphor of taking apart the airplane and putting it back together while flying it really fast. And the team is more than risen to the challenge.
Speaker #4: As of mid-July, for first time in my tenure as CEO, we have all 12 of our national sales territory staffed. And have added a full-time national and key accounts manager to focus on our big accounts.
Speaker #4: You know, this is really a long way to have come from the two reps we had at the beginning of 2024 and even from the nine we had a year-end.
Speaker #4: You know, we've filled out the commercial operations team as well. And brought in new leadership there also from Audiomed and the energy the all-hands sales and commercial ops meeting that we had a couple of weeks ago.
Speaker #4: It was striking as it was positive. Like the move to expectations are high, and, you know, if Q1 and Q2 were sort of max disruption, Q3 is really shaping up to be the quarter of maximum construction.
Speaker #4: As we really step up our internal systems, our lead sales management, dashboarding, reimbursement support, and, you know, as we prepare for our first ever concerted outbound marketing campaign, which we hope to launch in October.
Speaker #4: We're seeing some very promising increases in inbound inquiries in a couple of markets, where we seem to have crossed a sort of adoption threshold.
Speaker #4: It appears that once ou get enough practitioners using Altimus and that they've seen others use the product, seeing the results, seeing the portunity, you know, we get a profound spike in interest and in light of this, we are going to focus on, you know, expanding this awareness, finding the key users to provide social proof and credibility, and really helping the market understand that there's a better way to handle complex wounds.
Speaker #4: It seems that familiarity here breeds acceptance and adoption. So we really look forward to getting out and spreading the word. We're going to be at SAWC in September.
Speaker #4: So come and see us. If you're ere, obviously, all this sort of max construction is in service of setting up kind of max production and based on what I saw at the sales meeting, you know, we now have a team that's really committed to getting SANUWAVE firing on all cylinders.
Speaker #4: I think we're all pretty cited about seeing what happens when we do. So with that, I will turn it over to Peter Sorensen, our CFO.
Speaker #4: Who can walk you through the rest of our trials?
Speaker #5: Thank you, Morgan. The second quarter was a strong one for SANUWAVE with revenue reaching a new Q2 record and growing 42% year over year.
Speaker #5: This performance reflects continual momentum in our commercial strategy and growing demand for Altimus. We also delivered meaningful year over year improvement in gross margins with underscored the operating leverage inherent in our model and ur discipline approach to cost management.
Speaker #5: Overall, we remain focused on driving sustainable, profitable growth. It's now to take a closer look at the financials for the quarter. Revenue for the three months ended June 30th, 2025, totaled $10.2 million.
Speaker #5: An increase of 42% compared to $7.2 million for the same period in 2024. This growth was within our guidance of 40% to 50%.
Speaker #5: Gross margin as a centage of revenue amounted to 78.3% for the three months ended June 30th, 2025. Versus 73.2% for the same period last year.
Speaker #5: This represents an increase of about 510 basis points, which can be attributed to reduced costs on Altimus system production and a strategic focus on pricing for Altimus systems and applicators.
Speaker #5: For the three months ended June 30th, 2025, operating income totaled $1.9 million, which is slightly down by 0.1 million dollars compared to the same period last year.
Speaker #5: Operating expenses for the three months ended June 30th, 2025, amounted to 6.1 million dollars compared to 3.2 million dollars the same period last year.
Speaker #5: An increase of 2.9 million dollars. However, this change was largely driven by an increase in non-cash stock-based compensation expense of 1.1 million dollars versus Q2 2024.
Speaker #5: In which there was no stock comp expense. As well as there is a release of a historical accrual in Q2 2024 of $579,000. Which reduced our reported GAAP operating expenses by that amount that did not recur this quarter.
Speaker #5: Net income for the three months ended June 30th, 2025, was 1.1 million dollars. Compared to net income of 6.6 million dollars for the same period in 2024.
Speaker #5: A decrease of 5.5 million dollars. The decrease in net income was primarily driven by lower non-cash and infrequent items in Q2 2025 as compared to Q2 2024.
Speaker #5: As a reminder, we recognize that one-time non-cash gain of 5.3 million dollars related to the payoff of legacy debt in the prior year quarter, which did not recur this quarter.
Speaker #5: Additionally, the change in fair value of derivative liabilities resulted in a non-cash gain of $1 million in Q2 2025, compared to a $3.7 million gain in Q2 2024, representing a $2.7 million year-over-year variance.
Speaker #5: These impacts were partially offset by lower interest expense in Q2 2025 primarily due to the conversion our outstanding notes into common stock in Q4 2024 as part of the note and warrant exchange.
Speaker #5: EBITDA for the three months ended June 30th, 2025 was 3.2 million dollars. Adjusted EBITDA was 3.4 million dollars versus 1.5 million dollars for the same period last year.
Speaker #5: An improvement of 1.9 million dollars year over year. Total current assets amounted to 20.2 million dollars as of June 30th, 2025 versus 18.4 million dollars as of December 31st, 2024.
Speaker #5: Cash totaled 8.5 million dollars as of June 30th, 2025. We appreciate the continued support and confidence of our stakeholders. Q2 2025 represents another solid step forward for SANUWAVE.
Speaker #5: And we're encouraged by the progress we've made. As we look ahead to the second half of the year, we remain focused on disciplined execution and advancing our strategic growth initiatives.
Speaker #5: With that, I'll turn the call back over to Morgan.
Speaker #4: Thanks, Peter. So moving on to guidance, as we stated in our press release for guiding to 12 to 12.7 million in Q3 revenues. Obviously, Q3 is a ugh comp for us.
Speaker #4: It's up against the picture of Python quarter last year in which we had, you know, one really large sale sort of hit the scales and drive a surge to an 89% year-on-year growth rate.
Speaker #4: Big seems to be somewhat difficult animals to forecast. And, you know, while we're certainly out looking for them and see a fair bit of potential, you know, we're not including any of that in the guidance in the guidance above.
Speaker #4: We're really still in the learning phase on how to time forecasting with these bigger customers and how they ramp up when they do say yes.
Speaker #4: And I think we'd rather err on the side of conservatism. So but our annual guidance remains unchanged. As ever, I want to thank the SANUWAVE team for all of the hard work and the commitment and the trust.
Speaker #4: Companies exist downstream of their cultures. And, you know, this one only exists because of ours. As we have thoroughly outgrown our existing headquarters, especially the warehouse and shipping facilities.
Speaker #4: We're moving to our new office space about a mile away at the end of next week. And I'm sure the team will desperately miss the old carpets.
Speaker #4: But we'll manage as always to adapt and overcome. So thanks, everyone. And, you know, that, I will open it up to the operator for questions.
Speaker #1: At this time, if you would like to ask a question, please press star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two.
Speaker #1: Once again, to ask a question that is star one. Our first question will come from Kyle Bowser with Roth Capital Partners. Your line is open.
Speaker #6: Got it. Good morning, guys. Thanks for this. Good morning. Thanks for all the updates. And great, great progress here. Maybe I'll start on margins.
Speaker #6: So glad to hear the enhanced production process for the applicators is still on track for Q4. Can you give us a sense as to how this might impact gross margin?
Speaker #6: I an, you've you've generated some nice scales. Seems like the the business is poised for some pretty nice operating leverage. Especially given, you know, the commercial infrastructure is in place.
Speaker #6: this production process is nearing completion. So just kind trying to get a sense of how much drops to the bottom line at this point for incremental sales from an EBITDA standpoint as well.
Speaker #4: Sure. so you know the purpose obviously, the purpose in creating the new applicator design is both to increase the capacity to produce applicators and to get the costs down a bit.
Speaker #4: We suspect and Peter correct me if I'm wrong here. but we suspect we can pick up probably 350, 400 basis points of additional margin on the applicators with the new design.
Speaker #4: So it seemed that whatever the latest figures were?
Speaker #6: Some time to get to that as well too just because we've got we try to hold about six months of inventory on our applicators.
Speaker #6: So we ed to bleed off our existing costs on our current applicators before we start really seeing that impact. But we should see that in early 2026.
Speaker #4: Yeah. So it should be it should be sort of a steady fade in because we're not we're using a kind a blended cost as our cost basis.
Speaker #4: So it'll, it'll, it'll flow through gradually, but we'll flow.
Speaker #6: Okay. Appreciate that. And 13 reps sounds like that's a pretty good number. Do you envision needing to build that out or are you you feel pretty good kind of covering the map at this point?
Speaker #4: I think we are you know at this point, there's certain amount of you know let's get everybody really up trained and firing. I think we made a lot of we made a lot of progress there at the at the two-day sort of all-hands and teach-in.
Speaker #4: Really feels like a qualitatively strong group now. And folks who are you know doing a lot to help each other and kind of share best practices you know will we potentially add a few more people?
Speaker #4: yeah, I think that it's certainly something we're looking at. You know, are there some sector-specific folks who make sense? You know, do we want to stir?
Speaker #4: I mean, we're now getting to a size where we have to start thinking about you know do we need regional managers? You know, what is the what is the next step?
Speaker #4: I mean, obviously, you know breaking up the US into 12 regions is you know still means you've got some pretty big territories. And so you know ultimately, yeah, we're looking at it.
Speaker #4: We don't have any you know it'll be I wouldn't be surprised if we acquire a few more if we acquire a few more reps over the over the rest of the year.
Speaker #4: But I think at this point, we're pretty much where we need to be to have real national coverage.
Speaker #6: Got it. And glad to hear that you're working internally as well on kind of a marketing program. I think you mentioned you plan to bring that live in October.
Speaker #6: As you kind of map out the portunity in the US across wound care centers and physician offices and skilled nurse nursing facilities and assisted living facilities, what I guess where are you spending most of your time in focus or you know the patient types or conditions that Altimus really resonates with that you know, you kind tailor this marketing program towards?
Speaker #4: So you know to a great extent, one of the things we're focusing on in the marketing program is moving more to a kind of you know a market of one marketing stance where you ow we can actually target a bunch of these things individually create specific plans for specific you know for specific wound types, for specific patient types, for specific user types.
Speaker #4: And so you know a lot of it is going to be, you know, starting to really, you know, both differentiate and target the offerings so that we can engage with mobile wound care, with nursing homes, with skilled nursing facilities, with, you know, increasingly, I think we've ably been neglecting hospitals a bit.
Speaker #4: We're starting engage their with a bit more with a bit more focus. I ink there's also obviously, you know, you have a lot of opportunity in podiatry, in you know, in wound care centers.
Speaker #4: And so I think it really becomes a question of tailoring the you ow the offering such that you know tailoring the offering to both the wound and the customer type you know beginning to show people this is really how you can use this product.
Speaker #4: And then you know getting over the hump of you know people saying you know wound care is not a high trust environment, right? Like there are you know when you when you walk in with a shiny new thing and say you know this is this is the best this is the new wound care since moldy bread.
Speaker #4: The you're met with an understandable amount of skepticism. And I think you ow getting to key folks, getting to you know high enough usage rates and markets that everyone says, "Oh, you know I've heard of this thing.
Speaker #4: I've seen people use it. I hear they're getting great results. You know I should go take a look." Really matters. And so you know some of it is going to pushing for you know very specific you ow regional critical mass.
Speaker #6: Appreciate that. And maybe just lastly, any any update on the senior secured debt that's coming new? Thanks so much.
Speaker #4: There we go. We had a we had an internal bet on how long we could go on this call without somebody asking that. So yes, I guess it's probably fitting we give something of a something of an update.
Speaker #4: I think as we sort of long discussed, the you know we were looking at the you know, the refinancing of our you ow, of our debt as sort of a cost of capital equation, right?
Speaker #4: And so we were looking at do we want to do this as debt? Do we want to do this as equity? Like what's the what's the choice?
Speaker #4: And so we ran an internal process to look at what our debt options were, and we received several term sheets that we thought were very attractive.
Speaker #4: And we chose one. And our currently in the process of working to close it. So I can't really get into too much more detail right now.
Speaker #4: Like I can't name the counterparty. But I think people will be people will be favorably inclined towards both the the lender and the terms it's a significant improvement over what we have.
Speaker #6: That's excellent. No, appreciate the all the color here. We'll keep an ye out for that. I'll jump back in Q.
Speaker #4: Thanks, Kyle.
Speaker #1: As a reminder, if you would like ask a question, it is star and one to join the queue. We'll take our next question from Chris Plump with Talpine Capital.
Speaker #1: Your line is open.
Speaker #7: Good morning, guys. Chris, good ning. How are ou?
Speaker #4: Pretty good. Great start to the year. Actually, the last gentleman took my first question on the debt. But I was curious, also, on how you look at elephant hunting now with the new team you have in place.
Speaker #4: know you said they have a national account manager. Can you maybe talk a little bit about, you ow, who do you have that maybe you've sold systems to that have a a big runway with a couple hundred locations and maybe the pipeline for for maybe new large elephant hunting?
Speaker #4: Yeah. I mean.
Speaker #7: Spots?
Speaker #4: Sure. I mean, obviously, obviously for you know, for competitive reasons, we want to be a little bit careful about you ow, naming naming folks.
Speaker #4: But there are you ow, there are a number of key initiatives that you know we've gotten pretty interested in. we were recently we were recently added to the approved vendor list on one of the largest sort of hospital chains and networks in the US.
Speaker #4: And so you know that's become a very that's become an interesting hunting ground for us. You know, we're looking at a number of folks who do you know, who have considerably larger footprints.
Speaker #4: You know, like people who have several hundred locations. And I think you know it's sort of early days, right? I mean, we hired our new Key Accounts Rep in, I think, the second week of July.
Speaker #4: So you know, I mean, he's been here almost a month now. So yeah, we're going to start expecting things any day now. But it's, you know, it's always a little bit difficult to guess exactly how these guys are going to perform, right?
Speaker #4: The, you know, big, big customers like this tend to be more careful. They're also structured differently, right? Some of them are kind of tipping point accounts where, you know, there's one "oops" that, you know, there's one sort of national decision maker, and if they say yes, you know, you're sort of going on a large number of units.
Speaker #4: You know, others are sort of a will approve this and you know now you have a, you know, now you have a hunting license, but have to go get each one individually.
Speaker #4: Though they seem to get and they seem to get easier, you know, the more you get on board. Right? There's sort of, as you as you penetrate a network like that, there's kind of like a, you know, there's sort of a lip-over point where you know the the question changes from, you ow, why should I, you know, why why should I use this thing to, hey, why aren't you using this thing yet?
Speaker #4: You know, don't you see it? The rest of our peers are doing it. And so we're building some real momentum there.
Speaker #4: But I an, it's obviously, you know, we've we're kind of a month in. So it's just, it's a little early to be making you know much in the way of really concrete you ow prognostication.
Speaker #7: Great. Thanks, guys.
Speaker #4: Thanks, guys.
Speaker #1: It appears we have no further estions in the queue. I'll turn the program back to the speakers.
Speaker #7: Oh, I think we might have one more question.
Speaker #1: Apologies, we do have a question now from Albert Hanser from Kestrol. Your line is open.
Speaker #8: Hi. Nice job. It's fun to see the execution and all the momentum and good news. Sometimes I think the IP aspect gets overlooked. And I noticed, on your website in the deck, which I hadn't seen before, in the broader deck, you now have a slide on the IP and 140 patents.
Speaker #8: Can you just talk more about the value of those patents and where they lie? And just give us a broader landscape of kind of the foundation under which you're building the company?
Speaker #4: Well, you can you couldn't up with a you couldn't come up with an easier question. okay. So I mean, fundamentally, yes. SANUWAVE is sitting on a large patent portfolio that includes a lot of things to do with both shockwave and with ultrasound.
Speaker #4: obviously, we've used some of them as sort of core protection of our ability to operate. we're, ou know, it's something we're also looking to extend as we begin looking at, you know, new things we can do with the Altimus platform.
Speaker #4: obviously, you know, we have in the past had, you know, we have in the past monetized some of these patents. We have the one relationship with, Baxter Wave LLC to, you know, potentially utilize some of our some of our shockwave patents around some vascular conditions.
Speaker #4: I can't really speak to that any you ow, any further in sort of concrete specifics, you know, beyond what we have out in the public market, which is that, you know, they paid us two and a half million dollars last year to really buy an, ou know, to basically buy an option that would allow them to pay sort of amid single-digit millions fee to then go out and assert some patents on which there would be a, you know, there would be a rev sheet.
Speaker #4: There'd be a rev share on the back end with any sort of collection. You know, we are always sort of looking at the patent portfolio and saying, you know, what else can we do with this?
Speaker #4: You know, we get interest from time to time from folks about, you know, licensing or acquiring patents. But I just, I don't know that I don't know that I can really say anything else that's concrete on that topic at this time.
Speaker #8: Thank ou.
Speaker #1: As a inder, if you would like to ask a question that is star and one to join the queue. I'm showing we have no further estions over the phone at this time.
Speaker #4: Great. Well, thank ou, everyone, for joining us this morning. And, we look forward to speaking to you next quarter.