Q3 2025 SANUWAVE Health Inc Earnings Call

November 7, 2025

Operator: Please stand by. Your program is about to begin. Good day, everyone, welcome to the SANUWAVE 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 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. Please note this call may be 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, Chairman and CEO of SANUWAVE. Please go ahead.

Speaker #2: Please stand by . Your program is about to .

Speaker #4: Begin .

Speaker #2: Good day . Everyone , and welcome to the Sanuwave earnings call . At this time , all participants are in a listen only mode .

Operator: Good day, everyone, welcome to the SANUWAVE 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 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. Please note this call may be 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, Chairman and CEO of SANUWAVE. Please go ahead.

Speaker #2: Later , you will have the opportunity to ask questions during the question and answer session . You may register to ask a question at any time by pressing the star and one on your telephone keypad .

Speaker #2: You may withdraw yourself from the queue by pressing star and two . Please note this call may be recorded and I will be standing by .

Speaker #2: If you should need any assistance . It is now my pleasure to turn the conference over to Morgan Frank , chairman and CEO of Sanuwave .

Speaker #2: Please go ahead .

Speaker #5: Thank you . Good morning and welcome to Sanuwave's Third Quarter 2020 earnings Call . Our form 10-q was filed with the SEC last night .

Morgan Frank: Thank you. Good morning. Welcome to SANUWAVE's Q3 2025 Earnings Call. Form 10-Q is filed with the SEC last night. Our earnings release was issued this morning, and our updated presentation was made available on the website in the investor section. Please refer to that during the presentation. We really try to make it useful. Thanks. Joining on the call today is Peter Sorensen, our CFO. After the presentation, we will open the call up to Q&A. 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.

Speaker #5: Our earnings release was issued this morning and our updated presentation was made available on the website in the investor section . Please refer to that during the presentation .

Speaker #5: We really try to make it useful . Thanks . So joining me on the call today is Peter Sorensen , our CFO . And after the presentation we will open the call up to Q&A .

Speaker #5: So 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 .

Speaker #5: 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 .

Morgan Frank: Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many 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. Actual results may differ materially from those projected in the forward-looking statements. Company undertakes no obligation to update any forward-looking statement. Certain percentages discussed in this call are calculated from the underlying whole dollar amounts and therefore may not recalculate from rounded numbers used for disclosure purposes. As a reminder, our discussion today will include non-GAAP numbers. Reconciliation between our GAAP and non-GAAP results can be found in our recently filed 10-Q for the period ended 30 September 2025. All right. Now we have that out of the way. Let's dig into the apart.

Speaker #5: Description of these risks and uncertainties and other factors that could affect our financial results is included in our SEC filings . Actual results may differ materially from those projected in the forward looking statements .

Speaker #5: Company undertakes no obligation to update any forward looking statement . Certain percentages discussed in this call are calculated for the underlying whole dollar amounts , and therefore may not recalculate from rounded numbers used for disclosure purposes .

Speaker #5: As a reminder , our discussion today will include non-GAAP numbers , reconciliation between our GAAP and non-GAAP results can be found in our recently filed 10-q for the period ended September 30th , 2025 .

Speaker #5: All right , so now we have that out of the way . Let's let's dig into the good part . Q3 was an all time record revenue quarter for Sanuwave , up 22% versus the challenging pig Python quarter last year , when a large order drove 89% year on year growth .

Morgan Frank: Q3 was an all-time record revenue quarter for SANUWAVE, up 22% versus the challenging Pigtail Python quarter last year, when a large order drove 89% year-over-year growth. Quarter was also up 13% sequentially from Q2. This brings year-over-year growth for the first 9 months of 2025 to 39% versus the same period last year. We sold 155 UltraMIST systems in Q3, also an all-time record and up from 124 last year. Again, the Pigtail Python quarter and 116 last quarter. This took us to 1,416 units in the field, 504 of which, that's 36%, having sold in the trailing 12 months.

Speaker #5: The quarter was also up 13% sequentially from Q2 . This brings year on year growth for the first nine months of 2025 to 39% , versus the same period last year .

Speaker #5: We sold 155 ultra systems in Q3 , also an all time record and up from 124 last year . Again , the quarter and 116 last quarter .

Speaker #5: This took us to 1416 units in the field , 504 of which that's 36% have been sold in the trailing 12 months . Applicator revenue was 6.8 million in the quarter .

Morgan Frank: Applicator revenue was $6.8 million in the quarter, also an all-time record, up 26% year-on-year and 6% sequentially from Q2. At 59% of revenues for the quarter, this was in line with the 55% to 65% target range we have discussed on previous calls. We had two customers of about 5% in the quarter and one customer, a reseller, that slightly exceeded that. No other customers exceeded 3% for the quarter. Gross margins were healthy, 77.9% in the quarter, slightly down from 78.2% last quarter, up from 75.5% a year ago.

Speaker #5: Also , an all time record , up 26% year on year and 6% sequentially from Q2 at 59% of revenues for the quarter .

Speaker #5: This was in line with the 55 to 65% target range . We've discussed on previous calls , we had two customers of about 5% in the quarter and one customer a reseller that slightly exceeded that .

Speaker #5: No other customer has exceeded 3% for the quarter . Gross margins were healthy 77.9% in the quarter , slightly down from 78.2% last quarter .

Speaker #5: But up from 75.5% a year ago . This is this was primarily as a result of slightly lower overall ASP for ultra systems .

Morgan Frank: This was primarily as a result of slightly lower overall ASP for UltraMIST systems as a result of beginning to work with some larger resellers with whom we deal on a wholesale basis, where we sell systems at lower prices and allow them to mark the systems up when resold, as opposed to selling at full price and paying commission. This works out about the same, maybe slightly better for us on the operating line, but it does impact gross margins a bit. This was offset by slightly higher prices on applicators and some ongoing cost reductions to the production of the UltraMIST system. The qualification of our new four-cavity mold for applicators and the new, more manufacturable applicator process continues.

Speaker #5: As a result of beginning to work with some larger resellers with whom we deal on a wholesale basis , where we sell systems at lower prices and allow them to mark the systems up and resold , as opposed to selling at full price and paying commission .

Speaker #5: This works out about the same . Maybe slightly better for us on the operating line , but it does impact gross margins a bit .

Speaker #5: This was offset by slightly higher prices on applicators and some ongoing cost reductions to the production of the ultra system . The qualification of our new for cavity mold for applicators in the new , more manufacturable applicator process continues .

Speaker #5: We expect to have that process up and running for commercial production in January , though if we do really well , it could be as soon as December .

Morgan Frank: We expect to have that process up and running for commercial production in January, though if we do really well, it could be as soon as December, but I think at this point, January is probably a better bet. The clean room and equipment are in and qualified. We just need to get through the design verification, performance, and shelf life testing stages. Unfortunately, things like shelf life testing are inherently time-based. We use a blended cost basis for calculating our cost of goods sold. It will take a few quarters for these, you know, this new process to show through fully. We expect it to ultimately drive a few extra points of applicator margin as it reaches scale in the back half of 2026. Q3 has been a productive time for SANUWAVE.

Speaker #5: But I think at this point , January is probably a better bet . The clean room and equipment are in and qualified . We just need to get through the design verification , performance and shelf life testing stages and unfortunately , things like shelf life testing are inherently time based .

Speaker #5: We use a blended cost basis for calculating our cost of goods sold . So it will take a few quarters for these . This new process to show through fully , but we expect it to ultimately drive a few extra points of applicator margin as it reaches scale in the back half of 2026 .

Speaker #5: So Q3 has been a productive time for Sanuwave . We received $5 million payment for the exercise of IP licensing related to our intravascular shockwave patent portfolio , and we refinanced our debt , reducing 27.5 million of debt close to 29 million with closing costs to 24 million .

Morgan Frank: We received a $5 million payment for the exercise of IP licensing related to our intravascular shockwave patent portfolio. We refinanced our debt, reducing $27.5 million of debt, closer to $29 million with closing costs to $24 million. Our interest rate from 19.5% to SOFR plus 350, which is currently about seven point. This placed the company on excellent financial footing and positions it well to pay down this debt from cash flow as the facility contains no prepayment penalties or fees. We also moved to our new larger headquarters back in August.

Speaker #5: And our interest rate has changed from 19.5% to SOFR plus 350 basis points, which is currently about 7.63%. This places the company in excellent financial footing and positions it well to pay down this debt from cash flow.

Speaker #5: As the facility contains no prepayment penalties or fees . We also moved to our new , larger headquarters back in August . And one last piece of good news based on the refi and our ongoing financial performance , I am pleased to announce that Sanuwave has alleviated its substantial doubt to continue as a going concern for at least 12 months .

Morgan Frank: One last piece of good news based on the refi and our ongoing financial performance, I am pleased to announce that SANUWAVE has alleviated its substantial doubt to continue as a going concern for at least 12 months as of this 10-Q. Moving on to the part I'm sure everybody wants to get to, the wound care market was a bit unsettled in Q3 as many practitioners seem to be taking the sort of wait and see attitude to what turned out to be some pretty substantial changes in the skin sub and allograft reimbursement market. You know, these have been long mooted by CMS, this seemed to lead to a widespread taking the foot off the gas in the industry due to the uncertainty.

Speaker #5: As of this 10-q . So moving on to the part I'm sure everybody wants to get to the wound care market was a bit unsettled in Q3 , as many practitioners seem to be taking a sort wait and see attitude to what turned out to be some pretty substantial changes in the skin sub and allograft reimbursement market .

Speaker #5: These have been long mooted by CMS , and this seemed to lead to a widespread taking the foot off the gas in the industry due to the uncertainty .

Morgan Frank: While these changes, which were made final on Friday the 31st, did not affect SANUWAVE, our reimbursement for the 97610 code remains essentially unchanged, perhaps slightly up for 2026. It does affect many of our users, and this in combination, and perhaps particularly because of heightened fears about CMS audits and clawbacks in wound care, led many providers to choose to simply sort of back off a little and to use advanced wound care treatments on fewer patients at the margin. This uptick in audit and price sensitivity seems to be part and parcel to the broader CMS strategy of driving toward something more along the lines of evidence-based medicine requiring more data on efficacy, product differentiation, and, you know, value for money in treatment.

Speaker #5: While these changes , which were made final on Friday , the 31st did not affect Sanuwave , our reimbursement for the 97 610 code remains essentially unchanged , perhaps slightly up for 2026 .

Speaker #5: It does affect many of our users , and this in combination and perhaps particularly because of heightened fears about CMS audits and clawbacks in wound care , led many providers to simply choose to simply sort of back off a little and to use advanced wound care treatments on fewer patients at the margin .

Speaker #5: This uptick in audit and price sensitivity seems to be part and parcel to the broader CMS strategy of driving toward something more along the lines of evidence based medicine , requiring more data on efficacy , product differentiation , and value for money in treatment , regardless of any near-term disruption .

Morgan Frank: regardless of any near-term disruption, we think this is an overall positive trend for SANUWAVE and for UltraMIST, and we suspect that this is a paradigm in which our products can really thrive. It's only been a week since the final rule came out. It is perhaps a little early making too many strong pronouncements about exactly how this all is going to play out. In our experience, any certainty is better than huge uncertainty. With the market having really no idea if reimbursement was gonna be $2,500 or $500 or $127 per square centimeter in skin subs, this was simply too much variance for people to make decisions around. Now that the answer is known, you know, we expect people will rapidly adapt to this new reality and get moving.

Speaker #5: We think this is an overall positive trend for Sanuwave and for Ultra . We suspect that this is a paradigm in which our products can really thrive .

Speaker #5: It's only been a week since the final rule came out , and so it is perhaps a little early to be making too many strong pronouncements about exactly how this all is going to play out .

Speaker #5: But in our experience, any certainty is better than huge uncertainty. And with the market having really no idea if reimbursement was going to be.

Speaker #5: 2500 or 500 or $127 per square centimeter in skin subs , this was simply too much variance for people to make decisions around .

Speaker #5: So now that that answer is known , we expect people will rapidly adapt to this new reality and get moving . We've had a flurry of calls this week from distributors , partners , prospective salespeople , and we believe that the weeks and months ahead will represent a profound opportunity to make some moves to improve our market marketing and our sales positions .

Morgan Frank: We've had a flurry of calls this week from distributors, partners, prospective salespeople, and you know, we believe that the weeks and months ahead will represent a profound opportunity to make some moves to improve our market, marketing, and our sales positions. I mean, you could really sort of feel the market starting to crack back open again as soon as everybody knew what, you know, the fact to which they were planning. During our September all hands call, like I literally threw up a picture of Littlefinger from Game of Thrones and told the team, Chaos is not a pit, it's a ladder. We're going to climb it.

Speaker #5: I mean , you could really sort of feel the market starting to crack back open again as soon as everybody knew what that to which they were planning during our September , all hands call , I literally threw up a picture of Littlefinger from Game of Thrones and told the team , chaos is not a pit , it's a ladder .

Speaker #5: And so we're going to climb it . I mean , while perhaps the hope that Max disruption was behind us in the last call was a little bit optimistic , this seems like one of those moments in a market where the ones who figure out how to climb fastest can gain a lot of ground , and we're engaged .

Morgan Frank: I mean, while perhaps the hope that max disruption was behind us on the last call was a little bit optimistic, this seems like one of those moments in a market where the ones who figure out how to climb fastest can gain a lot of ground. We are engaged currently with the most qualitatively and quantitatively promising sales funnel I've ever seen in my tenure here. It's been a little bit frustratingly slow to move, but it feels like that may be rapidly starting to change. This is an exciting time here and one that should be very good for SANUWAVE. With that, I'll now turn you over to Peter Sorensen, our CFO, who can walk you through the rest of our financials.

Speaker #5: Currently with the most qualitatively and quantitatively promising sales funnel I've ever seen in my tenure here . It's been a little bit frustratingly slow to move , but it feels like that may be rapidly starting to change .

Speaker #5: So this is an exciting time here , and one that should be very good for wave . With that , I'll now turn you over to Peter Sorensen , our CFO , who can walk you through the rest of our financials .

Speaker #6: Thank you . Morgan , we had a strong third quarter at with revenue reaching a new all time quarterly record and up 22% year over year .

Peter Sorensen: Thank you, Morgan. We had a strong Q3 at SANUWAVE, with revenue reaching a new all-time quarterly record and up 22% year-over-year. This performance reflects the continued momentum of our commercial strategy and the growing demand for UltraMIST. Gross margins expanded meaningfully year-over-year, reflecting both the inherent leverage in our model and our disciplined approach to managing costs. Looking ahead, our focus remains on driving sustainable, profitable growth. With that, let's take a closer look at the financial results of the quarter. Revenue for the 3 months ended 30 September 2025 totaled $11.5 million, an increase of 22% as compared to $9.4 million for the same period of 2024.

Speaker #6: This performance reflects the continued momentum of our commercial strategy and the growing demand for ultra gross margins . Expanded meaningfully year over year , reflecting both the inherent leverage in our model and our disciplined approach to managing costs .

Speaker #6: Looking ahead , our focus remains on driving sustainable , profitable growth . So with that , let's take a closer look at the financial results of the quarter .

Speaker #6: Revenue for the three months ended September 30th , 2025 totaled $11.5 million , an increase of 22% as compared to $9.4 million for the same period of 2024 .

Speaker #6: This growth was below our guidance for the quarter , but right in the midpoint of the preliminary range of results , we disclosed on October 6th of 11.4 to 11.6 million gross margin as a percentage of revenue for the three months ended September 30th , 2025 , came in at 77.9% , up over 240 basis points year over year , driven by Lower ultra system production costs and our strategic pricing initiatives across systems and applicators .

Peter Sorensen: This growth was below our guidance for the quarter, but right in the midpoint of the preliminary range of results we disclosed on 6 October of $11.4 to 11.6 million. Gross margin as a percentage of revenue for the three months ended 30 September 2025 came in at 77.9%, up over 240 basis points year-over-year, driven by lower UltraMIST system production costs and our strategic pricing initiatives across systems and applicators. For the three months ended 30 September 2025, operating income totaled $1.5 million, which is down by $0.5 million compared to the same period last year.

Speaker #6: For the three months ended September 30th , 2025 , operating income totaled $1.5 million , which is down by $0.5 million compared to the same period last year .

Speaker #6: However , operating expenses for the three months ended September 30th , 2025 , amounted to $7.5 million , compared to $5.1 million for the same period last year , an increase of $2.4 million .

Peter Sorensen: Operating expenses for the 3 months ended September 30, 2025 amounted to $7.5 million compared to $5.1 million for the same period last year, an increase of $2.4 million. This change was largely driven by an increase in non-cash stock-based compensation expense of $1.4 million versus Q3 2024, in which there was no stock comp expense. Increased headcount expenses of $0.8 million, increased marketing expenses of $0.2 million, increased legal expenses of $0.2 million, and R&D increased expenses of $0.1 million, partially offset by decreased commission expense of $0.8 million.

Speaker #6: This change was largely driven by an increase in non-cash stock based compensation expense of $1.4 million versus Q3 2020 , for which there was no stock comp expense .

Speaker #6: Increased headcount expenses of $0.8 million , increased marketing expenses of $0.2 million , increased legal expenses of 0.2 and R&D increased expenses of $0.1 million , partially offset by decreased commission expense of $0.8 million .

Speaker #6: Net income for the three months ended September 30th , 2025 was $10.3 million , compared to net loss of $20.7 million for the same period in 2024 , an increase of $31 million .

Peter Sorensen: Net income for the 3 months ended 30 September 2025 was $10.3 million compared to net loss of $20.7 million for the same period in 2024, an increase of $31 million. The increase in net income was primarily driven by the change in fair value derivative liabilities, which resulted in a non-cash gain of $6.1 million in Q3 2025 versus $18.8 million loss in Q3 2024, representing a $25 million year-over-year variance. In addition, we had a $5 million gain related to a patent sale as noted on a previous 8-K and in our most recent 10-Q.

Speaker #6: The increase in net income was primarily driven by the change in fair value of derivative liabilities , which resulted in a non-cash gain of $6.1 million in Q3 2025 versus $18.8 million loss in Q3 2020 .

Speaker #6: Four , representing a $25 million year over year variance . In addition , we had a $5 million gain related to a patent sale .

Speaker #6: As noted on a previous 8-K and in our most recent 10-q , we also had lower interest expense of $1.6 million in Q3 2025 , primarily due to the conversion of our previous outstanding notes into common stock in Q4 2024 .

Peter Sorensen: We also had lower interest expense of $1.6 million in Q3 2025, primarily due to the conversion of our previous outstanding notes into common stock in Q4 2024 as part of the note and warrant exchange. These impacts were partially offset by non-recurring costs of $0.5 million related to the repayment of our senior secured debt. EBITDA for the three months ended 30 September 2025 was $12.4 million. Adjusted EBITDA was $3.5 million versus $2.1 million for the same period last year, an improvement of $1.3 million year-over-year. Total current assets amounted to $22.6 million as of 30 September 2025 versus $18.4 million as of 31 December 2024. Cash totaled $9.6 million as of 30 September 2025.

Speaker #6: As part of the note and warrant exchange , these impacts were partially offset by non-recurring costs of $0.5 million related to the repayment of our senior secured debt EBITDA for the three months ended September 30th , 2025 was $12.4 million .

Speaker #6: Adjusted EBITDA was $3.5 million versus $2.1 million for the same period last year , an improvement of $1.3 million year over year . Total current assets amounted to $22.6 million as of September 30th , 2025 , versus $18.4 million as of December 31st , 2024 .

Speaker #6: Cash totaled $9.6 million as of September 30th , 2025 . We're grateful for the continued trust and support of our stakeholders . Q3 2025 was another excellent quarter for Sanuwave , and we're pleased with the progress we've achieved across our business .

Peter Sorensen: We're grateful for the continued trust and support of our stakeholders. Q3 2025 was another excellent quarter for SANUWAVE, and we're pleased with the progress we've achieved across our business. As we head into the Q4 of the year, we remain committed to executing with discipline, driving growth, and creating long-term value for our stockholders. With that, I'll turn the call back over to Morgan.

Speaker #6: As we head into the final quarter of the year , we remain committed to executing with discipline , driving growth and creating long term value for our stockholders .

Speaker #6: With that , I'll turn the call back over to Morgan .

Speaker #5: Thanks , Peter . So moving on to guidance . As we stated in our press release , we are guiding to 13 to 14 million in Q3 revenues , up 26 to 36% year on year .

Morgan Frank: Thanks, Peter. Moving on to guidance, as we stated in our press release, we are guiding to $13 to 14 million in Q3 revenues, up 26% to 36% year-on-year and also representing, you know, which would represent another all-time high revenue quarter for SANUWAVE. We're starting to see significant cause for optimism, you know, now that the market concern around reimbursement and wound is alleviating once, you know, because now that we now finally have some certainty rather than vast uncertainty. Obviously, it's only been a few days since the final rule was announced. As we said earlier, we already feel some movement beginning and some of the logjam is breaking free. As ever, I want to express my gratitude to the SANUWAVE team for all the hard work and their commitment and trust.

Speaker #5: And also representing and which would represent a further all time high revenue quarter for Sanuwave . We're starting to see significant cause for optimism now that the market concern around reimbursement and wound is alleviating .

Speaker #5: Once you because now that we now finally have some certainty rather than vast uncertainty . Obviously it's only been a few days since the final rule was announced .

Speaker #5: But as we said earlier , we can already feel some movement beginning and some of the logjams breaking free . So as ever , I want to express my gratitude to the Sanuwave team for all the hard work and their commitment and trust , and I'd also like to thank them for routinely falling for my the highest reward for good work is more work .

Morgan Frank: I'd also like to thank them for routinely falling for my the highest reward for good work is more work stick, and pretending that that's insightful and motivational. Well done, guys, and thank you. With that, thanks, everyone, and we will open the call up to questions.

Speaker #5: Stick and pretending that that's insightful and motivational . Well done guys . And thank you so with that , thanks everyone . And we will open the call up to questions .

Speaker #2: At this time , if you would like to ask a question , please press the star and one on your telephone keypad . You may remove yourself from the queue at any time by pressing star two .

Operator: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. We'll take our first question from Ian Castle with IFCM. Your line is open.

Speaker #2: We'll take our first question from Ian Castle with IFCM. Your line is open.

Speaker #6: Yeah , I just had a couple questions , mainly around .

Ian Castle: Yeah. I just had 2 questions, mainly around the reseller model that seems to be picking up some steam. Maybe the first question, though, is, you know, due to the disruption in skin substitutes, I was curious if, you know, the resellers or distributors of those skin substitutes now the revenues are probably down 90% versus last year. I'm curious if you're seeing any inbound interest from those resellers who are now kind of scrambling to pick up additional products to fill that revenue gap in their businesses.

Speaker #7: The reseller model that seems to be picking up some steam . Maybe . The first question , though , is due to the disruption in in skin substitutes .

Speaker #7: I was curious if the resellers or distributors of those skin substitutes . Now the the revenues are probably down 90% versus last year .

Speaker #7: And I'm curious if you've seen any inbound interest from those resellers who are now kind of scrambling to pick up additional products to fill that revenue gap in their businesses .

Morgan Frank: Well, okay. So, I mean, the short answer to that question is yes. It feels like there is a substantial realignment beginning in the space. Obviously, you know, this is a very significant change to a large product category. We've definitely seen some inbound interest. I think a bunch of it started, you know, even well before the rule came out, and was sort of, you know, and some were sort of predicating, you know, well, maybe, you know, maybe we'd be interested in picking this up depending on what happens. I think it's, you know, it's a little bit premature to say, Well, okay, this is gonna result in a ton of new deals. You know, what I will say is, you know, distribution is an important part of this space.

Speaker #5: Well , okay . So , I mean , the short answer to that question is yes , it feels like there is a substantial realignment beginning in the space .

Speaker #5: And obviously , you know , this is a this is a very significant change to a large product category . We've definitely seen some inbound interest .

Speaker #5: I think a bunch of it started , you know , even even well before the rule came out and was sort of , you know , and some were sort of predicating the , you know , well , maybe , you know , maybe we'd be interested in picking this up , depending on what happens .

Speaker #5: I think it's it's a little bit premature to say , well , okay , this is this is going to result in a ton of new deals , but , you know what I will say is distribution is an important part of this space .

Morgan Frank: Some of these distributors are very sophisticated. They have good account control. They do good work with the providers to help them, you know, even down to the level of selecting patients and determining care. It's something that we've been sort of stripping down and rebuilding this year. You know, our average sales through distributors and resellers was about 36% in 2024. In this quarter, it was about 25%. You know, that's up a little from last quarter, but still kinda not to levels where it used to be. We're sort of assessing what the right mix for us is gonna be.

Speaker #5: A lot of those some of these distributors are very sophisticated . They have good account . They have good account control . They do good work with the providers to help them , even even down to the level of selecting patients .

Speaker #5: And determining care . It's something that we've been sort of stripping down and rebuilding this year . You know , our average sales through distributors and resellers was about 36% in 2024 .

Speaker #5: In this quarter, it was about 25%. So that's up a little from last quarter, but still kind of not to levels where it used to be.

Speaker #5: And so we're kind of assessing what the right level of we're sort of assessing what the right mix for us is going to be .

Speaker #7: And how do you how do you kind of blend that distributor channel with your direct sales force ? How do you think about that ?

Ian Castle: How are you gonna blend that distributor channel with your direct sales force? How do you think about that?

Morgan Frank: Yeah, it's always, you know, that's always sort of the tricky bit. We, you know, we're doing it through sort of a deconflicting structure, where, you know, if our, you know, if our reps are chasing something, you know, it's theirs. You know, we don't what we want to avoid is, are the two channels stepping on each other. It's sort of, you know, if a distributor wants to go after a customer, they'll come to us and say, Hey, we think this is an interesting prospect. You know, we'll de-conflict it through our internal lists and say, Yeah, we don't have anybody who's working on that. Go ahead.

Speaker #5: Yeah , it's always , you know , that's always sort of the tricky bit . And we , you know , we're doing it through .

Speaker #5: We're doing it through sort of a deconflicting structure where , you know , if our if our reps are chasing something , you know , it's theirs .

Speaker #5: And , you know , we don't we want to avoid is are the two channels stepping on each other . And so it's sort of , you know , if a distributor wants to go after a customer , they'll come to us and say , hey , we think this is an interesting prospect and we'll de-conflict it through our internal deconflict through our internal lists and say , yeah , we don't have anybody who's working on that .

Speaker #5: Go ahead .

Speaker #7: And maybe last question on the reseller and distributor model , how do you handle inventory management ? You know , are they kind of , you don't want to be stuck , you know , stuffing the channels , so to speak ?

Ian Castle: Maybe last question on the reseller and distributor model. You know, how do you handle inventory management? You know, are they kind of, you know, wanna be, you know, stuffing the channel, so to speak?

Morgan Frank: Yeah.

Ian Castle: Where they're buying nine months worth of inventory. How do you think about those inventory turns?

Speaker #7: Where they're buying nine months worth of inventory . How do you think about those inventory turns ?

Ian Castle: Where they're buying nine months worth of inventory. How do you think about those inventory turns?

Speaker #5: Yeah , yeah , yeah . That's a that's a great question . And that's , that's something we've given a lot of thought to and something we worry about a lot .

Morgan Frank: Yeah. Yeah, yeah. That's a great question. That's something we've given a lot of thought to and something we worry about a lot. You know, when you're dealing with stocking distributors, you always sort of run this risk of do you have too much inventory in the channel, and will you wind up kind of choking on it? You know, we've been trying to be sort of measured with this and not putting too much inventory into the channel to really avoid that problem. I think, you know, the first major distributor we dealt with on a stocking basis this year was back kind of toward the end of Q2. They took about 15 systems from us into inventory, At the time I was actually pretty worried about that.

Speaker #5: You know , when you're dealing with stocking distributors , you always sort of run this risk of do you have too much inventory in the channel .

Speaker #5: And will you wind up kind of choking on it ? The you know , we've been trying to be sort of measured with this and not putting too much inventory into the channel to really avoid that problem .

Speaker #5: I think the first major distributor we dealt with on a stocking basis this year was back kind of toward the end of Q2 .

Speaker #5: They took about 15 systems from us into inventory , and at the time , I was actually pretty worried about that . They came back six weeks later and said , yeah , we've sold them , you know , can we have ten more ?

Morgan Frank: They came back 6 weeks later and said, Yeah, we've sold them. You know, can we have 10 more? Took 10 more, you know, went out and sold those again in another 8 weeks. I think if we can kind of keep those turns in the sort of 8 to 12 weeks range, I think that's healthy. I think once we start seeing it bump up against that kind of, you know, like 10 to 12 area, we're gonna start to get nervous, you know, for any given distributor. You know, to look at them overall, obviously I think we'd like to keep it, you know, more toward the 8 range.

Speaker #5: Took ten more . And then , you know , went out and sold those again in another eight weeks . And so I think if we can kind of keep those turns in the sort of eight to if we can keep the inventory turns , there in the sort of 8 to 12 weeks range , I think that's healthy .

Speaker #5: I think once we start seeing it bump up against that kind of that kind of , you know , like 10 to 12 area , we're going to start to get nervous .

Speaker #5: You know , for any given distributor and then , you know , to look at them overall , obviously I think we'd like to keep it , you know , more toward the sort of eight range .

Speaker #7: Okay . Thanks for the color on that .

Ian Castle: Okay. Thanks for the color on that.

Speaker #2: Our next question comes from Kyle Bowser with Roth Capital Partners . Your line is open .

Operator: Our next question comes from Kyle Bauser with ROTH Capital Partners. Your line is open.

Speaker #8: Hi . Good morning . Thanks for all the updates . Maybe just following up a little bit on that . What's the latest rep headcount .

Kyle Bauser: Hi, good morning.

Morgan Frank: Hey.

Kyle Bauser: Thanks for all the updates. Maybe just following up a little bit on that. What's the latest rep headcount?

Morgan Frank: Rep headcount is still 13, same as it was last quarter. We've refigured it a little bit. You know, we changed the shape of a couple of territories, moved it to 12 national territories, and now have 2 full-time kind of national key account managers. Overall count is the same.

Speaker #5: Rep headcount is still 13 . The same as it was last quarter . We've rejiggered it a little bit . We changed the shape of a couple of territories , moved it to 12 national territories , and now have two full time kind of national key account managers .

Speaker #5: But overall , overall count is the same .

Speaker #8: Got it . And how are you feeling about that heading into 26 . Is that a pretty good number ? In addition to having the distributors as you mentioned ?

Kyle Bauser: Got it. How are you feeling about that heading into 2060? That's a pretty good number in addition to having the distributors, as you mentioned.

Speaker #9: Yeah , I think .

Morgan Frank: You know, I think obviously given a lot of what's happening in the industry right now, as you can imagine, there are, there are resumes. I think we're gonna kinda do this on a, you know, we're doing this on sort of a let's see what we see basis. I mean, obviously, you know, we plan to grow this rep headcount as we go forward. You know, exactly how we do it right now is something that we are doing a lot of work to assess internally. You know, do we wanna start bringing in some reps to just manage distributors? Do we want more key account reps? Do we want more national territories?

Speaker #5: Obviously given a lot of what's happening in the industry right now , as you can imagine , there are there are resumes . So I think we're going to kind of do this on a , you know , we're doing this on sort of a let's see what we see basis .

Speaker #5: I mean , obviously , you know , we plan to grow this rep , this rep headcount as we go forward , you know , exactly how we do it right now is something that we are doing a lot of work to assess internally .

Speaker #5: Do we want to start bringing in some reps to just manage distributors ? Do we want more key account reps ? Do we want more national territories ?

Speaker #5: Do we want to bring in a set of , you know , a set of more kind of inside sales folks to either just handle customers or to just set appointments so that we're having we can get our closers more time closing .

Morgan Frank: Do we wanna bring in a set of, you know, a set of more kind of inside sales folks to either just handle customers or to just set appointments, right? That we can get our closers more time closing. Like, those are really the discussions we're having internally at the moment. I think, you know, we'll be continuing to add to the sales force on kind of a measured basis.

Speaker #5: That's really those are really the discussions we're having internally at the moment . I think , you know , we'll be we'll be continuing to add to the sales force on kind of a measured basis .

Speaker #8: Got it. Yep. Makes sense. And, just curious, what sort of annual revenue are some of your more productive reps generating?

Kyle Bauser: Got it. Yep, makes sense. Just curious, what sort of annual revenue some of your more productive reps are doing? maybe also kind of what's the reasonable run rate for reps to achieve-

Speaker #8: And maybe also kind of what's a reasonable run rate for reps to achieve .

Speaker #5: Yeah I .

Morgan Frank: Yeah.

Speaker #9: Mean it's .

Kyle Bauser: in scale?

Morgan Frank: I mean, it's, to some extent, that's always gonna be a little bit territory specific, right?

Speaker #5: To some extent that's always going to be a little bit territory specific , right ? So you know , the and and a function of how well developed a territory is , I mean , we had a rep exceed 2 million of sales in Q3 .

Kyle Bauser: Yeah.

Morgan Frank: You know, the and a function of how well developed a territory is. I mean, we had a rep exceed $2 million of sales in Q3. You know, we had a couple of others over $1 million. You know, as these ramp up, you know, getting to this, you know, kind of $4 to 6 million annual sales rate, I mean, it's certainly not impossible. I think given, you know, the difference, we have a couple of markets that are more developed than others. You know, it's a question of kind of how long does it take to get an undeveloped market to look more like a developed market. Ultimately, I mean, rep productivity here can be very high.

Speaker #5: You know , we had a couple of others over a million . And so as these ramp up , you know , getting to this , you know , kind of 4 to $6 million annual sales rate , I mean , it doesn't it's certainly not impossible .

Speaker #5: I think , given the difference , we have a couple of markets that are more developed than others . And so , you know , it's it's a question of kind of how long does it take to get an undeveloped market to look more like a developed market .

Speaker #5: But ultimately, I mean, rep productivity here can be very high.

Speaker #8: Got it . And internationally , we're any of the 155 systems sold or any of those into international markets in the quarter . Okay .

Kyle Bauser: Got it. Internationally, were any of the 155 systems sold, were any of those into international markets in the quarter?

Morgan Frank: No.

Kyle Bauser: Okay. Maybe just lastly on that point, how are you thinking about the international opportunity for UltraMIST? I know you've got a lot to focus on in the US, just curious if you know, be interested in looking to take on distribution partners in OUS markets.

Speaker #8: And maybe just lastly on that point , how are you thinking about the international opportunity for ultra ? Would you ever I know you've got a lot to focus on in the US , but just curious if you'd be interested in looking to take on distribution partners in markets .

Speaker #9: I mean , it's .

Speaker #5: Certainly something we'd look .

Speaker #9: At .

Morgan Frank: Look at, you know, it's always, I mean, we sort of refer to this internally as the gold retriever in a tennis ball factory problem, where it's like, what are you going to chase? I think, you know, at the moment, there's so much domestic opportunity that it just, this hasn't really gotten top of the pile. I mean, if there were a really compelling distributor who could basically handle all of this without a whole lot of intervention from us and, you know, in a market where there was an easy regulatory pathway, I mean, I suppose we'd look at it just, it isn't something we've spent a lot of cycle time on yet.

Speaker #5: You know , it's always I mean , we sort of refer to this internally as the golden retriever in a tennis ball factory problem , where it's like , what are you going to chase ?

Speaker #5: And I think , you know , at the moment there's so much domestic opportunity that it just just hasn't really gotten top of the pile .

Speaker #5: I mean , if there were a if there were a really compelling distributor who could basically handle all of this without a whole lot of without a whole lot of intervention from us , and , you know , in a market where there was where there was an easy regulatory pathway .

Speaker #5: I mean , I suppose we'd look at it , but it just isn't something we've spent a lot of cycle time on yet .

Speaker #10: Sure .

Alex Silverman: Sure. Okay, got it. Morgan, Peter, thanks for all the updates.

Kyle Bauser: Sure. Okay, got it. Morgan, Peter, thanks for all the updates.

Speaker #8: Okay . Got it . Morgan . Peter , thanks for all the updates .

Speaker #11: Thanks .

Morgan Frank: Thanks.

Speaker #2: Our next question comes from Carl Burns with Northland Capital Markets . Your line is open .

Operator: Our next question comes from Carl Byrnes with Northland Capital Markets. Your line is open.

Speaker #12: Thanks for the question . Again . You know , considering the CMS fixed rate , one 2728 per square centimeter , would you expect that the private physician practices would look to ultra as an additional line of revenue ?

Carl Byrnes: Thanks for the question. Again, I, you know, considering the CMS fixed rate $127.28 per square centimeter, would you expect that the private physician practices would look to UltraMIST as an additional line of revenue? On that, I mean, how long do you think that takes to play out? I have a follow-up as well. Thanks.

Speaker #12: And and on that , I mean , how long do you think that takes to play out ? And then I have a follow up as well .

Speaker #12: Thanks .

Morgan Frank: I mean, short answer is yes. Right? I mean, I think physicians are often maximizing two things, right? They're maximizing their desire to provide good patient care and for patients to get better. Obviously, you know, they're running a business. So to the extent that they find both revenue and care gaps, you know, this becomes a very interesting option. I mean, on a relative basis, you know, the attractiveness of UltraMIST seems to have increased a great deal, you know, particularly from a, you know, if your goal is revenue maximization. Exactly how long that takes to play through is an interesting question. I'm not really sure how to answer it with any, like, rigor. It, it seems to vary a great deal by folks. I mean, people respond to new realities with differing time frames.

Speaker #5: I mean , short answer is yes . Right ? I mean , I think physicians are often maximizing two things , right ? They're maximizing their desire to provide good patient care .

Speaker #5: And for the patient to get better . And obviously , you know , they're running a business . And so to the extent , to the extent that they find both revenue and care gaps , this becomes a very interesting option .

Speaker #5: I mean , by on a relative basis , you know , the attractiveness of ultra seems to have increased a great deal . You know , particularly from a , if your goal is revenue maximization .

Speaker #5: Exactly how long that takes to play through is an interesting question . I'm not really sure how to answer it with any like rigor .

Speaker #5: It it seems to vary a great deal by folks . I mean people , just people respond to new realities with differing time frames .

Speaker #5: We've certainly seen a change in inbound . And , you know , we've certainly seen I mean , there we've certainly seen people who are sort of like on the fence saying , well , maybe let's see suddenly get more interested .

Morgan Frank: We've certainly seen a change in inbound. You know, we've certainly seen people who are sort of, like, on the fence saying, Well, maybe, let's see, suddenly get more interested. I think there's definitely going to be some of that. Exactly how it plays out is, you know, complex.

Speaker #5: And so, I think there's definitely going to be some of that. Exactly how it plays out is complex?

Speaker #12: Got it . Thanks . And then just one follow up question . You know , looking at mobile wound care . What do you think happens there given given the CMS change and kind of how does that affect your business ?

Carl Byrnes: Got it. Thanks. Then just one follow-up question. You know, looking at mobile wound care, what do you think happens there given the CMS change? Kind of how does that affect your business? What % of your business is tied into the mobile space? Thanks.

Speaker #12: What percent of your business is tied into the mobile space . Thanks .

Speaker #5: I think I mean , the mobile is experiencing a lot of the same issues as others . And there are there are widely divergent practices within mobile and we've been doing some looking at this and kind of tearing into the CMS data just to get a look at what we think , what we think the interrelationships are between , you know , skin subs and ultra .

Morgan Frank: I think, I mean, the mobile is experiencing a lot of the same issues as others. There are widely divergent practices within mobile. We've been doing some looking at this and kind of tearing into the CMS data just to get a look at, you know, what we think, what we think the interrelationships are between, you know, skin subs and UltraMIST. You know, one of the things we discovered is that, you know, 55% of the practitioners who bill, you know, UltraMIST don't bill haven't billed any skin sub at all in the last four years. Of the 45% who do, you know, most are, you know. A lot of times it's not the same patient or it's, you know, you can't bill the two in the same visit.

Speaker #5: You know , one of the things we've discovered is that 55% of the of the practitioners who bill , you know , ultra mist don't build any .

Speaker #5: You haven't built any skin sub at all in the last four years . So , you know , of the 45% who do you know most are , you know , a lot of times it's not the same patient or it's you can't build a two in the same visit .

Speaker #5: So from a standpoint of like , what's mobile going to do ? I think you some of the folks who were most aggressively using skin subs , you know , may see their practices , you know , either change dramatically or , you know , terminate .

Morgan Frank: From a standpoint of, like, what's mobile going to do, I think, you know, some of the folks who were most aggressively using skin subs, you know, may see their practices, you know, either change dramatically or, you know, terminate. I think, I mean, and this, like, just speaking hypothetically, you know, if my goal as a provider were to do the maximum number of skin sub applications, I wouldn't be using UltraMIST, right? Because the wound would heal more quickly, and you would wind up doing fewer applications. I think there's been sort of an inherent sorting here, where the folks most interested in doing the most skin sub have also tended to be the folks who were not using a lot of UltraMIST.

Speaker #5: But I think , I mean , and this just speaking hypothetically , if if my goal was to provider were to do the maximum number of skin sub applications , I wouldn't be using ultra because the wound would heal more quickly and you would wind up doing fewer applications .

Speaker #5: And so I think there's been sort of an inherent sorting here where the the folks most interested in doing the most skin sub have also tended to be the folks who were not using a lot of ultra .

Speaker #12: Got it . Cool . Thanks so much .

Carl Byrnes: Got it. Cool. Thanks so much.

Speaker #2: Our next question comes from Alex Silverman with AWS investments . Your line is open .

Operator: Our next question comes from Alex Silverman with AWM Investments. Your line is open.

Speaker #13: Hey good morning . Thanks for the update . Wondering two questions . One , can you give us a sense of , you know , what kind of toeholds or trialing you're doing in some of the very , very large wound centers ?

Alex Silverman: Hey, good morning. Thanks for the update. Wondering, two questions. One, can you give us a sense of, you know, what kind of toe holds or trialing you're doing in some of the very, very large, wound centers? Then I'll ask my second question after.

Speaker #13: And then I'll , I'll ask my second question after .

Morgan Frank: Well, certainly an interesting question. I mean, we're starting to get, I mean, one of, you know, we're starting to spread through a couple of hospital networks in particular, or at least these are things that, you know, have been going long enough that I think we can talk about them. You know, one in particular is one of the larger hospital networks in the US. We've been in at a couple of their flagship facilities now for several months. It's gone really well. I think they are using the product in a similar fashion to some other large hospital chains, predominantly around treating HAPIs and incipient HAPIs. I'm sorry, that's hospital-acquired pressure injury. You know, essentially, you lay on your hip or your back too long, it turns into a pressure ulcer. You know.

Speaker #9: Well .

Speaker #5: Certainly . Interesting question . I mean , we've we're starting to get we're starting to spread through a couple of hospital networks in particular , or at least these are , these are things that have been going long enough that I think we can talk about them .

Speaker #5: You know , one in particular is one of the larger hospital networks in the US . We've been in at a couple of their flagship facilities now for several months .

Speaker #5: It's gone really well . I think they are using the product in a similar fashion to some other large hospital chains , predominantly around treating Hap eyes and incipient Hap eyes .

Speaker #5: So that's hospital acquired pressure injury . Essentially , you lay on your lay on your hip or your back too long . It turns into a pressure ulcer .

Speaker #5: You know , in a patient with , you know , suppressed immune system or ill health , those can be very , very serious , even life threatening .

Alex Silverman: Yeah.

Morgan Frank: in a patient with, you know, suppressed immune system or ill health, those can be very, very serious, even life-threatening. you know, we're starting to spread there. We're starting to, you know, work on, you know, how do we become a. We were added to their approved vendor list, you know, they're kind of 150-ish hospitals and 2,200 facilities are out free to buy. We're definitely working on some other large opportunities. Nothing I can really talk about by name here right now, but, give me a little time on that, and I may have something for you.

Speaker #5: And so , you know , we're starting to spread there . We're starting to , we're starting to work on how do we become a we were added to their approved vendor list .

Speaker #5: And so , you know , they're kind of 150 ish hospitals and 2200 facilities are now free to buy . We're definitely working on some other large opportunities .

Speaker #5: Nothing I can really talk about by name here right now , but give me a little time on that and I may have something for you .

Speaker #13: Okay , great . And then second question , have you guys thought about how to get around the , the , the capital approval process , which can be so painful at some of these bigger buyers ?

Alex Silverman: Okay, great. Then second question, have you guys thought about how to get around the capital approval process, which can be so painful at some of these bigger buyers, the hospitals and the large wound care centers that, you know, have just painful processes?

Speaker #13: The hospitals and the large wound care centers that , you know , have just painful processes .

Morgan Frank: We have. In fact, it's something we've been giving a lot of thought to. Obviously, you know, starting to have a bit of a balance sheet helps. As we look at a number, your hospitals in particular tend to have very difficult capital cycles. You know, their capital budgets are highly segregated from their operating budgets. You know, I mean, you walk into a hospital, you'll see tracking codes, like, even on computer monitors because those are leased, right? Like, that's how-

Speaker #9: We have .

Speaker #5: In fact , it's something we've been giving a lot of thought to . And obviously , you know , starting to have a bit of a balance sheet helps the as we look .

Speaker #5: at a number hospitals in particular tend to have very difficult capital cycles and their capital budgets are highly segregated from their operating budgets .

Speaker #5: And so , I mean , you walk into a hospital , you'll see tracking codes even on computer monitors , because those are leased .

Speaker #5: Right . Like that's how that's how aggressive the , the cap budgets are protected . There . And so I think moving to something along the lines of a , you know , a rental model at prices that make sense for both sides , particularly if you could tie it to some sort of usage minimums , makes a lot of sense .

Alex Silverman: Yeah.

Morgan Frank: that's how aggressive the, like, the cap budgets are protected there. I think moving to something along the lines of a, you know, a rental model at prices that, you know, make sense for both sides, particularly if you could tie it to some sort of usage minimums, makes a lot of sense. Some hospitals don't seem to care. I mean, we've seen a number that are just like, "Great, let us buy the thing." There are many others for whom the cap budgets are tight. It seems to vary a lot hospital to hospital. Yeah, we're definitely starting to consider the, you know, can we rent these to hospitals that we believe will be, you know, sort of high use environments. Like, that can be a great model for us.

Speaker #5: Some hospitals don't seem to care . I mean , we've seen a number that are just like , great , let us buy the thing .

Speaker #5: But there are many others for whom the cap budgets are tight . So it seems to vary a lot . Hospital to hospital .

Speaker #5: But yeah , we're definitely starting to consider the , you know , can we rent these to hospitals that we believe will be , you know , sort of high environments that that can be that that can be a great model for us .

Speaker #13: I assume with a , I don't know , 5000 ish dollar cost for a system . The payback of placing one of these is could be a pretty quick payback for you .

Alex Silverman: I assume with a, I don't know, $5,000-ish dollar cost for a system, the payback of placing one of these could be a pretty quick payback for you.

Morgan Frank: obviously, depending on, you know, I'm sure you can do the math, right? If we price it at various points. You know, the real, you know, I mean, obviously the real fun for us is if you're selling, you know, if you're getting people to use, you know, 3, 4 cases of applicators a month, the value of the consumables rapidly exceeds the price of the capital sale.

Speaker #5: Obviously , depending on it . I'm , I'm sure I'm sure you can do the math right . If we if we price it at various at various points .

Speaker #5: But the real , you know , I mean , obviously the real fun for us is if you're selling , if you're getting people to use , you know , three , four cases of use the value of the consumables rapidly exceeds the price of the capital .

Speaker #5: So .

Speaker #13: Right , right . Okay . Great . Thank you .

Alex Silverman: Right. Right. Okay, great. Thank you.

Speaker #11: Thanks , thugs .

Morgan Frank: Thanks, Hugs.

Speaker #2: As a reminder , if you would like to ask a question that is star and one to join the queue , we'll take a question from Andrew REM with Odinson partners .

Operator: As a reminder, if you would like to ask a question, that is star and one to join the queue. We'll take a question from Andrew Rem with Odinson Partners. Your line is open.

Speaker #2: Your line is open . .

Speaker #14: Morning , gentlemen . I just wanted to go back to this . The reseller and is there a way that you guys can kind of bifurcate the market , where maybe direct you go to large , large accounts , heavy users and use resellers to get to kind of the fragmented small customers that would be less efficient to service on a direct basis .

Andrew Rem: Morning, gentlemen. I just wanted to go back to this, the reseller. Is there a way that you guys can kind of bifurcate the market where maybe direct you go to large accounts, heavy users, and use resellers to get to kind of the fragmented small customers that would be less efficient to service on a direct basis?

Morgan Frank: Yeah. You, you're speaking very much to a, to an internal discussion we have frequently. We, you know, we refer to them, you know, internally as bunnies, deer, elephants, and whales. You know, it's hard to have high-priced reps chasing bunnies. A lot of the distributors know a lot of the smaller customers really well. It's certainly something we're looking at. You know, whether that ultimately turns out to be the solution, it's certainly possible. It, you know, it's an idea we're exploring. I think we're just trying to get some experience with it and see how it works.

Speaker #5: Yeah . So you're speaking very much to a to an internal discussion . We have frequently the , you know , we we refer to them in internally as bunnies , deer , elephants and whales and , you know , the it's hard to have high priced reps chasing bunnies .

Speaker #5: And so, a lot of the distributors know a lot of the smaller customers really well. So, it's certainly something we're looking at.

Speaker #5: And , you know , whether that ultimate whether that ultimately turns out to be the solution , it's certainly possible . It you it's an idea .

Speaker #5: We're exploring . I think we're just trying to get some experience with it and see how it works . I mean , we we made a lot of changes in our distribution network and sort of tried to do a , you know , tried , tried to move to a , you know , more engaged , more hands on , more value add channel .

Morgan Frank: I mean, we made a lot of changes in our distribution network and sort of tried to do a, you know, tried to move to a, you know, more engaged, more hands-on, more value-add channel. We're still, you know, we're still getting some experience with it and seeing, you know, how it works and what it's good at and how to integrate it with our sales force most productively. Yeah, I mean, the idea you discussed is certainly one we've been looking at.

Speaker #5: And so we're still we're still getting some experience with it and seeing , you know , how how it works and what it's good at and how to how to integrate it with our Salesforce most productively .

Speaker #5: But yeah , I mean , the the idea the idea you discussed is certainly one we've been looking at .

Speaker #14: In would applicator sales also run through the reseller, or would you just use them to sell systems?

Andrew Rem: Would applicator sales also run through the reseller, or would you just use them to sell systems?

Morgan Frank: I mean, ultimately, it depends on the distributor or reseller. From many of the folks we're starting to talk to now have much more sophisticated ERP systems and, you know, systems that can integrate with our own. You know, what we're really looking for is to make sure we understand exactly how many applicators would be in the channel and exactly what the flow through to end customers winds up being. You know, we're very sensitive to that attach rate, like how many cases of applicators per week is a given user consuming. So to the extent that we can sustain adequate visibility to that, you know, we can allow sort of applicators into the channel.

Speaker #5: It's going to be I mean ultimately it depends on the it depends on the distributor or reseller . Like from many of the folks who are starting to talk to you now have much more sophisticated ERP systems and systems that can integrate with our own , you know what we're really looking for is to make sure we understand exactly how many , how many applicators would be in the channel and exactly what the flow through to end customers winds up being .

Speaker #5: You know , we're very sensitive to that attach rate . Like how many , how many cases of applicators per week is a given user consuming .

Speaker #5: And so to the extent that we can sustain adequate visibility to that , you know , we can , you know , we you know , we can allow sort of applicators into the channel .

Speaker #5: I mean , predominantly what we've done with these distributors is at least in the past , is to they'll set up the customer .

Morgan Frank: I mean, predominantly what we've done with these distributors is, you know, at least in the past. You know, they'll set up the customer. That customer will then come and order applicators from our portal, you know, so we have the direct relationship with them. We're directly drop shipping to them. Then, you know, we'll pay commission to a distributor based on those applicators. You know, we're starting to look more at the... Many of these folks just want to do, you know, stocking entirely themselves. You know, the question just becomes, can we sufficiently integrate it, that it makes sense for both sides?

Speaker #5: That customer will then come and order applicators from our portal . So we have the direct relationship with them . We're directly drop shipping to them .

Speaker #5: And then , you know , we'll pay commission to a distributor based on those applicators . But we're starting to look more at many of these folks just want to do , you know , want to do stocking entirely themselves .

Speaker #5: The question just becomes , can we sufficiently integrate it that it makes sense for both sides ?

Speaker #14: And then maybe lastly , and I'm not sure if this is a competitive if it is , you don't need to answer . But it does seem like the current environment lends itself to leverage from for you guys .

Andrew Rem: Maybe lastly, and I'm not sure if this is competitive, so if it is, you don't need to answer, but it does seem like the current environment lends itself to leverage for you guys in terms of negotiating with resellers. Maybe that speaks a little bit to your increased sense of urgency, but maybe can you comment it on that at all?

Speaker #14: In terms of negotiating with resellers . So and maybe that speaks a little bit to your increased sense of urgency , but maybe can you comment on that at all ?

Morgan Frank: I mean, I don't know that I really want to speak to something like leverage. It, you know, this is one of those moments where there's kind of a sorting hat going on. I think, you know, of like, some of the key salience in this market just changed, and people are adapting to this new situation. I think that provides a lot of opportunity. I think it's made a lot of people more interested in, you know, just in engaging with SANUWAVE. We've had a lot of inbound interest, and it feels like this is a great time to make some new friends.

Speaker #5: I mean , I know that I really want to speak to something like leverage it , you know , we're . The this is one of those moments where there's kind of a sorting hat going on .

Speaker #5: And I think , you know , like some of the key salience in this market just changed . And people are adapting to this new situation .

Speaker #5: And I think that provides a lot of opportunity . I think it's made it's made a lot of people more interested in , you know , just engaging with Sanuwave .

Speaker #5: We've had a lot of we've had a lot of inbound interest and it feels like this is a great time to it feels like this is a great time to kind of make some new friends .

Speaker #14: All right . Well , great quarter guys . Appreciate the time .

Andrew Rem: All right. Well, great quarter, guys. Appreciate the time.

Speaker #11: Thanks .

Morgan Frank: Thanks.

Speaker #2: It appears we have no further questions at this time . I'll turn the program back to the speakers for any additional or closing remarks .

Operator: It appears we have no further questions at this time. I'll turn the program back to the speakers for any additional or closing remarks.

Speaker #11: Well .

Morgan Frank: Well, thanks, everyone. Appreciate your making the time, first thing on a Friday morning, and we look forward to updating you further in the future. Thanks again.

Speaker #5: Thanks everyone . Appreciate your taking the time . First thing on a Friday morning and we look forward to updating you further in the future .

Speaker #5: Thanks again .

Operator: This does conclude today's program. Thank you for your participation, and you may disconnect at any time.

Q3 2025 SANUWAVE Health Inc Earnings Call

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