Q3 2025 SANUWAVE Health Inc Earnings Call
Speaker #3: Please stand by . Your program is about to begin . Good day , everyone , and welcome to the Sanuwave earnings call . At this time , all participants are in a listen only mode .
Speaker #3: 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 #3: 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 #3: 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 #3: Please go ahead .
Speaker #4: 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 .
Speaker #4: 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 #4: 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 #4: 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 #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: Scripture 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 #4: 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 .
Speaker #4: 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 #4: 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 picture Python quarter last year .
Speaker #4: When a large order drove 89% year on year growth 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 #4: We sold 155 ultra systems in Q3 , also an all time record and up from 124 last year . Again , the pig quarter and 116 last quarter .
Speaker #4: 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 .
Speaker #4: Also , an all time record , up 26% year on year , and 6% sequentially from Q2 at 59% of revenues for the quarter .
Speaker #4: 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 #4: 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 , but up from 75.5% a year ago .
Speaker #4: This is this was primarily as a result of slightly lower overall ASP for ultra 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 and resold , as opposed to selling at full price and paying commission .
Speaker #4: This works out about the same , maybe slightly better for us on the operating line , but it does impact gross margins a bit .
Speaker #4: 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 and the new , more manufacturable applicator process continues .
Speaker #4: 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 .
Speaker #4: But I think at this point January is probably a better bet . The clean room and equipment are in 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 #4: We use a blended cost basis for calculating our cost of goods sold . So it will take a few quarters for the this new process to show through fully .
Speaker #4: 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 #4: So Q3 has been a productive time for SANUWAVE Health, Inc. . 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 closer to 29 million with closing costs to 24 million .
Speaker #4: And our interest rate from 19.5 to sulfur plus 350 , which is currently We about 7.63% . This placed the company on excellent financial footing and positions it well to pay down the debt from cash flow , as the facility contains no prepayment penalties or fees .
Speaker #4: 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 .
Speaker #4: As of this 10-q . So we've gotten 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 wait and see attitude to what turned out to be some pretty substantial changes in the skin sub and allograft reimbursement market .
Speaker #4: 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 .
Speaker #4: 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 .
Speaker #4: 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 simply choose to simply sort of back off a little and to use advanced wound care treatments on fewer patients at the margin .
Speaker #4: 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 .
Speaker #4: We think this is an overall positive trend for Sanuwave and for Ultra Mist . We suspect that this is a paradigm in which our products can really thrive .
Speaker #4: 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 #4: 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 2500 or 500 or $127 per square centimeter in skin subs , this was simply too much variance for people to make decisions around .
Speaker #4: 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 .
Speaker #4: 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 , 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 .
Speaker #4: 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 currently with the most qualitatively and quantitatively promising sales funnel I've ever seen in my tenure here .
Speaker #4: It's been a little bit frustratingly slow to move, but it feels like that may be rapidly starting to change. So, this is an exciting time here, and one that should be very good for SANUWAVE.
Speaker #4: 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: Thank you . Morgan , we had a strong third quarter at Sanuwave with revenue reaching a new all time quarterly record and up 22% year over year .
Speaker #5: 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 #5: 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 #5: 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 #5: 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 Ultram system production costs and our strategic pricing initiatives across systems and applicators .
Speaker #5: 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 #5: 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 .
Speaker #5: 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 #5: 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 .
Speaker #5: Partially offset by decreased commission expense of $0.8 million . 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 .
Speaker #5: 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 in Q3 2020 .
Speaker #5: For representing a $25 million year over year variance . In addition , we had a $5 million gain related to a patent sale .
Speaker #5: 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 .
Speaker #5: As part of the note in 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 #5: 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 December 31st , 2024 .
Speaker #5: 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 as of progress we've achieved across our business as we head into the final quarter of the year , we remain committed to executing with disciplined driving , growth and creating long term value for our stockholders .
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 , we are guiding to 13 to 14 million in Q3 revenues , up 26 to 36% year on year .
Speaker #4: And also representing which would represent a another 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 the 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 #4: 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 team for all of the hard work and their commitment and trust .
Speaker #4: And 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 .
Speaker #4: Well done guys , and thank you so with that , thanks everyone . And we will open the call up to questions .
Speaker #3: 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.
Speaker #3: We'll take our first question from Ian Castle with IFC . Your line is open .
Speaker #5: Yeah , I just .
Speaker #6: Had a couple questions , mainly around the reseller model . That seems to be picking up some steam . Maybe the first question , though , is due to the disruption in skin substitutes .
Speaker #6: I was curious if the resellers or distributors of those skin substitutes—now that the revenues are probably down 90% versus last year.
Speaker #6: And 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 #4: 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 #4: 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 #4: 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 #4: 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 .
Speaker #4: They a lot of these 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 #4: 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 #4: 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 #4: 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 #4: .
Speaker #6: And how do you how do you kind of blend that distributor channel with your direct sales force ? How do you think about that ?
Speaker #4: Yeah , it's always , you know , that's always sort of the tricky bit . And we , you know , we're doing it through .
Speaker #4: We're doing it through sort deconflicting structure where , you know , if our if our reps are chasing something , you know , it's theirs .
Speaker #4: 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 .
Speaker #4: We'll de-conflict through our internal lists and say , yeah , we don't have anybody who's working on that . Go ahead .
Speaker #6: And maybe last question on the reseller and distributor model . How do you handle inventory management ? You know , are they kind
Speaker #6: know , stuffing the channels , so to of a speak ? Where they're buying nine months worth of inventory . How do you think about those inventory turns ?
Speaker #4: 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 .
Speaker #4: 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 #4: 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 #4: 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 #4: 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 ?
Speaker #4: 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 #4: 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 just start nervous , you know , for any given distributor .
Speaker #4: 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 #6: Okay . Thanks for the color on that .
Speaker #3: Our next question comes from Kyle Bosser with Roth Capital Partners . Your line is open .
Speaker #7: Hi . Good morning . Thanks . All the updates . Maybe just following up a little bit on that . What's the latest rep headcount .
Speaker #4: Rep headcount is still 13 . The same as to get 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 Cato National key account managers .
Speaker #4: But overall , overall count is the same .
Speaker #7: 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 .
Speaker #8: I think .
Speaker #4: 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 #4: I mean , obviously , you 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 #4: 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 #4: 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 like , that's really those are really the discussions we're having internally at the moment .
Speaker #4: I think , you know , we'll be we'll be continuing to add to the sales force on kind of a measured basis .
Speaker #7: Got it . Yep . Makes sense . And just curious what sort of annual revenue some of your more productive reps are doing .
Speaker #7: And maybe also kind of what's a reasonable run rate for reps to achieve?
Speaker #8: Yeah , I mean it's .
Speaker #4: To some extent that's always going to be a little bit territory specific , right ? So you know , the and a function of how well developed a territory is , I mean , we had a rep seed 2 million of sales in Q3 .
Speaker #4: 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 #4: 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 #4: But ultimately , I mean , rep productivity here can be very high .
Speaker #7: Got it . And internationally , were any of the 155 systems sold or any of those into international markets in the quarter .
Speaker #8: No .
Speaker #7: Okay . 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 , be interested in looking to take on distribution partners in markets .
Speaker #8: I mean , it's .
Speaker #4: Certainly something we'd look .
Speaker #8: At .
Speaker #4: You know , it's always I mean , we sort of refer to this internally as the golden retriever and a tennis ball factory problem where it's like , what are you going to chase ?
Speaker #4: 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 #4: 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 #4: 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 #8: Sure .
Speaker #7: Okay . Got it . Morgan . Peter , thanks for all the updates .
Speaker #8: Thanks .
Speaker #3: Our next question comes from Carl Burns with Northland Capital Markets . Your line is open .
Speaker #9: Thanks for the question . Again . You know , considering the CMS fixed rate , one 2728 per square centimeter , would you expect that the the private physician practices would look to ultra as an additional line of revenue and and on that , I mean , how long do you think that takes to play out .
Speaker #9: Then I have a follow up as well . Thanks .
Speaker #4: 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 the patient to get better .
Speaker #4: And obviously 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 #4: I mean , by on a relative basis , you know , the attractiveness of ultra mist seems to have increased a great deal .
Speaker #4: 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 .
Speaker #4: I'm not really sure how to answer it with any rigor . It it seems to vary a great deal by folks . I mean people , just people respond to new realities with differing time frames .
Speaker #4: We've certainly seen a change in inbound , and we've certainly seen , I mean , there we've certainly seen people who were sort of like on the fence saying , well , maybe lets see suddenly get more interested .
Speaker #4: And so I think there's definitely going to be some of that exactly how it plays out is complex .
Speaker #9: 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 ?
Speaker #9: What percent of your business is tied into the mobile space? Thanks.
Speaker #4: I .
Speaker #8: Think .
Speaker #4: 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 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 missed .
Speaker #4: You know , one of the things we discovered is that , you know , 55% of the of the practitioners who bill , you know , ultra mist don't bill any .
Speaker #4: 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 #4: 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 .
Speaker #4: But I think , I mean , this just speaking hypothetically , if if my goal was a provider were to do the maximum number of skin sub applications , I wouldn't be using ultra because the wound would heal more quickly .
Speaker #4: And you would wind up doing fewer applications . 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 #9: Got it . Cool . Thanks so much .
Speaker #3: Our next question comes from Alex Silverman with AWS investments . Your line is open .
Speaker #10: 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 ?
Speaker #10: And then I'll , I'll ask my second question after .
Speaker #8: Well .
Speaker #4: 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 #4: 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 #4: 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 eyes and incipient HAP.
Speaker #4: Sorry , 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 #4: You know , in a patient with , you know , suppressed immune system or ill health , those can be very , very serious , even life threatening .
Speaker #4: And so 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 #4: 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 #4: 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 #10: 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 ?
Speaker #10: The hospitals and the large wound care centers that , you know , have just painful processes .
Speaker #8: We have .
Speaker #4: 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 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 #4: And so , I mean , you walk into a hospital , you'll see tracking codes even on computer monitors , because those are leased .
Speaker #4: Right . Like that's how that's how aggressive the like 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 .
Speaker #4: 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 .
Speaker #4: But there are many others for whom the cap budgets are tight . So it seems to vary a lot . Hospital to hospital .
Speaker #4: 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 use environments like that , that can be that that can be a great model for us .
Speaker #10: 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 .
Speaker #10: Payback for you .
Speaker #4: Obviously , depending on I'm , I'm sure I'm sure you can do the math right . If we if we price it at a various at various points .
Speaker #4: But 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 , three , four cases of applicators a month , the , the value of the consumables rapidly exceeds the price of the capital .
Speaker #4: So .
Speaker #10: Right , right . Okay . Great . Thank you .
Speaker #4: Thanks . Hugs .
Speaker #3: 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 .
Speaker #3: Your line is open . .
Speaker #11: Good 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 .
Speaker #4: 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 .
Speaker #4: And , you know , the it's hard to have high priced reps chasing bunnies . And so and a lot of the distributors know a lot of the smaller customers really well .
Speaker #4: So it's certainly something we're looking at . And , you know , whether that ultimate whether that ultimately turns out to be the solution , it's certainly possible .
Speaker #4: 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 #4: 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 .
Speaker #4: 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 .
Speaker #4: Most productively . But yeah , I mean , the the idea the idea you discussed is certainly one we've been looking at
Speaker #4: .
Speaker #11: In
Speaker #11: would would applicator sales also run through the reseller or would you just use them to sell systems .
Speaker #4: It's going to be
Speaker #4: 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 the can integrate with our own .
Speaker #4: You know what? What we're really looking for is to make sure we understand exactly how many applicators would be in the channel.
Speaker #4: 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 , how many cases of applicators per week is a given user consuming .
Speaker #4: And so to the extent that we can sustain adequate visibility to that , we can , you know , we you know , we can allow sort of applicators into the channel .
Speaker #4: I mean , predominantly what we've done with these distributors is at least in the past , is to they'll set up the customer .
Speaker #4: 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 #4: 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 #4: The question just becomes , can we sufficiently integrate it that it makes sense for both sides ?
Speaker #11: And then maybe lastly, and I'm not sure if this is competitive — if it is, you don't need to answer — but it does seem like the current environment lends itself to leverage from you guys.
Speaker #11: 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 ?
Speaker #4: I don't 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 #4: And I think , you know , like what some of the key salience in this market just changed . And people are adapting to this new situation .
Speaker #4: 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 , engaging with Sanuwave .
Speaker #4: 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 #11: All right . Well , great quarter guys . Appreciate the time .
Speaker #12: Thanks .
Speaker #3: 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 #13: Well .
Speaker #4: Thanks everyone . Appreciate your taking the time . First thing on a Friday morning and we look forward to updating you further in future .
Speaker #4: Thanks again .