SANUWAVE Health Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 9, 2025

There are 4 speakers on the call.

Operator

Good day, everyone, and welcome to today's 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. Please note today's call will be recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Chairman and CEO of SANUWAVE, Morgan Frank.

Operator

Please go ahead.

Speaker 1

Thank you, Chloe. Welcome everyone to SANUWAVE's first quarter twenty twenty five earnings call. As many of you probably noticed, the Form 10 Q was filed with the SEC last night And our earnings release was issued this morning along with an updated presentation, which was made available on our website at the Investors section. You can please refer to that during this presentation. It really is useful, I promise.

Speaker 1

Okay. So joining on the call today, we have Peter Sorensen, our CFO. And after the presentation, we will open the call up to Q and 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 1

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. 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. The 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 be recalculable from the rounded numbers used for disclosure purposes.

Speaker 1

As a reminder, our discussion today will include non GAAP numbers. Reconciliations between our GAAP and non GAAP results can be found in our recently filed 10 Q for the period ended 03/31/2025. Okay. Thus prefaced, let's get to the interesting part. So Q1 was a strong start to the year coming in ahead of expectations.

Speaker 1

And obviously, we're very pleased to put up a 61% year on year growth comp in a quarter in which we hired a new Head of Sales and worked through some associated sales force restructuring. Placing 98 new Ultomis systems in Q1 represented 128% increase from system sales of 43% in Q1 of last year. And we did this without any unusually large orders in the quarter and with no customer representing more than the mid-6s percentage of our overall revenue. I mean, frankly, the quarter came in a bit stronger than we expected, but never a bad thing to get a good start to the year, especially in Q1, which is typically a quieter time seasonally for SANUWAVE and for medical device in general. We got going with a number of new customers in the quarter, some of whom we believe have excellent potential for follow on business and growth.

Speaker 1

We ended the quarter with eleven forty five systems in the field, four twenty nine of which have been placed in the trailing twelve months. Moving on to applicators. Sales in the quarter were $5,800,000 versus $4,100,000 last Q1. This was down very slightly from Q4, which is not unexpected. It's actually a pretty typical pattern, albeit one that was swamped by other factors last Q1 and so perhaps warrants a little bit of explanation.

Speaker 1

Patients see their out of pocket maximums reset every January and thus it's quite common to see people delay treatment in Q1 once they start having to pay out of pocket. Again, this tends to lead to a bit of reduced usage in Q1 until it starts to catch up in Q2 and later in the year. Applicators constituted 62% of our revenues in Q1, which is toward the high end, but within our 55% to 65% target. Gross margins increased a bit for the quarter versus Q4 as a result of strong systems pricing and efficiencies with our contract manufacturers. We started cutting steel on our new four cavity applicator mold back in January and we are on schedule to complete its qualification and have production commercial product in Q4 of this year.

Speaker 1

This should both ensure additional capacity and lower production costs for our consumers. So as you've seen from our balance sheet, we used Q1 to build up inventory on both Ultramist systems and of applicators as well. And we also took the opportunity to stockpile a number of longer lead time components to enable more rapid production ramp up if needed. We've been doing this both because having lots of razor blades on hand is never a bad thing for those in the razor business and in support of our elephant hunting aspirations toward engaging with larger customers. We ultimately having systems on hand to enable us to really just take yes for an answer on a large order is never a bad thing.

Speaker 1

And for the first time since I've been CEO, we're really at a quite comfortable inventory level. And to be honest, it feels comfortable. So especially during such uncertain economic and trade conditions as these, we feel really good about our supply chains and our manufacturing. And as of right now, we do not anticipate any material cost availability or margin issues resulting from the current tariff situation. Our production is domestic and we are well set up for parts and benefiting from economies of scale.

Speaker 1

Just as a note of housekeeping, our uplift to NASDAQ this quarter was a great step for us, but it also came with a $295,000 listing fee, which affected our operating profit, our EBITDA and our adjusted EBITDA figures. Obviously, we hope not to have that recur next quarter. So with that, I will turn you over to Peter Sorensen, our CFO, who can walk you through the rest of our financials. Thank you, Morgan. Q1 was an excellent quarter for SANUWAVE marked by record breaking Q1 revenues and robust 61% year over year growth.

Speaker 1

Beyond our top line performance, we also delivered meaningful improvements in gross margins both compared to the same period last year and sequentially, underscoring the strength and scalability of our business model. These results reflect our continued focus on driving rapid profitable growth. Let's now take a closer look at the financials. Revenue for the three months ended 03/31/2025 totaled $9,300,000 an increase of 61% as compared to 5,800,000 for the same period of 2024. This growth exceeded the top end of our previous guidance of 45% to 55%.

Speaker 1

Gross margin as a percentage of revenue amounted to 79% for the three months ended 03/31/2025 versus 72.6% for the same period last year. This represents an increase of over six forty basis points, which can be attributed to reduced cost in Ultramist system production and a strategic focus on pricing for Ultramist systems and applicators. For the three months ended 03/31/2025, operating income totaled $1,000,000 which is an improvement of $2,000,000 compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and manage spend effectively. Operating expenses for the three months ended 03/31/2025 amounted to $6,400,000 compared to $5,300,000 for the same period last year, an increase of $1,100,000 This change was largely driven by an increase in non cash stock based compensation expense of 1,000,000 versus Q1 of twenty twenty four in which there was no stock comp expense. And as Morgan mentioned, we had a $295,000 Nasdaq uplift expense in the quarter.

Speaker 1

Net loss for the three months ended 03/31/2025 was $5,700,000 compared to a net loss of $4,500,000 for the same period in 2024. The increase in net loss was primarily driven by higher non cash expenses including stock based compensation expense and changes in the fair value of derivative liabilities, which resulted in a $4,900,000 loss this quarter versus $2,500,000 in Q1 of twenty twenty four. Additionally, in Q1 twenty twenty four, we recognized $2,500,000 in other income related to a patent license agreement, did not recur this year. These impacts were partially offset by lower interest expense in Q1 twenty twenty five, primarily due to the conversion of our outstanding notes into common stock in Q4 twenty twenty four as part of the note and warrant exchange. EBITDA for the three months ended 03/31/2025 was negative $3,600,000 However, adjusted EBITDA was a positive $2,300,000 versus negative $59,000 for the same period last year, an improvement of $2,400,000 year over year.

Speaker 1

Total current assets amounted to 18,800,000 as of 03/31/2025 versus $18,400,000 as of 12/31/2024. Cash totaled $8,500,000 as of 03/31/2025. We're grateful for the continued support of our stakeholders. Q1 twenty twenty five marks a strong start to the year and we're excited to build on this momentum as we execute on our growth strategy. With that, I'll turn the call back over to Morgan.

Speaker 1

Thanks, Peter. So moving back to moving on to guidance. As we stated in our press release, we are guiding to 10,000,000 to $10,700,000 in Q2 revenues, 40% to 50% year on year growth. Q1 was a bit ahead of plan. So we're essentially adopting guidance of on plan for midyear in keeping with our annual guidance target of 47% to 53% for the full year 2025 as described on our Q4 call.

Speaker 1

So on a personal note, I mean the May will mark my two year anniversary as CEO at Sanuid. Time really does fly when you're having fun. We've built a great team and a great culture and I remain immensely proud and grateful for all the folks who followed me out under the last year and even more grateful for the job they did of getting us back in. I mean the whole team knows what's coming next because it's how we always end things here. The highest reward for good work is more work.

Speaker 1

Now go earn some more work. So thanks to everyone. And with that, I will open up to questions.

Operator

And we will take a question from Carl Byrnes with Northland Capital Markets. Your line is open.

Speaker 2

Thanks for the question and congratulations on the quarter. I'm wondering if you can quantify that in terms of system placements from what you might categorize as smaller customers and larger customers. And then how that might look going forward? Thanks so much.

Speaker 1

Thanks, Kyle. Good to catch up. So that's one of those questions that sounds really simple on the surface, but actually gets sort of vexically complicated as you try to delineate it and answer it. I mean, so for example, we have a number of customers who are substantial chains of nursing homes or long term care facilities. And each gets sold each location gets sold individually.

Speaker 1

They tend to have their own administrators, their own clinical therapy teams who do who make their own decisions. And so kind of whether you cast each of those individual sales as being a part of a larger customer or being a onesie small customer has some pretty significant impact on how we look at that. I mean, ultimately, if we group those large groups as single entities, which I think probably makes the most sense, then we had 58 new customers in Q1. As we start to look at who are really big and who are relatively small, that's another question that gets it gets tricky to define just around the fact that some of these customers are growing very rapidly. And so a customer that may be in the kind of five to 10 range now could be at the 40 or 50 range by the end of the year.

Speaker 1

And so it's really more a function of how we view our ability to grow with that customer going forward. And so I don't know that I really have like a solid answer for you in terms of like bigger versus smaller. But hopefully that sort of helps in terms of how to think about it.

Speaker 2

No, definitely does. And then just a follow-up on that. Typically, what are you seeing in terms of time to sale from initiation of a conversation getting a purchase order in place? Thanks.

Speaker 1

We're seeing a remarkably wide range is sort of the honest answer. I mean, we get inbounds to our corporate e mail that say, hi, I'm interested in your product and can you give me a price quote on your system? And those often close in a couple of days. We have other larger customers where the negotiations tend to take longer and are ongoing. I think the answer is sort of anywhere between a couple of days and several months for the bigger as the customers tend to get bigger and the capital outlay gets larger, the time frames tend to scratch.

Speaker 2

For sure. That's very helpful. Thank you so much. And congrats again on the quarter.

Operator

And we'll move next to Albert Honzer with Kestrel. Your line is open.

Speaker 2

Thank you. Congratulations, Morgan. Very, very impressive execution. Two quick questions. One, can you just address the debt and what you're seeing in the landscape with regards to that?

Speaker 2

I feel like that's the one last piece of the puzzle that's hopefully we'd love your color on. And then two, great to see you out there telling the story at different conferences like ROTH and INVEGAYS. Anything in the next three or four months that we should put in our calendar to come see? Thank you.

Speaker 1

Sure. Let me start with the second question first, which is, yes, we're starting to look at some other conferences and sort of non deal roadshow activities for later in the year. We don't have anything definitively set at this time. So we'll keep you posted as that evolves. Moving to debt, yes, I mean, I'm sure many of you have noticed the our debt is not cheap.

Speaker 1

We're certainly looking at refi opportunities. I think it would be premature for us to really say anything definitive. But I suspect as you can imagine this is a topic that is front of mind for us and where we are exploring a number of opportunities and feel pretty good about feel pretty good about the likelihood we can do something to improve our interest rate.

Operator

And we'll take our next question from Christopher Davis with Founding Asset Management. Your line is open.

Speaker 3

Thank you. Morgan, again, So a question looking at the slide deck, slide four, so the market opportunity, where are you getting success within those segments on the total addressable market? Do do we know accurately exactly what kind of wounds this is being used on mainly and the success rate of different kinds of wounds potentially?

Speaker 1

Yes. So that's the actual as we're not the ones providing the service, right? We don't actually get a ton of visibility into what our practitioners are specifically treating, right? I mean, there's a whole set of HIPAA rules around that where the patient records are private. And so we can see we talk to our providers.

Speaker 1

We get a sense of what they're doing. We get a sense of when they're finding interesting applications and new things and we're sort of trying to help each of our providers understand the interesting things that others have discovered. But we don't actually have any really clear visibility through to say there were this many diabetic foot ulcers, there were this many venous leg ulcers, there were this many deep tissue injuries or burns. We just don't have it's just not data that we have access to. It's all because particularly as it's all built under the same code.

Speaker 3

Okay. Follow-up question if I may. Any developments regarding any kind of patent assertion suits or engagements that may have happened or maybe likely?

Speaker 1

Yes. Obviously, the nature of our agreements there, I have to be a little careful. Ultimately, as you know, we entered into an intellectual property assertion agreement with an outside assertion firm last year. They paid us $2,500,000 to buy effectively an option under which they can pay us a mid single digit million payment take the patents down into a special purpose vehicle and go commence assertion. In the event that that's successful we'll share profits on the back end.

Speaker 1

But to actually sort of speak to the tangible process there is a little bit it's difficult because it's both private and because it's a matter that's functionally out of our control. I can say we're very happy with our partner. We think they're making great progress. And I just don't know that I can really say anything more specific at this time.

Speaker 3

Fair enough. Thank you.

Operator

We'll move next to Ian Cassel with IFCM. Your line is open.

Speaker 1

Congratulations Morgan to you and the team there. It's incredible turnaround over the last two years and congrats on the two year anniversary. I was wondering if you could give us some insight now with Tim joining the team. I know it's only been a couple of months, but is there any maybe insight into maybe news the new sales strategy might not be the right way to phrase it, but the evolving sales strategy there and how you're doing things different now versus six months ago? Sure.

Speaker 1

I mean, essentially, we're pursuing the sales strategy that we've been pursuing and I guess really through most of the latter half of last year. Like it's been a we've been looking to engage with larger customers at a higher level. We have been looking for a more sort of senior and seasoned sales executive in the team people who are sort of use the industry parlance more accustomed to selling in the carpeted parts of the facility than the parts that are tile. And it's been really interesting to start to see how differently folks who have a lot of med device experience, but perhaps not wound are approaching this. And I think we're really starting to build some very interesting momentum.

Speaker 1

I mean the strategy really remains the same, right? There are a lot of nursing homes and skilled nursing facilities with whom I think there's a real confluence of interests and where engagement makes a lot of sense, especially those who tend to have their own clinical groups, right? The counterpoint to that is that obviously the mobile and home health care space is also a very rapidly growing opportunity in this market. And so that's a group we're also making sort of strong outreaches into. And I think along with doctors' offices and hospitals like we're really at this point we're probably just starting to push kind of like one percent market penetration.

Speaker 1

And so it feels like we have it feels like we have it's really about kind of focusing on what to prioritize and what to chase.

Speaker 3

Thank you.

Operator

And it does appear that there are no further questions at this time. I would like to turn it back to management for any additional or closing remarks.

Speaker 1

Well, thanks for coming everyone. And I appreciate the ongoing interest and support. And we'll speak to you next quarter. Thanks very much.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful afternoon.

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Key Takeaways

  • SANUWAVE reported Q1 revenue of $9.3M, a 61% year-over-year increase driven by 98 new Ultimis system placements, exceeding the high end of guidance.
  • Gross margin improved to 79% from 72.6% a year ago, and adjusted EBITDA turned positive at $2.3M versus $(0.06)M last year, underscoring improved profitability.
  • The company built comfortable inventory levels of systems and applicators and is on schedule to qualify its new four-cavity applicator mold in Q4, which should increase capacity and lower production costs.
  • Management reaffirmed Q2 guidance of $10M–$10.7M in revenues (40%–50% growth) and maintained full-year targets of 47%–53% growth, reflecting confidence in execution.
  • Net loss widened to $5.7M from $4.5M a year ago, primarily due to $1M in stock-based compensation, a $295K Nasdaq listing fee, and non-cash derivative losses, with no patent-license income recurring.
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Earnings Conference Call
SANUWAVE Health Q1 2025
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