Sanuwave Health - Earnings Call - Q2 2022

Transcript

Speaker 0

Greetings, and welcome to SANUWAVE Second Quarter Business Update Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Kevin Richardson, Chief Executive Officer. Thank you.

You may begin.

Speaker 1

Thank you, Doug. Today, we will review Q2 results, discuss our outlook and provide revenue guidance for the rest of 2022. Joining me on the call today are Jack Schlutwig, our Chief Revenue Officer and Tony Reno, our newly announced CFO. We have provided an eight page slide presentation to help our investors understand our results and our framework for growth. The slides are available on the SanWave website under the Investor News section.

On the slide presentation, please spend time reviewing the obligatory forward looking statements as we will be reviewing guidance for 2022. We're using the Q2 results and filing to put the late filing chapter behind us and begin to look forward at the growth opportunity we have in front of us. We're now fully positioned to achieve the growth opportunity in the wound care space that SANUWAVE can achieve. We have two products that treat chronic advanced wounds, Ultramist and DermaPace. Both products use energy, ultrasound waves and focused shock waves to stimulate the body to rejuvenate and repair itself.

Clinically, the products have superior results. The products are easy to use and adjust quickly into the clinics and wound care facilities workflow. Reimbursement continues to rise and is robust, the clinics and physicians to get a high return on investment with using these products. Based on the positive outcomes that our products generate clinically, we do see that those reimbursement rates can continue to climb in the near future. With the reimbursement as strong as it is, it is also important to know that clinically, we close the wounds for less expense than many other advanced therapies.

Our products heal effectively, pay the clinics and physicians nicely and save the system money. It's a great recipe for success. Jack will discuss the current outlook and what we have in hand today. But suffice it to say, we have a long way to grow as we add back salespeople, add new verticals and become part of a standard protocol in some of the major wound care practices. We think the sky is the limit.

Let me turn the presentation over now to Tony Reno, our newly announced CFO. Jack will then cover the pipeline and sales metrics, and I will conclude with some initial revenue guidance for 2022. Toni?

Speaker 2

Thank you, Kevin. First of all, I would like to thank the SinoWave team for the warm welcome. This is a great team and SinoWave has a bright future with continuously increasing revenue and on a path to breakeven and future profitability. Using my past experience as CFO in international publicly traded and private equity health organizations, I'm looking forward to contribute to the financial leadership on SinoWave's growth path. Revenues for Q2 ending June 30 amounted to $3,900,000 an increase of $1,000,000 over the same period last year.

This is an increase of 33% driven by Ultramax sales. The company moved manufacturing from Georgia to Minnesota, which impacted timing of international shipments resulting in $100,000 reduction in international revenue year over year. Gross margin increased to 72% from 64%. The improvements were driven due to product mix and more effective customer service and logistics and improvements in supply chain management. OpEx was down $1,000,000 driven by lower sales and marketing expenses and R and D costs.

Moving forward, we expect Q3 to be similar to Q2 and Q4 to begin to see benefits of additional cost saving initiatives, likely to be offset by increase in sales and marketing due to some incremental hiring. Thank you all for your continued support of Sunnyways. Over to Kevin and Jack.

Speaker 1

Great. Jack, if you could walk us through a slide deck and just to reference people, Jack will be covering Slides five, six and seven on the slide deck that is available on our investor website.

Speaker 3

Thank you, Kevin. Thank you, Tony. We are excited with the growth of our portfolio and continue to focus on our accounts and expanding SANUWAVE's footprint with the Energy First platform. We have a small but strong committed sales team and look forward to new additions in key markets over the next several months. When we look at Slide five, illustrating our pipeline and our growth that we've seen quarter over quarter and year over year, our trials are our pipeline and our lifeblood.

Our typical trials last anywhere from sixty to ninety days and allow our customers to assess the benefits of our energy products, both clinically and financially. Last year, 2021, at this time, we had 44 trials valued at $1,500,000 Last quarter, we had 66 trials valued at $1,900,000 I'm pleased to announce that ending June, we had 94 trials valued at $3,100,000 up 100% year over year. And for the first time, we have a backlog of 96 trials, which we were actively trying to fill and engage with those new customers, and we value those systems at $3,000,000 Great growth and market penetration year over year, and we were able to accomplish this growth with 33% less salespeople. Our team is truly focused on healing patients with the Energy First platform. We're starting to see Energy First platform as accepted by large national chains.

We are seeing growth in new markets and verticals such as skilled nursing facilities, cosmetics and sports medicine, while in some cases even becoming the standard of care. We have a great deal of potential and interest in both of our products and look forward to some big wins in the near future. When you look at Slide six, we continue to expand our footprint in new accounts, adding 161 accounts by the end of this year when we expect to be at six eighty eight accounts, an overall increase of 30%. We do so by targeting new accounts and focused on applicator sales and our increasing demand in the areas that I mentioned previously. And we have the ability to do so based on our current pipeline.

On Slide seven, we continuously assess our business and look at our accounts driving more recurring revenue. We are focused on increasing new accounts and increasing the number of monthly treatments. Currently, have five twenty seven active accounts. Each of those accounts administer 25 treatments a month and our top 100 accounts administer 102 treatments per month, while the remaining accounts treat 7.4 patients per month. As a sales team, we are working with lower volume accounts to increase the monthly usage.

We have identified dormant accounts and are reengaging with them. The goal is to increase the base book of business and increase the recurring revenue in these accounts. The team is focused on selling systems, increasing new accounts and reengaging with dormant accounts that were lost. This started in July and we've already seen success in sales generated. The final piece is a system upgrade across all of our accounts to collect data and also offer another touch point for all of the accounts.

We are excited about the remainder of 2022 and optimistic on our trajectory. Kevin, I'll turn it back over to you.

Speaker 1

Great. Thank you, Jack. Thank you, Tony. We're going to now go through Slide eight, which is our guidance for 2022. It's our first attempt at guidance in a long time, and we wanted to explain how we arrive at that guidance.

So we'll have $18,000,000 of revenue, that's up from 13,000,000 the prior year, and operating profitability in Q4. The guidance is based on what we have in hand currently. So they're based on the numbers Jack reviewed, which are evals and trials that are taking place currently and the backlog of evals that will begin taking place over the coming months. And using the our historic close rates on those to determine what the revenue will be for the remainder of the year. We also have the other initiatives that we've talked about of reengaging dormant accounts and driving more usage.

So those are all baked into the $18,000,000 We do have a large number of system sales that could be with bigger, larger customers. We don't include those in guidance because they're going to be very lumpy. They're going to be very big. And until we're 100% certain we can deliver the product and have the implementation teams to support those customers, we're not going to include those in guidance. When we do have those announced and feel comfortable with that, we will add that to guidance in the future.

We also do not include Sports Matter Cosmetics in guidance at this point in time. Breakeven is also important for us, so we don't have to go back to the market to fund ongoing operating losses. So a big initiative this year is getting to that profitability in Q4. And given our recent successful funding that we had with existing supportive investors, we're now positioned to turn on more growth from our supply chain, add additional sales team members and accelerate the top line as we head into 2023. I'm going to stop there.

We're going to open it up to questions to Tony, myself or Jack. And just one final thing, thank you for supporting us as we've gone through this to kind of SanuWave two point zero as we now move forward. So we'll open up to questions.

Speaker 0

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. Our first question comes from the line of Satya and Shpaugh. Please proceed with your question.

Speaker 4

Hey, Kevin. How are you?

Speaker 1

Good. How are you, Sachin?

Speaker 4

Good, good. Great presentation. And like you said, with SANUWAVE two point zero sort of starting to, I guess, one of the questions as a long term investor now is how are we going to see this company sort of get back onto the OTCQB? And then eventually, what is the plan to kind of get back or not get back, but to get the NASDAQ so that the institutional community can have an opportunity to get involved?

Speaker 1

Great. Thank you, Sachin. Let me first address OTC, then I'll address NASDAQ. So with the OTC, we were moved to the, what are called the OTC gray markets in September of last year when we did not get our 10 ks for the prior year filed on time. We have since moved to the OTC pink Sheets because we have gotten our filings done on time.

The application process to get on the OTCQB has been started. It could be anywhere from two weeks to ten weeks. The group that we're working with thinks it will be on the faster side. And as that happens and gets announced, we'll let investors know. What it allows for is a different type of market makers and solicited bids and so forth.

It also makes it easier for the transaction to occur with some of the brokerage firms that are out there for individual investors. The next step would be to move to NASDAQ, and there's a process that has been put in place underway. We'll be working with our investment adviser, Kestrel, on this process. We've got an independent Board. We've separated the CEO and Chairman role.

That's a recent thing. So we added three new Board members in April. We added a fourth as part of the transaction recently that happened. And that's part of the process to get ready for NASDAQ. There are certain requirements that we will have to wait on.

Specifically, there's a certain number of regulatory filings that you have shown that you aren't late with. And also there's certain requirements on your balance sheet that you need. So it is a process. I would it probably will not occur in 2022. It'll occur in early twenty twenty three.

It's one of the requirements that came with the recent raise is to get up to NASDAQ and become an investable company. So that's for institutions. So that's one of the processes that's underway and now we have a team in place that I think can execute on that as we build out the accounting and finance function and are timely on our filings consistently.

Speaker 4

Great. Thanks. And then I don't know if you can sort of forecast a little bit even more ahead into 2023 as all your engines are sort of revving now in the same direction and your focus now will sort of turn from accounting issues and integration to growth like you said. But in your estimate, what would be sort of success for you in terms of SANUWAVE and revenue growth for 2023, if you can even comment on that?

Speaker 1

The wound care market is going through a lot of change, but our product should be in every wound care center, it should be anywhere that the chronic wounds exist. So I guess that's an awful large footprint, I mean that's billions of dollars of opportunity. And there's that old proverb, how do you eat an elephant and it's one bite at a time. We have to execute and keep adding one eval, one device, make sure they're using it. And so it really comes down to just execution with the team where they're making sure we're penetrating markets and getting patients' wounds healed, lives saved and there's a good economic return for the center and there's also cost savings for the payer.

We're a unique product set where we can actually have the physician actually make more money than he would with other products, yet at the same time save money relative for the payer. And it's a very unique situation that and then clinically heal the wound faster. So we have we're really in a unique situation where there shouldn't be anything that slows us down other than having the resources to build it out. And now with the recent raise that was completed, we can get our supply chain up and running and cranking. We can get hired the right sales team, do some more clinical work if that's what's needed to get into the private payer market a little more aggressively.

So those are the types of initiatives, Sachin, that we're working on. Okay. Thanks, Kevin. Thank you, Sachin.

Speaker 0

There are no more questions in the queue. I'd like to hand call back to Mr. Richardson for closing remarks.

Speaker 1

Well, thank you everyone for joining us and thank you for supporting us as we're now positioning kind of SANUWAVE Two Point Zero for rapid growth the remainder of this year, accelerating into next year. If you have any questions, as always, free to reach out. If you have any other items that you think would be beneficial to us, please let us know so we can incorporate them into the business. So thank you very much and have a great day.

Speaker 0

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have

Speaker 1

a wonderful day.