SenesTech, Inc.
Q1 2021 Earnings Call Transcript

Published: 13 May 2021

[Operator:]

Good day, and welcome to the SenesTech's first quarter fiscal year 2021 financial results. . I would now like to turn the conference over to Joe Diaz with Lytham Partners. Please go ahead.

[Joe Diaz:]

Thank you, Carl, and thanks to all of you joining us today. On today's call, we will discuss SenesTech's first quarter 2021 financial results for the period, which ended March 31, 2021. With us on the call today are Ken Siegel, the company's Chief Executive Officer; and Tom Chesterman, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of SenesTech during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. And such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

[Kenneth Siegel:]

Thanks, Joe. Good afternoon, and thanks all of you for joining us today. As you saw in the press release, we issued after the close, we continued the positive traction achieved last year with a strong first quarter, growing revenues 138% compared to a year ago. The groundwork I've talked about on the last few conference calls to obtain real-world usage data of ContraPest, particularly in urban and agricultural settings has been a key driver. The data is resonating well with potential customers who understand now the economic benefits of adding ContraPest fertility management into their pest management programs. That said, we're cognizant that we are still a long way from our potential, and there's plenty of work to be done. However, I am pleased with the progress to date. So let's dive in a bit more on the progress we've made on our core areas of focus. To remind you, those include obtaining compelling real-world data, focusing our sales and marketing efforts towards high-value targets, getting our sales team back out on the road as COVID abates, launching an e-commerce platform, repositioning ContraPest as part of an overall integrated pest management strategy, focusing our R&D efforts on product improvements and enhancements and finally, maintaining fiscal discipline. While I talked about this in some length during our year-end call, the conclusion of key studies for ContraPest in both agricultural and urban settings with overwhelmingly positive efficacy and economic results did, in fact, occur during the first quarter of 2021. This was clearly one of the most significant progress events during the quarter, and I expect it to be a driver for sales expansion in the future. I won't go into all the details again like I did last time, but to briefly remind you of some of the specifics.

[Thomas Chesterman:]

Thank you, Ken. As a reminder to all, if you have not seen our earnings press release, you can get it on our website in the Investor Relations section. Also, we expect to be filing our Form 10-Q in a day or 2, so this is just a summary. Revenue for the quarter was approximately $88,000 compared to approximately $37,000 in the first quarter of 2020. This represents an increase of 138%, continuing recent trends in growth. This does not include more than $20,000 of backlog, late orders that were not fulfilled during the first quarter but were fulfilled in the first days of April and will be included in the second quarter numbers. It's worth noting, as was mentioned before, that nearly 1/3 of our revenue for the quarter was from California for reasons that Ken mentioned previously. Now that we are no longer restricted use product in California and as pest management professionals continue to implement alternatives to the second-generation anticoagulants that has been restricted, we should see continued growth in this area. Operating expenses were down again year-over-year, coming in at $1.8 million for the first quarter of 2021 versus $2.3 million in the first quarter of 2020. You'll note that R&D went up. This is a reflection of increased regulatory effort as we continue to provide additional data to the EPA and improve our label and claims for ContraPest. On a GAAP basis, net loss for Q1 2021 was $1.8 million compared to a net loss of $2.7 million for Q1 of 2020. The adjusted EBITDA loss, which is a non-GAAP measure of operating performance for Q1 was $1.6 million versus $2.1 million in Q1 of 2020. This reflects the reduction in operating expenses, largely speaking.

[Operator:]

.

[Joe Diaz:]

Ken, this is Joe. While the queue gets filled up, let me ask you, in your prepared remarks, you mentioned that the West Coast chicken farm, and you mentioned the success of that test, is that chicken farm still buying product? And do you feel that they will be expanding the ContraPest deployment going forward?

[Thomas Chesterman:]

Well, as was mentioned a little bit, both poultry facilities are still deploying ContraPest to our knowledge, but one buy through a distributor and the other one through a PMP. So we don't have direct knowledge. Looking at the overall market, though, we do know that the PMP that we worked with on the West Coast is continuing to expand ContraPest deployment in his - throughout his other customers. And then even looking larger, the poultry market is very large and very diverse in the millions by itself, but the target is really much bigger for us throughout what we call the grain vector, that it would be all of the sources and uses of grain in agriculture. So it is a very large market. And the reason why having this data, we are focusing on that market as a key vertical.

[Kenneth Siegel:]

Yes, sorry, I was on mute when you asked the question, Joe. But the other piece, picking up on Tom's point on the grain vector, the one thing we are aware of is the East Coast farm is actually looking now to deploy ContraPest in grain storage. So we're looking forward to moving forward with that. So the whole notion of following grain across protein production, transport, et cetera, is beginning to get traction.

[Joe Diaz:]

And as it relates to your roster of customers, who are your top 5 largest customers if you feel you can comment on that?

[Kenneth Siegel:]

Tom, do you want to take that?

[Thomas Chesterman:]

Sure. We don't typically name specific customers, but the top 5 are rather diverse group. Two distributors, which makes sense and say sell on to a wide variety of end users. One East Coast City, the one that just ordered for Ken's comments earlier. We have another large project going collaboration with Island Conservation that we've talked about before. They're a large customer. And finally, on the top 5, it's actually a tie between a zoo and a property owner who has begun to deploy properties that he owns or manages.

[Joe Diaz:]

And California, obviously, one would consider it to be a very big market now that they've banned the SGARs. What's the opportunity for SenesTech going forward? How big is the market? How do you plan to work there?

[Kenneth Siegel:]

So let me start on that one. So based on what we heard in the hearings for 1788, the market at least $100 million was being spent on the SGARs that are now being banned or limited. So how long it will take for us to penetrate that market, is a more difficult question. The act doesn't specifically ban the use of SGARs in all situations, but limits their usage. And at the outset, I think PMPs are going to be looking at us and also at other alternatives. So our key challenge is we need to work with the industry. We need to get awareness out to see how best we can get the best management professionals that we can get end users to incorporate ContraPest into their integrated pest management things. So we're really optimistic about it. The other piece that both Tom and I mentioned is ContraPest is now no longer restricted use in California. So we can present it more broadly. Essentially, it doesn't have to go through a PMP. You can go through the do it yourselfers, you can go to direct end users. So we're looking at how it is we market to and through all of those different vectors. So pretty exciting.

[Joe Diaz:]

So are there any questions in the queue?

[Operator:]

No, sir. And this will conclude the question-and-answer session. I'd like to turn the conference back over to Ken Siegel for any closing remarks.

[Kenneth Siegel:]

Well, again, thank all of you for joining us this afternoon. I think as you can see, we've made significant progress on the various things that Tom and I have been laying out over the past several quarters. We are now fully ramped and engaged on sales and marketing. I think we have now established a fully capable commercial organization. And hope to continue to show accelerating progress to all of you over the next several quarters. So again, thank you for joining us, and have a pleasant evening.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.