SenesTech, Inc.
Q3 2019 Earnings Call Transcript

Published: 13 Nov 2019

[Operator:]

Good afternoon, and welcome to the SenesTech, Incorporated. Third Quarter Fiscal Year 2019 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

[Robert Blum:]

Thanks so much, Gary, and thank all of you for joining us today. On today's call, we will discuss SenesTech's third quarter 2019 financial results for the period ended September 30, 2019. 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'll open the call for a question-and-answer session.Before we begin with prepared remarks, we submit for the record the following statements

[Ken Siegel:]

Thank you, Robert. Good afternoon, everyone, and thank you for joining us. In our last call, I laid out our strategy and critical focus areas for the next several quarters. I described our three target verticals

[Tom Chesterman:]

Thank you, Ken, and good afternoon to all. Let’s start with revenues. Our revenues for the third quarter were $36,000, up from $24,000 in the second quarter. Not included but quite meaningful, the $36,000 does not include an additional order from one of our PMP partners for $38,000. This was a stocking order intended for a variety of the PMP's customers and we will recognize the revenue as it is shipped or deployed at the end-user locations.Operating expenses were $2.6 million for the quarter, which is up from the second quarter. Within the third quarter, we had an unusual surge in professional and legal fees that we do not expect to occur for $160,000. We also launched a marketing and sales surge primarily in California, which increased expenses $90,000. That brought the net operating loss to $2.6 million or $2.3 million for a more cash-focused EBITDA.We ended the quarter with $3.9 million in cash. I would anticipate that our operating expenses will continue at $600,000 to $700,000 per month and that the EBITDA loss for the year will be a little in excess of $8 million. How much in excess will depend on how much revenue grows during the fourth quarter from the programs and initiatives that Ken mentioned.Last quarter, we also introduced a set of market awareness metrics. Total inquiries are the total pipeline of individuals who have shown an interest in a solution that SenesTech offers. This is the starting point of a potential customer relationship. At the end of the second quarter, this figure was 193. Year-to-date, the number is 761. Unique contacts are what we called qualified leads, those with whom the conversations has ramped up and who are now ready for a full sales effort.At the end of the quarter – second quarter, this number was at 107. The year-to-date number is 259. One additional metric, which more describes the campaign reach, we call influence contacts. These measures any sort of response to a campaign communication, which can, of course, include no thanks. But what is a no thanks yesterday can turn into a yes later once they are aware of what ContraPest is. That number year-to-date is 13,185.As a reminder, our full press release and earnings is available on our website. Furthermore, we expect to be filing our 10-Q shortly where the complete financial picture for the quarter will be.At this point, we would like to turn the call over for questions. Operator, could you please open it up?

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Kevin Ellich with Craig-Hallum. Please go ahead.

[Kevin Ellich:]

Good afternoon, guys. I was going to say, good morning. Hey, Ken, hey Tom.

[Ken Siegel:]

Hi.

[Kevin Ellich:]

A couple of questions for you. I guess let's start off with D.C. Good update there in terms of the validation and the camera study. In the press release, you guys cited the $300,000 – the contract is for up to $300,000 per year. Wondering when are we going to start to see that ramp?

[Ken Siegel:]

Your turn, Tom.

[Tom Chesterman:]

As you may recall, Kevin, we had a rather sizable stocking order at the end of last year, which was them preparing to deploy ContraPest in the city. That's – they have not yet burned through that, so we have not seen any additional orders coming out of that yet. We might expect that to be – however, I would reiterate that, that contract is up to – how much they actually spend in a given year really is dependent on exactly how do they deploy it. And that's something that's totally under their control.

[Kevin Ellich:]

Got it. Understand. I understand. And then, Tom, since I have you, just going back to the $38,000 order that you cited, the stocking order on September 3 – 30, will that all come through in Q4? Or is that going to be spread over maybe a couple of quarters?

[Tom Chesterman:]

I'm not sure at this time. There were a number of additional conditions that were necessary for the recognition of the revenue. I would anticipate that most of them would clear in the fourth quarter. I can't guarantee that all of them would.

[Kevin Ellich:]

Got it. And then the SG&A was higher this quarter. I think I picked up that you said professional and legal fees were an incremental – was it $160,000? And there was one other thing this quarter. Can you give us a little bit more color as to what those two items were?

[Tom Chesterman:]

Yes. The $160,000 was professional and legal fees. And those include not just legal fees, but other types of professionals including any lobbyists we might have, et cetera. We also launched a marketing and sales surge primarily in California, which increased the expenses $90,000. I would also say that within that period, we had some start-up costs for the contract sales organization. And all of those were more or less periodic rather than being something that I would expect to continue at the same rate.

[Kevin Ellich:]

Got it. Understood. And then, Ken, just going back to some of your prepared remarks, you made a comment, which I thought was pretty interesting about a program with a major retailer. Can you give us a little bit more color? You said it's already expanded. Can you tell us who it is? And then is it only – is it in California? Or is it in other states as well?

[Ken Siegel:]

Kevin, I can't give you more detail. We're under NDA right now. I will tell you that this is a national retailer, so it's not just a California issue.

[Kevin Ellich:]

Okay. I understand. And then lastly, obviously, it seems like you're making good progress with all of your efforts in the verticals. What do you think is the most interesting opportunity and may be the biggest TAM over the next one to two year?

[Ken Siegel:]

I’m most excited about food production and its various forms. Though the piece that really emerged in the last quarter, and this was a significant contribution by Loretta Mayer, is organics. And as we're seeing our way there, particularly with their strong bias against poisons, that's a wide-open field for us. But again, as we're looking at whether it's organics or otherwise, the whole grain vector, since it works its way across the entire food chain, is something that I think we're very well positioned to exploit right now. And so that's where I'm most excited.

[Kevin Ellich:]

Excellent. Thanks guys. That’s all I have.

[Operator:]

[Operator Instructions] The next question comes from Ian Gilson with Zacks Investment Research. Please go ahead.

[Ian Gilson:]

Good afternoon. I missed part of the call. Did you discuss the initiative in San Francisco?

[Ken Siegel:]

We talked about it at very high level, Ian. We are really just starting in San Francisco with a couple of pilot projects. We're working with a PMP there. We're working in some of the municipal buildings, but it's early stages at this point. And we'll probably have more to talk about in the next quarter. The big thing we really were focusing on in the call for this quarter is where we are in D.C. And D.C. is the one showing the best early returns. I don't know if you went for that, but you've got a point that we're seeing 80% bait consumption levels. We are now deployed at…

[Ian Gilson:]

Yes, I did get that from the press release. On that particular area, how many bait stations were there in D.C.?

[Ken Siegel:]

I don't know off the top of my head, but I can get you that data.

[Ian Gilson:]

I'm talking for just the camera side.

[Ken Siegel:]

Again it's not a data that I have in front of me right now, but it's something that we would get for you.

[Ian Gilson:]

Okay, great. Thank you. Thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Ken Siegel for any closing remarks.

[Ken Siegel:]

Again, thank all of you for joining us. It's – I'm now six months in. It's been a very exciting time. I think we're really beginning to start seeing momentum in commercialization process, and look forward to sharing more with you next quarter. Again, thank you.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.