SANUWAVE Health, Inc.
Q1 2024 Earnings Call Transcript

Published: 10 May 2024

[Operator:]

Good day, everyone, and welcome to today's SANUWAVE announces record Q1 2024 results. [Operator Instructions] Please note that this call is being recorded, and I will be standing by should you need any assistance.

[It is now my pleasure to turn the conference over to Morgan Frank. Please go ahead.:]

[Morgan Frank:]

Thank you very much. Hi, everyone, and welcome to SANUWAVE's First Quarter 2024 Earnings Call. As many of you probably saw, our Form 10-Q was filed with the SEC Thursday night. And our earnings release was issued this morning, along with the updated presentation accompanying this call, which is made available on our website in the Investors section. You can refer to that presentation during this call. Joining me on this call is Peter Sorensen, our CFO. And after the presentation, we will open the call up to Q&A.

[So let me begin with the obligatory forward-looking statements. This call may contain forward-looking statements such as statements relating to future financial results, production expectations and constraints and plans for future business development activities. 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 are included in our SEC filings. Actual results may differ materially from those projected in the forward-looking statements, and the company undertakes no obligation to update any forward-looking statement.:]

[Okay. So [ 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 3 months ended March 31, 2024.:]

[So with that behind us, let's get to the good part. Last quarter, we spoke of the acceleration being here at SANUWAVE, and we are very pleased to be able to show everyone what that begins to look like. Our growth rate more than doubled as compared to fiscal year 2023, and we're pleased to say that we believe that this rate is sustainable going forward. Our gross margins rose back to what we believe to be in a more normalized rate in the mid-70s and will remain a focus for us. We believe that through price discipline and some upcoming manufacturing improvements that we can continue to improve this figure over the coming quarter and year as an integral part of our ongoing drive to a rapid profitable growth which has been beginning to show results.:]

[Despite some unusual operating expense charges around severance and ongoing costs associated with the M&A project with SEPA, SANUWAVE managed a modest $59,000 adjusted EBITDA loss in its traditionally weakest quarter of the year. UltraMIST systems sold were up 54% from Q1 2023. We ended the quarter with 709 active systems in the field. Revenue from the UltraMIST line increased 81% year-on-year and consumable applicators revenue, the razor blade [ 2R razor ] increased 64% versus Q1 2023 and 14% sequentially from what had previously been our record quarter in Q4 of 2023. Both categories showed revenue growth in excess of unit growth due to strong pricing, and applicators continue to benefit from the larger user-based systems in the field.:]

[Applicator revenues were in excess of 70% of total revenues in Q1. Honestly, this is a bit higher than what we've been aiming for. We believe this is largely reflective of seasonally slower system sales in Q1, which is a common occurrence in medical device. And we're hoping to see that number more in the 55% to 65% range in coming quarters as system sales pick up. In support of that end, we hired 4 new salespeople as well as a number of additional commercial operations and clinical training staff in Q1 as we begin to expand our geographic footprint and set ourselves up to engage with larger customers who had previously been outside of our reach is simply too big to support.:]

[It's an exciting time here. We find ourselves with inventory and a market hungry for product. Staffing up to go get after it is adding a real spring and everybody step around here and the active pursuit of the goal of deeper customer engagement to help build UltraMIST into their practice flows and facility treatment plans now underway. We're paying particular attention to some opportunities in nursing homes, in assisted living and acute care as well as the mobile and systems that have become increasingly popular and successful under the care to the edge philosophy of bringing care to patients rather than requiring patients to come to care.:]

[We believe the ULTIMA system provides a strong value proposition here as affordable and easy-to-use treatment modality that delivers proven healing benefits painlessly and rapidly so caregivers can support their patients and patients can get their lives back. We remain optimistic about 2024 being the breakout year for SANUWAVE. And we feel like we have the pieces in place now and it's time to go execute.:]

[So speaking of new pieces, I'll now turn the call over to Peter Sorensen, who joined us as our CFO in the beginning of April, so he can walk you through the numbers. Peter?:]

[Peter Sorensen:]

Thank you, Morgan. Good morning, everyone. I'm pleased to have joined the SANUWAVE team just a short 6 weeks ago, and I'm very excited to contribute to the team's continued growth and strategic initiatives. With that, here's a look at the numbers.

[Revenue for the 3 months ended March 31, 2024, totaled $5.8 million, an increase of 53% as compared to $3.8 million for the same period of 2023. This growth is within the previous guidance range of 45% to 55%. Gross margin as a percentage of revenue amounted to 73% for the 3 months ended March 31, 2024, versus 67% for the same period last year. For the 3 months ended March 31, 2024, operating loss totaled $1.1 million, which is an improvement of $928,000 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 3 months ended March 31, 2024, amounted to $5.3 million compared to $4.5 million for the 3 months ended March 31, 2022, an increase of $761,000 due to a couple of nonrecurring charges related to litigation charges and a charge for severance agreement.:]

[Net loss for the 3 months ended March 31, 2024, was $4.5 million compared to a net loss of $13.1 million for the same period in 2023. The decrease in net loss was primarily due to a change in the fair value of derivative liabilities, interest expense and somewhat offset by the receipt of $2.5 million related to the license and option agreement.:]

[Adjusted EBITDA for the 3 months ended March 31, 2024, was close to breakeven at a $59,000 loss versus a $1.8 million loss for the same period last year, an improvement of $1.7 million. SANUWAVE continued to execute its financial strategy to improve operational profitability and manage operating expenses. Total current assets amounted to $10.8 million as of March 31, 2024, versus $9.8 million as of December 31, 2023. Cash totaled $2.9 million as of March 31, 2024.:]

[We thank you for the continued support of SANUWAVE. And with that, I'll now transfer the call back to Morgan.:]

[Morgan Frank:]

Okay. Thanks, Peter. So let's get to the elephants in the room. I'm sure many of you have questions about the merger and uplifting. And as most of you probably saw in our SEC filings, we extended the outside date for the SEPA merger to May 31. So I mean, obviously, this deal has taken a bit longer than we had hoped. As we discussed on our call in March, the holdups on closing the merger are updated financials and exchange listing. I was really hoping to have something definitive for you today. But at the end of the day, some of the timing is simply outside our control. What I can say is that as of today, the company sees a path to closing this merger before the end of May. So believe me, nobody wants this done more than I do, so we can get on pursuing our growth plans. And we're just somewhat limited in what we can speak about publicly right now. So we look forward to updating you further in the not-too-distant future.

[In the meantime, our business continues to grow and to go well. As you likely saw in the press release, we are following up a 53% growth quarter with guidance for 45% to 55% year-on-year growth in Q2, and we're reiterating our 50% growth guidance for fiscal year 2024. This sort of growth is no mean feat. And it just it represents the culmination of a lot of hours, lots of people who have been rolling up their sleeves and really putting their backs into the work. And I just want to thank the entire SANUWAVE team for this. I am honored and excited to be part of it.:]

[And with that, I will open the call up to questions.:]

[Operator:]

[Operator Instructions] And it appears we have no questions at this time. I'd like to turn it back to the presenters for any additional or closing remarks.

[Morgan Frank:]

Well, I will try to take that as a sign that we were thorough and helped anticipate everybody's concerns. Thanks, everyone, and we'll see you again next quarter.

[Operator:]

And this will conclude today's conference. Thank you for your participation, and you may now disconnect.