SANUWAVE Health Inc (SNWV) 2025 Q3 法說會逐字稿

Good day, everyone, and welcome to the SANUWAVE Q3 revenue update. (Operator Instructions)

Please note today's call will be recorded. (Operator Instructions)

It is now my pleasure to turn today's conference over to Morgan Frank, CEO.

Thank you very much. Welcome to SANUWAVE's third-quarter 2025 revenue pre-announcement call. Our press release on this went out earlier this afternoon. Joining me on the call is Peter Sorensen, our CFO. And after the presentation, we will open the call up to Q&A.

So we'll begin with the always riveting 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.

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. A description of these risks, 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 in this call are calculated from the underlying whole dollar amounts and, therefore, may not recalculate some rounded numbers used for disclosure purposes.

All right. Best preface, let's get to it. As you've likely seen, the company preannounced Q3 2025 revenues today after market closed. We came in at $11.4 million to $11.6 million, an all-time quarterly record for the company, representing 12% to 14% sequential growth from Q2 and 22% to 24% growth versus the pig through python quarter last year.

We also sold a record number of systems in the quarter. This was not, however, enough to reach our previously announced guidance of $12 million to $12.7 million from the Q2 earnings call. Back on that call, we spoke of Q1 and Q2 being max disruption and Q3 really being max construction. We spoke of sort of taking airplane apart, putting it back together while flying it. In the end, I think we were just a bit too optimistic in forecasting the end of peak disruption.

And Q3 turned out to be a more challenging period than we had expected. The uncertainty created by the large proposed changes in reimbursement for skin substitute and allograft products seems like it froze the market and it just sort of caused everyone to take their foot off the gas while they waited to get some certainty on how this is going to play out.

This seems to have begun to ameliorate later in the quarter, especially after the SAWC convention in Las Vegas early September. And after that, the pace of business picked up pretty markedly. September turned out to be the best single month in company history for revenue, for system sales, and for applicators. It just wasn't enough to overcome the slow start to the quarter, and this resulted in revenues coming in below our expectations.

As a result of this, we are adjusting our annual revenue guidance to $44 million to $46 million, approximately 40% year-on-year growth at midpoint versus our prior guidance of $48 million to $50 million. Many, including and especially a number of our customers and users, have asked if these reimbursement changes for skin subs will affect reimbursement for UltraMIST. The simple answer is we do not believe that they will.

The current proposed changes, which obviously are not yet final and may be subject to further change for CPT code 97610 for 2026 look to be very small increase in reimbursement of between $2 and $4, roughly 50 to 100 basis points. So nothing material, but in the context of what's going on in wound care, up a few bucks, seems like a win, and we're happy with that result.

The bottom line here is that it seems like uncertainty has been holding up the wound care market a bit, and this has affected growth plans, capital budgets, and even patient counts. We have no special insight into what the ultimate skin sub pricing will be, but industry consensus seems to be coalescing around a decrease of 80% to 90% on price. And that's a lot for a market to plan for and around, especially when that outcome is uncertain.

It's sometimes not knowing seems to freeze activity more than even knowing that something you're not going to like is going to happen. So our sense is that this seems to be beginning to resolve. And we saw revenue and business flow pick up in September.

We also think that, ultimately, this provides a substantial opportunity for us to expand our footprint and our partnerships. I mean, all in all, it really was a good quarter for us, and we got a great deal done on both the capital market side as well as with our customers and our market.

It just wasn't quite enough to reach our guidance. And I take the blame on that one. The disruption was just more than we expected, and we just couldn't make up the ground after the slow start. That said, I want to thank the team and our partners because given the headwinds here, this was a strong outcome, and we remain on our path to pursue profitable growth.

We are still in ramp-up phase. 10 of our 13 salespeople have joined the company since last November. And they've been hitting the ground running well and building up both the quantity and quality of our pipeline, which remains robust and honestly is currently the best I've ever seen it. There's just been more delay and uncertainty than we anticipated.

Our overall sense is there's a lot of traction building here. We're just still learning a bit on how to forecast the closing of such deals and getting them implemented. And it's just somewhat new territory. So just bear with us. We remain incredibly excited and optimistic about how this is playing out.

So we'll now open the call up to questions. But before we do, I'd just like to remind everyone that this is a preliminary guidance call on top-line numbers and overall market conditions, and that as we do not yet have our final quarterly numbers, we will not be providing answers on topics like margins, costs, EBITDA, or other financial metrics from below the revenue line, and we will not be getting into greater specifics on the Q4 guidance than that already provided in the release.

We will, of course, provide all that in early November when we report our quarter.

All right. So thanks, and now let's take questions.

(Operator Instructions) Kyle Bauser, ROTH Capital Partners.

Great. Thank you. Good afternoon and thanks for all the updates here. I guess a lot of my questions were on a little bit more detail on the revenue number, but realizing you can't dig in too much. Maybe you could just speak at a high level just around like the mix potentially or maybe even like how -- like number of capital equipment sales in the quarter. I think you said it was a record amount, so maybe above a certain number. I guess any color that you can provide would be appreciated.

Yeah. I guess -- I mean, on that one, we do -- I guess we do, in fact, have a final number. So we placed 155 systems in the quarter.

Got it. Yeah. Great. I appreciate the color there. And in September, it sounds like things rebounded, particularly after SAWC. Was -- do you think that was largely attributed to the momentum at that conference? Was there more clarity around where things will shake out with the final ruling early next month? And we're only a few days into Q4, but do you feel like that momentum is continuing?

It's -- I mean, it's always difficult to guess why a whole industry does things. But I think, yeah, a fair bit of what happened, it seems like a lot of people came and were waiting for SAWC to go down and like talk to everyone and get a sense of what people thought was going on in the industry.

It seemed like there was like a wide variety of opinion, and it seems like it's coalesced at SAWC. And so I think a lot of it was just sort of a reduction in this perception of uncertainty. But I mean, we're -- we've noticed a very significant uptick in business and traction since that time.

We don't see any signs of it slowing down yet. I mean, obviously, it's very early in Q4. So it's hard to say too much. But it does feel like things have gotten better.

Yeah. Great. And in terms of sites of care that have been the most active, obviously, you've got wound care centers and physician offices and skilled nursing facilities, even the mobile clinics. Like is there any to call out that have been particularly strong or areas that you think could be key growth drivers here?

I think we're seeing a lot of growth. I mean, mobile has been such a big driver in the space. We're seeing a lot of growth there. We're starting to get some more traction in some of the wound centers as well. One of the spaces we're really starting to focus on a great deal, it's also the hospital space, like the HAPI market for hospital-acquired pressure injuries is -- I mean, it's estimated to be a $22 billion market in the US now.

It's just such a growing problem for the hospitals themselves. We've had some providers tell us that like the average cost for them on a HAPI injury is between $20,000 and $150,000 depending on where you get sued. And so they have like -- the hospitals have a lot of interest in preventing these injuries. I think it's a big marker for patient quality of life.

It's a great way to get patients out of your hospital and back to their lives sooner. Like it really is an everyone wins. And so that's a market that we plan to focus a lot on in coming months and quarters.

Got it. Makes sense. And then I think in the previous quarters, you said in terms of diabetic foot ulcers and venous blood ulcers, it's evenly split. Is that still roughly the same?

It's hard to say. I mean, we don't actually have visibility into exactly what wounds are being treated like a provider -- a mobile wound care provider buys applicators from us and they go and they treat their patients. And whether they've treated a DFU or VLU or a HAPI, like we ultimately -- we only get like all prescriptions from them, like we don't actually have a treatment count.

Great. And then just lastly, you called out you're feeling good about the pipeline. Anything you could speak about regarding the pipeline and other things to think about?

I mean, we continue to be really focused on engaging with bigger, higher use customers. We've been trying to get more deeply involved with some of our bigger and more sophisticated customers. I think you'll start to see some posters, white papers, research papers coming out of these groups in the coming months and quarters. And ultimately, we're engaging with a bigger customer, and it's a bigger sale. And I think it's just some of these are -- I think it will just slow down a little bit in Q3.

Some of these take a little longer to close than we thought. But we're not -- none of it feels like no. It just feels like this is going to take a little longer. So we're -- we feel really good about the pipeline, but I just -- I don't want to get into specifics on specific customers. But --

Yeah. Great. Well, I appreciate the update. I mean, the new guidance is still representing 39% at the midpoint, which is still very healthy. So thanks for taking my questions.

Carl Byrnes, Northland Capital Markets.

Great. Thanks for the question. Going back to the CMS disruption, I mean, do you see -- or you perceive the CMS disruption was more of an issue with smaller customers or larger customers? Or was there no distinction between the two with respect to that dynamic? Thanks.

I'm not sure that there was a great deal of distinction. It's a -- a number of our providers -- UltraMIST is actually a synergistic treatment with allografting. And so a number of our customers tend to use both. And so I think this is true in a lot of mobile care. It's true in a lot of wound centers.

And when they just pause, everything just slows down a little bit. So wasn't -- I didn't see it particularly focused any place. It seemed pretty general with anybody who is using skin subs.

Got it. Got it. And so -- and if we look at what's happening with skin substitute, let's assume that the PFS and the OPPS, they're adopted, which I think it will be, and there's a reasonable rate somewhere north of the initial proposal, let's call it, somewhere like 135, 155. Doesn't it create a need for an additional line of revenue for health care providers in addition to the clinical opportunity for better and improved outcomes? I would think you would actually potentially benefit.

That's certainly the story we're telling our sales force. I think it does. And I think there's also an opportunity here to start to really drive some standards and some best practices around like how does the -- what's the best way to use a skin substitute? What is the right way to prepare a site for it? Like what should you be measuring?

How do you get -- how do you build the evidence-based protocols that show like this is the right way to treat a wound. This is the best way to heal your patient. This is a cost-effective way to do it. And so yeah, there's a little bit of chaos here, but it's -- that's an opportunity. I think that there's a really -- there's a profound chance here to set up the protocols that are going to prevail in wound care over the next several years.

Cool, cool. And then just -- and I'll hop back in the queue here. If we look at the guidance of the third quarter, we just take the midpoint at $11.5 million, that implies that the fourth quarter ramp is going to be $13 million to $15 million to get to the new guidance of $44 million to $46 million. That's a pretty big range. I mean, in terms of sequential, it's like 13% sequential over the midpoint and then the high end is 30% sequential.

What visibility do you have at this point? I mean, again, considering the guidance in those ranges?

We have a great deal of visibility that we'd like to be cautious at this point with our guidance.

Cool. Cool. Understandable. All right. Thanks so much and congratulations. I mean, the numbers that you're putting up despite the guidance, I mean, the growth is just for a medtech company is stratospheric. So congrats on that.

Okay. Thanks.

(Operator Instructions) There are no further questions on the line at this time. I'll turn the program back to our CEO for any additional or closing remarks.

Well, thanks, everyone, for joining us, and we look forward to giving you the rest of the info when we report the quarter in November. Thanks, again.

This does conclude today's program. Thank you for your participation, and you may now disconnect.