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

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Good day everyone and welcome to the Sanu wave earnings call. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing the and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing and 2.

Please note this call may be recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of Stanuave. Please go ahead.

Thank you. Good morning. Welcome to Sandy Wave's 3rd quarter 2025 earnings call. Form 10-Q was filed with the SEC last night. Our earnings release was issued this morning, and our updated presentation was made available on the website in the investor section. Please refer to that during your presentation. We really TRY to make it useful. Thanks. So joining me on the call today is Peter Sorenson, our CFO, and after the presentation we will open the call up to Q&A.

So, let me begin with the 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.

Description of these risks and 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. Company undertakes no obligation to update any forward-looking statement. Certain percentages discussed in this call are calculated for the underlying whole dollar amounts and therefore may not recalculate from rounded numbers. Disclosure purposes.

As a reminder, our discussion today will include non-GAAP numbers. Reconciliation between our GAAP and non-GAAP results can be found in our recently filed 10-Q for the period ended September 30th, 2025.

Alright, so now we have that out of the way. Let's dig into the good part. Q3 was an all-time record revenue quarter for Sandy wave, up 22% versus the challenging pig through Python quarter last year when a large order drove 89% year on year growth. Quarter was also up 13% sequentially from Q2.

This brings year on year growth for the first nine months of 2025 to 39% versus the same period last year.

Sold 155 ultimate systems in Q3, also an all-time record, and up from 124 last year again, the Pick Python quarter and 116 last quarter. This took us to 1,416 units in the field, 504 of which, that's 36%, haven't sold in the trailing 12 months. Applicator revenue was 6.8 million in the quarter, also an all-time record, up 26% year on year and 6% sequentially from Q2. At 59% of revenues for the quarter, this was in line with the 55 to 65% target range we have discussed on previous calls.

We have 2 customers of about 5% in the border and 1 customer, a reseller that slightly exceeded that. No other customers exceeded 3% to the border.

Gross margins were healthy 77.9% in the quarter, slightly down from 78.2% last quarter, but up from 75.5% a year ago. This is for this was primarily as a result of slightly lower overall ASP for ultimate systems as a result of beginning to work with some larger resellers with whom we deal on a wholesale basis.

Where we sell systems at lower prices and allow them to mark the systems up when we sold as opposed to selling at full price and paying commission. This works out about the same, maybe slightly better for us on the operating line, but it does impact gross margins a bit. This was offset by slightly higher prices on applicators and some ongoing cost reductions to the production of the ultram system.

The qualification of our new 4 cavity mold for applicators and the new more manufacturable applicator process continues. We expect to have that process up and running for commercial production in January, though, if we do really well, it could be as soon as December, but I think at this point January is probably a better bet. The clean room and equipment are in and qualified. We just need to get through the design verification performance and. Shelf life testing stages and unfortunately things like shelf life testing are inherently time based. We use a blended cost basis for calculating our cost of goods sold so it will take a few quarters for the, these, this new process to show through fully but we expect it to ultimately drive a few extra points of applicator margin as it reaches scale in the back half of 2026.

So Q3's been a productive time for Sandy wave. We received $5 million payment for the exercise of IP licensing related to our intravascular shockwave patent portfolio, and, we refinanced our debt reducing $27.5 million of debt, closer to $29 million with closing costs to $24 million and, our interest rate from.

19.5 to sofa plus 350, which is currently about 7.63%. This placed the company on excellent financial footing and positions it well to pay down this debt from cash flow as the facility contains no prepayment penalties or fees. We also moved to our new larger headquarters back in August, and one last piece of good news based on the refi and our ongoing financial performance.

I am pleased to announce that Senuave has alleviated its substantial doubt to continuously going concern for at least 12 months as of this 10-Q.

So, we've got to the part I'm sure everybody wants to get to, the wound care market was a bit unsettled in Q3, as many practitioners seem to be taking the sort of wait and see attitude to.

What turned out to be some pretty substantial changes in the skin sub and allograft reimbursement market, these have been long mooted by CMS, and this seems to lead to a widespread taking the foot off the gas in the industry due to the uncertainty.

While these changes which were made final on Friday, the 31st, did not affect any wave of our reimbursement for the 97 610 code. Remains essentially unchanged, perhaps slightly up for 2026. It does affect many of our users, and this in combination and perhaps particularly because of heightened fears about CMS audits and clawbacks in wound care led many providers to simply to choose to simply sort of back off a little and to use advanced wound care treatments on fewer patients at the margin.

This uptick in audit and price sensitivity seems to be part and parcel to the broader CMS strategy of driving toward something more in the lens of evidence-based medicine requiring more data on efficacy, product differentiation. And value for money in treatment regardless of any near term disruption, we think this is an overall positive trend for Sanuwave and for Ultramist, and we suspect that this is a paradigm in which our products can really thrive. It's only been a week since the final rule came out, and so it is perhaps a little early to making too many strong pronouncements about exactly how this all is going to play out. But in our experience any certainty is better than huge uncertainty and with the market having really no idea if reimbursement was going to be. 2,500 or 500 or $127 per square centimeter in skin subs. This was simply too much variance for people to make decisions around.

So now that that answer is known, we expect people will rapidly adapt to this new reality and get moving, but we've had a flurry of calls this week from distributors, partners, perspective sales people, and, we believe that the weeks. And months ahead will represent a profound opportunity to make some moves to improve our market, marketing, and our sales positions. I mean you could really sort of feel the market starting to crack back open again as soon as everybody knew what, fact to which they were planning.

During our September all hands call, like, I literally threw up a picture of Littlefinger from Game of Thrones and told the team, chaos is not a pit, it's a ladder, and so we're going to climb it. I mean, while perhaps the hope that max disruption was behind us in the last call was a little bit optimistic, this seems like one of those moments in a market where the ones who figure out how to climb fastest can gain a lot of ground.

And we're engaged currently with the most qualitatively and quantitatively promising sales funnel I've ever seen in my tenure here. It's been a little bit frustratingly slow to move, but it feels like that may be rapidly starting to change. So this is an exciting time here and one that should be very good for Sandy wave, with that, I'll turn you over to Peter Sorenson, our CFO, who can walk you through the rest of our financials.

Thank you, Morgan. We had a strong 3rd quarter at Sanuave with revenue reaching a new all-time quarterly record and up 22% year over year. This performance reflects the continued momentum of our commercial strategy and the growing demand for Ultramist. Gross margins expanding meaningfully year over year, reflecting both the inherent leverage in our model and our disciplined approach to managing costs. Looking ahead, our focus remains on driving sustainable, profitable growth. So with that, let's take a closer look at the financial results of the quarter.

Revenue for the three months ended September 30th, 2025 totaled $11.5 million an increase of 22% as compared to $9.4 million for the same period of 2024. This growth was below our guidance for the quarter, but right in the midpoint of the preliminary range of results we disclosed on October 6th of 11.4 to $11.6 million.

Gross margin as a percentage of revenue for the three months end of September 30th, 2025 came in at 77.9%, up over 240 basis points year over year, driven by lower ultimate assist production costs in our strategic pricing initiatives across systems and applicators.

For the three months ended September 30th, 2025, operating income totaled $1.5 million which is down by $0.5 million compared to the same period last year. However, operating expenses for the three months ended September 30th, 2025, amounting to $7.5 million compared to $5.1 million for the same period last year, an increase of $2.4 million. This change was largely driven by an increase in non-cash stock-based compensation expense of $1.4 million versus Q3 2024, in which there is no stock comp expense.

Increased head count expenses of $0.8 million increased marketing expenses of $0.2 million. Increased legal expenses of 0.2 million, and R&D increased expenses of $0.1 million.

Partially offset by decreased commission expense of $0.8 million.

Net income for the three months ended September 30th, 2025 was $10.3 million compared to net loss of $20.7 million for the same period in 2024, an increase of $31 million. The increase in net income was primarily driven by the change in fair value derivative liabilities, which resulted in a non-cash gain of $6.1 million in Q3 2025 versus the $18.8 million loss in Q3 2024, representing a $25 million year over year variance.

In addition, we had a $5 million gain related to a patent sale, as noted on a previous Ak and in our most recent 10-Q.

We also had lower interest expense of $1.6 million in Q3 2025, primarily due to the conversion of our previous outstanding notes into common stock in Q4 2024 as part of the note and warrant exchange. These impacts were partially offset by non-recurring costs of $0.5 million related to the repayment of our senior secured debt.

EBITDA for the three months ended September 30th, 2025 was $12.4 million. Adjusted EBITDA was $3.5 million versus $2.1 million for the same period last year, an improvement of $1.3 million year over year.

Total current assets amounted to $22.6 million as of September 30th, 2025 versus $18.4 million as of December 31st, 2024. Cash totaled $9.6 million as of September 30th, 2025.

We're grateful for the continued trust and support of our stakeholders. Q3 2025 is another excellent quarter for Sandy Wave, and we're pleased with the progress we've achieved across our business. As we head into the final quarter of the year, we remain committed to executing with discipline, driving growth, and creating long-term value for our stockholders. With that, I'll turn the call back over to Morgan.

Thanks Peter. So moving on to guidance, as we stated in our press release, we are guiding to 13 to 14 million in Q3 revenues, up 26 to 36% year on year and also representing, and which would represent a, another all-time high revenue quarter for say anyways.

We're starting to see significant cause for optimism.

Now that the market concern around reimbursement and wound is alleviating once because now that we now finally have some certainty rather than vast uncertainty, obviously it's only been a few days since the final rule was announced, but, as I said earlier, we can already feel some movement beginning and some of the log jams breaking free. So as ever, I want to express my gratitude to the Sandy Wave team for all the hard work and, their commitment trust, I'd also like to thank them for routinely falling for my the highest reward for good work is more work stick and pretending that that's, insightful and motivational. Well done, guys, and thank you so with that, thanks everyone, and we will open the call up to questions.

At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing 2.

We'll take our first question from Ian Castle with IFCM. Your line is open.

Yeah, I just had a couple questions, mainly around the reseller model that seems to be picking up some steam. Maybe the first question though is, due to the disruption in in skin substitutes, I was curious if, the resellers or distributors of those skin substitutes that now the rev the revenues are probably down 90% versus last year. And I'm curious if you're seeing any inbound interest from those resellers who are now kind of scrambling to pick up additional products to fill that revenue GAAP in their businesses.

Well, okay, so I mean the short answer to that question is yes, it feels like there is a substantial realignment beginning in the space and obviously you know this is a very significant change to a large product category. We've definitely seen some inbound interest I think a bunch of it started. Even well before the rule came out.

And was sort of, and some were sort of predicating the, well, maybe we'd be interested in picking this up depending on what happens. I think it's a little bit premature to say, well, okay, this is what this is going to result in a ton of new deals, but what I will say is, distribution is an important part of the space. They, a lot of the, some of these distributors are very sophisticated. They have good account. They've good account control. They do good work with the providers to help them, even down to the level of selecting patients and determining care.

It's something that we've been sort of stripping down and rebuilding this year, our average sales through distributors and resellers was about 36%.

In 2024, in this quarter it was about 25%.

So you know that's up a little from last quarter but still kind of not to levels where it used to be and so we're kind of assessing what the right level of we're sort of assessing what the right mix for us is going to be.

And how do you kind of blend that distributor channel with your direct sales force? How do you think about that?

Yeah, it's always, that's always sort of the tricky bit, and we, we're doing it through sort of a deconflicting structure where, if our reps are chasing something, it's theirs, and, we don't, what we want to avoid is are the two channels stepping on each other.

And so it's sort of, if a distributor wants to go after a customer they'll come to us and say hey we think this is an interesting prospect and you know we'll deconflict it through our internal we'll deconflict it through our internal lists and say yeah we don't have anybody who's working on that go ahead.

And maybe last question on the reseller and distributor model, how do you handle inventory management? Are they kind of, you don't want to be stuck, stuffing the channel, so to speak, where they're buying 9 months' worth of inventory? How do you think about those inventory turns?

Yeah, that's a great question, and that's something we've given a lot of thought to and something we worry about a lot, when you're dealing with stocking distributors you always sort of run this risk of you do you have too much inventory in the channel and will you wind up kind of choking on it the you know we've been trying to be sort of measured with this and not putting too much inventory into the channel. To really avoid that problem, I think you know the first major distributor we dealt with on a stocking basis this year was back kind of toward the end of Q2.

They took about 15 systems from us in the inventory and at the time I was actually pretty worried about that. They came back six weeks later and said, yeah, we've sold them, can we have 10 more?

Took 10 more and then, went out and sold those again in another 8 weeks. And so I think if we can kind of keep those turns in the sort of 8 to if we can keep the inventory turns there in the sort of 8 to 12 weeks range, I think that's healthy.

I think once we start seeing it bump up against that kind of, like 10 to 12 area, we're going to start to get nervous.

For any given distributor and then you know to look at them overall obviously I think we'd like to keep it, more toward the the sort of 8 range.

Okay, thanks for the color on that.

Our next question comes from Kyle Bosser with Roth Capital Partners. Your line is open.

Hi, good morning, thanks for all the updates. Maybe just following up a little bit on that. What, what's the latest rep head count?

Rep head count is still 13, same as it was last quarter. We've rejiggered it a little bit, we changed the shape of a couple of territories, moved it to 12 national territories, and now have two full-time kind of key national key account managers, but overall account is the same.

Got it. And how are you feeling about that heading into 26? Is that a pretty good number in addition to having the, distributors, as you mentioned.

I think obviously given a lot of what's happening in the industry right now, as you can imagine there are there are resumes.

So I think we're going to kind of do this on a, we're doing this on sort of a.

Let's see what we see.

Basis. I mean, obviously you know we plan to grow this rep headcount as we go forward, exactly how we do it right now is something that we are.

Doing a lot of work to assess internally, do we want to start bringing in some reps to just manage distributors? Do we want more key account reps? Do we want more national territories? Do we want to bring in a set of more kind of inside sales folks to either just handle customers or to. Just set appointments right so that we're having we can get our closers more time closing like that's really those are really the discussions we're having internally at the moment I think you know we'll be we'll be continuing to add to the sales force on kind of a measured basis.

Got it, yes, makes makes sense and just curious what sort of annual revenue some of your more productive reps are doing and maybe also kind of what's the reasonable run rate for reps to achieve. Yeah.

I mean it's to some extent that's always going to be a little bit territory specific right? So you know the and and a function of how well developed a territory is.

I mean, we had a rep exceed 2 million of sales in Q3.

We had a couple of others over a million.

And so you know as these ramp up, getting to this, kind of $4 million to $6 million dollar annual sales rate I mean it doesn't, it's certainly not impossible, I think given you know the difference we have a couple of markets that are more developed than others and so you know it's a question of kind of how long does it take to get an undeveloped market to look more like a developed market.

But ultimately I mean rep productivity here can be very high.

Got it. And and internationally were any of the 155 systems sold, were any of those into international markets in the quarter?

Okay, and maybe just lastly on that point, how are you thinking about the international opportunity for Ultram? Would you ever, yeah, I know you've got a lot to focus on in the US, but just curious if you, be interested in looking to take on distribution partners, in OES markets.

I mean it's certainly something we'd look at you know it's always I mean we sort of refer to this internally as the golden retriever in a tennis ball factory problem where you could it's like what are you going to chase.

And I think you know at the moment there's so much domestic opportunity that it just hasn't really gotten top of the pile. I mean if there were a really compelling distributor who could basically handle all of this without a whole lot of. Without a whole lot of intervention from us and you know in a market where there was where there was an easy regulatory pathway I mean I suppose we'd look at it but like it just it isn't something we've spent a lot of cycle time on yet.

Sure.

Okay, got it, Morgan Peter, thanks for all the updates.

Thanks.

Our next question comes from Carl Burns with Northland Capital Markets. Your line is open.

Thanks for the question. Again, I, considering the CMS fixed rate 127.28 per square centimeter, would you expect that the private physician practices would look to ltramist as an additional line of revenue? And on that, I mean, how long do you think that takes to play out? Then I have a follow-up as well. Thanks.

I mean, the short answer is yes, right? I mean, I think physicians are often maximizing two things, right? They're maximizing their desire to provide good patient care and for patients to get better and obviously, they're running a business and so to the to the extent that they find both revenue and care gaps.

This becomes a very interesting option. I mean, by on a relative basis, the attractiveness of ltraist seems to have increased a great deal, particularly from a, if your goal is revenue maximization.

Exactly how long that takes to play through is an interesting question. I'm not really sure how to answer it with any like rigor. It seems to vary a great deal by folks. I mean, people just, people respond to new realities with differing time frames. We've certainly seen a change in inbound.

And you know we've certainly seen, I mean there were, we've certainly seen people who are sort of like on the fence saying, well, maybe let's see suddenly get more interested and so I think there's definitely going to be some of that, exactly how it plays out is.

Complex.

Got it, thanks. And then you just one follow-up question, looking at mobile wound care, what do you think happens there given the CMs change and kind of how does that affect your business? What percent of your business is tied into the mobile space? Thanks.

I think I mean the mobile is experiencing a lot of the same issues as others.

And there are They're widely divergent practices within mobile and you know we've been doing some looking at this and kind of tearing into the the CMS data just to get a look at, what we think the interrels are between, skin subs and, ltramist, one of the things we discovered is that, 55% of the of the practitioners who build, Ultramist.

Don't build any. You haven't built any skin sub at all in the last 4 years. So of the 45% who do, most are, a lot of times it's not the same patient. Or it's you can't build the two in the same visit.

So from a standpoint of like what's mobile going to do, I think, some of the folks who were most aggressively using skin subs, may see their practices, either.

Change dramatically or, terminate, but I think, I mean, in this just speaking hypothetically, if If my goal as a provider were to do the maximum number of skin sub applications, I wouldn't be using Ultravis, right, because the wound would heal more quickly and you would wind up doing fewer applications. And so I think there's been sort of an inherent sorting here where the folks most interested in doing the most skin sub have also tended to be the folks who were not using a lot of ltramist.

Got it. Cool. Thank, thanks so much.

Our next question comes from Alex Silverman with AWM Investments. Your line is open.

Hey, good morning, thanks for the update.

Wondering two questions. One, can you give us a sense of, what kind of toe holds or trialing you're doing in some of the very large, wound centers.

And then I'll ask my second question after.

Well, certainly an interesting question. I mean, we've We're starting to get one of you, we're starting to spread through a couple of hospital networks in particular or at least these are these are things that you know have been going long enough that we could talk about them, one in particular is one of the larger hospital networks in the US we've been in at a couple of their flagship facilities now for. Several months it's gone really well I think they are using the product in a similar fashion to some other large hospital chains predominantly around treating hapa eyes and incipienthapa eyes I'm sorry, that's hospital acquired pressure injury. Essentially you lay on your lay on your hip or your back too long, it turns into a pressure ulcer, in a patient with, suppressed immune system or ill health, those can be very serious, even life threatening, and so, we're starting to spread there we're starting to work on, how do we become a, we were added to their approved vendor list and so, they're kind of 150-ish hospitals and 2,200 facilities are now free to buy.

We're definitely working on some other large opportunities. Nothing I can really talk about by name here right now, but, give you a little time on that, and I may have something for you.

Okay great and and then second question have you guys thought about how to get around the the the capital approval process which can be so painful at some of these bigger buyers, the hospitals and the large wound care centers that you know have just painful processes.

We have, in fact, it's something we've been giving a lot of thought to and obviously, starting to have a bit of a balance sheet helps the.

As we look at a number of hospitals in particular tend to have very difficult capital cycles, and you know their capital budgets are.

Highly segregated from their operating budgets and so yeah I mean you walk into a hospital you'll see tracking codes like even on computer monitors because those are leased right like that's how that's how aggressive the like the the cap budgets are protected there and. So I think moving to something along the lines of a rental model at prices that, makes sense for both sides, particularly if you could tie it to some sort of usage minimums, makes a lot of sense. Some hospitals don't seem to care. I mean, we've seen a number that are just like, great, let us buy the thing, but there are many others for whom the cap budgets are tight. So it seems to vary a lot hospital to hospital but yeah we're definitely starting to consider the you know can we rent these to hospitals that we believe will be.

Sort of high use environments like that that can be that that can be a great model for us.

I assume with a, I don't know, 5,000ish dollar cost for a system the the payback of placing one of these is could be a pretty quick, payback for you.

Obviously depending on if I'm sure, I'm sure you can do the math right if we price it at a various, at various points.

But the real, I mean, obviously the real fun for us is if you're selling, if you're getting people to use, 34 cases of applicators a month, the value of the consumables rapidly exceeds the price of the capital so. Right.

Okay Great thank you.

That sucks.

As a reminder, if you would like to ask a question that is star and one to join the queue.

We'll take a question from Andrew Rem with Odinson Partners. Your line is open.

Morning gentlemen, I just wanted to go back to this, the reseller and is there a way that you guys can kind of bifurcate the market where maybe direct you go to large accounts heavy users, and use resellers to get to kind of that the fragmented small customers that would be less efficient to service on a direct Basis.

Yeah, so you, you're speaking very much to a, to an internal discussion we have frequently. The, we refer to them, internally as bunnies, deer, elephants, and whales, and, the, it's hard to have high priced reps chasing bunnies. And so and a lot of the distributors know a lot of the smaller customers really well so it's certainly something we're looking at and you know whether that ultimate whether that ultimately turns out to be the solution it's certainly possible and you know it's an idea we're exploring I think we're just trying to get some experience with it and see how it works I mean we.

We made a lot of changes in our distribution network and sort of tried to do, tried to move to a, more engaged, more hands on, more value add channel and so we're still getting some experience with it, seeing, how it works and what it's good at and how to.

How to integrate it with our sales force most productively, but yeah, I mean the the idea the idea you discussed is certainly one we've been looking at.

In that would would applicator sales also run through the reseller or would you just use them to sell systems?

It's going to be, I mean, ultimately depends on the, it depends on the distributor or reseller like from many of the folks we're starting to talk to now have a much more sophisticated. ERP systems and you know systems that can integrate with our own you know what we're really looking for is to make sure we understand exactly how many you know how many applicators would be in the channel and exactly what the flow through to end customers winds up being, we're very sensitive to that attach rate like how many cases of applicators per week is a given user consuming. And so to the extent that we can sustain adequate visibility to that. We can.

We can allow sort of applicators into the channel. I mean, predominantly what we've done with these distributors is, at least in the past is to, they'll set up the customer that customer will then come and order applicators from our portal, so we have a direct relationship with them we're directly drop shipping to them.

And then you know we'll pay commission to a distributor based on those applicators.

But you know we're starting to look more at the many of these folks just want to do in you know want to do stocking entirely themselves.

You know the question just becomes can we sufficiently integrate it that it makes sense for both sides.

And then maybe lastly, and I'm not sure if this is a competitive so if it is you don't need to answer, but it does seem like the current environment lends itself to leverage from for you guys in terms of negotiating with resellers so and maybe that speaks a little bit to your increased sense of urgency, but maybe can you commented on that at all?

I mean, I don't know that I really want to speak to something like leverage, it, we're.

This is one of those moments where there's kind of a sorting hat going on, and I think, like what some of the key salients in this market just changed and people are adapting to this new situation, and I think that provides a lot of opportunity. I think it's made a lot of people more interested in engaging with Sandy wave. We've had a lot of inbound interest and.

It feels like this is a great time to kind of make some new friends.

Alright, well, great quarter guys, appreciate the time.

Thanks.

It appears we have no further questions at this time. I'll turn the program back to the speakers for any additional or closing remarks.

Well, thanks everyone appreciate you making the time, first thing on a Friday morning and we look forward to, updating you further.

In the future, thanks again.

This does conclude today's program.

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