Good afternoon, and welcome to the SenesTech Second Quarter Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

All right. Thank you very much, operator, and thank you all for joining us today to discuss SenesTech's second quarter 2025 financial results, and this is for the period ended June 30, 2025. With us on the call today is Joel Fruendt, 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. [Operator Instructions] Before we begin with prepared remarks, we submit for the record the following statements. 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. Forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date in which they were made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise. With that said, let me turn the call over to Joel Fruendt, Chief Executive Officer. Joel, please proceed.

Thank you, Robert, and good afternoon, everyone. Thank you all for joining us today for our second quarter 2025 conference call. As you can see from the press release, we had yet another quarter of tremendous performance highlighted by record quarterly revenue and record gross profit margins and gross profit dollars, which led to another quarter of improved adjusted EBITDA. The adoption of our Evolve Rodent Birth Control solution continues to be a game changer, which has significantly opened up the addressable market opportunity for SenesTech. We are seeing growth across all channels in our 6-channel strategy. During the quarter, Evolve sales were up an incredible 94% compared to the year ago second quarter and up 36% sequentially. Evolve now makes up 83% of our total quarterly revenue. While revenue growth is key, we have also dramatically grown our gross profit dollar contributions, a key metric to us achieving cash flow breakeven. This improvement was due to higher inherent gross margins of our Evolve product line. During the quarter, gross profit margins were 65.4%, up from 54.2% in the year ago second quarter and compared to 64.5% in Q1. From a gross profit dollar perspective, we were up 64% compared to last year's Q2. As Evolve sales continue to grow and make up the majority of our overall sales mix, we expect to see continued long-term improvement in gross margins. As we have talked about for some time, Evolve has opened the door to market verticals and distribution channels, which our earlier product ContraPest simply wasn't suited for. For instance, e-commerce sales, which include Amazon, walmart.com, tractorsupply.com and diypestcontrol.com as well as our own e-commerce sites are much more suited for the soft bait form factor of Evolve compared to the liquid solution of ContraPest. E-commerce was up 78% compared…

Thank you, Joel. Let me take a moment to expand on the numbers in the press release and a few of the points that Joel mentioned in his earlier remarks. On the revenue line, total revenue for the second quarter was $625,000, which was an increase of 36% from Q2 of last year and up 29% sequentially. Breaking it down further, Evolve revenue increased 94% and accounted for 83% of our second quarter sales. ContraPest decreased approximately 45% and accounted for 17% of our Q2 sales. While down from the year ago period, ContraPest was actually up 3% sequentially. There are still a number of loyal ContraPest customers and there are a couple of states where Evolve is not yet approved, and which ContraPest can address their rodent fertility needs. Looking at it from a vertical breakdown. E-commerce is clearly our largest contributor coming in at 56% of our overall Q2 sales. Overall, e-commerce was up 78% compared to Q2 of last year and up 18% sequentially. Amazon is going well and is the predominant e-commerce channel right now. Municipal sales, while still a relatively small percentage of total sales, saw a 538% increase from a year ago quarter, driven by new deployments in Chicago and New York. Brick-and-mortar sales were more than $65,000 during Q2, driven by the large Bradley Caldwell order. In last year's Q2, we had virtually no retail sales. We recognized about $20,000 in international sales during Q2 from a follow-on order in the Caribbean. As Joel mentioned, we have a few potential significant orders pending regulatory approval, which we expect will be key drivers for us later this year. Other contributors during Q2 were in the areas of agribusiness, commercial, pest management professionals as well as zoos and sanctuaries. Turning to gross margins and gross…

Thanks, Tom. Before I turn it over to any questions, I think it's important to take a step back to recognize everything that we have accomplished over the past year or so to put us in the position that we are in today. It was only 1.5 years ago that we launched our Evolve Rat product, which was then followed up by our Evolve Mouse solution. Since that time, Evolve sales have grown at an accelerated rate, including 94% year-over-year growth during this quarter. Evolve has changed the game for us by opening doors to key market verticals domestically and internationally. We are increasingly building a defensible market position built on science, regulatory trusts, IP protection and category leadership. Just as we have shown to date, it is my expectation that we will continue to see adoption expand across our key market verticals and distribution channels, each of which can significantly transform this business. With a large addressable global market that has shown regulatory tailwinds in our favor, a first-mover advantage in rodent birth control, a diverse and scalable go-to-market strategy that is producing results and a lean focused growth strategy, which balances revenue growth with operational efficiencies to move the business towards breakeven, I couldn't be more excited about the position SenesTech is in today. Please know that we are working hard every day on behalf of our shareholders and really the public at large to suppress rodent populations in a sustainable manner. As always, I thank you all for your interest in SenesTech. With that, I'm happy to open the call to questions. Robert, let me turn the call over to you to see if there are any questions in the webcast portal.

All right. Very good. Thank you, Joel and Tom for the prepared remarks there. We've got a series of questions here. I'll try to maybe lump them into buckets where appropriate. Starting off here, should we expect incremental improvements to gross margins in the coming quarters?

I think you can -- yes, it's Joel. I think you can look at -- that we expect margins to stay consistent where they're at, and we may be able to see some improvement in the coming quarters as well.

All right. Next question here. Is there room to accelerate e-commerce growth with additional digital marketing spend?

Yes, and that certainly is in the plans, and what we are looking at is that, okay, how can we accelerate not only in e-commerce, but across all of our channels and what are those things that will give us a good bang for the buck. And so we're really excited about being able to lay out those plans and do that acceleration.

Okay. Next question here. Should we expect higher volumes from cities like New York City, Chicago, Boston, Baltimore, L.A. County and San Francisco where the product has been launched?

Well, as you can see across not only the city and government verticals but others, it usually starts out with a test, a trial, and then they see the results. And once they see the results, then you start to see the increased flow of orders and revenues building. And certainly, we believe that across the cities and government agencies is that you're going to be seeing -- you're seeing continued growth as these trials prove out that Evolve is the product that they want to use, and that will give them another tool in their toolbox. So we're expecting good things out of the trials and moving forward with implementation into their regular pest management practices.

All right. Great. Next question, what is the potential capacity in terms of dollars of the expanded manufacturing facility?

Well, right now, we have the capacity to do with the one shift we're running and the line we're running on to do roughly 1 million pounds, which translates roughly to $10 million in revenue. But we're not standing still on that. We're looking to put in place not only, okay, how can we put in additional shifts, but also additional lines when we had the facility built and organized for us. We have the capacity put in at least 3 different manufacturing lines. And so we're in the process of taking a look at all those options and what makes the most sense for us, not only short term, but also long term.

All right. I believe Tom addressed this question's prepared remarks though. What is the new basic share count as of today?

Well, yes, I did cover it, but let me be specific. As of today, I just checked, we have 4,724,340 shares outstanding.

All right. Very specific there. There are a few questions regarding the recent capital raise. I'll try to maybe summarize here. Are you planning to do more in the future? If yes, can you provide some clearance on why you would need to do any additional capital raises?

Joel, do you want to take that?

Tom? Tom, would you...

Yes. So one of the things that's really been holding our stock back for years now really is a financing overhang. We did not have enough cash to confidently bridge to cash flow profitability. So starting at the beginning of this year, we initiated a plan to use warrant transactions to get more than a few months runway. We now have that. We have the cash in hand to convince even the most skeptical that we can bridge to cash flow profitability. And as I mentioned earlier in the call, we have now concluded that program, and so I don't anticipate further financings like that in the near future, perhaps not ever.

All right. Very good. Next question here. Would a New York City full-scale expansion require a big capital investment?

I can answer that. It's -- a full-scale New York would not require a significant capital investment right away, but what we would do is we would plan on expanding, as I just mentioned before, and to increase our capacity that way. And our -- the capital -- the CapEx that we would need in order to do that to add additional lines is somewhere in the $300,000 to $400,000 range.

All right. Next question here pertains to sort of just breakeven and profitability. Talk -- and again, Tom, I think you addressed this, but talk a little bit about the breakeven point, both from a cost and a revenue standpoint. And when is the earliest we could flip to profitability?

Yes. If you look at it right now, when we did our OpEx reductions earlier this year to get our burn rate down, we have said before, and we're holding tight on this is that our revenue level in order to get to cash flow breakeven is somewhere in that $6.5 million revenue line. And we think we can get to that line somewhere in the second part of 2026.

All right. Very good. Next question here, talking about the need to, I believe, higher additional folks to sort of meet some of your growth expectations here. Do you need to hire additional people?

Yes. We have been hiring some people. And as we look forward, we're hiring salespeople. We're also putting on manufacturers reps, right, that will handle us with a lot of the retail accounts trying to do this in the most logical and cost-effective way that we possibly can. Manufacturers reps have existing contacts with a lot of the big box retailers and agriculture retailers. So we're putting in field salespeople that are company people. We're going to expand our field team that goes out and does these field trials. As you can see, we're getting a lot of requests for field trials and assistance. And so we want to make sure that we're properly staffed there. So that's in the plans as well. So yes, as we continue to expand and grow in each of these vertical markets that we've realized and are on board with what we're trying to do, we're going to be able to support those across the board.

All right. Next question here. Are there any active trials that have not been announced?

Well, we have a lot of trials, small and large, that are out there. So I have to say there are active trials that have not been announced, but those could be a small scale. I mean, the large ones that have to do with the major cities, we have out there. Certainly, we have trials that are going on in the agriculture industry, as I mentioned a little bit earlier that we've not announced on. But we certainly, as time goes on and as we have these trials and there -- we'll be relaying that information as we get the results.

All right. There's a few questions here pertaining to the ATM. Is there any, well, maybe more broadly, if there's any definition here, about what you would utilize the ATM for on a go-forward basis?

Tom?

Well, in short, we are not using it right now. It's not active. We have the capacity. But with the recent raises, we have enough cash for right now. So if in the future we find that the stock price surges, volume surges and there's an ability to bring down some capital, we might. But right now, we're seeing that more as a capacity and a potential as opposed to a plan.

All right. Very good. Next question here. How long before you are in store with Tractor Supply and end cap would be perfect?

We totally agree with that, and we hope to have some news on that in the coming months.

All right. Another question here. Can you specify how OpEx will be cut? How much will come out of SG&A versus R&D?

Well, we've already made the cuts that -- and we announced them last quarter. And they really were a mixture of things where we've in-sourced some marketing activities, where we've cut down on some of the R&D towards additional species, for example, things like that. So it really was not specifically either SG&A or R&D. As we move forward, we -- there are -- we continue to look at every expense, but we don't have any specific plans to further reduce OpEx. In fact, there may be some areas, as Joel mentioned, such as in sales, where we may want to increase a little bit of investment as our financials allow.

And if I can add to that, Robert, it's -- when we start looking at things, we have requests all the time for other animals and under mammals and how can they -- how can we come up with solutions for them. But we just -- we said it's like, right now, we are focusing exclusively on Evolve, Evolve Rat, Evolve Mouse, and we're going to focus all of our efforts on that. That doesn't mean that we won't expand into some of these other areas. In some adjacent areas, maybe, as we go on. But we felt it very important at this time to really put that focus on the products we have and getting them out into the marketplace and get our trials going. And so that was all part of the plan. And as we go along, we may add things. But right now, we're really focused on -- laser focused, I should say, on Evolve and making sure that we give it everything that is needed in the marketplace to succeed.

All right. And barring any last-minute questions, we'll leave this probably the last question. You spoke on this, but would you please clarify your statement about marketing through major brick-and-mortar retailers?

Well, I mean, I think what we're referring to there is that major brick-and-mortar retailers are interested in our product. We have some discussions that are ongoing. And as I mentioned, we hope to have some announcements on that in the coming couple of months.

All right. Very good. I am showing no additional questions here. I think we hopefully hit on everything. Joel, I will turn it back over to you for any closing remarks here.

Yes. We're very happy with the quarter. We're happy with the year-to-date progress, and we believe our very best months are ahead of us this year. So stay tuned. We've got a lot of things that are in process and other things that are upcoming. So appreciate all of your support and your interest in SenesTech.

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