Operator:

Good day, everyone, and welcome to today's SANUWAVE announces highest quarterly revenues in company history, Q3 2024 results. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of SANUWAVE. Morgan Frank: Thank you very much. So welcome, everyone, to SANUWAVE's Third Quarter 2024 Earnings Call. As many of you saw our Form 10-Q was filed with the SEC last night. Our earnings release was issued this morning and our updated corporate presentation was made available on our website in the Investors section. Please refer to that during this presentation. Joining me today is Peter Sorensen, our CFO. And after the presentation, we will open the call up for Q&A. Let me kick off with the always scintillating forward-looking statements disclaimer. 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. Descriptions 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. The company undertakes no obligation to update any forward-looking statements. As a reminder, our discussion today will include non-GAAP numbers. Reconciliations between our GAAP plans and non-GAAP results can be found in our recently filed 10-Q for the quarter ended September 30, 2024. Okay. So with that out of the way, let's get into good stuff. Last conference call, we spoke about our revenue growth rates in 50s, being sustainable, and we guided above trend growth of 65% to 75% for Q3. We're extremely pleased to have meaningfully exceeded that guidance, posting revenues for the quarter of $9.4 million, by far the best quarter in the company's history and an increase of 89% versus the same quarter last year and 31% sequentially from Q2 2024. [ UltraMIST ] revenue, which was approximately 58% of our revenue in the quarter, grew 75% from a year ago and 14% sequentially versus Q2. And this consumables revenue alone actually exceeded full Q3 revenues for 2023 which is a promising sign for us given that we fundamentally view ourselves as being in the consumables business. UltraMIST systems sales for the quarter was a big swing factor with 144% growth year-on-year and 74% growth from Q2 as our ongoing mantra of rapid profitable growth that has so fun repeating on prior calls, continue to play out, and we saw a rise in our gross margins to 75.5%, saw $2 million of operating profit and $2.1 million of adjusted EBITDA in the quarter. Company also turned the corner on being cash generative for Q3 as a whole, even after cash interest costs. You can get more detail here from the earnings call deck and from our website or our SEC filings. So all in all, we fully got a significant number of steps in the right direction for the company. And as many of you likely saw, we took some further steps on October 18 to reverse split the stock affecting note and warrant exchange and a variety of warrant exercises and closed a $10.3 million pipe deal funded by several new as well as several existing investors. Post this set of transactions, the company repaid certain debt and regained compliance with the covenants of our remaining loans is no longer in forbearance on any of our obligations. This has greatly simplified and stabilized the company's capital structure as a part of our efforts to create a simple investable structure conducive to allowing us both to grow and thrive and to be value for our business rather than our cap stack. On the business side, Q3 obviously came in ahead of plan. This underlines one of the challenges we're facing and forecasting at the moment, which is that -- which is what we're really internally referring to as sort of pigs a pythons problem. As we discussed on prior calls, companies are beginning to engage with a much larger, more sophisticated sort of customer. Obviously, this is fantastic opportunity for us and it's precisely the sort of thing that we need to be doing as we seek to transition to being, I guess, kind of a small business being a medium-sized one. But it's also going to make revenue especially systems revenue a bit trickier to predict in the near term. Applicator revenue tends to be much more linear and therefore, easier to forecast because it's simply a function of how many systems you have in the field, how many patients they treat per week. And the applicator pricing, but system sales, especially with bigger customers tend to have a less linear aspect and I think this Q3 shows the pig skin sometimes made quite a lump as they pass through python. Selling 124 systems in 1 quarter versus 55 in the prior year and 72 last quarter was a real breakout for the company. But as much as we'd like to, this is a difficult outcome to draw trend lines to infinity from -- we expect it will become a bit easier to forecast this as we go forward and we get more customers into the adoption stage and some laws of averages and large numbers start to work for us. But in the near term, it's going to be a little lumpy. And though obviously, sometimes lumpy, can be good. So with that, I will turn it over to Peter to run through the numbers in some more detail, and then I'll pick this theme up a again as we speak about guidance. Peter Sorensen: Thank you, Morgan. We're reiterating what was previously said, it was another exciting quarter for SANUWAVE wave as we achieved all-time record high quarterly revenues, including year-over-year growth of almost 90% and strong sequential growth of over 30% from last quarter's previous all-time record quarter. We also increased our gross margins both year-over-year and sequentially, and we continue to execute on our goal of rapid profitable growth. So with that, let's take a look at the numbers. Revenue for the 3 months ended September 30, 2024, totaled $9.4 million, an increase of 89% as compared to $5 million for the same period of 2023. This growth is greater than the previous guidance of a 65% to 75% increase. Gross margin as a percentage of revenue amounted to 75.5% for the 3 months ended September 30, 2024, versus 71.5% in the same period last year, an increase of over 400 basis points, which is mainly due to completing a line transfer at a new contract manufacturer as well as positive pricing impacts compared to the same period last year. For the 3 months ended September 30, 2024, operating income totaled $2 million, which is an improvement of $2.5 million 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 September 30, 2024, amounted to $5.1 million compared to $4.1 million for the 3 months ended September 30, 2023, an increase of $1 million, which was mainly driven by increased selling expenses. Net loss for the 3 months ended September 30, 2024, was $20.7 million compared to a net loss of $23.7 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 and an increase in operating income. Adjusted EBITDA for the 3 months ended September 30, 2024, was $2.1 million versus a negative $264,000 for the same period last year, an improvement of $2.4 million. SANUWAVE continues to execute its financial strategy to improve operational profitability and manage operating expenses. As previously discussed with the subsequent event of the note and warrant exchange, we are thrilled to be moving on from most of the derivative liability that has previously clouded our bottom line results. Total current assets amounted to $9.9 million as of September 30, 2024, versus $9.8 million as of December 31, 2023. Cash totaled $3.3 million as of September 30, 2024. We thank you for the continued support of SANUWAVE, and I'll now transfer the call back to Morgan. Morgan Frank: Thanks, Peter. So moving on to guidance. As you likely saw in our press release, we're guiding to $9.7 million to $10.5 million in revenue for Q4, which would represent roughly 40% to 50% growth from what was another sort of pig through python quarter last year in Q4 when we had our first full quarter without supply constraints on our UltraMIST system, we were catching up on backlog. Q4 2023 was up over 40% sequentially from Q3 of last year. So it's a bit more difficult sort of quarter to comp against. But obviously, this guidance takes us up to revenue estimate in excess of $32 million for 2024 as a whole, which is a bit ahead of our previous guidance and would put us at a 57% year-on-year growth rate. The company has also been looking at requirements to uplist to NASDAQ. And currently believes that it will be able to do so using the market value standard presuming it is able to sustain a $4 bid price and a $75 million market cap for 90 trading days. Yesterday, made 15 days of our not that we're counting. So again, I'd really just close by reiterating that we're building for the long term here, and we're very excited by the progress we've made remain hungry for more. I would like to thank the whole SANUWAVE team for their extraordinary efforts here. And to remind everyone that as our internal control mantra is the reward for good work is more work that there's going to be plenty more opportunity to come. So with that, I will open the call up for questions. Operator? Operator: [Operator Instructions] And we'll take our first question from Alex Silverman with AWM Investments. Alex Silverman: Congratulations. Curious, a couple of questions. Can you spend a little bit of time talking about the -- your process of moving to a new manufacturer both for systems as well as disposables and where you are in that process? Morgan Frank: Sure. So on the systems side, we successfully completed the transition to 2 new contract manufacturers that we are using to manufacture the UltraMIST system now. We're now up and running there and are getting systems in at kind of 25 to 30 a week cadence. So that seems to be going very well on the applicator side, we have been working through a minor redesign on the product that would remove a couple of ultraviolet cure adhesive steps in the production process. Once we have that time nailed down, we're looking to go and cut new larger molds that we can use, and we're hoping to have kind of I think at this point, probably sometime in Q2 next year have the second source stood up on applicators with the new design. Our goal is to maintain multiple sourcing on these so that there's no single point of failure. Alex Silverman: That makes perfect sense. Given, I assume your systems are FIFO accounting, how many of this quarter's systems were on the new more profitable manufacturing as opposed to the less -- the lower margin prior? Peter Sorensen: I'll take that one, Morgan. It was just a few... Morgan Frank: Yes. Peter, you want to field that there? Peter Sorensen: Yes, I'll take that. So just a few at the end of the quarter as these new contract manufacturers got stood up near the end of Q3. And we still have leftover inventory from our previous ones. So in Q4, we'll start to see another uptick in our gross margin as that COGS comes down on those systems. Alex Silverman: Got it. Got it. So there will sort of be a step function on the margin on systems Q3 to Q4 and then starting in 2025, a step function on the applicators. Peter Sorensen: Correct. Alex Silverman: Okay. Helpful. And then in terms of the 124 systems that you sold in the quarter, which is kind of mind-boggling. Can you walk through how many of those are to the "more sophisticated bigger customers"? And how many of those are to the mom-and-pop. Morgan Frank: So yes, I guess, it's always a little tricky to sort of to break it down that way. I mean what we can say is we've had a couple new customers that have been -- that started to ramp aggressively in Q3. And that between a couple of large customers, they were being -- they were a very significant effect on the quarter. I think we're sort of trying to stay away from like revealing data about our customers and like who's buying, how much it was. Alex Silverman: And if you could spend a moment on new customer pipeline and sort of what you're seeing out there? Morgan Frank: Yes. I mean, the top of our funnel right now is exciting. Like it's the best we've ever seen it. but it's also a little different than anything we've seen before, where these are bigger customers, they're more sophisticated. They're potentially much bigger buyers of product. They also tend to take -- if you're going to buy 100 systems, you think about it very differently than if you're going to buy 2. And so it's -- we're still sort of learning what it takes to move these guys through the funnel and the speed at which they move. But we're very excited about what we're seeing. It's -- I think over the next couple of quarters -- it really feels like we could be turning a corner here. Operator: We'll take our next question from Christopher Davis with Founding Asset MGMT. Christopher Davis: So Morgan and team, congratulations on executing frankly, as efficient and comprehensive turnaround as I've ever seen. So really -- so maybe fill in a little bit of the profile over the next year of OpEx for us. And maybe also talk about numbers of salespeople, what you had 4 quarters ago, what you intend to have, what you have now and what you have -- what you may have next year? Morgan Frank: Sure. Thanks. So we started this year with I believe are 3 salespeople. There's actually been some turnover in the sales force since then. I believe we're now at 9 and should be at 11 by kind of the middle of this month. So that's -- obviously, we're starting to get some traction there and we're increasingly focusing on how to get more deeply involved with some of the bigger, more sophisticated customers. From an operating expense stand, obviously, adding head count does add to OpEx. We don't expect it to be anything like proportional. The -- our Q2 number had some expense reversal back out on a GAAP basis, this quarter had -- Q3 had some expenses in it associated with the transaction that we consummated in October with some of the processes with the nonrecurring engineering expense associated with standing up the new production lines. So I think in spite of having added a fair bit of head count, I think it's reasonable to assume that operating expenses in Q4 are going to be about flat in dollar terms with Q3. And there should be some modest growth across 2025. I mean some of the swing factors we'll include things like weather and to what extent we're going to pursue some additional clinical study. But overall, I think using a dollar value for Q4, pretty similar to what we experienced in Q3 is a reasonable assumption. Operator: We'll take our next question from [ Daniel Hurst ], Private Investor. Unknown Attendee: Morgan, just a couple of quick questions, if you don't mind. Looking here on Page 12 and 13 of your 10-Q that you guys filed last night. Sections 7 and 8, going senior secured debt in default of $26 million -- just over $26 million and a promissory note payable with $1.3 million in default. Just looking to see when those might be getting cleaned up, if you will. Morgan Frank: Sure. So the $1.3 million note has already been repaid as of this time and is no longer an obligation of the company. And the default on the LH expansion that was associated with noncompliance with a minimum cash covenant of $5 million. And that covenant has also now been met. So at this time, we are no longer in default or in forbearance on any of our debt obligation. Unknown Attendee: Okay. Beautiful. And Page 16, the breakdown of U.S. revenue and international revenue. Obviously, you guys have done a tremendous job of growing revenue here in the U.S., international side, however, came as a little sluggish, if not meandering. I know you guys are focused on the U.S. side. Any comment on the international side? Morgan Frank: I mean the international sales were predominant -- I think exclusively actually associated with the dermaPACE and profile product lines. And so the company's primary focus at the moment remains UltraMIST in the U.S.. And so given that UltraMIST is not cleared for use in the EU. We're -- it's just that's not going to be a focus in the near term, like the opportunity in the U.S. is so large that we really -- we've chosen to focus there and really don't want to be the dog that faces 1 bunny and come home fed rather than trying to chase 2 and coming home hungry. Unknown Attendee: Okay. And last question, Page -- the bottom of Page 25, on the top of Page 26, said the company has still identified the following material weaknesses. It lists 3 of them. And then it says, as a result, management concluded that its internal control over reporting was not effective as of September 30 of this year. Any ideas on that? Morgan Frank: Well, I mean, obviously, it's not uncommon for companies our size to have various forms of material weaknesses in their reporting. It's something that we have chosen to focus on internally. We're now -- we've hired a full-time employee whose entire job is to remedy these reporting issues she reports both directly to Peter, our CFO, and to the Audit Committee on our Board. So these are issues that we believe are well within our remediate and that we're currently working on. Operator: [Operator Instructions] We'll take our next question from [ John Lundy ], private investor. Unknown Attendee: How soon do you expect to be cash flow positive? And if it's not in the near future, is there going to be more debt? How are you going to handle that? Morgan Frank: Well, as we mentioned on the call earlier, the company was cash generative in Q3. Unknown Attendee: And you expect that to continue? Morgan Frank: I think we haven't given any guidance there. But I think based on the -- based on what we said about operating expense and about expected revenue levels for Q4, I think you can probably do some reasonably good math. Operator: We'll take our next question from Ian Cassel with IFCM. Ian Cassel: Congratulations on the quarter. I had a question about the clinical studies or validation studies that you may be working on now or may be working on in the future. I was just curious if you're -- quite honestly, if you're working on any more -- or do you see the need to do additional ones to get further penetration in the market. Morgan Frank: Yes. Thanks, Ian. I don't know that it's so much a function of penetration in the market in that -- there's a fair bit of data out on UltraMIST. We have a lot of -- we have a fair number of users out now that have history using the product, and there's a general sense of people have had good experiences with it. The question becomes, one, how do we bolster our claims using real-world data because this is obviously something that both CMS and insurers have become increasingly interested in, is do post-approval studies show us that your product is working out in the field. We have some users that have repositories of data and very interested in working with us on this. And so I suspect we'll certainly be pulling together some data along those lines over the next year. The question of prospective studies then becomes an issue of is there something else we might want to be able to pursue and be able to make claims about. We have a couple of things in mind. I'm not sure this is really the place to discuss them. But it's -- there are a couple of prospective studies that we think could be managed fairly easily and that would -- might yield some data that would be really beneficial to us. Operator: And it appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks. Morgan Frank: Great. Well, thank you all for participating in the call. And thanks for the attention. Thanks for the questions, and we will speak to you next quarter. Operator: That concludes today's teleconference. Thank you for your participation. You may now disconnect.