SenesTech, Inc.

Good afternoon and welcome to CinesTech, Inc. report second quarter of fiscal year 2022 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Robert Bloom with Liftoff Partners. Please go ahead.

All right. Thank you so much. And thank you all for joining us today to discuss the NASDAQ's second quarter 2022 financial results for the period ended June 30th, 2022. With us on the call today are Mr. Ken Siegel, the company's chief executive officer, Mr. 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. Before we begin with prepared remarks, we submit for the record the following statements. Statements made by the management team of Synestek during the course of this conference call may contain forward-looking statements within the meaning of Section 27A, the Securities Act of 1933 is amended, and Section 21E of the Securities Exchange Act of 1934 is 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 our filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only of the dates 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 Ken Siegel. Ken, please proceed.

Thanks, Robert. Good afternoon, and thank you all for joining us today. As you saw in the press release, the second quarter represented another quarter of record sales. with sales up 72% compared to the year-ago second quarter. Even more impressive, perhaps, is that we saw strong sequential sales growth of 42% from the most recent first quarter. Adding one more layer to that, June was our highest revenue month ever, as we continue to see month-over-month compounding sales growth. Sales growth during the quarter was led by increases in our e-commerce solutions. continued traction within the zoos and animal sanctuary segment, deployment of ContraPest to two campuses of a major Silicon Valley technology company, and the launch of our novel Elevate bait system with ContraPest. On that last point, Elevate was available for just nine business days towards the end of the quarter, and we saw very strong initial demand from customers. This should bode well for us for the rest of the year. During the quarter, we shipped 1,500 units, which accounted for approximately $32,000 in sales, which again came from being available for just nine days. Elevate continues to generate significant interest and growing demand. And while we're not likely to see the demand stay at the initial weekly level of sales, it's not too early to declare Elevate a success. For those who aren't already familiar, the Elevate system we created with its suspended bait station, is revolutionary within the pest control industry. There simply is no other effective product on the market like it, expressly designed for above-ground deployment for the control of brew friends. The industry has typically utilized traditional bait boxes to deliver pesticides and other products, and the design of our system is such that it permits easy drop-in and replacement of new 8-ounce bottles of ContraPest reducing both servicing time and cost. We filed for patent protection for the Elevate system in April in recognition of both its uniqueness and its effectiveness. The initial focus for us with Elevate is agriculture. And while our experience with agricultural applications demonstrates the efficacy and economic value of ContraPest, our customers have been requesting an additional baiting option to target rats where they often live. specifically in rafters and other above-ground locations. As I mentioned last quarter, in preparation for our EPA submission for Elevate, we conducted extensive trials to prove the effectiveness of the system. As we've discussed with other market verticals, this real-world study information is critical, and we believe it has aided in the initial demand for the product in providing potential customers the necessary data to make informed purchasing decisions. Importantly, Elevate was developed with the assistance of AgriCom, a major player in biosecurity and sanitation, and they're extremely passionate about the efficacy of the product and its impact on food security. Not having strong endorsements from the mainstream industry had been an issue for us in the past, so with AgriCom's enthusiastic support, We're optimistic about accelerated adoption across the pest control space. Just as an aside, our partners in the trials are now buying, deploying, and expanding the use of the Elevate system. And they're seeing good consumption. So we're obviously very excited about the traction of Elevate in just the first nine days of its launch. And that was without California being in the mix. As you hopefully saw, we received approval of the system by the California Department of Pesticide Regulation at the end of July. Elevate is now available in all 50 states and the District of Columbia. With California being a major agricultural sector and frequently representing about a third of our overall quarterly sales, this should only enhance the growth of Elevate going forward. I'm certainly excited by this key development, and look forward to speaking with you all again next quarter on Elevate's progress. As we talk about the Elevate introduction, we also had another product innovation launched. Just within the past weeks, we introduced a new tray design for our bait station delivery system. This tray features some key improvements in the design that address suggestions from our customers and will improve performance, particularly in warmer weather. We continue to monitor product performance in the field, and we'll continue to introduce improvements. Let's talk about our e-commerce platform, which continues to be a key driver of growth for us. Our second quarter e-commerce solutions grew 55% sequentially compared to the first quarter of 2022, with sales to California up more than double during that time period. The growth in this vertical continues to be driven by our marketing initiatives, including our Operation Rat Race campaign, which has driven strong increases in traffic. If you haven't seen the campaign, I highly encourage you to check out one of our social media channels. The campaign takes a different tack from traditional pest control advertising in order to highlight ContraPest's different approach to pest management. It targets each of our key market segments, including agribusiness, household, municipality, commercial, professional, and zoos and sanctuaries, and additionally treats California as its own market segment in light of the opportunity created by the recent AB 1788 legislation. The campaign includes conventional and digital advertising, paid and earned media, targeted email messaging to a significantly expanded list of high-potential targets, and concentrated field sales efforts. In addition to our Operation Rat Race campaigns, we've added increased website functionality, which has been a key driver to e-commerce growth. A complete redesign of our e-commerce site, ContraPestStore.com, has resulted in a steep increase in engagement and inbound inquiries across all segments. As we've stated in the past, excuse me, we're taking a very analytical approach to our marketing efforts to ensure we are driving down our customer acquisition costs and increasing the lifetime value of our customers. Furthermore, many distributors in the structural PMP space that have been historically reliant on brick and mortar and outside sales teams to service customers are now launching and growing e-commerce platforms. As these industry changes continue, we believe there is further room for growth within e-commerce. We continue to see net benefits from incremental investment in marketing and advertising in this channel, and have increased our spend this quarter to drive further growth. During the second quarter, we saw a 264% increase in active e-commerce customers, compared to the second quarter of 2021, and that's up 21% sequentially compared to the first quarter of 2022 numbers. Churn has also improved, as has the number of subscription-based customers we have. I'm pleased with the job the team has done to continue driving growth in our e-commerce business and expect to see further growth going forward. So I talked a bit about our agriculture market vertical at the beginning, So let me expand on a couple of additional areas. First, zoos and sanctuaries. This vertical continues to be a key early adopter for ContraPest. Over the past 12 months, the vertical has seen sales grow more than 300%, and we now have nearly 70 current customers. ContraPest has been shown in multiple independent deployments to be effective when used alone, or in conjunction with other integrated pest management or IPM tools, with efficacy improvements of up to over 90% over the use of traditional IPM methods. This makes ContraPest a logical choice for deployments in zoos and sanctuaries where traditional methods are falling short and where there's a heightened risk of non-target species exposure. Let me share a recent observation in this area. A world-class zoo one of the top five largest in the United States, developed a significant rat problem in their free-flight aviary in 2019 when a hole was discovered in the perimeter mesh that allowed rats to access the habitat. Despite the zoo's best efforts, the rats flourished in the aviary and began to negatively impact the health and well-being of the birds, devouring any eggs they could find. The zoo started using ContraPest in December 2021. Within four months, they saw a dramatic decrease in the rat population. They no longer saw juveniles or obviously pregnant females on their camera traps, and they found less evidence of rodent activity in areas that had previously accumulated droppings. Most importantly, they started to see successful breeding of the birds. This spring marked the first time in years that they were able to recover eggs from nests and successfully hatch those of interest. As the waterfowl and ground laying birds begin their breeding cycle this year, they expect to recover even more eggs that would previously have been lost to the rats. This success is important not only to the birds in the aviary, but as a demonstrated tool that can contribute to the conservation of threatened species. So recently, we've developed customized programs for zoos and sanctuaries with targeted advertising and sales efforts, and we expect the addition of Elevate to accelerate growth into this vertical going forward. Another area that we've been working hard to communicate the benefits of ContraPest to is what I call the large environmentally focused corporations. During the quarter, we deployed ContraPest at two campuses of a major Silicon Valley technology company. As you can imagine, we're not able to speak specifically to the customer's name, but it's highly gratifying to see the types of corporations that are increasingly recognizing ContraPest as a key to corporate sustainability initiatives and as a successful component of an integrated pest management strategy. We're optimistic this will be a springboard to other similar developments in Silicon Valley, as well as other large corporations across the country. Related to this, we've also recently started working with local authorities to address the unique challenges of treating infestations in and around homeless encampments. Initial deployment of just our EVO stations on the ground is showing immediate signs of good consumption. And the customer is now adding the Elevate bait system to their order, expanding deployment in the coming weeks. And so while it's early on, we're encouraged as we focus on proving efficacy while also reducing the risk of harm to the inhabitants. This builds, of course, on our overall push into municipalities and counties with growing success with those government entities who have a commitment to innovation, environmental awareness, and most importantly, to results. Our existing customers are continuing their deployments, and we're attracting new ones. So before I turn it over to Tom, I think it's important to take a step back and recognize the opportunity we have in front of us. Rat infestations have been exploding both in the US and around the world. The trend isn't new and has been going on, in fact, for decades, if not centuries. Despite us spending a billion dollars per year on poisons and other lethal treatments for rats, it's just not working. I've stated this in some of my industry presentations, but it's worth repeating. Rodent problems are a product of two factors, the birth rate and the death rate. Up to now, solutions have only focused on the death rate, and ContraPest changes that. You all know the numbers by now that a single pair of rats can be responsible for up to 15,000 descendants in their one-year lifespans. You simply can't eliminate them fast enough to overcome that birth rate. Only by controlling rat reproduction can you do that. And we have the only solution. Not only that, but we do this in a sustainable way. As we are all well aware, society continues to focus on reexamining the tools and methods we use to see if they are truly the best we can do. Concerns about the residual effects of introducing increasingly toxic poisons into pest control and the potentially deadly effects they have on kids, on pets, and on the many animals who feed on rodents are becoming mainstream issues. The characteristics of contrapests yield themselves well to the move towards sustainability. And with deployments like the one we had this quarter at the large Silicon Valley campus, where they're increasingly concerned about the impact of poisons, we think this move towards sustainability will be a key factor in the future growth of ContraPest. So with a product that works, that fits nicely into an integrated pest management approach, and that does so in an environmentally sustainable way, we just feel we have the right product for the right time in history. One more thing. It's with pleasure that I announce the addition of Dan Pulaski to the Synestec executive team as our chief technical officer. Dan joins the Synestec team with years of experience in leading technical teams through product development and aggressive growth strategies. Dan will oversee the R&D, regulatory, quality, and field development departments in his new role and will provide the strategic vision for the scientific arm of the company. In his most recent position, Dan held the title of Vice President, Research and Development at PLZ Corp., a manufacturer of chemical consumer products. Dan was the technical expert for their entire product portfolio, which included many EPA-registered products, including pesticides, disinfectants, and germicidal cleansers. Dan joins the team at a great point. and we all look forward to working with him to take ContraPest and Synestec to the next level.