SANUWAVE Health, Inc.

Your program is about to begin. Good day, everyone, and welcome to today's SanuWave 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. Please note, today's call will be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Chairman and CEO of SanuWave, Morgan Frank. Please go ahead.

Thank you, Chloe. Welcome, everyone, to SanuWave's first quarter 2025 earnings call. As many of you probably noticed, the Form 10-Q was filed with the SEC last night, and our earnings release was issued this morning. along with an updated presentation, which was made available on our website at the investor section. You can please refer to that during this presentation. It really is useful, promise. Okay, so joining me on the call today, we have Peter Sorensen, our CFO, and after the presentation, we will open the call up to Q&A. 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. The company undertakes no obligation to update any forward-looking statement. Certain percentages discussed in this call are calculated from the underlying whole dollar amounts and therefore may not be recalculable from the rounded numbers used for disclosure purposes. As a reminder, our discussion today will include non-GAAP numbers. Reconciliations between our GAAP and non-GAAP results can be found in our recently filed 10Q for the period ended March 31st, 2025. Okay, thus prefaced, let's get to the interesting part. So Q1 was a strong start to the year, coming in ahead of expectations, and obviously we're very pleased to put up a 61% year-on-year growth comp in a quarter in which we hired a new head of sales and worked through some associated Salesforce restructuring. Placing 98 new Ultimis systems in Q1 represented a 128% increase. from system sales of 43 in Q1 of last year. And we did this without any unusually large orders in the quarter and with no customer representing more than the mid sixes percentage of our overall revenue. I mean, frankly, the quarter came in a bit stronger than we expected, but you know, never a bad thing to get a good start to the year, especially in Q1, which is typically a quieter time seasonally for Sandy Wave and for medical device in general. We got going with a number of new customers in the quarter, some of whom we believe have excellent potential for follow-on business and growth. We ended the quarter with 1,145 systems in the field, 429 of which have been placed in the trailing 12 months. Moving on to applicators, sales in the quarter were 5.8 million versus 4.1 million last Q1. This was down very slightly from Q4, which is not unexpected and is actually a pretty typical pattern, albeit one that was swamped by other factors last Q1, and so perhaps warrants a little bit of explanation. Patients see their out-of-pocket maximums reset every January, and thus it's quite common to see people delay treatment in Q1 once they start having to pay out-of-pocket again. This tends to lead to a bit of reduced usage in Q1 until it starts to catch up in Q2 and later in the year. Applicators constituted 62% of our revenues in Q1, which is toward the high end, but within our 55% to 65% target. Gross margins increased a bit for the quarter versus Q4 as a result of strong systems pricing and efficiencies with our contract manufacturers. We started cutting steel on our new four-cavity applicator mold back in January, and we are on schedule to complete its qualification and have a production commercial product in Q4 of this year. This should both ensure additional capacity and lower production costs for our consumers. So as can be seen from our balance sheet, we used Q1 to build up inventory on both Ultramis systems and of applicators as well. And we also took the opportunity to stockpile a number of longer lead time components to enable more rapid production ramp up if needed. We've been doing this both because having lots of razor blades on hand is never a bad thing for those in the razor business and in support of our elephant hunting aspirations toward engaging with larger customers. Ultimately, having systems on hand to enable us to really just take yes for an answer on a large order is never a bad thing. And for the first time since I've been CEO, we're really at a quite comfortable inventory level. And to be honest, it feels comfortable. So especially during COVID, such uncertain economic and trade conditions as these. We feel really good about our supply chains and our manufacturing, and as of right now, we do not anticipate any material cost, availability, or margin issues resulting from the current tariff situation. Our production is domestic, and we are well set up for parts and benefiting from economies of scale. Just as a note of housekeeping, our uplist to NASDAQ this quarter was a great step for us, but it also came with a $295,000 listing fee, which affected our operating profit, our EBITDA, and our adjusted EBITDA figures. Obviously, we hope not to have that recur next quarter. So with that, I will turn you over to Peter Sorensen, our CFO, who can walk you through the rest of our financials.

Thank you, Morgan. Q1 was an excellent quarter for Sanywave, marked by record-breaking Q1 revenues and robust 61% year-over-year growth. Beyond our top-line performance, we also delivered meaningful improvements in gross margins, both compared to the same period last year and sequentially, underscoring the strength and scalability of our business model. These results reflect our continued focus on driving rapid, profitable growth. Let's now take a closer look at the financials. Revenue for the three months ended March 31st, 2025 totaled $9.3 million, an increase of 61% as compared to $5.8 million for the same period of 2024. This growth exceeded the top end of our previous guidance of 45 to 55%. Gross margin as a percentage of revenue amounted to 79% for the three months ended March 31st, 2025 versus 72.6% for the same period last year. This represents an increase of over 640 basis points, which can be attributed to reduced cost and ultimate system production and a strategic focus on pricing for ultimate systems and applicators. For the three months ended March 31st, 2025, operating income totaled $1 million, which is an improvement of $2 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 three months ended March 31st, 2025 amounted to $6.4 million compared to $5.3 million for the same period last year, an increase of $1.1 million. This change was largely driven by an increase in non-cash stock-based compensation expense of $1 million versus Q1 of 2024 in which there was no stock comp expense. And as Morgan mentioned, we had a $295,000 NASDAQ uplist expense in the quarter. Net loss for the three months ended March 31st, 2025 was $5.7 million compared to a net loss of $4.5 million for the same period in 2024. The increase in net loss was primarily driven by higher non-cash and infrequent expenses, including stock-based compensation expense and changes in the fair value of derivative liabilities, which resulted in a $4.9 million loss this quarter versus $2.5 million in Q1 of 2024. Additionally, in Q1 2024, we recognized $2.5 million in other income related to a patent license agreement, which did not recur this year. These impacts were partially offset by lower interest expense in Q1 2025, primarily due to the conversion of our outstanding notes into common stock in Q4 2024 as part of the note and warrant exchange. EBITDA for the three months ended March 31, 2025, was negative $3.6 million. However, adjusted EBITDA was a positive $2.3 million versus negative $59,000 for the same period last year, an improvement of $2.4 million year-over-year. Total current assets amounted to $18.8 million as of March 31, 2025, versus $18.4 million as of December 31, 2024. Cash totaled $8.5 million as of March 31, 2025. We're grateful for the continued support of our stakeholders. Q1 2025 marks a strong start to the year, and we're excited to build on this momentum as we execute on our growth strategy. With that, I'll turn the call back over to Morgan.