SANUWAVE Health, Inc.

Good day, everyone, and welcome to the SanuWave Q2 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 star and 1 on your telephone keypad. You may withdraw yourself from the queue by pressing star 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 SandyWave. Please go ahead.

Thank you very much. Good morning and welcome to SandyWave's second quarter 2025 earnings call. Our Form 10-Q was filed with the SEC last night and our earnings release issued this morning, along with our updated presentation, which was made available on our website in the investor section. It's useful to refer to this during the presentation. It really does provide some useful information, I promise. So joining me on the call this morning is Peter Sorensen, our CFO. And after the presentation, we will open the call up to Q&A. Let me begin with everybody's favorite forward-looking statements and other disclosures. This call may contain forward-looking statements, such as statements referring to our future financial results, production expectations, 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 a 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 statements. Certain percentages discussed in this call are calculated from the underlying whole dollar amounts and therefore may not recalculate 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 10-Q for the period ended June 30th, 2025. All right, so now that we are absolved of any potential sins of prognostication, let's get to the good bits. Q2 was another strong performance for Sanyu Wave up 42% year-on-year on the top line and bringing us to 51% year-on-year for the first six months of 2025. We sold 116 Ultramis systems in Q2, a 61% increase versus a year ago and an 18% increase from Q1. This took us to 1,261 systems in the field. 473 or 38% of which have been sold in the last 12 months. Applicator revenue was 6.4 million in the quarter, 63% of our overall revenues and like last quarter was toward the high end of our 55 to 65% target range. It grew 37% from the same quarter last year and a bit over 10% sequentially from last quarter. Our tone of business and customer adoption remains good, and customer concentration dropped slightly in the quarter, with only one customer exceeding 5% of revenues, and that customer just barely doing so. Gross margins remain strong at 78.3%, up 510 basis points from a year ago, though down slightly from Q1, predominantly as a result of the engineering costs associated with standing up our second source of applicator production. We remain on track to commence commercial production of this new more manufacturable applicator design in Q4 of this year and continue to believe that the four cavity molds and removal of UV cure adhesive steps will both provide us with ample applicator capacity for the foreseeable future and reduce our consumables production costs. As our production is all domestic, we continue to anticipate no material effects from tariffs or trade disruption. So, all in all, it's been a really productive first half of 2025, and the companies are starting to chew up ground. We've described Q1 and Q2 as sort of the period of max disruption, as we've made some very significant changes to our sales leadership, Salesforce, our commercial ops, and our commercial strategy. Internally, we've been using the metaphor of taking apart the airplane and putting it back together while flying it really fast. And the team has more than risen to the challenge. As of mid-July, for the first time in my tenure as CEO, we have all 12 of our national sales territories staffed and have added a full-time national and key accounts manager to focus on our big accounts. this is really a long way to have come from the two reps we had at the beginning of 2024. And even from the nine we had at year end, you know, we filled out the commercial operations team as well and brought in new leadership there also from Audiomed. And the energy, the all hands sales and commercial ops meeting that we had a couple of weeks ago was as striking as it was positive. Like the moods and expectations are high. And, you know, if Q1 and Q2 were, sort of max disruption, Q3 is really shaping up to be the quarter of maximum construction. As we really step up our internal systems, our lead sales management, dashboard and reimbursement support, and as we prepare for our first ever concerted outbound marketing campaign, which we hope to launch in October. We're seeing some very promising increases in inbound inquiry in a couple of markets. where we seem to have crossed the sort of adoption threshold. It appears that once you get enough practitioners using Ultramist and that they've seen others use the product, seen the results, seen the opportunity, we get a profound spike in interest. And in light of this, we are going to focus on expanding this awareness, finding the key users to provide social proof and credibility and really helping the market understand that there's a better way to handle complex wounds. It seems that familiarity here breeds acceptance and adoption, so we really look forward to getting out and spreading the word. We're going to be at SAWC in September, so come and see us if you're there. Obviously, all this sort of max construction is in service of setting up max production, and based on What I saw at the sales meeting, you know, we now have a team that's really committed to getting Sanywave firing on all cylinders. I think we're all pretty excited about seeing what happens when we do. 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. The second quarter was a strong one for SanuWave, with revenue reaching a new Q2 record and growing 42% year-over-year. This performance reflects continued momentum in our commercial strategy and growing demand for Ultramis. We also delivered meaningful year-over-year improvement in growth margins, which underscored the operating leverage inherent in our model and our disciplined approach to cost management. Overall, we remain focused on driving sustainable, profitable growth. Let's now take a closer look at the financials for the quarter. Revenue for the three months ended June 30th, 2025 totaled $10.2 million, an increase of 42% as compared to $7.2 million for the same period of 2024. This growth was within our previous guidance of 40 to 50%. Gross margin as a percentage of revenue amounted to 78.3% for the three months ended June 30th, 2025 versus 73.2% for the same period last year. This represents an increase of about 510 basis points, which can be attributed to reduced costs on Ultramus system production and a strategic focus on pricing for Ultramus systems and applicators. For the three months ended June 30th, 2025, operating income totaled $1.9 million, which is slightly down by $0.1 million compared to the same period last year. Operating expenses for the three months ended June 30th, 2025 amounted to $6.1 million compared to $3.2 million for the same period last year, an increase of $2.9 million. However, this change was largely driven by an increase in non-cash stock-based compensation expense of $1.1 million versus Q2 2024, in which there was no stock comp expense, as well as there was a release of a historical accrual in Q2 2024 of $579,000, which reduced our reported gap operating expenses by that amount that did not recur this quarter. Net income for the three months ended June 30th, 2025 was $1.1 million compared to net income of $6.6 million for the same period in 2024, a decrease of $5.5 million. The decrease in net income was primarily driven by lower non-cash and infrequent items in Q2 2025 as compared to Q2 2024. As a reminder, we recognize that one-time non-cash gain of $5.3 million related to the payoff of legacy debt in the prior year quarter, which did not recur this quarter. Additionally, the change in fair value of derivative liabilities resulted in a non-cash gain of $1 million in Q2 2025 versus a $3.7 million gain in Q2 2024, representing a $2.7 million year-over-year variance. These impacts were partially offset by lower interest expense in Q2 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 and the June 30th, 2025 was $3.2 million. Adjusted EBITDA was $3.4 million versus $1.5 million for the same period last year, an improvement of $1.9 million year over year. Total current assets amounted to $20.2 million as of June 30th, 2025 versus $18.4 million as of December 31st, 2024. Cash totaled $8.5 million as of June 30th, 2025. We appreciate the continued support and confidence of our stakeholders. Q2 2025 represents another solid step forward for SanuWave, and we're encouraged by the progress we've made. As we look ahead to the second half of the year, we remain focused on discipline execution and advancing our strategic growth initiatives. With that, I'll turn the call back over to Morgan.