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spk01: Good afternoon, and welcome to Sanendo's third quarter earnings conference call. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Louisa Smith from the Gilmartin Group for a few introductory comments.
spk05: Thanks, operator. Good afternoon, and thank you for participating in today's call. Joining me from Sunendo are Bjorn Burkheim, President and CEO, and Michael Watts, CFO. Earlier today, Sunendo released financial results for the quarter and did September 30, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meeting of federal securities laws. which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including those relating to our operating trends and future financial performance, the impact of COVID-19 on our business, expense management, expectations for hiring, growth in our organization, market opportunity, revenue guidance, commercial expansion, and product pipeline development are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those implied by these forward-looking statements. Accordingly, You should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the risk factor section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 23rd, 2022 and available on EDGAR and in our other public reports filed periodically with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast on November 9, 2022. Sunendo disclaims any intention or obligation, except as required by law, to update or revise any financial projection or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will now turn the call over to Bjorn.
spk09: Hey, thanks, Louisa. Good afternoon, everyone, and thank you for joining us. For today's call, I will provide opening comments and a business update, followed by Mike, who will provide additional detail regarding our quarterly results and guidance for the remainder of the year before opening the call to Q&A. Sunendo had a strong third quarter marked by continued revenue growth, significant product announcements, and a notable financing. We were pleased with our performance, especially in light of the anticipation that Q3 and the second half of 2022 might prove to be sluggish based upon macroeconomic headwinds. On a high level, our operating performance was strong. Revenue for the third quarter of 2022 was $9.8 million, representing growth of 25% over the same period last year. We were pleased to see continued performance in our procedure utilization rates, equating to approximately 72,000 procedures across our install base for the quarter. Coupled with a price increase that was effected July 1st, this equates to roughly a 30% increase in consumable revenue compared to the third quarter of last year. In the third quarter, we sold 38 gel wave consoles compared to 29 in the prior year period, a growth rate of approximately 30% year-over-year. As of September 30th, GelWave's ending install base was approximately 935 units, compared to approximately 766 units on September 30th, 2021. This quarter, we also closed a 63 million follow-on financing with new and existing investors. Earlier in the quarter, we drew down $10 million of our available debt. These additional funds will grant us more financial flexibility to execute on our strategy as we seek to fulfill our mission of saving teeth, improving lives. Overall, Q3 was a quarter during which we achieved milestones that we believe will serve as a positive inflection point for Sunendo as we continue to build a business. Before diving into further business updates, I'd like to address the current macro environment, trends we see within the MedTech sector and their potential impact on our business. The supply chain headwinds we experienced in the first half of this year have eased in Q3, and our internal teams continue to monitor the potential for further disruptions. In response to these challenges, we implemented some design changes during the full commercial launch of CleanFlow to allow for greater stability throughout the supply chain, including a new packaging design. However, our gross margins in Q3 came in less than we had originally anticipated. During the quarter, we incurred certain costs that we'll expand upon later in our financial section, as well as compression of pricing for our prior generation console. The negative impacts were partially offset by price increases for our procedure instruments that became effective July 1st. Mike will provide more detail on gross margin trends during the financial review. We've also observed that the placement of capital equipment has been mixed across the MedTech sector, primarily due to inflationary pressures and news headlines threatening a weakening economy. And while we are closely tracking expenditure trends in the dental market, we still expect system placements to be stronger in the fourth quarter as compared to the third. This has historically been the case due to year-end tax incentives and buying practices of our customers. And finally, as we've previously communicated and consistently observed in years prior to COVID, we saw a moderate seasonal slowdown of procedure utilization during the summer months this year. We believe this was caused by longer-than-average vacations on the part of both practitioners and patients, given that it was the first summer since 2019 that many took extended vacations. But again, this was a trend observed throughout the medtech sector, and we expect utilization to pick up in Q4, which, when paired with anticipated capital placements at the end of the year, should translate to a successful year-end. In summary, we are encouraged by our Q3 utilization and are looking forward to a strong finish to 2022 for both consoles and procedure instruments. Turning to some recent business updates, we're thrilled to have announced the release of the GelWave G4 system. On October 18, we announced the launch of our next-generation General Wave console, which received a great reception when showcased at EndoCon, Sunendo's second annual endodontic conference on innovation. We're very excited about the G4 system and what it offers. Building upon the foundation of General Wave's broad-spectrum acoustic energy and advanced fluid dynamics, G4 has the ability to improve workflow efficiency across the office and will cut down on system preparation time for support staff. Key features of the General Wave G4 system include, one, an improved user interface with auditory cues, two, multi-operatory connectivity, three, battery backup, and four, increased fluid capacity, enabling up to six procedures. Ultimately, the console has the ability to elevate patient care practice efficiency, and become the centerpiece of the endodontic office. The introduction of the GEL-Wave G-force system comes just six months after the commercial launch of the clean flow procedure instrument back in April, and is indicative of Sunendo's commitment to innovation and endodontics. The system is already in the hands of several doctors, and the feedback we're receiving is really exciting. As an example, We've had one doctor share that their staff has saved one hour per day by converting to the general wave G4 system. G4 represents a significant move forward in creating a platform for the general wave procedure to become the standard of care for root canal therapy and tooth decay. We look forward to providing more updates on future calls. As for CleanFlow, we're seeing successful adoption trends since we initially introduced it to the market in the spring. While we're ahead of internal estimates for converting doctors to CleanFlow, we're maintaining a pace to have full conversion within 24 months of launch. As a reminder, converting users to CleanFlow procedure instruments represents a margin inflection point for the business. As we scale CleanFlow and convert users to the new technology, we anticipate margins will improve due to fewer components, ease of assembly, and benefits of scale. In addition to hosting EndoCon in October, Sunendo was honored to sponsor the inaugural Women in Endodontics Summit. This conference, held in Tucson, Arizona, was a two-day event providing educational opportunities highlighting nationally recognized women in the field we were proud to be involved as we recognize the significance of supporting growth and leadership opportunities for women in the industry and is further evidence of how we are supporting the industry across technology service and education turning to our commercial strategy we've been pleased for the positive impact resulting from the bifurcation of our consumable and capital sales teams As a reminder, we significantly expanded the size of our consumable rep team at the end of 2021 in preparation for the launch of CleanFlow and to adjust for the delegation of account management responsibilities. In Q3, our consumable team sold over 72,000 procedure instruments. Clinical education has been a critical component of this sales team strategy, in addition to training practitioners to efficiently incorporate the device into their practices. We believe this hands-on approach will best emphasize the benefits of our technology and maximize the opportunity for increased practice volumes. The shift towards a bifurcated sales force has also benefited our capital sales team, as these reps had previously spent as much as 50% of their time servicing existing accounts. We've already begun to see increased lead generation and pipeline opportunities for this newly focused sales team, and in Q3, we placed 38 systems, despite some of the macro headwinds outlined earlier in my remarks. Additionally, this team is well-situated to expand our focus to include general dentists who perform a large share of their own root canal procedures. We believe the fourth quarter will provide a chance to further realize these synergies as the team focuses on supporting practitioners in placing capital orders at the end of the year. We will continue to drive execution of these two teams into 2023. Additionally, in July, we were pleased to announce the appointment of Joanne Lindberg as Vice President of Sales, North America. As Sunendo continues to scale and further establish a leadership position in the endodontic market, Joanne leads the sales team and oversees sales strategy in the US and Canada. She has already made an impact within the sales organization as she brings significant experience with increasing scale and operational leadership. Joanne's hire is representative of our continued focus on sales expansion and execution. In the third quarter, we also conducted a consumer survey of 500 individuals, which concluded that over 67% of respondents are terrified of getting a root canal procedure. And more than 80% were nervous, anxious, or scared about undergoing treatment. This shows the significant need to bring root canal therapy into the 21st century. We believe that Sanendo's general wave procedure will redefine root canal therapy with a minimally invasive process that preserves tooth structure and promotes pain-free, fast healing. With compelling data, consumer-driven acceptance, and revolutionary technology, we're excited about Sunendo's future. We had an encouraging third quarter and have committed the necessary resources to invest in our commercial infrastructure and continued innovation. With the launch of CleanFlow in the spring and the recent release of the next generation G4 console, we know our technology is well positioned to support doctors in expanding their practices and improving the patient experience. This unique value proposition will allow us to capture a significant share of the almost $2 billion root canal market in the US and Canada. And we're looking forward to the next phase of our growth. With that, I'll turn the call over to Michael Watts, Sunendo's Chief Financial Officer. Mike.
spk03: Thanks, Bjorn. As previously mentioned, Sunendo total revenue for the third quarter 2022 was $9.8 million, compared to $7.9 million for the third quarter of 2021, an increase of 25%. Growth in the quarter was primarily driven by increased procedural instrument sales, increased General Wave console sales, and strong TDO software sales growth. In the third quarter, General Wave console revenue was $2.1 million compared to $1.8 million in the third quarter of 2021. Genwave console average selling prices in the quarter were roughly $55,000, slightly below our second quarter of 2022. The reduction in ASP is largely attributable to incentives provided on our existing Gen 3 console in anticipation of the Q4 launch of the Gen 4 console. Turning to procedure instruments, PI revenue was $4.8 million. compared to 3.7 million in the third quarter of 2021, an increase of approximately 30 percent. PI revenue growth was driven primarily by the General Wave increased install base, procedure instruments sold, and an approximately 10 percent increase in average selling prices compared to the prior year period. Procedure instruments sold in the quarter totaled approximately 72,000. Total software revenue for the third quarter was $2.1 million. compared to $1.7 million in the third quarter of 2021, an increase of 21%. The increase was primarily driven by continued momentum with large group practices looking to standardize across their enterprise. Total other product-related revenue was $900,000 in the quarter. Gross margin for the third quarter of 2022 was 24% compared to 26% in the third quarter of 2021. While gross margin results were in line with the first half of 2022, we fell short of our expectations due to the aforementioned reduction in console pricing, higher than expected Gen 3 console service costs, and procuring Gen 3 console components at lower volumes with some partial offset by favorable higher procedure instrument pricing. Total operating expenses in the third quarter of 2022 were $16.9 million, compared to $13.1 million in the same period of the prior year. The increase was driven primarily by higher personnel expenses relating to our commercial expansion, as well as higher general and administrative costs, primarily legal and accounting associated with operating as a public company. The loss from operations was $14.6 million in the third quarter of 2022, compared to $11.1 million in the third quarter of 2021. Net loss, was $15.5 million for the third quarter of 2022, compared to $12.7 million in the third quarter of 2021. Our cash and cash equivalents and short-term investments as of September 30th, 2022 were approximately $105.6 million, while our long-term borrowings totaled $40 million. Net proceeds from the recent closing of our private placement totaled $59 million. Moving to our financial guidance. For 2022, we are reiterating our annual revenue to be in the range of $40.5 to $42.5 million, representing year-over-year annual growth between 22% and 28%. This implies revenue of $11.1 to $13.1 million in the fourth quarter. Moving down the income statement, We expect fourth quarter gross margins to be approximately 25% to 28% for reasons previously noted. The benefit of cost reductions for clean flow will begin having a meaningful impact in early 2023 as we move to higher volumes and improved production processes. At this point, I'd like to open up the call for questions.
spk01: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. Our first question today comes from John Block from Stifel. Your line is open.
spk07: Great, guys. Thanks. Good afternoon. Maybe the first one. Mike, you're on the $55,000 for the consoles for the quarter. I think it's down roughly 8% from the 2Q levels. I just want to make sure I'm clear. Is this sort of like a one-timer as you transition to the G4 console? How do we think about that console ASP going forward? Does it go back to the $60K where I think you were in 1H22? Does it even go higher? Are you taking price upon the rollout of G4? Let me maybe pause there, and then I can ask my follow-up.
spk03: Hey, John, it's Mike. So in speaking about G3's pricing, we need to put in the context of G4, which we just launched. So we're expecting G4 to have a higher ASP. So we've priced that console at a list price, approximately $20,000 more than the current G3 version. We're expecting the two consoles to still play out in the market. And we'd look at G3 to probably maintain its price point that we ended Q3 at. going forward.
spk09: John, maybe just a quick follow-up here from myself. This is Bjorn. You know, we had a slight reduction in ASP on the G3 that just effectively dropped pending the G4 launch, which is a common dynamic that sometimes happens when you launch new capital equipment in the MedTech sector.
spk07: Okay, so maybe just to tack on to that, and sorry for for the additional clarification, but G3 is still going to be on the market. That might run around the $55,000 ASP realized. What do you expect the realized ASP to be of G4 and then maybe to just push you? How do you think that split works going forward between the two different offerings that will be in the market?
spk03: So, John, it's Mike. So just to talk about G4, we're getting positive feedback today from customers and You know, we're introducing this price differential that I just mentioned, and people are very receptive to the technology upgrade that it provides, where it provides them opportunity to see a more efficient operatory and also improved user interface and functionality. So, you know, we're not ready yet to provide ASP net guidance, I think, on G4, but suffice it to say that we're expecting a positive from G3. I don't know, Bjorn, if you wanted to.
spk09: Yeah, the other thing I'd just add is that as we're thinking about both G3 and G4 in the market, so we have flexibility in our inventory levels to support a couple of different scenarios here. But as we go out and sell the G4 system, we will obviously be leading with the G4. G4 is a significantly improved console, and I think that's what we will be leading with But we are also keeping the opportunity open for customers that, for different reasons, will want to purchase the G3 system. They will be able to do that for some time.
spk07: Okay, understood. And maybe just a follow-up question is around gross margin. And maybe just to push you guys to the first is it looks like the exit will now be 25% to 28% GM for 4Q. Previously, it was in the low 30s. Mike, what do we do? Do we just sort of like run whatever our, you know, I'll speak for myself, whatever my trajectory was from the 31 exit in 4Q, is it the same trajectory? Do you make up any ground off of a lower exit in 4Q? And then just to push you guys, can you just be a little bit more detailed? Like what changed from when you guided last quarter where you thought you would have some solid sequential improvement and I mean, I know you called out G3 a little bit, but, I mean, clearly you knew that was in the hopper and what was coming there. So maybe talk about what was the incremental negative surprise that led to the shortfall for 3Q, and then help us with the trajectory or the ramp into 2023 around GMs. Thanks, guys.
spk03: Sure. John, so I'll take the first half of the question, and then Bjorn can expand on it. Sure. You know, when we look at how we were thinking about Q3, one of the opportunities that presented itself was just around how some inventory that came in for some replacement components on our install base. And they came in due to certain timing that we had associated with some supply chain challenges that were early in the year. And we thought it was best to roll those out starting in Q3, work it through in Q4, and get that behind us in 2022. So we took that opportunity to do it in Q3. It also, in order to execute that effectively over Q3 and Q4, we use a third party service provider that we already use today, but we use them at a higher level to do that for us. So when we look at the service costs, that was something that we think is better for us to take into 2022 and put those placements in before we exit the year. Now, when you look also at Q4, moving to Q4, our guidance is still sound. You know, we expect Q3 exit to still be stronger than Q4, but the dynamic that I just mentioned around the ASP and also the continuous service cost in Q4, and then also there's another factor where we had produced clean flow at lower quantities in Q3, and we're going to work through that inventory through the first half of Q4. So as we exit Q4, call it December, we expect back to be that place where we originally guided the exit to be. But for the overall quarter, it averages out to 25% to 28%.
spk09: Maybe just to build a little bit on what Mike is saying here. So the key difference here, John, is that effectively is related to supply chain, right? That some of these supply chain, some of these parts that we needed to maintain some of our consoles did not come in, you know, as projected. And hence, we had to come back and actually come back to these units in the field. But, you know, having said that, we're still very optimistic about the margin inflection points that we have here coming in the business going forward. Today, we have trained more than 500 doctors in the field on clean flow, and as we've talked about before, clean flow is the key margin inflection point for the business. We're going to continue, obviously, to aggressively train doctors going forward, but we are ahead, quite significantly ahead on plans to train doctors in the field. But even though we're ahead, right now we're consuming the earlier clean flow procedure instrument that we made with higher cost parts. But at this point in time, on our manufacturing floor, we're now manufacturing clean flow with production molds and significantly lower part prices. And as we consume these higher cost clean flow procedure instrument, we should start seeing the benefits of a higher contribution margin of clean flow towards the very end of Q4 and into 2023. So we should be then seeing sequential margin growth quarter by quarter next year as we continue to push clean flow.
spk07: Understood. Helpful caller. Thanks, guys. Thank you, John.
spk01: We now turn to Jason Bednar from Piper Sandler. Your line is open.
spk06: Hey, team. Good afternoon. Congrats on another solid quarter here. Really appreciate all the color on G4. I'm going to start off here building off of John Block's question there. So you've got the 20K higher on the ASP. Can you talk about the COGS in the system? I mean, I don't know if you can speak to anything on margins with that system relative to G3. maybe the new G3 margins given the lower price point. Just how do those two stack up? Will G4 be nicely above that of G3 when we start thinking about margins going forward? And then can you talk about how you're planning to handle upgrades or trade-ins of old units? Is that something that you're planning to run a formal program to incentivize adoption of G4, or is that not part of the plan here?
spk03: Hi, Jason. It's Mike. So I'll start. The answer is just talking about the gross margins on the console. So right now, when we look at G4 compared to G3, we look at G4 to be in line with where G3 was, call it Q2, at that prior price point going forward. At least now, as we launch, moving forward, we expect it to have higher margins and a better overall service profile in outer years. but initially we'll start at equal to where the G3 was. And second part of the question, just talk about the upgrade program. We are offering a limited upgrade program to our existing users, but what we're seeing is that, you know, really a lot of customers see the benefits and they want to incorporate this into their practice, including their existing console as well. So right now we're not looking at a significant upgrade program overall, and we're not expecting many of our existing users to take the upgrade step, at least in the early periods of Gen 4. Over time we expect everyone, of course, to move to Gen 4.
spk09: And also building on Mike's answer here, to Mike's point, we're not anticipating a higher number of upgrades in Q4. We have the opportunity. We see that as a big opportunity to go out and talk to our existing customers. But our focus is going to be to drive new system sales. That will obviously be better on the longer-term horizon for the business, and then we will be you know, adding, you know, doing upgrades kind of as we continue to go forward here. But our focus will be to drive new system sales.
spk06: Okay. All right. Very helpful. And then maybe one on the capital equipment environment here. I think you mentioned some longer sales cycles that are unfolding. Definitely not overly surprising just given the environment we're in. I guess I'm not sure if the prospect of a new console leaking out of the market led to any purchase delays at the time during the third quarter. I'm curious if you think the presence or the G4 coming played a role in some of those sales dynamics during 3Q, but then also how you see the capital environment playing out real time, because again, you do have the macro that's a little bit uncertain, but you also have the benefit of launching an entirely new console. So I guess just curious how you see things playing out here, your end. I think the commentary was some better equipment sales versus 3Q, but then, you know, think about how should we be thinking about that as well as we look ahead to 23?
spk09: Yeah, Jason, good questions. And, you know, there's always that risk, right, when you're introducing new capital equipment that that will somehow leak and some consoles, there will be some delays in console sales because of that, which is one of the reasons why we're happy that we were able to actually exceed our numbers here in Q3. But as we look further into the, as we look towards the end of the year here, we continue to see strong demand for General Wave. We continue to have a very robust pipeline, but Just like we talked about in our prior call, conversion cycles we feel are longer in the current macro environment because of higher interest rates and financial uncertainty and so forth. Having said that, though, we still believe that Q4 will be stronger than Q3 because of tax and economic incentives here towards the end of the year. And in general, I would also say, just add on and say that obviously this is taking our console platform to to an entirely new level. So this sets us up very well as we, not just for Q4, but as we also look into 2023.
spk08: All right.
spk06: Thanks so much. I'll hop back into you. Thank you, Jason.
spk01: Our next question comes from Nathan Rich from Goldman Sachs. Your line is open.
spk00: Hi. Good afternoon. Thanks for the question. Maybe pivoting over to what you're seeing from a utilization standpoint, sounds like you expect utilization to pick up in the fourth quarter. Just curious how the cadence played out in the third quarter. I think July had been pretty strong. How did August and September trend? And I guess how do you feel about kind of visibility for 4Q in terms of the level of utilization that you're seeing? And I'll maybe stop there and ask my follow-up.
spk09: Yeah, good question. So there's, you know, a lot of different things, different dynamics there, right? So one of the things we talked about in our prepared remarks is that, you know, there was a softening in utilization because of the summer holidays. We think that because of the COVID dynamic, there was a lot of doctors and also patients that haven't taken vacations for a long time and hence took longer vacations. That's why we believe we saw a slightly softer dynamic. To your point, July versus August and September, we did see a slightly lower utilization in July, especially around the July holidays. As we look here into October, October seems to be tracking well. In general, what we're seeing is that you know, our utilization is, it just really mirrors the overall demand in the endodontic market. So as total number of procedures and endodontics goes up, then we, you know, we see that being mirrored in our procedures. We're also very happy from a revenue perspective. You know, in Q3, we had our highest consumable revenue ever. which is even though we had a slightly lighter utilization in the summer months because of the summer holidays.
spk00: Great. And then if I could ask one on the outlook for capital equipment, maybe just a little bit more specifically to 4Q. I think, you know, looking back at last year, the fourth quarter accounted for, you know, 35 to 40% of system placements for the year. Is that the type of seasonality that you would expect this year? And could you maybe comment on the demand that you're seeing on the capital equipment side coming out of Endocon and And, you know, what type of, I guess, I don't know if coverage is the right way to think about it, but do you have for the fourth quarter based on the demand that you've seen out of that event? Thank you.
spk09: Yeah, so EndoCon was a great conference for us. You know, that's a conference that continues to grow. It continues to be an exciting place where we can showcase general wave technologies both on the console side and on the consumable side. So that was an exciting start for the quarter. Like we talked about a little bit earlier here, the demand and the pipeline is strong. The only variability is the time that it takes to close some of these different consoles. But Q4, like you're alluding to, has always been a strong quarter for us, and we believe that it will also be a strong quarter this year. If you look at the range that we talked about, the guidance range that we talked about in our prepared remarks from 40.5 to 42.5 for this year, the variability of that range is really a function of the console sales that we see here in Q4.
spk00: That's helpful. Thank you.
spk01: We now turn to Michael Czerny from Bank of America. Your line is open.
spk08: Good afternoon, and thanks for taking the question. Maybe I can go kind of reverse order on the console side. You talked about the dynamics of, I think, Mike, you had mentioned some of the cost dynamics of filling and servicing G3s and some demand for G3s. How do you think about the go-forward in the event that we do have some type of economic sensitivity, is there either an opportunity or a need to have some type of bifurcated product base, or is that not something that you're considering at this point in time and the G3 dynamic will be a one-off in nature?
spk03: So, Michael, I just want to make sure I understand your question. So, when you look at how we're planning about G3 and G4. We think that there's a near-term opportunity to sell both consoles over the coming quarters. G3, G4 rather, still uses the same foundational technology, the same PIs, the same procedural fluids. So people aren't having to necessarily switch their consumable profile for that. And there's a lot of customers, of course, in our pipeline that we introduced G3-2 that we think will cycle through over the coming quarters as well. So what we see in the foreseeable future is still a two-pronged approach, having G3 and G4 continue to play in the marketplace.
spk09: But just to add on and give a little bit further color there, Michael, we do believe that we should end up with one console platform now, and we will eventually retire selling the G3 system. I think in general, as we look on G4, we were just taking this technology to the next level in terms of enabling practice efficiency. Doctors can do multiple procedures across multiple consoles, battery backup. There's more fluid capacity to do more procedures, improved screen, et cetera, et cetera. So just taking this console platform to the next level You know, I think that, and if you look in an endodontic practice, how much time and how many benefits come out of implementing a general wave console, we do believe that we should be able to maintain that higher ASP, and there should be no reason why over time that doctors that are doing root canal procedures shouldn't, you know, step up and buy that slightly more higher ASP G4 system.
spk08: Got it. I think all my other questions answered. I'm good for now. Thank you.
spk09: Thank you, Michael.
spk01: We turn to Erin Wright from Morgan Stanley. Your line is open.
spk04: Great, thanks. With the bifurcation of the sales force, how is the strategy progressing relative to your expectations at this point? And how do we think about the traction there and any metrics you can give us around productivity and the ramp up we should expect into 2023 as you think about that maturing sales force? And are you where you need to be from a sales force perspective, particularly as we start thinking about 2023? Thanks.
spk09: Yeah, thanks, Aaron. So commenting first on the bifurcation, you know, we're happy with us having bifurcated the sales team. We hired most of our team in Q4 of 21. The first half of this year, 2022, has been spent trading both the capital sales reps and the consumable reps. Looking maybe specifically at what the team has done, we have now, the last year we've installed the consumable team in particular has helped install more than 200 units. We've also, like we talked about, helped convert more than 500 users to CleanFlow, which includes trading those doctors on CleanFlow, which means that more than 50% of our user base have now been trained on CleanFlow. We couldn't have done this without having done that bifurcation and without having those consumable reps. And we did this while setting a record revenue for consumables in Q3. So we're happy with the progress of the team. Now what we need to do going forward, we need to wrap up converting the remaining doctors to clean flow and allow the team to focus on driver utilization. So the key, if you look at this from a consumable rep perspective, the key different metrics that we'll be closely monitoring, right, is how many doctors that we're training on clean flow and how we're helping drive utilization in the field. When it comes to sales reps going forward, Salesforce rather, I think that's what your question was, you know, as part of Building scale in the sales organization, we've hired, like we talked about in our prepared remarks, we've hired a VP of sales that will help coordinate activities both across the capital and the consumable team. We're not expecting any meaningful increase to the sales force here in Q4, but as we look into next year, we think there's an opportunity to slightly expand that team, especially as we're thinking about also start selling into the GP side of this.
spk04: Okay, that's helpful. And can you talk about the go-to-market strategy, having both consoles, like the G3 and the G4? How does that work? And then when does G3 officially roll off?
spk09: So, Erin, we will continue to lead with – going forward, we will be leading all sales activities with G4. We believe it's a better system, and we believe that's what we will be selling. Now, we do believe that some customers, for different various reasons, will continue to buy G3 for some time because of either a price differential or they've, you know, just like any other Mentech or a smartphone, et cetera, some will buy the older system. But so the strategy to continue to push that out will be really all about selling the G4 system. Was there a second part of that to your question? Aaron, did I miss the second part?
spk04: When do you expect G3 to roll off? Like, when does that end, just as we think about pricing dynamics?
spk03: So I can take that, Aaron. So when we think about G3, G4, so How long we keep G3 is going to be largely dependent just on really letting the market play that out early on for Q1 and Q2 of 2023. But as Bjorn indicated, we don't anticipate having a G3 and G4 system in the years.
spk04: Okay. Got it. Thank you.
spk09: Thank you, Erin.
spk01: This concludes our Q&A. I'll now hand over to Bjorn Bergheim, President and CEO, for final remarks.
spk09: Bjorn Bergheim Well, thank you, operator. We appreciate everyone spending time with us today. And Mike and I look forward to meeting many of you as we go forward, both at future investor conferences and also for individual meetings. Have a great day.
spk01: Today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
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