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Sonendo, Inc., a dental equipment and supplies company, has announced a change in its independent accounting firm, according to a recent filing with the U.S. Securities and Exchange Commission (SEC). Effective August 14, 2024, Sonendo has engaged BDO USA, P.C. as its new auditor, replacing Ernst & Young LLP (EY).
The company's decision to change auditors comes after its financial statements for the fiscal years ending December 31, 2023, and 2022, included an explanatory paragraph from EY. This paragraph highlighted concerns about the company's recurring losses and raised substantial doubt about Sonendo's ability to continue as a going concern.
Despite these concerns, EY's reports on Sonendo's financial statements did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified regarding uncertainty, audit scope, or accounting principles. Furthermore, there were no disagreements or reportable events between Sonendo and EY that would have influenced EY's reports for the specified fiscal years.
Sonendo has provided EY with the disclosures contained within the SEC filing and has included a letter from EY, dated August 14, 2024, as part of the filing. In this letter, EY confirms their agreement with the contents of the disclosures made by Sonendo.
The company's Audit Committee had initiated a competitive process to select a new independent registered public accounting firm, resulting in the appointment of BDO. Prior to their engagement, Sonendo did not consult with BDO on any matters that would require disclosure under SEC regulations.
In other recent news, Sonendo Inc. has released its Q2 2024 financial results and raised its full-year revenue guidance. The dental technology firm reported a total revenue of $8.3 million for Q2, marking a year-over-year decrease, but console sales saw a 7% increase. The company has adjusted its full-year 2024 revenue guidance to a range of $31 million to $32 million.
Sonendo also reported a GAAP gross margin of 37.5% for the quarter, with projections of adjusted gross margins reaching 40% to 41% in the second half of 2024. The firm is actively exploring financing options to strengthen their balance sheet, boasting $24.2 million in cash, cash equivalents, and short-term investments as of June 30, 2024.
In terms of future expectations, Sonendo anticipates a reduction in adjusted EBITDA loss in the second half of 2024 and a return to double-digit revenue growth in 2025. Despite challenges with Procedure Instrument sales, the company is focusing on sales force incentives to boost utilization.
InvestingPro Insights
In light of Sonendo's recent auditor change, a look at the company's financial health through InvestingPro data and tips could provide investors with additional context. The company's market cap stands at a modest $5.24 million, reflecting investor sentiment and the scale of the business. Despite the auditor's concerns over Sonendo's ability to continue as a going concern, the company holds more cash than debt on its balance sheet, an InvestingPro Tip that suggests some degree of financial stability. Additionally, Sonendo's gross profit margin for the last twelve months as of Q2 2024 is at 38.12%, indicating the company's effectiveness in controlling the cost of goods sold relative to revenue.
However, other metrics raise caution. Sonendo's revenue growth has been negative at -5.12% in the latest quarter, and analysts anticipate a sales decline in the current year, which may have contributed to the auditor's concerns. The company's stock price has also experienced significant volatility, with a year-to-date price total return of -65.71% and a one-year price total return of -93.51%, signaling a challenging market perception.
For investors seeking a more in-depth analysis, there are additional InvestingPro Tips available, including insights into the company's cash burn rate and profitability expectations. Sonendo's valuation implies a poor free cash flow yield, and analysts do not anticipate the company will be profitable this year. These tips, along with others on the InvestingPro platform, can help investors make more informed decisions when considering Sonendo's financial trajectory.
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