Earnings call transcript: Sanuwave Q3 2025 sees strong growth, stock surges premarket

Sanuwave Health Inc. (SNWV) reported a robust financial performance for the third quarter of 2025, significantly improving its revenue and net income compared to the previous year. The company's stock price responded positively in premarket trading, rising 16.74% to $30.83. This surge follows the announcement of a 22% increase in revenue year-over-year, alongside a notable improvement in gross margins and net income.

Key Takeaways

• Sanuwave's Q3 2025 revenue increased by 22% year-over-year to $11.5 million.
• The company achieved a net income of $10.3 million, reversing a $20.7 million loss from the previous year.
• Premarket trading saw the stock rise 16.74%, reflecting investor optimism.
• Sanuwave's gross margins improved to 77.9% from 75.5% last year.
• The company is expanding its product line with new commercial production slated for January 2026.

Company Performance

Sanuwave demonstrated strong performance in Q3 2025, with revenue and profitability showing significant improvement over the previous year. The company's strategic initiatives, such as expanding its product line and improving operational efficiency, have contributed to these positive results. The wound care market, however, faces uncertainties due to changes in CMS reimbursement, but Sanuwave remains optimistic about future opportunities.

Financial Highlights

• Revenue: $11.5 million, up 22% year-over-year
• Gross margins: 77.9%, up from 75.5% last year
• Net income: $10.3 million, compared to a $20.7 million loss in 2024
• Adjusted EBITDA: $3.5 million, up $1.3 million year-over-year
• Cash balance: $9.6 million as of September 30, 2025

Market Reaction

Following the earnings announcement, Sanuwave's stock price increased by 16.74% in premarket trading, reaching $30.83. This positive movement reflects investor confidence in the company's strong financial performance and growth prospects. The stock's rise is notable against its 52-week range, suggesting a favorable market sentiment.

Outlook & Guidance

Looking ahead, Sanuwave has provided revenue guidance for Q4 2025 in the range of $13-$14 million, indicating an expected year-on-year growth of 26%-36%. The company is optimistic about market opportunities post-CMS reimbursement clarity and is exploring expansion of its sales force and distribution channels.

Executive Commentary

CEO Morgan Frank highlighted the company's strategic focus, stating, "We're engaged currently with the most qualitatively and quantitatively promising sales funnel I've ever seen in my tenure here." He also expressed confidence in the company's direction, noting, "We think this is an overall positive trend for Sanuwave and for Ultramist."

Risks and Challenges

• CMS reimbursement changes could impact the wound care market.
• The mobile wound care market faces significant disruption.
• Economic uncertainties may affect hospital equipment rental models.
• Maintaining competitive advantage in a rapidly evolving market.
• Managing inventory efficiently with distributors.

Q&A

During the earnings call, analysts inquired about the company's strategy to capitalize on new revenue streams from skin substitute distributors and the potential of rental models for hospital equipment. The management emphasized careful inventory management and highlighted the potential for significant sales representative productivity, estimating $4-6 million in annual sales per representative.

Full transcript - SANUWAVE Health Inc (SNWV) Q3 2025:

Conference Operator: Good day, everyone, and welcome to the 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. You may register to ask a question at any time by pressing the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two. 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 Sanuwave. Please go ahead.

Morgan Frank, Chairman and CEO, Sanuwave: Thank you. Good morning and welcome to Sanuwave's third quarter 2025 earnings call. Form 10-Q was filed with the SEC last night. Our earnings release was issued this morning, and our updated presentation was made available on the website in the investor section. Please refer to that during the presentation. We really try to make it useful. Thanks. Joining me on the call today is Peter Sorensen, our CFO. 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, 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 recalculate from rounded numbers used for disclosure purposes. As a reminder, our discussion today will include non-GAAP numbers. Reconciliation between our GAAP and non-GAAP results can be found in our recently filed 10Q for the period ended September 30, 2025. All right. Now we have that out of the way. Let's dig into the part. Q3 was an all-time record revenue quarter for Sanuwave, up 22% versus the challenging quarter last year, when a large order drove 89% year-on-year growth.

The quarter was also up 13% sequentially from Q2. This brings year-on-year growth for the first nine months of 2025 to 39% versus the same period last year. We sold 155 Ultimate Systems in Q3, also an all-time record, and up from 124 last year, again, the Pigtail Python quarter, and 116 last quarter. This took us to 1,416 units in the field, 504 of which, that's 36%, having sold in the trailing 12 months. Applicator revenue was $6.8 million in the quarter, also an all-time record, up 26% year-on-year and 6% sequentially from Q2. At 59% of revenues for the quarter, this was in line with the 55-65% target range we have discussed on previous calls. We had two customers of about 5% in the quarter and one customer, a reseller, that slightly exceeded that. No other customers exceeded 3% for the quarter.

Gross margins were healthy, 77.9% in the quarter, slightly down from 78.2% last quarter, but up from 75.5% a year ago. This was primarily as a result of slightly lower overall ASP for Ultimate Systems as a result of beginning to work with some larger resellers with whom we deal on a wholesale basis, where we sell systems at lower prices and allow them to mark the systems up when resold as opposed to selling at full price and paying commission. This works out about the same, maybe slightly better for us on the operating line, but it does impact gross margins a bit. This was offset by slightly higher prices on applicators and some ongoing cost reductions to the production of the Ultimate System. The qualification of our new four-cavity mold for applicators and the new more manufacturable applicator process continues.

We expect to have that process up and running for commercial production in January, though if we do really well, it could be as soon as December. I think at this point, January is probably a better bet. The clean room and equipment are in and qualified. We just need to get through the design verification, performance, and shelf life testing stages. Unfortunately, things like shelf life testing are inherently time-based. We use a blended cost basis for calculating our cost units sold. It will take a few quarters for this new process to show through fully. We expect it to ultimately drive a few extra points of applicator margin as it reaches scale in the back half of 2026. Q3 has been a productive time for Sanuwave.

We received a $5 million payment for the exercise of IP licensing related to our intravascular shockwave patent portfolio. We refinanced our debt, reducing $27.5 million of debt, closer to $29 million with closing costs, to $24 million. Our interest rate from 19.5% to SOFR plus 350, which is currently about 7.63%. This placed the company on excellent financial footing and positions it well to pay down this debt from cash flow as the facility contains no prepayment penalties or fees. We also moved to our new larger headquarters back in August. One last piece of good news, based on the refi and our ongoing financial performance, I am pleased to announce that Sanuwave has alleviated its substantial doubt to continuously concern for at least 12 months as of this 10Q. We've gotten to the part I'm sure everybody wants to get to.

The wound care market was a bit unsettled in Q3, as many practitioners seemed to be taking a sort of wait-and-see attitude to what turned out to be some pretty substantial changes in the skin sub and allograft reimbursement market. These have been long mooted by CMS. This seemed to lead to a widespread taking the foot off the gas in the industry due to the uncertainty. While these changes, which were made final on Friday the 31st, did not affect Sanuwave, our reimbursement for the 97610 code remains essentially unchanged, perhaps slightly up for 2026. It does affect many of our users. This, in combination, and perhaps particularly because of heightened fears about CMS audits and clawbacks in wound care, led many providers to simply choose to simply sort of back off a little and to use advanced wound care treatments on fewer patients at the margin.

This uptick in audit and price sensitivity seems to be part and parcel to the broader CMS strategy of driving toward something more along the lines of evidence-based medicine requiring more data on efficacy, product differentiation, and value for money in treatment. Regardless of any near-term disruption, we think this is an overall positive trend for Sanuwave and for Ultramist. We suspect that this is a paradigm in which our product can really thrive. It's only been a week since the final rule came out. It is perhaps a little early to be making too many strong pronouncements about exactly how this all is going to play out. In our experience, any certainty is better than huge uncertainty.

With the market having really no idea if reimbursement was going to be $2,500 or $500 or $127 per square centimeter in skin subs, this was simply too much variance for people to make decisions around. Now that that answer is known, we expect people will rapidly adapt to this new reality and get moving. We've had a flurry of calls this week from distributors, partners, prospective salespeople. We believe that the weeks and months ahead will represent a profound opportunity to make some moves to improve our market, marketing, and our sales positions. I mean, you could really sort of feel the market starting to crack back open again as soon as everybody knew back to which they were planning. During our September all-hands call, I literally threw up a picture of Littlefinger from Game of Thrones and told the team, "Chaos is not a pit.

It's a ladder." And we are going to climb it. I mean, while perhaps the hope that max disruption was behind us in the last call was a little bit optimistic, this seems like one of those moments in a market where the ones who figure out how to climb fastest can gain a lot of ground. We are engaged currently with the most qualitatively and quantitatively promising sales funnel I've ever seen in my tenure here. It's been a little bit frustratingly slow to move, but it feels like that may be rapidly starting to change. This is an exciting time here and one that should be very good for Sanuwave. With that, I'll turn you over to Peter Sorensen, our CFO, who can walk you through the rest of our financials.

Peter Sorensen, CFO, Sanuwave: Thank you, Morgan. We had a strong third quarter at Sanuwave with revenue reaching a new all-time quarterly record and up 22% year-over-year. This performance reflects the continued momentum of our commercial strategy and the growing demand for Ultramist. Gross margins expanded meaningfully year-over-year, reflecting both the inherent leverage in our model and our disciplined approach to managing costs. Looking ahead, our focus remains on driving sustainable, profitable growth. With that, let's take a closer look at the financial results of the quarter. Revenue for the three months ended September 30, 2025, totaled $11.5 million, an increase of 22% as compared to $9.4 million for the same period of 2024. This growth was below our guidance for the quarter, but right in the midpoint of the preliminary range of results we disclosed on October 6 of $11.4-$11.6 million.

Gross margin as a percentage of revenue for the three months ended September 30, 2025, came in at 77.9%, up over 240 basis points year-over-year, driven by lower Ultimate System production costs and our strategic pricing initiatives across systems and applicators. For the three months ended September 30, 2025, operating income totaled $1.5 million, which is down by $0.5 million compared to the same period last year. However, operating expenses for the three months ended September 30, 2025, amounted to $7.5 million compared to $5.1 million for the same period last year, an increase of $2.4 million.

This change was largely driven by an increase in non-cash stock-based compensation expense of $1.4 million versus Q3, 2024, in which there was no stock comp expense, increased headcount expenses of $0.8 million, increased marketing expenses of $0.2 million, increased legal expenses of $0.2 million, and R&D increased expenses of $0.1 million, partially offset by decreased commission expense of $0.8 million. Net income for the three months ended September 30th, 2025, was $10.3 million compared to net loss of $20.7 million for the same period in 2024, an increase of $31 million. The increase in net income was primarily driven by the change in fair value of derivative liabilities, which resulted in a non-cash gain of $6.1 million in Q3, 2025, versus an $18.8 million loss in Q3, 2024, representing a $25 million year-over-year variance.

In addition, we had a $5 million gain related to a patent sale as noted on a previous AK and in our most recent 10Q. We also had lower interest expense of $1.6 million in Q3, 2025, primarily due to the conversion of our previous outstanding notes into common stock in Q4, 2024, as part of the note and warrant exchange. These impacts were partially offset by non-recurring costs of $0.5 million related to the repayment of our senior secured debt. EBITDA for the three months ended September 30th, 2025, was $12.4 million. Adjusted EBITDA was $3.5 million versus $2.1 million for the same period last year, an improvement of $1.3 million year-over-year. Total current assets amounted to $22.6 million as of September 30th, 2025, versus $18.4 million as of December 31st, 2024. Cash totaled $9.6 million as of September 30th, 2025.

We're grateful for the continued trust and support of our stakeholders. Q3, 2025 was another excellent quarter for Sanuwave, and we're pleased with the progress we've achieved across our business. As we head into the final quarter of the year, we remain committed to executing with discipline, driving growth, and creating long-term value for our stockholders. With that, I'll turn the call back over to Morgan.

Morgan Frank, Chairman and CEO, Sanuwave: Thanks, Peter. Moving on to guidance. As we stated in our press release, we are guiding to $13-$14 million in Q3 revenues, up 26%-36% year-on-year, and also representing, which would represent another all-time high revenue quarter for Sanuwave. We're starting to see significant cause for optimism now that the market concern around reimbursement and wound is alleviating because now that we now finally have some certainty rather than vast uncertainty. Obviously, it's only been a few days since the final rule was announced, but as we said earlier, we can already feel some movement beginning and some of the logjams breaking free. As ever, I want to express my gratitude to the Sanuwave team for all of the hard work and their commitment and trust.

I'd also like to thank them for routinely falling for my "the highest reward for good work is more work" shtick and pretending that that's insightful and motivational. Well done, guys, and thank you. With that, thanks, everyone. We will open the call up to questions.

Conference Operator: At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. We'll take our first question from Ian Cassel with IFCM. Your line is open.

Ian Cassel, Analyst, IFCM: Yeah, I just had a couple of questions, mainly around the reseller model that seems to be picking up some steam. Maybe the first question, though, is due to the disruption in skin substitutes, I was curious if the resellers or distributors of those skin substitutes, now the revenues are probably down 90% versus last year. I'm curious if you're seeing any inbound interest from those resellers who are now kind of scrambling to pick up additional products to fill that revenue gap in their businesses.

Morgan Frank, Chairman and CEO, Sanuwave: Okay. I mean, the short answer to that question is yes. It feels like there is a substantial realignment beginning in the space. Obviously, this is a very significant change to a large product category. We've definitely seen some inbound interest. I think a bunch of it started even well before the rule came out and was sort of, and some were sort of predicating the, "Well, maybe we'd be interested in picking this up depending on what happens." I think it's a little bit premature to say, "Okay, this is going to result in a ton of new deals." What I will say is distribution is an important part of this space. A lot of some of these distributors are very sophisticated. They have good account control.

They do good work with the providers to help them even down to the level of selecting patients and determining care. It's something that we've been sort of stripping down and rebuilding this year. Our average sales through distributors and resellers was about 36% in 2024. In this quarter, it was about 25%. That's up a little from last quarter, but still kind of not to levels where it used to be. We're kind of assessing what the right mix for us is going to be.

Ian Cassel, Analyst, IFCM: How do you kind of blend that distributor channel with your direct sales force? How do you think about that?

Morgan Frank, Chairman and CEO, Sanuwave: Yeah, that's always sort of the tricky bit. We're doing it through sort of a deconflicting structure where if our reps are chasing something, it's theirs. What we want to avoid is the two channels stepping on each other. It's sort of if a distributor wants to go after a customer, they'll come to us and say, "Hey, we think this is an interesting prospect." We'll deconflict it through our internal lists and say, "Yeah, we don't have anybody who's working on that. Go ahead.

Ian Cassel, Analyst, IFCM: Maybe last question on the reseller and distributor model. How do you handle inventory management? Are they kind of, you do not want to be stuffing the channel, so to speak, where they are buying nine months' worth of inventory. How do you think about those inventory turns?

Morgan Frank, Chairman and CEO, Sanuwave: Yeah, yeah, yeah. That's a great question. That's something we've given a lot of thought to and something we worry about a lot. When you're dealing with stocking distributors, you always sort of run this risk of, "Do you have too much inventory in the channel? Will you wind up kind of choking on it?" We've been trying to be sort of measured with this and not putting too much inventory into the channel to really avoid that problem. I think the first major distributor we dealt with on a stocking basis this year was back kind of toward the end of Q2. They took about 15 systems from us into inventory. At the time, I was actually pretty worried about that. They came back six weeks later and said, "Yeah, we've sold them.

Can we have 10 more?" Took 10 more and then went out and sold those again in another eight weeks. I think if we can kind of keep those turns in the sort of eight, if we can keep the inventory turns there in the sort of 8-12 weeks range, I think that's healthy. I think once we start seeing it bump up against that kind of 10-12 area, we're going to start to get nervous for any given distributor. To look at them overall, obviously, I think we'd like to keep it more toward the sort of 8 range.

Ian Cassel, Analyst, IFCM: Okay. Thanks for the color on that.

Conference Operator: Our next question comes from Kyle Bosser with Ross Capital Partners. Your line is open.

Kyle Bosser, Analyst, Ross Capital Partners: Hi, good morning. Thank you for all the updates. Maybe just following up a little bit on that, what's the latest rep headcount?

Morgan Frank, Chairman and CEO, Sanuwave: Rep headcount is still 13, same as it was last quarter. We've rejiggered it a little bit. We changed the shape of a couple of territories, moved it to 12 national territories, and now have two full-time kind of key national key account managers. Overall, count is the same.

Kyle Bosser, Analyst, Ross Capital Partners: Got it. How are you feeling about that heading into 2026? You had a pretty good number in addition to having the distributors, as you mentioned.

Morgan Frank, Chairman and CEO, Sanuwave: I think, obviously, given a lot of what's happening in the industry right now, as you can imagine, there are resumes. I think we're going to kind of do this on a we're doing this on sort of a let's-do-what-we-see basis. I mean, obviously, we plan to grow this rep headcount as we go forward. Exactly how we do it right now is something that we are doing a lot of work to assess internally. Do we want to start bringing in some reps to just manage distributors? Do we want more key account reps? Do we want more national territories? Do we want to bring in a set of more kind of inside sales folks to either just handle customers or to just set appointments, right, so that we can get our closers more time closing? Those are really the discussions we're having internally at the moment.

I think we'll be continuing to add to the sales force on kind of a measured basis.

Kyle Bosser, Analyst, Ross Capital Partners: Got it. Yep. Makes sense. Just curious, what sort of annual revenue some of your more productive reps are doing? Maybe also kind of what's the reasonable run rate for reps to achieve sales?

Morgan Frank, Chairman and CEO, Sanuwave: Yeah. I mean, to some extent, that's always going to be a little bit territory specific, right? And a function of how well developed a territory is. I mean, we had a rep exceed $2 million of sales in Q3. We had a couple of others over $1 million. As these ramp up, getting to this kind of $4-$6 million annual sales rate, I mean, it's certainly not impossible. I think given the difference, we have a couple of markets that are more developed than others. It's a question of kind of how long does it take to get an undeveloped market to look more like a developed market. Ultimately, I mean, rep productivity here can be very high.

Kyle Bosser, Analyst, Ross Capital Partners: Got it. Internationally, were any of the 155 systems sold, were any of those into international markets in the quarter?

Morgan Frank, Chairman and CEO, Sanuwave: No.

Kyle Bosser, Analyst, Ross Capital Partners: Okay. Maybe just lastly, on that point, how are you thinking about the international opportunity for Ultramist? I know you've got a lot to focus on in the US, but just curious if you'd be interested in looking to take on distribution partners in OUS markets.

Morgan Frank, Chairman and CEO, Sanuwave: I mean, it's certainly something we'd look at. I mean, we sort of refer to this internally as the golden retriever in a tennis ball factory problem, where it's like, "What are you going to chase?" I think at the moment, there's so much domestic opportunity that it just hasn't really gotten top of the pile. I mean, if there were a really compelling distributor who could basically handle all of this without a whole lot of intervention from us and in a market where there was an easy regulatory pathway, I mean, I suppose we'd look at it, but it just isn't something we've spent a lot of cycle time on yet.

Kyle Bosser, Analyst, Ross Capital Partners: Sure. Okay. Got it. Morgan, Peter, thanks for all the updates.

Morgan Frank, Chairman and CEO, Sanuwave: Thanks.

Conference Operator: Our next question comes from Carl Burns with Northland Capital Markets. Your line is open.

Carl Burns, Analyst, Northland Capital Markets: Thanks for the question. Again, considering the CMS fixed rate $127.28 per square centimeter, would you expect that the privatization practices would look to Ultramist as an additional line of revenue? On that, I mean, how long do you think that takes to play out? I have a follow-up as well. Thanks.

Morgan Frank, Chairman and CEO, Sanuwave: I mean, short answer is yes, right? I mean, I think physicians are often maximizing two things, right? They're maximizing their desire to provide good patient care and for the patient to get better. Obviously, they're running a business. To the extent that they find both revenue and care gaps, this becomes a very interesting option. I mean, on a relative basis, the attractiveness of Ultramist seems to have increased a great deal, particularly if your goal is revenue maximization. Exactly how long that takes to play through is an interesting question. I'm not really sure how to answer it with any rigor. It seems to vary a great deal by folks. I mean, people respond to new realities with differing time frames. We've certainly seen a change in inbound.

We've certainly seen, I mean, we've certainly seen people who are sort of on the fence saying, "Well, maybe let's see, suddenly get more interested." I think there's definitely going to be some of that. Exactly how it plays out is complex.

Carl Burns, Analyst, Northland Capital Markets: Got it. Thanks. Just one follow-up question. Looking at mobile wound care, what do you think happens there given the CMS change? How does that affect your business? What % of your business is tied into the mobile space? Thanks.

Morgan Frank, Chairman and CEO, Sanuwave: I mean, the mobile is experiencing a lot of the same issues as others. There are widely divergent practices within mobile. We've been doing some looking at this and kind of tearing into the CMS data just to get a look at what we think the interrelationships are between skin subs and Ultramist. One of the things we discovered is that 55% of the practitioners who bill Ultramist don't bill any, haven't billed any skin sub at all in the last four years. Of the 45% who do, most are, a lot of times it's not the same patient, or you can't bill the two in the same visit. From a standpoint of what's mobile going to do, I think some of the folks who were most aggressively using skin subs may see their practices either change dramatically or terminate.

I think, I mean, just speaking hypothetically, if my goal as a provider were to do the maximum number of skin sub applications, I would not be using Ultramist, right? Because the wound would heal more quickly, and you would wind up doing fewer applications. I think there has been sort of an inherent sorting here where the folks most interested in doing the most skin sub have also tended to be the folks who were not using a lot of Ultramist.

Carl Burns, Analyst, Northland Capital Markets: Got it. Cool. Thanks so much.

Conference Operator: Our next question comes from Alex Silverman with AWM Investments. Your line is open.

Alex Silverman, Analyst, AWM Investments: Hey, good morning. Thanks for the update. Wondering, two questions. One, can you give us a sense of what kind of toeholds or trialing you're doing in some of the very, very large wound centers? And then I'll ask my second question after.

Morgan Frank, Chairman and CEO, Sanuwave: It's a really interesting question. I mean, we're starting to get, I mean, we're starting to spread through a couple of hospital networks in particular, or at least these are things that have been going long enough that I think we can talk about them. One in particular is one of the larger hospital networks in the US. We've been in at a couple of their flagship facilities now for several months. It's gone really well. I think they are using the product in a similar fashion to some other large hospital chains, predominantly around treating HAPIs and incipient HAPIs. Sorry, that's hospital-acquired pressure injury. Essentially, you lay on your hip or your back too long. It turns into a pressure ulcer. In a patient with suppressed immune system or ill health, those can be very, very serious, even life-threatening. We're starting to spread there.

We're starting to work on how do we become a we were added to their approved vendor list. Their kind of 150-ish hospitals and 2,200 facilities are now free to buy. We're definitely working on some other large opportunities. Nothing I can really talk about by name here right now, but give me a little time on that, and I may have something for you.

Alex Silverman, Analyst, AWM Investments: Okay. Great. Second question, have you guys thought about how to get around the capital approval process, which can be so painful at some of these bigger buyers, the hospitals and the large wound care centers that have just painful processes?

Morgan Frank, Chairman and CEO, Sanuwave: We have. In fact, it's something we've been giving a lot of thought to. Obviously, starting to have a bit of a balance sheet helps. As we look at a number of hospitals in particular, they tend to have very difficult capital cycles. Their capital budgets are highly segregated from their operating budgets. I mean, you walk into a hospital, you'll see tracking codes even on computer monitors because those are leased, right? That's how aggressive the capital budgets are protected there. I think moving to something along the lines of a rental model at prices that make sense for both sides, particularly if you could tie it to some sort of usage minimums, makes a lot of sense. Some hospitals don't seem to care. I mean, we've seen a number that are just like, "Great.

Let us buy the thing." There are many others for whom the cap budgets are tight. It seems to vary a lot hospital to hospital. Yeah, we're definitely starting to consider the, "Can we rent these to hospitals that we believe will be sort of high-use environments?" That can be a great model for us.

Alex Silverman, Analyst, AWM Investments: I assume with a, I don't know, $5,000-ish dollar cost for a system, the payback of placing one of these could be a pretty quick payback for you.

Morgan Frank, Chairman and CEO, Sanuwave: Obviously, depending on, I'm sure you can do the math, right? If we price it at various points. I mean, obviously, the real fun for us is if you're selling, if you're getting people to use three, four cases of applicators a month, the value of the consumables rapidly exceeds the price of the capital sale.

Alex Silverman, Analyst, AWM Investments: Right. Right. Okay. Great. Thank you.

Morgan Frank, Chairman and CEO, Sanuwave: Thanks, Alex.

Conference Operator: As a reminder, if you'd like to ask a question, that is star and one to join the queue. We'll take a question from Andrew Rem with Odenson Partners. Your line is open.

Carl Burns, Analyst, Northland Capital Markets: Good morning, gentlemen. I just wanted to go back to the reseller. Is there a way that you guys can kind of bifurcate the market where maybe direct you go to large accounts, heavy users, and use resellers to get to kind of the fragmented small customers that would be less efficient to service on a direct basis?

Morgan Frank, Chairman and CEO, Sanuwave: Yeah. You're speaking very much to an internal discussion we have frequently. We refer to them internally as bunnies, deer, elephants, and whales. It's hard to have high-priced reps chasing bunnies. A lot of the distributors know a lot of the smaller customers really well. It's certainly something we're looking at. Whether that ultimately turns out to be the solution, it's certainly possible. It's an idea we're exploring. I think we're just trying to get some experience with it and see how it works. I mean, we've made a lot of changes in our distribution network and sort of tried to move to a more engaged, more hands-on, more value-add channel. We're still getting some experience with it and seeing how it works and what it's good at and how to integrate it with our sales force most productively.

Yeah, I mean, the idea you discussed is certainly one we've been looking at.

Carl Burns, Analyst, Northland Capital Markets: Would applicator sales also run through the reseller, or would you just use them to sell systems?

Morgan Frank, Chairman and CEO, Sanuwave: It's going to be, I mean, ultimately, it depends on the distributor or reseller. Many of the folks we're starting to talk to now have much more sophisticated ERP systems and systems that can integrate with our own. What we're really looking for is to make sure we understand exactly how many applicators would be in the channel and exactly what the flow through to end customers winds up being. We're very sensitive to that attach rate, like how many cases of applicators per week is a given user consuming. To the extent that we can sustain adequate visibility to that, we can allow sort of applicators into the channel. I mean, predominantly, what we've done with these distributors, at least in the past, is they'll set up the customer. That customer will then come and order applicators from our portal.

We have the direct relationship with them. We're directly dropshipping to them, and then we'll pay commission to a distributor based on those applicators. We're starting to look more at the many of these folks just want to do stocking entirely themselves. The question just becomes, can we sufficiently integrate it that it makes sense for both sides?

Carl Burns, Analyst, Northland Capital Markets: Maybe lastly, and I'm not sure if this is a competitive set. If it is, you don't need to answer. It does seem like the current environment lends itself to leverage for you guys in terms of negotiating with resellers. Maybe that speaks a little bit to your increased sense of urgency. Maybe can you comment on that at all?

Morgan Frank, Chairman and CEO, Sanuwave: I mean, I don't know that I really want to speak to something like leverage. This is one of those moments where there's kind of a sorting hat going on. I think some of the key salience in this market just changed. People are adapting to this new situation. I think that provides a lot of opportunity. I think it's made a lot of people more interested in engaging with Sanuwave. We've had a lot of inbound interest. It feels like this is a great time to kind of make some new friends.

Carl Burns, Analyst, Northland Capital Markets: All right. Great quarter, guys. Appreciate the time.

Morgan Frank, Chairman and CEO, Sanuwave: Thanks.

Conference Operator: It appears we have no further questions at this time. I'll turn the program back to the speakers for any additional or closing remarks.

Morgan Frank, Chairman and CEO, Sanuwave: Thanks, everyone. Appreciate your making the time first thing on a Friday morning. We look forward to updating you further in the future. Thanks again.

Conference Operator: This does conclude today's program. Thank you for your participation, and you may disconnect at any time.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.