SONX - Earnings call transcript Q2 2022

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Operator

Good afternoon and welcome to Sonendo's Second 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 Matt Bacso from Gilmartin Group for some introductory comments. you're when ahead go ready. Please

Matt Bacso

Watts, afternoon. Thanks, of website. the in President quarter you Sonendo the Michael participating ended company's June A release thank call, operator. and financial joining copy for and Bergheim, press Good the today's Bjarne me for are is today on XXXX. And from results Earlier CFO. XX, CEO, released Sonendo, available

harbor Exchange based you our organization, to statements provisions of predictions All expectations that and call of relating our in Before COVID-XX that implied development XXXX. events the any Securities Litigation performance public and management XXrd, future EDGAR, make the XXXX this in to available we on refer risk on begin, to forward-looking periodically section contained Form XX-K statements description the securities other of relate of or Reform intention this our contains associated law, or on conference of required risks forward-looking various material statements. most revise as new I'd XX, of forward-looking March those statements revenue business, or Act is made disclaims annual and Any recent These will our financial impact the product by can any assumptions. time-sensitive accurate pipeline from financial with for estimates federal broadcast uncertainties business, on including operating that current to involve obligation because of filed upon Commission otherwise. statements. expense live or should filed events, to call uncertainties differ information now August Private management, in remind the whether forward-looking in include are our as pursuant with to those of actual materially with Bjarne. events, within like list I meaning call guidance, XXXX, and factors these future Securities And commercial during which our results of or statements This information, with the on market Sonendo for risks performance, the a the except growth and the over undue turn expansion, the trends expectations reports on projections you safe to place call update please that these cause statements, of will or forward-looking opportunity, Accordingly, statements, by hiring, SEC. not and and and laws, reliance to results, statements and that, future are our only are report

Bjarne Bergheim

afternoon, us. everyone thank you Matt. and Thanks, for Good joining

and instruments procedure quarter, opening company's throughout utilization console today's realized Growth our for XXXX. before monthly being the and second detail increased strong TDO call, procedure I quarter growth. When results business sales, the in XXXX update provide followed history. continued month driven with QX sales opening to the Total quarterly will For will regarding who $XX.X call growth XX% the additional of provide million Mike representing guidance XXXX updated Q&A. by comments and was was trends, utilization, increased growth by in over quarter the June GentleWave strongest the analyzing primarily the we sequential revenue

in GentleWave quarter, in prior-year strong, market technology. to and the period, sold positive which the a users, In canal patient our the and XX volumes market dental While root is offices growth. sign XX compared our consoles the our equates that to the of on consoles growth is durability predicated to we end for demand is penetrate new sell there's ability XX% to second

XXX base XXX on units June installed ending units, GentleWave's XX, June XX compared XXXX. approximately of was As approximately to

our on the business current wanted its a business. I providing address briefly to environment update, Before impact macro and

met simpler a last pouch earnings with a of all connection second temporary successfully transitioned the design instrument orders on in chain this and As CleanFlow. supply to were with launch full of we we call disruption, the our packaging. commercial customer communicated Despite associated in procedure in May, headwinds quarter reminder, XXXX

somewhat Although to in year, the supply earlier second margin chain challenging as environment stabilized inefficiencies the the XXX remained basis impacted points. gross has it's relative in quarter roughly operational by

percentage instrument quarter, halfway through increase due sit price gross we As our processes margin in from a and expect instruments to last improved here to in the company meaningful benefiting converting CleanFlow increase almost third months. digit XX and percentage we increasing the sequential procedure operating of third procedure to the report mid-single

later be margin to detail gross trends XXXX. our our to Mike heading or remarks, prepared approach half continue in diligent will We back the on into quarterly And in our more supply chain. provide

Turning being I other the to pieces want to there core two One console the highlight GentleWave being current are environment, business. our of utilization and economic sales.

particularly a seasonality strong we in QX Thus, there expect very instruments. XX,XXX our vacation. where current to decline procedure procedures said, base, that business, selling to component record company set to As That QX we it within is starting summer a sequentially. we're to is to a important installed in modestly instruments procedure out utilization see point momentum due

the Following in months, utilization we to summer QX expect increase QX.

and purchase. softer potentially likely decision very customers a our are lead cycles pipeline equipment, their But to Regarding remains longer operating conversion environment, robust. economic to extending will in capital which we

Given with and GentleWave robust our this we're pipeline, dynamic. growing concerned not

conversion very strongest revenue As capital number revenue procedure purchase as equipments longer to expect our with healthy of typically To a instrument wait maximize headwinds our benefits. dentists and the console is sales about a calendar due remain cycles. reminder, to to we slight year quarter tax typically guidance large to to equipment, updated quarter capital fourth feel good summarize,

event, showcase AAE CleanFlow booth Now turning procedure to our to Meeting Association as extracted critical the of Phoenix. call or this of in us which in a or instruments conference and tooth new our launch what of of most The starting drive. a quarterly to XX, we the business largest important full in is AAE April with perform CleanFlow. and AAE an ahead procedure On Endodontists customers allows that announced of entire updates industry our using commercial market launch the allowed year. announcement test was timing we the observe was great American to a Annual

AAE, our customers Following gives instruments. as adoption away CleanFlow confidence line positive, in orders extremely for which with initial also were expectations generation Early are in from we been transition procedure us which we from current our feedback with pleased. has

communicated, and processes CleanFlow's considerate to and months move still the manner. will expand in we of procedure generation improve commercial the the as for of the we're we full responsible Scaling the and is that the may adoption only CleanFlow operations vast in our commercial a Since months early majority volumes. and launch, year as have into As current XX up we previously account expectation take instruments PI it of use throughout CleanFlow manufacturing XXXX. our still

and a believe easier at drive we volumes. which designed As will CleanFlow increased with we material production reminder, allows specifically lowers efficiencies for fewer which assembly, loss components, higher

core approximately and approximately team annually see late root our Turning sales $X.X benefits of capital consumable Since beginning you to we're in size to bifurcated penetrate XXXX, in our our new million procedures account billion. rep of driver growth positive sales. a of market commercial North expanding the management opportunity the representing important strategy, from performed team XX of an America, our as market canal remains separating

utilization, education team increased of instrumental expect simultaneously to further and with efficiencies. we rep training procedure In QX consumable additional with full our rep partners as while integrate the the our team continues CleanFlow, instruments were to improve across provide CleanFlow, to in them hosted achieving reps on and rep of Our been events person volumes with clinical see to customers. Along consumable to team has second quarter, the launch team the XX,XXX in our focus record sold. with launch training commercial events their tools allow designed numerous own to These country. be practice consumable the

been Lastly, of benefits April, new launch have best the in organization emphasize with to our of the technology. developing recent we CleanFlow

increased see opportunities a early of on we our as into and our signs new back the of XXXX. customers who of also generation account half pipeline pipeline are to As reps, capital we're consumable have capital by focused management fully now head starting absorbed equipment responsibilities productivity are strong selling to that reps, from

reminder, their time a of roughly of establishment existing the servicing to prior consumable As the XX% reps spent rep capital accounts. team,

be Our of half to customers. the plan our further the present the on and is and XXXX to partner field execution over for level our our continued into size maintain commercial focus at with near-term. will of XXXX its team team, second The

GentleWave Journal common featured it in GentleWave Before on Based canals effectiveness to The I group when This compelling microscopic that conventional KOL study I the independent be of bacteria revolutionary data summary, approach. was to highlight the to study disinfection more evidence backed we superior hand further June the of results, wanted of as a shown the edition expected, clinical infected to canal structure. effective. and have In evaluated study the root from Mike, of on GentleWave compared and was cover root of Endodontics. removing the over of support. spaces, that cleaning offers tooth complexity, technology provides by GentleWave and

commercial of Our standard investing make for focus therapy. continues infrastructure to root our to canal in be the care GentleWave

Michael CleanFlow. I full to commercial will the with gross that, continue prioritize over a margin Financial to expansion turn clinical Mike? Sonendo's Watts, Chief Officer. will we and call Additionally, practice of efficiency launch With

Michael Watts

Thanks, Bjarne.

in XXXX. Sonendo's was second software GentleWave in to in procedure console consistent quarter and the XX%. first the the console increased mentioned, an instrument Growth million, were roughly for driven quarter, $XX.X previously quarter $XX,XXX quarter compared revenue by million $X.X for quarter second of average increase compared the second of XXXX total growth. XXXX. quarter In sales increased $X $X.X sales, strong to TDO of prices As was with XXXX of was the console million selling million, GentleWave revenue primarily second of quarter the the sales, GentleWave

XXXX, $X.X in XXXX revenue their to the XXXX. quarter. $X.X was same The quarter second second the of was costs large of associated offset inefficiencies expenses $X.X of disruption new primarily million legal second million, XXXX. was instruments XXXX. operating other XX% Loss average higher of and from was supply from The the Gross as expenses increase the XX%. million quarter base period XXXX to to was Higher to services, the standardize to which second in million, for X% to Net was in primarily $XX.X across second of in the driven million, second we quarter approximate software to Turning due estimate was by of the a of operating of reduction were was licenses quarter expenditures prior-year. Procedure was XX%. an quarter in revenue in margin expansion, $XX.X driven expenses of PI loss quarter growth driven million related primarily of compared the in period. the install general partially for growth as $XX.X prices was approximately CleanFlow following well $XX.X increase $XX representing compared as launch. to million XXX to decrease and quarter in operational compared by compared increase losses XXXX, product primarily the to compared in commercial revenue prior-year to an instruments, the accounting Total quarter the period. The personnel Total operating $X.X first by to quarter basis second practices second compared XXXX, administrative increase second of in XXXX GentleWave in lower $XXX,XXX group procedure revenue operations Total XX,XXX, driven to to the totaled $XX.X the XX% was XXXX. quarter. prior-year a increase chain, quarter the the our points looking specifically instruments with roughly higher quarter margin R&D second sold sequential due in million compared enterprise. public by the selling quarter and the $X.X compared of for of company. PI an million gross in from procedure XX% headwind relating the in primarily in sold the million On improved million basis, was operating increased and

borrowings as was long-term XX, and and $XX.X cash while short-term approximately equivalents June million. our investments of cash million, XXXX totaled $XX Our

needed credit the to available this in and on additional first support provide on XX the resources our We capital mentioned quarter to our milestones. current X, to call believe subject earnings will In July, our liquidity and April beyond. As late certain expanded we $XX business an include access and funding million we million XXXX tranche. first grow

guidance. financial our to Moving

it to annual between months, in now XX% million, schedules. the the in For revenue annual volumes When procedure important due year-over-year vacation quarter, largely and $XX.X analyzing million to be to representing $XX.X XX%. range seasonality of is there in the is XXXX, expect we growth third remember summer to

we QX result, instrument single-digit to procedure sequentially in a expect levels. the low range QX percentage mid to As decline sold from

we third year the modestly prior quarter on the Additionally, GentleWave compared sold be to expect units up period. to

down Moving expect third to approximately XX%. statement, we to quarter XX% margins income to gross be

As second previously roughly stated, XX%. quarter when would headwinds, been gross excluding the chain supply have margins

adoption. As this price expect sequentially adjusted a procedure and due to mix level be we CleanFlow QX flat instrument increase inefficiencies, we up from from these pass announced margins operational revenue gross incremental to benefit recently to

XX% margins in and improved CleanFlow, this to by up point, expect QX operational At the like continue I'd increase, range low efficiency. PI call we volumes Lastly, the driven adoption price the to of be contributions in questions. positive for increase to open gross

Operator

[Operator you. Thank Instructions].

first our Michael have on America. the We of phone of question Bank line Cherny from

You question, your may with Michael. proceed

Michael Cherny

and about I months backdrop. gone CleanFlow little XX you you to macro not want or afternoon a could to especially conversion take the that bit congratulations hear given launch so. surprising on strong say Good the results. think this the Impressive, talk

not ones said as quicker fairly an have a of get or that jump I Who about what similar it's period adopters the the strategic in are you willing you been early for important time? are -- in nature much past. But that's are as that hesitant think cycle? right conversions to you the who maybe think to are And just more either in? to of that who

Bjarne Bergheim

question. that We to a obviously excited executed for out Michael, ago very give April, to this just have project. this and on in about that X.X about Yes CleanFlow. super shout you, the thank here we're big Yes, well team want months launched

gradually customers We base you're installed our are, alluding converting like XXX we've talked Michael. about, to like we CleanFlow of are to

said that We a said months, that this have but the will XX not have approximately take conversion is conversion. we linear

So be benefits could we really also speed I but to that there the benefits drive earlier opportunity to us in margin doctor, have talked could calls, to from just be I also think the about like up to there think a obviously perspective. not

good. the time a -- software do in we when some hearing them, easier actually myself, of some this two to to to we for consumable of instrument. have talked a different hands get then example, our improve with or we we procedures immediately customer for be of And and bit because doctors, workflow being these way doctors CleanFlow, they've, would of this with them that to I that these hey, time raised say this. But us using there couple procedure, procedure helps that is is a they done legacy are they've time, new want we early. spend -- using it what I are and And the I've been rep said, XXX% This used it roll of organized feedback need get used more these a at time. cases the instrument that others to think CleanFlow is to do there's is years, so from very doctors. -- some to the with lot saves the part may we three access though, them -- for made way conversion, their with with little And that procedure our upgrade, we and we in account. one take very an is and that, do time convert see may what sales to procedure want We are their we're familiar to doing instrument out for -- a doctors

progression very rollout. very, the about So this excited of

Michael Cherny

different of globally disruptions Thanks. given to gross the And pressures. all see to the various margin have time may be gross surprising margin. Not any that you just

already the what to And the that think metric for us changed? to you that chain acknowledgeable XQ. margin the providing you that about right admittedly gives disruptions? given Has guidance change being dynamics? What term it As gross supply into you're visibility relative short needs

Michael Watts

Michael Watts. Hey, it's Michael,

So then question, any can address additional I'll that and commentary. add Bjarne

what in are safety we and adequately we our from help what constraint. So had weekends in disruption us come and was recover QX overtime, finished had really to what see product as and we working sure recovering saw our that packaging a customers and that as teams make stocks, to we supplied. us identified goods positions And started in,

our and work work. we're to back look weekend that grateful and were May, very April, June, we So willing overtime teams the in

As into QX. move we

inventory Now, we've move largely recover more our been production to goods, and positions to process. a able in normalized finished

here, overtime so tend the only so light or weekends we example, at where had level. two very weeks six first And in for work we've to a

needs So quarter. halfway at and we labor that We us this recover behind think inventory the that's the that think position. through additional point to resources

The expediting additional that product And expedited, we in were which other incurred in QX almost processes through so similarly adds cost. that process, was had sterilization. of XX% area our we expense on additional like certain orders

do As move service a predict it, back six for normalized we're we're that able process to into now to to just the the weeks being and able cost. that now cycles, will significantly external

new a what CleanFlow similarly effective CleanFlow, the early us. additionally, have So that now, incurred six are us. that's then product. then the on, is past on of CleanFlow, we of we top we into talked the QX costs in July that feel the help most announced price we on increase behind quarter, additionally into about that that, will we weeks like see is And X, we've And that

that to come as to into volumes and QX we As then QX. we'll further move see from scale, start into begin economies production we

see So we'll gains. further

that's conviction through So us gross the in further gives to QX. what QX schedule and out competence margin into then improvements

Bjarne Bergheim

round here. perhaps little He's answer we manage company and talking able a side now out realize what's supply with that every that chain think Mike's maybe across is chains issue out better. And supply the space deal still there I about med-tech just entire supply the med-tech chain the in different to an is to of this. this. to bit is we're But spaces having to the Obviously,

And ensure components. lot into Sonendo certain that the time. an chain inventory a will to parts of also the all correct that higher time to position are example As supposed into supply some calling maintaining spending critical on into we're come Sonendo of at come the

So result, just of supply for context as impacting provides perhaps a forward. chain see Mike's less And bit a we response. us little going that's

Michael Cherny

Understood. much. so thanks And

Bjarne Bergheim

Thanks, Michael.

Operator

Thank Jon you, now you're Michael. have Please when Stifel. ahead We of go Block ready.

Jonathan Block

Great. Hope you maybe July the me, can Beyond third I for said okay? you Thanks, think you to start, increase effective hear guys. price X.

in most to what the that essentially regularly the past of you lot call increase you opportunity, because and there past through terms But thought more then half? is see certainly past you of any year you from think in are a XX your additional feedback take XXXX? and of recent through in expensive consumer. months, just it base. the base, a the those to push maybe increases you've the think the about, price said the mean, base, had price one passing customer in 'XX. price always half said customer hearing leverage opportunities the over still from it a I I in talk of we you third do And this more Or I

Bjarne Bergheim

this taking months. in is we our good also I value of increases. a know, like lot price Jon. question. in But price. XX customers. GentleWave been you're the saying, we've thanks, we aggressive and Yes, do these in feel Yes, increase see And GentleWave so price procedure, the about third Good

passing, to to through, And some there of would can feedback their I'm think increases. half customers bit going I customers price say this that on for of roughly and to think, I the I what continue opportunities do price we to be a -- and out through, to similar margin customers. potential of continue be but lot to they prepared it to the that, think So timing, the price the there Again, is if take these talk haven't the for us that that value you increases passing speaks had With making obviously, -- the negative fact on the own there, little our customers to further talk but could we're their regards you're we passing something do for actually about I are and to lot to not going a there are is price, that opportunity saying, cost the of evaluate. this about the increases, in see forward. inherent procedures for and a GentleWave from feel

Jonathan Block

it'd just above Great, and from one, question well really guess. The on. where good of number be can Xb, was quarter PI sort at, I ask our in If perspective. I the we were

increase. quicker us You ask that you base? June forward that signaling feel increase to a your July then feel price talk very and we do price installed saw a consumable was follow-up? the maybe there the like any you're Do ahead you that into in was how clean XQ mentioned and number X I'll like to Or pull of

Bjarne Bergheim

nice very number of we for trends that's feel procedure bolstered so QX, utilization in the us spot on quarter. instruments you're Obviously, in here. CleanFlow, Yes, record sold John, by

forward, for here. think underlying there speaks potentially, pull the of signals think strong this of core business. us, we that of the regards business. strong that the be see more some kind I We could With I underlying to of to core the of momentum feel is it to but obviously,

of to bit I to there, is a think seasonality utilization. other we the thing have recognize right there's just little

to and QX into a But utilization back into come have strong to forth, that softening -- of QX, in also that later we seen having things seeing that part here doctors see QX. vacations typically the and in right, and continue see the we're the QX. we QX, somewhat summer from so when in expect as utilization given vacations, these we that utilization obviously, doctors the for expect of we One is

Michael Watts

there's I QX, Hey forward. Address your Mike, to we whether that. Jon, if add just pull think it's could question on

So I familiar investors all visibility the have to if don't know at we console utilization level. our that are

using, sure don't are customers our make position closely out what people we and one. we building very to sales that measure inventories So and were one actually exceed seeing what to where we're that are for at

back So at results, sales was and fairly we our nearly out one. one look QX utilization to close

believe level. around So at that People built have and there an controls there's And we don't increase. that. a price that position But inventory that probably sure some macro done that enough to we as customers doesn't happen. up make to, think may in of we yes, anticipation alluded Bjarne governance have that have out

Jonathan Block

great. quarter very been capital. for you Maybe fourth growth also helpful. when usually dialed big just have at me, XH, in you the a guidance, it It's you strong last for that the versus certainly has have pretty XH, That's look question but XH

is thoughts trend just environment, call Thanks, versus and seeing else that guys. it overall range, room on I to essentially, conservatism yourself seeing all market investors. but the tighten wiggle know So a for the around unchanged, your with midpoint keeping you're Bjarne, or perspective maybe from anything capital call some the and you're just what giving out dental keeping you maybe

Bjarne Bergheim

John. thanks, Yes,

we of conversion XX.X see environment, but the slightly a remains is it also the get strong. on but of economic slightly like want to strong feel causing side, XX.X. tightening pipeline range and it obviously pipeline, strong our midpoint a on why that so cycle, longer to yes, console, to that's the slightly So the And just about to maintaining see we're in prepared this we emphasize strong and remarks, the softer talked utilization trends demand because we utilization

So we guide. feel that very good about

Jonathan Block

Thank guys. you,

Bjarne Bergheim

John. Thanks,

Operator

The question you, Thank next Piper Jason John. comes of Bednar from Sandler.

with proceed your Jason. question, may You

Jason Bednar

contribution Bjarne off like break that finished The Mike. afternoon. on to here side. processes price or just sounds in three margins Congrats the referenced? the the increase Bjarne operational we is you how instituted I'll Mike, on and start are for able third for where good points you sequential in four I to coming mix down gross much second and PIs? guess increase I the are CleanFlow quarter. buckets the you quarter, we progress then maybe It looking of guess have on three from you place, improved the from that Thanks,

Bjarne Bergheim

Yes, thanks, Jason.

improvement, Michael how then just weeks to gain good will a about is about bridge QX. moment And we just operational XX% X.X, XX%, ago, XX% feel progressing we're X then in as essentially with efficiencies into expect points, see definitely six XXX I'd that basis points where XXX quarter, in price. other basis operational XX%. the we're it that we And as the to shared rather performing So you I to to and us XX%, some that get say

Jason Bednar

on that the maybe just more still to then and quarter Okay, contributing little side, maybe like comes gross in into so to CleanFlow a and fourth margin little early follow-up, and sounds be it more 'XX? operational bit price, a in

Bjarne Bergheim

producing take as then we half still for out legacy to October. are And that reductions today point. four compared processes low PIs. relatively great and have at are months mean, still scheduled cost place to on into CleanFlow in some I a our is That's we're move a still that September quantities and additional CleanFlow

So we'll production. XXXX see more scale CleanFlow of margin from at moving into from come becomes CleanFlow as it QX and gains full in

Jason Bednar

compared the Are extra utilization nice draw using a points again I there. it any on generation follow-up the months system That's system in first into are an granular prior can going initial CleanFlow prior here, Okay, rollout, use can seen by using PI, there really the the that CleanFlow few you early, just it's on of practices well I see of and early prior things would like all CleanFlow sounds anything that in with tough segue know of are or of versus the couple generation terms Great. uptick PI? but what that really and question, my to and right. just you or get utilization have that's you GentleWave know

Bjarne Bergheim

a keeping what are anecdotally a that shows I right, we're think Yes, give using But on and their that practice. CleanFlow we yet. and doing in of in that of really lot prepared doctors, not the the it's lot time really Jason a on see quite as this in to to topic, all for simpler come doctors is they specifically we're this going -- on an question easier, procedure it we drive workflow analytics are numbers in this general takes it's less excellent

keep the also continuing second entered So increase as And productive more we're think here, our to to the consumable in procedures, speed, doctors these getting and practice. we half directions the right we these to up I other and to the thing reps that from are CleanFlow, but share positive. mind, concurrently in total as are

factors bit those you over driving can think into that so on utilization So we really gives us practice, help a hopefully of have little time two obviously that color.

Jason Bednar

that more the that business, here? that first you seasonality to you're like are in is Yes, you. that. on early on April of of the part trying more August, one, the if seasonality you're you're helpful June, extend July about talking here the what quick business, in yes. really just when Maybe Or seen in and able mean, hit out in can to through starting you of in seeing And it commentary the was if expecting just show understand one the is gating Thank comment, August. to I wondering up to kind you've business? monthly performance seasonality

Bjarne Bergheim

goes seasonality there's key two business. to two it of One thinking the of elements seasonality elements we're back around the think I the of kind about, capital equipment. is that

Second is consumables. around the seasonality

QX. relative on typically given equipment, slightly for increases tax because QX On these But QX, QX, we've like of capital expect we to talked and AAE timing benefit slightly side. strong the economic a conference, about earlier, the benefits is the capital QX than of softer the doctors

have significant I in on coming side, I done the this here about think in time are these away think some lot can year, go live a again, we goes COVID. to this live, they to years field. because are out At to talking many was more doctors, see fact vacations because can that the time, they same procedures of Mike we perhaps obviously past first doctors back of talking And the the these for taking that consumables what we in doctors on more vacations, procedures is than can in the and see of this we're seeing Sonendo.

you little a we your So QX part and because these continue earlier to vacations. as QX. obviously of strong be bit a to point result helping questions right in the move of also is question, that impact in now the a And But in but the QX which your utilization as the as creates potential have utilization well you softness good that of expect to point. consumable you out effect CleanFlow of towards like reps you have

Michael Watts

X on week in Jason the July many of customers. it Monday week a think lot to really, And them a just took of that know high We it our that vacation I off. of to filing talked for context our was put we directly a customers. full

expect August. things we in August. in late in normal we're still of back course July. But to seeing to get So September and It's that early

Jason Bednar

All Thanks so right, perfect. much.

Bjarne Bergheim

Jason. Thanks,

Operator

you. We Goldman now Rich have of Sachs. Thank Nathan

proceed question, You with may your Nathan.

Nathan Rich

afternoon. good and Thanks

of Just questions. clarification a couple

make if of as doesn't CapEx, to is whether are I just encourage the you potentially much, potential risks change we financing signs a a and it practice any have just environment seem given this environments put of I and cycles conversion it's, to you that you can to for in quarter appetite point? get in seen of like we're or into kind guess do that fourth there lengthening promotional the of guess place Or purchase? pointing kind that at the On practices are incentives, the

Bjarne Bergheim

Yes, be forward. we -- a right. have at some a with the we there Yes, as could you longer strong But -- things different point, a because couple are see we we But, of slight going on to for are levers there the environment your is Good, point, from could consoles, I a questions. to your this softening demand that so, work your to about, here. pipelines. Nate. financing business have options good there other well. we there of And conversion look talked from to think if the see point, like that think given I thanks, It that doctor's strong cycle macro and be perspective,

which it's to even guidance on also to our range. think I interest But overall have were this thinking rate, want just uncertainty and the be about markets. increase some that. inflation point, increasing rates an may levers or that, highlight And your still doctors dynamics, we business midpoint in general counter -- we goes I Some feel the given financial these just of from of maintaining to we also the

business year. the in we And feel second of good the the so half about

Michael Watts

Now, hey, Michael Watts. it's Nathan,

expand conversation lever. So the during if just I on could about

in every So Diego it's get but EndoCon lot we users QX, San held our TDO in a also coming, non-TDO users. We year. of also have, conference,

financial their So help at it start further economics. that's where an for them their great also to giving improvements that's user practice, becoming a area technology, people their look we and now GentleWave that the how can incentives, opportunity clinical time. practice just only also a the understand And improve not in improve but practice, to drive incentive outcomes start to showcase at given us improved

So, step EndoCon's a us. big for

We into also, to onboarding, not into GentleWave when education their of course, they're programs. practice, patient but only help their adopt practices

with So there's many a to into that and GentleWave do help information drive when non-monetary which can things we a are running council. loop expand induces customer, you the walk customers a GentleWave. adoption can that office, There's that that's help we on of

Nathan Rich

on forward, to the to about your changed or be I kind when has gross view at your you'll had the north question Hopefully going ease, changed margin we my chain year, supply long-term I continue margin, where get continue has just that of whether and and I build to you all, think margin there we're challenges path it of been get be is seems price. gross you with to XX%. like challenges like year, supply potential potential the do chain on long-term some Obviously, And guess, all. those I to of some kind with that. at to the and curious really feel gross will this path going think anticipated? I Great. second offset And of deal also And of guess, view versus to what you've of said initially able the you've exiting you guess

Michael Watts

I'd say that, Nathan, again, Watts. its Michael

the that CleanFlow, say exceeded going our talked launch about met what experienced CleanFlows chain. as expectations what in X.X months, to we for I'd being So or it's do to and We assemble. all it we've simpler supply to our

right So to therefore our with be components. are, we're think production components those stages in suppliers our produce in The we process. there'll early now efficiencies

changes that processes further scale, some think we to their savings. will also So drive at material

think So not reinforced, from what has if were. I our expectations our conviction been previous further improved

Bjarne Bergheim

we to good this about. long-term continue here we Mike targets that talking talking drive feel this forward. CleanFlow. forward. supply all because execute just any I've Yes, CleanFlow We here. on going I think that enable the And And would a business of the of negative chain a you're manage key like able going that add contribution impact agree think XXX% the is that because very we we less the to of margin is are bodes margin I the feel have will to margin about also launching about better. with margins conversions. now And chain increase Mike And for And on that us will disruptions supply from side

Nathan Rich

Congrats Great. the on quarter.

Bjarne Bergheim

Nate. Thanks,

Operator

[Operator We with Instructions]. Stanley. ready, now question go Erin. ahead a have Erin from Wright you. you're Morgan Please Thank with

Erin Wright

thanks. Great,

with perspective, initial sales rep sales sales be from generally just about anomalies Are on for the year? terms Are think that count where seeing you the there about bifurcation reps any traction of the of want from well? force. perspective? a progression front as Thanks. that As the you we thinking an in quarterly the we and And to you're should OpEx be

Bjarne Bergheim

sales that And we to right at projections be the Right is of execution, we not sales XX going improving forward terms thoughtful sales now -- what thoughtful in our to have guidance conserving any them, ensure this it's question. The this to would point and adding are is continue That's point in number adding reps. all while productivity. time different about all about at supporting on we future thing the as revenues, being of want and same that, reps. going drive cash for we one, focus only Thanks to Erin. where reps these about now, And sales in OpEx have say environment. are given territories. hi, training reps sales I time about Yes, be to our top-line we

into expand our sales we So those as are two thinking go key team. the elements that

Michael Watts

Erin. on just OpEx, And to your on question expand

of OpEx look QX, and So half largely the line in when at for we for we're first QX XXXX.

we're into seeing is we what as QX sales variability go more around So QX, and just forward levels.

to we jump expect where from OpEx down jump or up see we So trended. don't materially

Erin Wright

greater than tailwind efficiencies also, you value with barrier too? kind facing of But for And Okay, perfect. constraints And more of conversion were now? on question in a labor some that right the of technology your terms it this other broader flip Thanks. related customers? a already, Or is for of some does questions think you that, of point? can at that of asking. generating impacting -- people are be that side to the a then in proposition resonating that could you your the that customers maybe process? Do Is

Bjarne Bergheim

dental across we're obviously the are some Yes, labor space some that aware constraints. doctors facing

beauty reduce GentleWave procedure. it think actually of will practice, system a the time is I the and and of the the that streamline streamline

to So I I example, gives an a one this to a hold us parallel, sell the you for one multiple canal go while assistant will to -- think for do the That example, example, for something an comment do and to else. procedure, procedures opportunity root off do simplicity, practice tooth, hand, et opportunity in cetera. can just CleanFlow, your effectively the procedure it can further would with on and and you gives someone

providing constraints, procedure actually help integration, on specifically is I can make tries but integrating workflow GentleWave labor help practice to that help that more efficient. in them can their also TBO both around software this the this their also practice will a environment, on in obviously we we think So where workflow,

will think different our I opportunity environment, that in So actually products into an practices. these that give from to us this sell perspective,

Erin Wright

you. Thank great. Okay,

Bjarne Bergheim

Erin. Thanks,

Operator

Erin. you, Thank

questions. further no have We

closing hand to for it like Bjarne back to I'd So some remarks.

Bjarne Bergheim

We operator. individual a Have many and at you, go appreciate also forward forward again, with look today. us you everyone's meeting of conferences as spending and we both for day. investor great meetings. thank it Mike Well, I future to time

Operator

Thank lines. conclude disconnect may your have day. And That does a you for joining. call. today's you Please great

Sonendo (SONX) 11 Aug 222022 Q2 Earnings call transcript