SONX - Earnings call transcript Q4 2023

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Operator

Good afternoon, and welcome to Sonendo's fourth quarter earnings conference call. [Operator Instructions] 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.

Louisa Smith

Thanks, operator.

Good afternoon, and thank you for participating in today's call.

are President Sonendo Michael CEO; from CFO. Watts, me Bjarne and Bergheim, and Joining

released for the financial year Sonendo website. today, Earlier results XX, available the A is ended the XXXX. copy release of press on company's December and quarter

statements like federal begin, you remind are the pursuant securities during laws, I'd made make statements within harbor that future Act include Any safe are to of of call to relate Securities which that the Before forward-looking will events, the performance statements of this to Reform Litigation we on expectations provisions management Private or forward-looking predictions this that meaning of made statements. call XXXX. or results

impact risks our for you current statements, expense relating statements. that All by place including development and These of actual various expansion growth forward-looking could those assumptions. upon trends hiring, to on reliance on involve those undue and pipeline estimates product not our or commercial our are Accordingly, to statements. from materially and revenue management, guidance, these cause operating based opportunity, implied business, organization, differ performance, and market uncertainties should results events expectations these forward-looking our COVID-XX in the material statements future financial

March reports most SEC. and annual in other a For our Risk XX-K XXXX, list report with EDGAR and filed and with please the uncertainties section on periodically the available with Exchange associated Factors Commission, our today, recent risks business, filed of and XX, description public Securities of on the the refer and Form to

March XXXX. the and is live time-sensitive contains broadcast only accurate call information as conference of XX, on This

events update any otherwise. intention by future law, any projections forward-looking because information, of or as required or disclaims or except whether statements, Sonendo or revise new financial obligation, to

that, turn to I will the with now over Bjarne. call And

Bjarne Bergheim

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

I for full a will business update quarter for key priorities. today sharpened conclude will detailing performance providing I organizational then fourth considerably and update specific how more of start a a by year will on our high-level we've XXXX. XXXX. Mike and the call discussion financial focus outlook give detailed our with

We the questions. open will call for then

for XXXX, two, commercial one, our cash margin X conservation; three, we are: key expansion. priorities enter the and organization As execution;

We are and progressing gross are to progress on example, areas and positive QX, in this as committed all margin. work. X reflects continuing cash an

the agreement flexibility Finally, X I'll steps software recently divestiture highlight for Sonendo's greater we've TDO, practice to platform of to organization. including provide balance the taken that revised additional the strengthen our management sheet, announced and

full million As fourth full for and X% our quarter year revenue year year-over-year. of growth $XX.X results, XXXX representing was

fourth improvement the line in million same X% million a XXXX. from While for significant million of the Non-GAAP of the XX%, $XX.X in revenue Non-GAAP the with of fourth XXXX, to year-over-year, a fourth XX% gross operations XXXX. $XX.X $X quarter of improvement guidance. margin of the the compared period was XX% quarter was loss fourth quarter in from for our was for XXXX down results issued previously quarter were

to lessons last we and key years, the valuable like the over through how would garnered now We've priorities few organization. driving discuss I are

focus need, in drives value GentleWave efficient proposition get we that the have changes however, quality care. how more showcase around all offering believe several best best for root We We a we is for system. to As implementing sell well. the execution, and and commercial very we team. the of within Sonendo's things patient It commercial for are few about the the priority canal therapy doing

we way we're execution thing commercial first onboard changing around customers. The the is new

with efficiency new customer Teaching higher better system, the their and doctors of how it's can a to gate. to according well practice onboarding training they drives unlearn. our that drive hard GentleWave out playbook utilization the economics found have in We right

have high our GentleWave These to at going onboarding that continue playbook cohorts trained forward. to cohorts a utilize according the been advocates rate procedure. for We demonstrated also have who become great

Coupled our instrument, is with strong most product that found the GX and CleanFlow improvements new for reliable platforms med our console users with is base. next-generation accomplishment across both has This worth very see capital placements. opportunities and is a team procedure And in on our proud are equipment our GX tech. we console now upgrades sales that drive an upgrade of our we of staff console in energizing It GentleWave doctors, offering installed now reliability the and noting to of. and par dentistry with GX are that to consoles the efficiency some

the our very sales excited consoles entire and from the GX move standardizing playbooks by legacy our as consoles are of words, for X commercial We're productivity our to our in team. they driving other GX gen is for program team. that platform benefit focus, key optimizing new Doctors

value PI key for We a driver growth. that recognize overall is also utilization Sonendo's

systems to new sales installed increase focus. an of base and establishing So existing among consumable area our remains

for incentivizing overhauled on to We the this time. at compensation activities that team, focused our structure the be have commercial need right further we

made of quality seeing by and the changes energized sales and remains the The commercial we our we're pipeline opportunities our strong, team have ahead.

in dramatically a operating quarter, conservation, in our we sequential spend costs. the XX% decrease in cash for resulting As reduced fourth

of and to resources. of Several on start continued into require XXXX. same front longer the this no make level have been We have the programs progress completed

also the is focusing has fewer with by the development more of example Spending associated the program console. things and doing One GX on been reduced with less.

higher that focus our and drive activities our team. We within sales are and marketing prioritizing a efforts investment and return on have on

put and way a in is us on to goal path effective profitability. the efficient quicker we more be sell to Our and

gross of simplifying operations. one primarily instrument spending, one to the procedure and console, CleanFlow, with significantly only in-house. lower GX consoles transition type also production the pleased and was type conjunction the In instruments procedure complete Contributing bringing for XX% Sonendo margins XX, to our of we December improvement with our manufacturing adjusted were fourth this GentleWave quarter. in margin of is of By hence

reached have XXXX. been time original We milestone towards to than for pleased April this have earlier I'm point of our working this some target and

addition to and reliability GX service in our of our and installed to the going of a forward. we've the the In console cost base assembly conversion reduction our in-house improved also expect CleanFlow console,

on Moving acquisition on to great matters significant week, of Last we GentleWave into growth XXXX procedure. and our Sonendo of proceeds sales benefits resulting of opened doors helped It sale allowing doctors drive balance for was team, penetration endodontic in practices. educate million. gross many and them the the the to our TDO us approximately announced in sheet. $XX a TDO, for of

This also GentleWave opportunities pleased new we have with allows Valsoft. platform. are TDO to strategic still with focus be accomplished time and good can divestiture with have TDO's our We formed be in will the a that partnership hands. all Sonendo efforts our we on opportunity customers driving

to our capital X to TDO key a of the will it as revenue on with of as sheet, finally, our business. we company have greater provide we which facility will to relates allow a priorities. debt revision And core and deal focus execute Ultimately, health the stronger Perceptive covenants our full bring Sonendo balance revised and of structure our negotiated on Perceptive, flexibility that our includes sale contribute with the

executive like opening the I'll opportunity Mike and family this results But outstanding and Michael Mike want for week commentary relationship and first, of month, and the We best leaving the we the for the thank announced I'd take his I be will endeavors. Sonendo over contributions both incredible, X later call personal that for to Q&A. to his recognize last for that commitment and in to Sonendo now Watts very some last the ongoing call for to I'm we've an team. his established, the on turn and to grateful him he's this been valuable before Mike? support his member wish professional our years. to financial organization

Michael Watts

Bjarne. Thanks,

stated, versus As X%. average QX revenue offset as volume million the a the increase increased of $X.X decrease for of quarter products quarter driven installed selling revenue. console primarily in approximately fourth $X fourth an of and year. Sonendo's million quarter compared prior growth was X%. compared legacy PI to by total a X% the and of segment prior XXXX, installed prices million million revenue selling the year, decrease versus PI revenue $XX.X average driven result few XXXX, decrease The declined was consoles of $XX.X of base. reduced by lower was by in replacements by base offset a and XXXX QX in PI revenue fourth of for to was the previously prices, our

GentleWave quarter resulting placed console fourth In trade-in XX% for in in million when base approximately the GentleWave The in million, XX average $XX,XXX in the price consoles net with of XXXX. console $X.X a We fourth of XX. compared to quarter $X.X at GX the was one selling QX of a fourth revenue of installed XXXX. change quarter, the the was decrease

XXXX, as Our December installed base X,XXX. was of XX,

product-related quarter the an million in fourth XXXX, software $X.X fourth XX%. was other $X.X to QX million the of $X revenue the Total for in quarter. revenue was increase million Total compared quarter of

of and with a and to margin for improve GX operating non-GAAP year The XX% margin conversion reflecting the was period same assembly to XXXX from basis, XX% gross the along our quarter in-house a other sustained profitability. transition significant GAAP of the PI efficiencies continued of on in the console provided commitment improvement. XX% fourth prior CleanFlow improvement to exclusively

XXXX primary Total and million for Loss the were the were a loss prior in when of $XX.X to different expenses period of reported you in retention quarter quarter in quarter $XX.X of SG&A $XX.X we million through in loss marketing compared year. to year. fourth fourth in of was reductions net compared and of the was $X.X $XX.X million of quarter fourth XXXX compared sales exclude fourth XXXX. million operating million million $XX.X the R&D operations expenses in Net the the spending. prior the in the of XXXX same from credit XXXX fourth quarter Decreases employee the to

cash at gross while term and year-end. XX, of short-term $XX $XX.X as investments loan Our approximately equivalents cash were December million and at million, remained XXXX, our

million revisions revenue in with monthly loan noted our press other principal we changes, term along and with on XXXX, including $XX onetime a restructured As of covenants. XXXX, March payments in our X, our payment to principal with release Perceptive March

year full XXXX results. our Turning to

compared revenue. revenue sold PIs Total $XX.X in increased year in PI console an $XX.X installed approximately XXX,XXX. increase primarily was driven for an year revenue total higher XXXX X% for $XX.X PI year driven revenues million by XXXX, approximately the an product XXXX for of $XX.X increase by year, the to compared lower versus revenue in X%. growth the of million ASP. prior increased Full XX%. by million to was increase million segment and PI XXXX, base full Sonendo's were was offset

year XX% GentleWave full XXXX, console when decrease to million a Total in other the compared revenue $X.X Total $X.X compared million $XX.X year revenue for revenue of the $X.X XXXX. about of $X.X was software XXXX. for was in was the product-related increase XX%. in million, an million to million

In XXXX XXXX. of the sales impairment related to a inventory assets of Gross adjustments in compared XX% overall impacting million long-lived $X.X XXXX, XX% was margins. we to margin cost relating recorded million for to $X.X onetime and charge and

Total operating million compared to XXXX. for expenses $XX.X were XXXX million in $XX.X

in through year, was expenses. to from marketing we in R&D XXXX. for to charge impairment Non-GAAP in assets of Loss stock-based and operations expenses million loss from XXXX. million driven SG&A $X.X reductions compared compensation million and loss recorded was primarily $XX.X $XX.X XXXX million XXXX operations operations expense were depreciation, in by $XX.X million expense, in million the Decreases of excludes assets. During a amortization $XX compared spending. long-lived versus operating was Non-GAAP $XX.X impairment from XXXX. long-lived Net million loss for XXXX $XX.X in and sales the

guidance of our we range are full million million. $XX $XX revenue initiating XXXX for to As net outlook, year XXXX the in

revenue to which approximately $X TDO is that from operations quarter forward. excludes First million. will discontinued this expected software, moving be be revenue Note as reported

knowing time At point, Bjarne the to company success. to for I'd and been this my well It is open for questions. want team here very I Sonendo. for call continued experience, has leave incredible positioned and like thank up I the an at the Lastly,

Operator

Jon Instructions] our Block [Operator of And question the of first is Stifel. line from

Jonathan Block

was Maybe just a start guidance, certainly with the our little and XXXX I'll expectation. which low below seems

about was pro seems for entire discontinued for of sort for like think XXXX. were $X looks we fourth as the numbers call year Mike, these to sale million. it, But XQ of should was it the ops. take revs out of like $XX.X $X.X And I try it about got I'll right, software I've pro anyway, software million, million. software forma So quarter the it the forma

know But midpoint. stronger you the between a is a I seasonally annualize through million just $XX big and quarter. get I You delta went there's exercise the pretty million that, million. XQ $XX $XX

there us to you the that start and bridge So 'XX back through Bjarne, maybe can and guide. walk that just help

Bjarne Bergheim

Yes, Jon. happy to,

So just is on path us us off for the goal and me that to let put start by [Technical saying profitability. a Difficulty] quicker

like prepared talked our we Just about remarks. in

Another aiming on customers to GentleWave and a our to is boil-the-ocean very we're way focus to more investments that more closer more think general about adoption. kind different than a of money to strategy. That's move

been obviously, of our the TDO guide and obviously the about marketing but see the I like talked see. if here, about none high growth like quite years, and quarterly we and back you're Specifically would to have we mentioning, include think numbers as it that didn't X expenses like of sales relates last now seen, look kind we to we've these

So on a we're few focusing expenses. things. We're reducing

is me to costs. stress this like into business. growth. It's cutting about I profitable talked about growth Let about not just this back back bringing And just really the just getting

opportunities bit the same will while the commercial be on a little really bullish projections. these forward. at business, we're So the more time, changes revenue about implementing But cautious in we the going

should come see continue as you move to back forward So we here. growth

forward the we just the of of guide. really list run I let through side, the me that the as And excited business the upside quickly that about things me gives, make commercial on go think, on some

around talked great we GX product obviously, CleanFlow. and offering about all, of First

We're We to onboard significant customers we've continue to real, upgrade utilization, peer we're move that's on. customers driving like DSO to to hence, as GX peer. opportunities, talked better, and that about forward. we before, going opportunities have better is The better something to to going work

We're we going to more as going know events such focused do profit professional on that doing than effectively we're more before, to results, activities forward. efficiently to events. we've sales done that now be as go we We're specific and lead education and

We have a renewed focus on endodontist.

That's ADA believe And to at reimbursement for ADA can the Code help that last Maintenance thing drive doctors want agreed Difficulty] to just increased upside. GentleWave the I [Technical will other that we get in is thing help Chicago, really Committee annual meeting the say believe week the procedure. another their we

you to want And want -- Mike, those I qualitative know So that of are anything just don't some else kind perspectives. to you if add?

Michael Watts

everything. We're utilization No, in I forecast. remain think you stable covered seeing the

the [Technical you that placements. can. is where year upgrades console to where fluctuation Bjarne the throughout see so course, do highlighted And as to that's as as really, improvement think So with we're, I that opportunity Difficulty] much targeting of we some we have show

Jonathan Block

will helpful. That think focus bit. little And on a also my Okay. other question was I 'XX

you especially think away. just much through could that one gross little X XX%. XXXX, I'll the the with flat if a it's business past a in going line, margin and then do us Mike, at Just margin ask the basis, for on been higher quarters, pretty more. normalized XX%, Maybe, bit, we the How software GMs about talk

Michael Watts

Yes.

of of production numbers. take the largely sequentially we'll look the you'll gross CleanFlow we at see beyond in and we'll that able course, continue And QX, moving we we product margins gross for part in when QX to move QX, hold. the But XXX% you're to if that go under through Gen throughout in-house year, as the And product report see the So improvements QX. to we'll XX% segment start beyond. revenue -- numbers, from see as had into lower segment through be just X margin, then,

working into burn And goods QX. got should improve products we we've inventory -- will QX, maybe assembly, that got a with initiatives in But to process. to in-house in of other that X left model finished how our we're we around be some efficiencies little through optimize bit We've a able trickle CleanFlow also then is. service on that

Jonathan Block

little a push But just bit. to Okay. you sorry,

about for talked in last quarter. I XX% gross think the previously, margins you being XXXX range

is high the prior for number of mid-XXs an GMs the course, was a that the pro we margin of Is XXXX? in the on the there that year, about thinking updated a gross sale year? that's Of be that forma all sort TDO for to for XXs of now should basis,

Michael Watts

where is year. we're full the targeting for mid-XXs So

So as the improvement. in we be exit to should start mid- year, And high see we that XXs. the to

Bjarne Bergheim

more console Any key cost us, going significantly for down. it to is margin obviously unit reliable opportunities right, us forward here GX less PIs servicing and to now costs. drive the continuing that manufacturing is will give the of drive And

to we opportunities like to forward. continue we big before, move to -- this -- medtech we are normalized we still us said the drive very those have So are margins drive opportunity more We towards margins. for have as still

Jonathan Block

the you capital maybe final And encompassing. question, heard put of broad for X Okay. But all mentioned Bjarne, Mike, like in to But the think the stable maybe sort and side. X you if to programs capital. it's over a pretty I I one the on fluctuations me, past try months, right, to you utilization stimulate

agreements announced widen the capital net opportunity, DSO trial period the of on the to that You've sort stimulate demand. should and placing

pay the feel I that down of at programs these those these have those bit capital? Have the a now Why fluctuation hold are sort talking on about you in the in utilization, means still we seen not not with off, trial taken the stable background. just capital where yield little odds. returns programs doing we're or So

Bjarne Bergheim

Thanks, Yes. Jon.

business alluded over sales the more I on and the lot years, X marketing about we to to, need we think on marketing like this right, way a and efficient get last I we spent general, have and side. in of run the sales money

by to of in significant making changes drive the call drive in efficiencies but how around side we to to utilization by more commercial the utilization, organization we existing doctors efficient -- and things think but -- also not installed to base. we engine during alluded on a a the that which some number also of capital much the we here, respond across have that onboarding, new the place we but One are which just better of about

are streamlining that can organization, here will onboard the of will -- So forward. focus. we amount meaningfully the and significant things going way significant we've the we that and round better doctors. do all decline. focusing playbooks, been of onboard steady well, focusing them onboarded we and additional on about we change cohorts the not will on how we According that that doing within utilize well, think A they It's perform our to if sales, have seen stay

sales our focusing including most team on activities, sales GX effective the activities. sales, profit -- more We're

also sufficient to something standardized We we team. close across us put align We're are do that to field have the of. that to and plans in for playbooks being important going what's drive the in much putting we're activities, are more ensuring would in see. we place professional with to place education the better like activities Compensation rates commercial that's

those more be driving events, different cost-effective to the and events driving and put our we're going much going KOLs continuing more these We're on We're more into closely to work regions. to then we're with things.

there's to think have about of very excited I opportunities There's the that different to we was I -- commercial have, we're change combined team. and if we're lot the with commercial that, things a a of So the opportunities we doing ahead. lot summarize,

Jonathan Block

offline. rest the take I'll

Operator

And today's this Q&A Thank will you. conclude session.

for remarks. closing Sonendo like management to back to the hand any I'd So

Bjarne Bergheim

you, operator. day. time everyone's appreciate We today. great Have Thank a

Operator

you today's joining. you. Thank for Thank This call. concludes all

You disconnect lines. your may now

Sonendo (SONX) 11 Mar 242023 Q4 Earnings call transcript