SONX - Earnings call transcript Q2 2024

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Operator

Good afternoon, and welcome to Sonendo Second 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 John CEO; from CFO. Bostjancic, me Bjarne and Bergheim, and Joining

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

performance, on safe remind laws, Before that make pursuant which that are made call Act future forward-looking are including in of expansion material All hiring, management assumptions. expectations and of call events to XXXX. or statements. financial you to involve are expense pipeline place statements management, our that statements. meaning the estimates forward-looking risks the the you market commercial statements Accordingly, Private guidance, our we on growth Litigation made reliance this like expectations operating cause should that and differ revenue statements within product could during harbor relate by forward-looking based implied these of various Securities events, will Reform opportunity, development on Any materially for results These those and I'd forward-looking current undue to statements, include this predictions of begin, organization, results these provisions trends relating our to uncertainties or statements not federal or to and actual future from securities those performance statements.

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

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

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

Bjarne. turn call over will I that, to the With

Bjarne Bergheim

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

I quarter, made pleased our very happy to strong second time progress am had just strategy. reset we since initiated Sonendo in short very a I'm the and a note that with we

the of Our focused I'm areas forward. team is we've focus additional eager executing laid and moving share to commitments some on out, diligently against

into improved I'll as insight well the in initiatives metrics. driving quarter to this our operating results. During some newly I'll review the appointed associated he call, and of introduce provide performance CFO, John the more as Then Bostjancic, will our detail second you

decay, world, most Sonendo continues in to disease how chronic revolutionize prevalent treated. the tooth the is

the of to canal of We strong as therapy via clinical nearly efficient root procedure, date. treated patients by invasive a with demonstrating GentleWave and GentleWave standard are care as more for evidenced technology million by outcomes establishing superior X.X cleaning less

the about and on with we the strategic announced currently procedure, enable to excited in States significant capitalize is However, the Canada that GentleWave intended and a team efficient of growth very in a performing reset ahead. significant Sonendo potential the remains only United XX% manner. to endodontists opportunity more Sonendo focused In May, that

really pleased I'm the so still early with far. journey, stages are of we've we While results the that in achieved

this of entire the this the engagement and we strategy embraced organization so of has and as energy, the is I on leadership Successfully magnitude importantly, by not More commitment are together. rest impressed and that change navigating the demonstrated humbled team new easy.

well employees confidence. trust our and of as contributions and for all thank to want as their customers their I So

conservation. on direction: our expansion progress X each good and cash execution, strategic pillars commercial made We gross the margin of of new

of focus We success have execution standpoint, of on reengaged ways. a with base GentleWave in define have our customer commercial we increasing system. progress measure number to sales and core and the utilization our incentives team endodontist a realigned can direct drive From our

quarter of healthy X% unit second second more sold quarter. we sales year-over-year also to over in console growth console the quarter XXXX, For straight for while a one, generating example, backlog this the carrying compared

the Example this the reliable units legacy more XX sold GX and GentleWave number even enhanced two, the system. units system quarter, customer we of GX XX to upgrades were from for

greater for the reduce the We the significantly decreasing continue XXXX GX, unplanned rate to to service the from in in priority peer-to-peer X.X us improving the drive quarter. consistently GX and procedural customer rate the calls, as for strategic and XXXX factors GX utilization in our long believe in or expand we USC more instrument decreasing in second turn to base, upgrade the experience both X.X which the us than in Those in reenergize less to positive X.X influence. quarter term. legacy customer program XXXX is that USCs, USC enable market second and GX from will should a Executing and with our and should X GX share

that progress the underlying seeing the substantially we're have of three, sales utilization, and quarter we rate was few evidenced within that believe and related data stabilized by number volume year-over-year, key Example we all while as decreased XX% the points. utilization PI for a

the of for utilization. X.X% only to compared the sequentially marked PI it the X.X% second half XXXX, second half of PI second XXXX quarter the believe low while decreased the XXXX. increased utilization by in that of year-over-year, First, point first We half

years. sales past through ASPs end-of-quarter work any PI disciplined forging and focused of sales helps closer once over us compensation doctors of and which realigning relationships remain sold team's to enabled towards programs, customer offer led and our focus PI driving from away maintain to incentives through discount utilization. excess significant us higher number units we in a with sales on Second, utilization the our not This X again utilization

half in closely this and utilization more sales single our customer we PI customers which progress, XX,XXX of sold, sold in second to more have increase customer XXXX forward low XX,XXX excess than we compares XXXX, the align for going utilized we XXXX PIs the PI to utilization. in expect and shipment the with and this PIs upon Year-to-date and sales to in Based year. of utilization in digits

will Example Sonendo sales of number as key recent Brian we Brian of even seamless leadership rates excited be the higher the from our area by are experience sales customers President the in [ wealth base sustain a utilization One Vice brings customer new Sales. onboarding Brian drive procedure a focus and utilization hiring instrument ensure our with of help right to to team dental Chester for market. consumable of PI four, existing enable ] higher and start. to

while efficiency $XX raising the range ongoing to commercial year that confidence the $XX educating economics. compared are for to ease our guidance our our guidance provide on XXXX procedure, revenue million strategy, prior and as we provided we to about helping GentleWave our clinical million Based patients of upon better range May. their million own quarter in them our of full between better By the customers we're practice earnings their progress first in of $XX use improving this for outcomes to million to call and $XX

arrangements have of of to and Adjusted year from service well the on quarter multiple XX.X% our As it strategic the touched by the in costs first relates gross costs XXXX for engineering and quarter gross XX.X% sourcing second through and service quarter gross pieces second the negative increased meaningfully just reducing margin for X.X% prior driving projects results demonstrate was progress. of for compared are These quarter. made we as I executing XX.X% down USCs labor of in the and to XXXX related margin XXXX we to quarter substantial quarter. collaborative value-based fronts manufacturing the to on and XXXX consoles compared expansion, and incurred earlier, team, of warranty margin suppliers. the XX.X% prior our how with material the the year first in and XX.X% hand in-house GAAP for our to

of margins XX% to deliver successes, increasing these of we our call. are result for range a range first the half discussed second our to also XXXX high-XX% in as As the to gross the in quarter early adjusted compared now we expectations XX%

the then Moving the exit longer well to deliver to that will range upper into confident prior XXs XX% on we forward, commitments our we remain and XXXX we as reach term. mid-

of in quarter operating for versus total XX% a the sequential conservation, of to quarter last the prior to second this we to compared driving pillar by first $X.X reduction million, million down QX by year-over-year reduction build year and year. $X.X success the upon the $X.X Finally, million costs the cash of continued quarter a

and will continue doctors to and their mission become practices. will product in of G&A we most efficiency, costs. operating our come updates therapy R&D of root R&D, where sales in that also to focus invest in more support and within marketing further While expense from with and Within canal reductions standard Sonendo's care we're efficiencies software reduced meaningfully we have have and operating driving judiciously

expense quarter second loss sequential This decrease that our excited improvements, $X.X improvement $X.X versus million up allow console. a to or adjusted we're CleanFlow XX% specific treatment X gross this These drove FlowControl year-over-year needs to and launch $X.X example, combined their this significant speed to improvement For protocols to the This we the to software year. in XXXX. with upgrade announce year, our a clinician instrument. for operating represents million adjusted quarter margin, patients' a of later expansion for EBITDA tailor will expect in procedure using the flexibility GX quarter million of

discipline, coupled which we for with adjusted compared our revenue further working full anticipate we executing we doing reducing EBITDA half adjusted will an guidance $XX.X Simply EBITDA And reduction updated to in we're be our reflects that loss for expect Based smarter XX% to are expense put, the year, continued between the reported to XXXX. gross focus loss $XX and on our full the million loss less, for operating year and XXXX. of and million, second a with now adjusted better. $XX on more year-over-year of XX% the margin, million expectations

on our we growth work we do, we is the we by to have have continue the far more to a together strategic confidence the reset. and there year-to-date of remain to organization team return in that market. encouraged from While our revenue and commercial we XXXX, execute know our position in pillars full build we leadership to double-digit to entire and the are We can in will relentlessly of that confident X results, commitment

the Board to our combination of #X multiple the strengthen is priority debt, Before actively continuing sheet. want and I I turn financing for are John. including to sources This management and John explore also that a and non-dilutive balance options, to me to equity call reiterate to review the over financials,

We will those as details discussions progress. provide more

With to to excited Sonendo XX Bostjancic, now device and in you the Sonendo's to him team. in would companies, appointed I'm Chief medical more financial to experience review comes financial with quarter Financial the introduce on leadership traded John to Officer, results that, second like the John I extensive recently roles industry with publicly operational over have John? years at and detail. of

John Bostjancic

Bjarne, you joining and all thank Thanks, today's for on call. us

we quarters dating XXXX back afternoon's XX-Q practice, results. have Please financial that to this specific reporting press methodology GAAP results including methodology financial compared of filing. on recast forms for these for to non-GAAP and filings we management's for and XX.X included details refer financial non-GAAP results to slightly X-K and and more reconciliations QX and non-GAAP Exhibit modified X Please and for reporting reasons reconciliations non-GAAP financial and between in release have results, the prior X-K note our results all

The lower second decrease contracts a continuing by for from higher extended XXXX compared revenue. revenue console which Total offset million in for to was the service XXXX. $X.X of by volumes volumes and partially $X.X the and lower increase ASP, million was sales quarter second console was PI driven quarter of an operations

compared sold prior the In Gen X,XXX quarter trade-ins. to base We of GentleWave which $X.X the selling average installed increased to million The of was XX quarter, upgrades $X.X consoles QX console our year for for XXXX, console units XXXX. $XX,XXX. were We price as by in XX million revenue second June the approximately quarter. during XX X totaled XX,

of million to quarter XXXX. PI revenue million totaled compared the $X.X second in QX $X.X

the the X.X% PI and year. As of all of Bjarne and related low have it underlying shipments decline sales volume in will far that going and grow the in utilization, and this forward, the sales underlying that stabilized second decline believe year-over-year we we customer expect substantially digits more PI and exceeded in closely sales utilization. to We previously single PI the align was utilization PI the half with utilization mentioned,

to compared increase Other $X.X year. the the product-related by for was totaled revenue million prior driven quarter in higher service extended $X contracts million This revenue.

year quarter. XXXX of in the quarter XX.X% of for quarter. negative the exclusion and gross for XXXX, compared $X.X products. the adjusted XX.X% in $XXX,XXX gross the XXXX and in the Adjusted for primary prior the relates adjusted impact recently XX.X% compared and connection quarter recorded margin XXXX the GAAP The gross second the in GAAP quarter second and X.X% from to to for inventory of of first quarter and gross obsolete difference excess increased and year margin to between quarter second in prior XXXX to XX.X% million the with first XX.X% was of charges margin respectively, margin of discontinued of XXXX we

including commercial Total operating decrease of and was year. of compensation second P&L all the expenses, marketing products among adoption our expenses lower lines. decrease quarter in a stock-based same in to customer primarily for of XXXX compared increase spending our employee-related million, also driven accounts. million reductions The compensation period a lower as existing new by expenses the to was across million count to $X.X result reprioritized the $XX.X The recruiting as organization and the totaled we benefit prior $X.X of and decrease attributed the head

period. in GAAP EBITDA operating compared $X.X the million totaled compared loss loss the to prior million million million totaled period. million in prior in year operations continuing to year of quarter. totaled Adjusted $XX.X prior the Net in XXXX year second in $XX.X $XX period compared from to quarter the million $X.X the $X.X loss

term investments As million equivalents we and under June and our of $XX.X loan XXXX, cash, principal facility. $XX.X cash million, payments outstanding XX, short-term our of had totaled

flow XXXX, we our XXXX. second free for burn negative the For of by $X million to reduced cash million quarter of $X.X the quarter second

earlier, noted call of forward-looking QX elements our Bjarne revised improved we have and guidance to compared May. multiple As our financial in

half the year $XX for We EBITDA a for have full XX% and $XX now year to generate $XX gross adjusted range XX% to to to the range million. we range the the $XX guidance loss to of million to XXXX, in increased the million generate in revenue of margins second full expect XXXX. XXXX for our adjusted of expect We an million

revenue PI the XXXX to in XXXX utilization second low contemplates increase revenue year guidance compared second and console of full half sales half the compared last single second year the Our and year. of lower for to the to half the of for digits

over turn now Bjarne. back call I'll the to

Bjarne Bergheim

Thanks, John.

we team with indication that deliver we Sonendo's and committed success are safety and management and dedicated by engaged the the to the employees of outlook, and us Sonendo therapy is reset early and excited entire health. Board in encouraged Sonendo's about remain for of ahead The our tooth optimistic and fully and mission today. strategy of our shared opportunity you to to about transform restoring endodontics on decay have

for open the that, will With call I questions.

Operator

the [Operator Instructions] from Stifel. Block The line is question of first Jon with

Joseph Federico

laid It at that the that and I the and out to gross John. This next that with the is mid- previously to in above Joe Federico standout mean range for start range had for on on I call. year this quarter. to margin. was, us, wanted I updated know estimate. upper-XX% you was the our least well upper-XX%

were So outlook? year Is then this maybe reiterated first, just just was you clarify, to targeting in updated upside some And now curious, this quarter, that just seen I what up. not brought conservatism? in why the that out-year with estimate and is exiting the

Bjarne Bergheim

year this to is the of end XX%. first about all, now the of target for Well, XX%

more anything say, the the think here really key and team R&D I the this is, both I that than thing leadership drives team. on strong would operations Joe, else,

on obviously, executing reducing very to value-based driving continued focus costs, very, unique it's plan. about on plan. et our improved cetera. talked labor remarks, engineering, to really reliability, We material in And we prepared focus GX, and like have transition a about the We're a

XX% quarter, are obviously, to CleanFlow. super, There completely rest about But So good But function do. to that I proposing of this we the inclusive over we a at more for have this progress. super, excited the that year. have of elements time, obviously we in some, point say, step work now been converted this having XX% target is are would implemented to

John Bostjancic

long with term, monitor up landed costs and the we show yet we're pleased is are still where to path that an cost the longer take really inventory we're And to early XX%-plus but now a continue but but to in that. with And realize probably too second to amortized XXXX And XXXX it's quarter. going to to adjust start we'll and right material up, to savings definitely probably keep but future to on clear too guidance, just it, out, it's term. eye going we've early then

Jonathan Block

step then past, Great. amount was back, any the that Okay. with that breakeven. flow thoughts you out know kind you I All reset revenue to would a Very laid And target strategy cash just of achieve in in just kind around had provided taking May, have helpful. a Do whole right. be? of the updated what

Bjarne Bergheim

little think too I early it's to a tell.

thing first to that us and for this the more less, reset how to side two we on world show and can what margin to Those for execution through show with key that do and are us first possible. wanted is right the we also around we the drive is now The things commercial show significantly here. specifically

time, around. of XXXX, med that It's to back we one growth And you to in right, get dental back the interesting go were if companies XXXX we tech fastest-growing trajectory. to in want and

and focus that key now, preservation really So commercial that's with really us the less that driving doing cash. right for execution, margin

this great made progress we've quarter. And

work We to lot have more a do.

we think a So that yet. the as for flow right, have have this a the we're possible that super that revenue I of some of good year-over-year. not But in you see in are cash in we That's forward. some numbers see as we can business indication that breakeven things EBITDA target prepared gives excited give XX% a loss provided, to and go we we're something about, reduction of

Jonathan Block

then can and one dynamics Okay. for increase the little stabilized. procedure the more sales. second see out utilization us. take that than incentivized and procedure more sales in maybe kind Got you it. in sneak force has is the underlying new just there growth you I know plan, And rather volume instrument That the real you makes sense. time what's off-line, bit sales to instrument some that were but the and that's driving the out playing push below I strategic called rest expectation Do that in think a know I the half? of utilization

Bjarne Bergheim

That's exactly right, Joe.

and If go in XXXX in utilized. we sold look sold we about XX,XXX more But instruments as than here that X,XXX back XX,XXX in you that prepared sold number, and 'XX, QX. we in our than like this year, in were utilized more was talked we was more remarks, procedure QX

The was data seeing is in actually point that sales. first utilization actually in spot-on here good. July very July We're actually

indication to So that's closer we we starting think see. that that that would a good equilibrium to to get we're like

Operator

Thank back to now you. over conference I further for team the remarks. management like pass any would to

Bjarne Bergheim

for great a everyone's appreciate operator. day. Thank We time. you, Have Thank Yes. a today. good call Thanks you.

Operator

Thank participation. day, you now and have all. disconnect lines. a conference may This you hope your wonderful concludes We your appreciate call. today's you We

Sonendo (SONX) 7 Aug 242024 Q2 Earnings call transcript