SANUWAVE Health Inc (OTC:SNWV) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.

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Summary

SANUWAVE Health Inc reported record Q1 revenues of $9.6 million, a 3% increase from the previous year, driven by a 22% year-over-year increase in consumables utilization.

The company saw a rise in active systems to 1382, up from 1292 at year-end, despite initial market challenges due to new CMS pricing for skin substitutes.

Guidance for Q2 is set at 10-15% year-over-year growth, with a full-year target of $51 to $55 million, supported by increased engagement with large systems and potential expansion into new market areas.

Operational loss for Q1 was $1.1 million, with increased expenses in R&D, sales, and marketing, but a significant reduction in net loss from $6.1 million to $1.4 million year-over-year.

The company is focusing on maintaining operational discipline, expanding the adoption of Ultramist, and addressing challenges in rural healthcare delivery.

Full Transcript

OPERATOR

Hello and welcome everyone joining today's SANUWAVE Health Inc 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. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Morgan Frank, Chairman and CEO of SANUWAVE Health Inc. Please go ahead.

Morgan Frank (Chairman and CEO)

Thank you Nikki welcome to SANUWAVE Health Inc's first quarter 2026 earnings call. Our Form 10Q was filed with the SEC last night along with our earnings release and our updated presentation was made available on our website in the Investor section. Please refer to that during the presentation. Joining me on the call is Peter Sorensen, our CFO and after the presentation we will open up for Q&A. So let's begin with the forward looking statements and disclosures. This call may contain forward looking statements such as statements relating to future financial results, production expectations, plans for future business development activities, and expectations regarding the impact of changes in reimbursement levels and tariff rates. Investors are cautioned that any such forward looking statements are not guarantees of future performance and involve certain risks and uncertainties, many of which are beyond the Company's ability to control. Description of these risks and 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 in the underlying whole dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes. As a reminder, our discussion today will include non Generally Accepted Accounting Principles (GAAP) numbers. Reconciliations between our Generally Accepted Accounting Principles (GAAP) and non Generally Accepted Accounting Principles (GAAP) results can be found in our recently filed 10Q for the period of March 31, 2026. Okay, so as we mentioned in our press release, Q1 basically started out with sort of a shock pause in January in which the whole advanced wound care market seemed to sort of lock up for a moment and basically freeze solid. It was pretty dramatic and in essence it seemed like a great many market participants were not expecting the new Centers for Medicare & Medicaid Services (CMS) pricing for skin subs to actually be applied and we're confident in some sort of kind of 11th hour rescission or modification. Obviously this did not come, so it took the market a little time to come to terms with this, but at least from where we sit, it seems to have started doing so in February and we saw improvement all quarter with each month beyond being better than the one before. So despite a very slow first 30 days and some ongoing elevated churn rates due to financial stress at practitioners, the company sold 97 systems in Q1 and our active systems number rose to 1382 up from 1292 at year end. Quick reminder on our methodology here. Active Systems is a measure of systems owned by customers who have ordered applicators in the trailing six months or according to a specific schedule. In a few corner cases this figure includes churn customer loss, customer reactivation, which is to say churn customers who began ordering again, new customer acquisition of machine, new customer acquisitions of machines and then sell throughout of resellers while netting out sales into reseller inventory. So because channel inventory obviously are not systems that are in use, so the goal here is to give you as good a sense as we can of how many systems are actually being used in the field. So essentially this change in active systems number is a flow number and it's just showing you the number of systems in the market whose owners are actively ordering. Net change in active systems during Q1 was 90. This increase and a bit of recovery in usage rates from some existing customers drove Q1 to an all time record in applicator unit sales. This did not translate into an all time record for applicator revenues, owing predominantly to a greater quantity of sales going through resellers who buy at wholesale price. This trend was accentuated by the transition of a couple of our long standing distributors becoming resellers. Therefore the customers they serve moving to wholesale pricing from what was previously retail with commission paid on the back end. This worked out pretty similarly for us on the operating line, but obviously that does affect revenues and asp, so there was a bit of a step function there, but one that's also behind us. We take this record unit volume as a good sign for the market and after some suppression over the last six or seven months a sign that patient counts are starting to trend better again. Many have asked about a number of markets for us and sort of where our current focus lies. So we remain committed to serving all of advanced wound care and are expanding our presence in hospitals, wound centers, physicians offices, and in particular we're seeing a lot of renewed interest in long term care and nursing facilities seeking to perform their own wound care. The hospitals are showing a particular strength as well, but we're also seeing some meaningful and encouraging progress in mobile wound, a space that a number of folks seem to have had a lot of questions and concerns about so there seems to be a misconception that mobile wound is going away or would need to be de emphasized. But from where we sit, we simply don't believe this to be the case. As with the market as a whole, the patients in the wounds there are not going away and most of them are neither interested in, nor in many cases capable of jumping up and heading to a wound center. The care to the edge philosophy of Centers for Medicare & Medicaid Services (CMS) remains very much alive and mobile wound care will remain an important part of that. But like a lot of this industry, mobile wound care is changing because the needs of the market have changed. We're seeing sort of a reevaluation and a consolidation. Centers for Medicare & Medicaid Services (CMS) and Mac standards for documentation have tightened. This is selecting for more sophisticated providers. This issue is compounded by the expense of the significant back office staff that's required to run a mobile wound care system properly. That takes scale and revenues dropping from mobile wound as a result of lower allograph reimbursement models that once worked, these models can no longer support themselves. So the new reality is that you need enough revenue to cover the back office nut and you need a high enough root density so that you can cover the expense of practitioners and that's driving consolidation. Like you just, you need more revenue and more patients per practitioner. So I mean, look, I'm making these numbers up, but if you have 30 patients being covered by 10 mobile wound care companies, you know, now perhaps you're going to need, you know, now perhaps you're going to have those 30 covered by five or maybe even three companies. Like the patient count stays the same, but the market adapts. So in many ways this is favorable to Sanuwave, both because Ultramist remains such an effective treatment modality that generates strong clinical outcomes and for Saintewaver as a company, because working with a smaller number of larger, more sophisticated companies is actually easier for us. And this allows us to provide more engagement and more individual attention. The one place we have some concern is rural where the patients are far apart and the pay rates are often paradoxically lower. Pay rate in rural areas gets indexed to the low local wages. And so the reward for 90 minutes of windshield time to reach a patient in an underserved community with no other healthcare options, often lower payout and something's going to need to give around that. We suspect that a re indexing or payment for travel time may be required and that the payer system has a great deal of incentive to figure this out. Because I mean honestly, the cost of not treating these wounds would rapidly swell to many multiples of any cost to provide care. So overall the market freeze seems to be beginning to thaw out and we expect this ice to sort of break up further as we get temporally further from the aggressive Centers for Medicare & Medicaid Services (CMS) skin substitute audits and clawbacks of claims made in Q4 which have been freezing capital budgets as providers sort of play it cautious until they're sure they're not going to face large recoupments. We've been seeing some more movement there. We've been seeing a lot more movement around requests and inquiries, but sales cycles do still remain a bit extended. We expect this to improve as customer clarity into their own finances improves. So you know, as we mentioned in the past, we had a very successful SAWC in April and we really started to sense that the question in the industry is shifting from, you know, is the sky falling? To you know, so what now? And an increasing, you know, move to thoughts of kind of more holistic and unified patient care, the development of more rigorous wound care protocols and a general focus on evidence based medicine. All of which we see as incrementally very positive development that will be beneficial to Saniwave in the long run. With that, I'll now turn you over to Peter Sorensen, our CFO who can walk you through the quarter's financials.

Peter Sorensen (Chief Financial Officer)

Thank you Morgan. We delivered the highest Q1 revenues and company history, surpassing last year's previous record by three percent. We're encouraged by consumables utilization which grew 22% year over year and 4% sequentially from the fourth quarter of 2025. Before turning to the financials in more detail, I want to provide an update on the sales tax issue. As discussed in the 10-K on our prior call, we've entered into voluntary disclosure agreements with almost all the applicable states. The benefits of these Voluntary Disclosure Agreements (BDAs) are limiting the look back period of potential tax exposure and abating potential penalties in some states. We continue to push forward in this process at full speed and have made meaningful progress in our remediation activities with our third party tax advisors. With that, let's take a closer look at the financial results for the quarter. Revenue for the three months ended March 31, 2026 totaled $9.6 million, an increase of three percent as compared to $9.3 million for the same period of 2025. This growth was on the low end of our guidance for the quarter of three to ten percent Gross margin as a percentage of revenue for the three months ended March 31, 2026 came in at 77.3%, a decrease of 1.77 percentage points Year over year driven by a decrease in pricing on Ultramist system and applicators resulting from wholesale pricing to resellers. For the three months ended March 31, 2026, operating loss totaled $1.1 million, which is a $1.7 million swing compared to the same period last year which had operating income of $0.6 million. Operating expenses for the three months ended March 31, 2026amounted to $8.6 million compared to $6.8 million for the same period last year, an increase of $1.8 million. The change in operating expenses was driven by several key factors. Non cash stock based Compensation increased by $380,000. Payroll related headcount expenses were $384,000 higher in Q1 compared to Q1 2025 due to increased headcount and R and D. Non personnel expenses increased by $346,000 reflecting investments in ongoing product development initiatives. We also had non recurring expenses of about $300,000 in restatement work on the 10K from tax, legal and audit fees in the first quarter of 2026. Sales and marketing costs increased about $400,000 year over year as well to support increased outreach of Altramid. Despite these expense increases, we remain focused on disciplined cost management and expect operating leverage to improve as revenue scale throughout the year. Net loss for the three months ended March 31, 2026 was $1.4 million compared to net loss of $6.1 million for the same period in 2025, an improvement of $4.7 million. The improvement was primarily attributable to the $4.9 million non cash loss and the change in fair value of derivative not recur in the first quarter of 2026. Interest expense was also $1.4 million lower year over year, primarily reflecting the senior debt refinancing with JP Morgan at the end of Q3 2025. EBITDA for the three months ended March 31, 2026 was negative $0.6 million. Adjusted EBITDA was positive $1.1 million versus $2.3 million for the same period last year. The year over year decline reflects planned investments in headcount, R and D and commercial expansion. Total current assets amounted to $24 million as of March 31, 2026 versus $24.6 million as of December 31, 2025. Cash and cash equivalents totaled $10.8 million as of March 31, 20 26. We're grateful for the continued trust and support of our stakeholders. Q1 26 was a record start to the year for Sanuwave with all time Q1 revenue, continued momentum and consumable utilization and growing traction across our commercial channels. As we move through the balance of 2026, we remain focused on operational discipline, expanding adoption of Ultramist and positioning Sandoway for sustained profitable growth. With that, I'll turn the call back over to Morgan.

Morgan Frank (Chairman and CEO)

Thanks, Peter. So our guidance for Q2 is 10 to 15% year on year growth which represents 11.1 to 11.6 million for the quarter. We are maintaining our guidance of 51 to 55 million for the year. We've been seeing a great deal of engagement from some large systems right now. We have several evaluations ongoing that we hope will flower into bigger opportunities as the year goes on. These things take some time to bring to fruition, but this is what's making us optimistic about the second half. As ever, I want to express my gratitude to the SANUWAVE Health Inc team for all the hard work and the commitment and the trust. This has just been incredibly steady crew to take into the recent rough seas and I really look forward to seeing what it can do once the waves calm down a little bit. So thanks team. Like really. So that's it for the prepared remarks. Can we please open it up for questions?

OPERATOR

Absolutely. And if you would like to ask a question, please press star one on your keypad to leave the queue at any time. Press star 2 once again, that is star 1 to ask a question. And we will pause for a moment to allow everyone a chance to join the queue. And we will take our first question from Ian Castle with ifcm. Please go ahead. Your line is open.

Ian Castle (Equity Analyst)

Yes, my question is kind of relates to your closing remarks there. You grew 3% year over year in Q1, expecting to grow 10 to 15% in Q2. And you obviously have seen a nice rebound in activity. You kept your guidance the same. I think it was 16 to 25 percent growth for the year. You obviously expect some significant growth in the back half of the year. Can maybe give a little bit more color on what you're seeing and what gives you that confidence. The back half.

Morgan Frank (Chairman and CEO)

Yeah, okay, fair enough. Thanks, Ian. It's a good question. So one, this is traditionally a fairly seasonal business and so accepting last year where the back half was unusually affected by the slowdown in the industry, if you look at sort of the average difference between the first half and the second half of a year for SANUWAVE Health Inc going back so 20, 21, 22, 2324. The second half is usually up about 48%. Average is an increase of 48% versus the first half. So in general, we have a seasonal trend that's favorable to us. That's the average. So obviously in a year like this where we're seeing significant suppression in the first half, as we kind of come out of the, as we kind of come out of the skin substitute market challenges, I think there's a possibility that we do better than typical in terms of that back half versus front half growth rate. That's the top down. The bottom up is we're seeing a larger amount of large account national account engagement than we've ever had where we're finding our way into, we're getting first placements, demos with a lot of very large systems. Traditionally, we've had great success with evaluations and early trial purchases where once systems get a look at Ultramist and get a chance to use the product, see the results, they tend to gain confidence and come back internally. We refer to this as the magic phaser gun problem, where, you know, people think you're trying to sell them a magic phaser gun and then, you know, once they've used it and gained some confidence with the actual results that the product can deliver, they tend to become a lot more enthusiastic and want to spread the system through, you know, through their practices. So, you know, it's sort of, I mean, both kind of from a top down standpoint and from a bottom up standpoint. We're just, we're seeing a lot of, we're seeing a lot of progress that we think should drive a significantly better seg.

Ian Castle (Equity Analyst)

Thanks for the color on that. I have kind of a combination of two questions, but kind of the same type of trajectory with both of them. You know, when you're looking at Ultramist today, you know, are you excited about any advancements you're making to the product itself, you know, over the next 24 months? You know, first question, second question. You know, are there any kind of evidence based trials you're doing with perhaps large customers or groups that kind of will give more evidence to entering into new areas of the market?

Morgan Frank (Chairman and CEO)

Sure. The answer to sort of all of your questions is yes. We're, you know, I mean, as you probably saw, like, you know, we're, we're starting to get to a more normalized spend on research and development and you know, that flows in a number of directions. Some of them are, some of what we're doing involves incremental improvement to the existing product. Some of what we're doing involves some line extension and some work into some adjacent areas. We're not really at a point where we want to talk about that publicly right now from a data standpoint. Yeah, we're working with a number of our, our users to both generate data, to generate some data about cost effectiveness and then to sort of push and validate into additional use cases. Ultramist has a very broad label. It has a lot of use cases in virtually any sort of wound. I think you can probably. I don't want to spill, I don't want to steal people's thunder, but I think you can probably, you can expect to see some papers and white papers over the coming quarters that will outline some interesting use cases for ultramist that I think could be, you know, could be an expansion relative, you know, as compared to existing use. Thank you.

OPERATOR

Thank you. And once again, that is star N1 on your telephone keypad. If you would like to join the queue. We will pause for another moment. And Once more, that is Star N1 to join the queue. And it appears that we have no further questions in queue at this time. I will now turn the meeting back to Morgan for closing comments.

Morgan Frank (Chairman and CEO)

Great. Well, I'll take that as a sign that we covered most of the concerns. So thanks everyone. We appreciate your continued interest and support and we will speak to you next quarter.

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