SenesTech, Inc. (NASDAQ:SNES) Q3 2023 Earnings Call Transcript November 9, 2023
SenesTech, Inc. beats earnings expectations. Reported EPS is $-0.47, expectations were $-0.85.
Operator: Good afternoon. And welcome to the SenesTech Reports Third Quarter Fiscal Year 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Robert Blum of Lytham Partners. Please go ahead.
Robert Blum: All right. Thank you very much. And thank you all for joining us today to discuss SenesTech’s third quarter 2023 financial results for the period ended September 30, 2023. With us on the call representing the company today is, Joel Fruendt, the company’s Chief Executive Officer; and Tom Chesterman, the company’s Chief Financial Officer. At the conclusion of today’s prepared remarks, we will open the call for a question-and-answer session. Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of SenesTech during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft eventually or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in our filings with the Securities Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date at which they were made and are based on management’s assumptions and estimates as of such date.
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The company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise. With that said, let me turn the call over to Joel Fruendt, Chief Executive Officer, SenesTech. Joel, please proceed.
Joel Fruendt: Good afternoon, everyone. Thank you all for joining us today. The results of the third quarter highlight the progress we have made on the various initiatives implemented to drive sales, improve our product quality and expand our product options. Specifically, we accelerated our growth trajectory during the third quarter with a strong 44% year-over-year growth in revenues, coming in at a new all-time quarterly record of $360,000. Sales growth during the third quarter was led by increases in nearly every key vertical market, including agribusiness, zoos and sanctuaries, and commercial. Lately, in addition, we have been seeing a surge in demand from residential homeowners’ associations. This revenue growth, coupled with a number of operational improvements, such as improvements in our return on marketing investment within our e-commerce platform, helped lead to an improvement of nearly $700,000 in our net loss and adjusted EBITDA loss compared to the year ago period.
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Q&A Session
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However, this is just the beginning, as I believe our growth will further accelerate following the launch of the revolutionary Evolve Soft Bait product. Evolve is our all-new soft bait product that has similar efficacy to ContraPest, but in a format that is easier to deploy, that customers can use more efficiently in their integrated pest management programs and is offered at a competitive price to traditional rodenticides. As with ContraPest, Evolve targets the root cause of pest problems. Rats’ ability to rapidly reproduce. The solution controls the population by controlling the fertility of rats, in other words, the birth rate, rather than relying solely on trying to keep up with the growing numbers of an infestation by solely managing the death rate.
Evolve’s active ingredient, gossypol, is derived from cottonseed and has a well-documented record of efficacy affecting fertility in rats. The compound interferes with the reproductive mechanisms in both male sperm count and motility, and longer estrous cycles in reduced follicles for females, thereby controlling their population. Similar to ContraPest, the low gossypol levels in Evolve are designed for the body mass of rats, so larger mammals would need to repeatedly ingest a substantial amount over several weeks to see any effects. Birds appear to be more tolerant of gossypol as they have different intestinal tracts and modes of digestion. It’s important to point out the tremendous job our team has done in the development of this product.
Our Chief Technical Officer, Dan Palasky, and his team were able to develop Evolve under the EPA’s Minimum Risk Rules, also known as a 25B exemption. By leveraging this expedited pathway, we have been able to bring this innovative product to the market at a fraction of the time and investment it took to develop ContraPest. Dan and his team have published a white paper summarizing key data on our website, as well as continuing to perform field tests and further feed and breed laboratory tests. The results are impressive. Evolve can be used anywhere rats are found. Simply place two to 12 pieces per location and update based on rat activity levels. We recommend that Evolve be secured in tamper-resistant bait stations in areas where there is potential exposure to children, pets, wildlife or other non-target species.
Due to its soft bait format and label, Evolve offers convenience and application options and can be broadcast in areas such as agricultural fields and complexes. Another key differentiator for Evolve is that it is priced competitively to rodenticide alternatives. As many of you know, ContraPest is a premium-based product that is often priced 2 times to 3 times over rodenticide. So let’s take a step back. Why a soft bait product? When the company first introduced ContraPest, we needed to convince the pest control market of two things. One, the value of fertility control as a means of population control, and two, the applicability of a liquid bait into their procedures. At this point, there is growing acceptance of fertility control as part of integrated pest management, but there is still resistance from pest management companies to alter their established practices of utilizing non-liquid products.
The current ContraPest delivery solutions we have in the market, Ultimate, Isolate and Elevate, are all currently delivered in a liquid form. As rats need to consume about 10% of their body weight in water every day, it is palatable to the rats and keeps them coming back for more. However, only about 5% of the current rodenticide market is a liquid formulation, if even that much. The remaining 95% is non-liquid baits. To this point, we believe the launch of the Evolve solution is expected to be a significant step in expanding SenesTech’s reach within key market verticals, including big box retailers, key e-commerce channels and leading industry pest management professionals. We have already received a number of pre-orders and expect to start shipping product next week.
