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Sonendo Inc (SONX) Q1 2024 Earnings Call Transcript Highlights: Strategic Shifts and Financial ...

GuruFocus Research
·4-min read

  • Revenue: Q1 2024 revenue was $7 million, exceeding the $6 million guidance.

  • Gross Margin: GAAP gross margin increased to 28% in Q1 2024 from 23% in Q1 2023; Non-GAAP gross margin rose to 30%.

  • Net Income: Net loss was $6.8 million in Q1 2024, including a $5.7 million gain from the sale of the software business.

  • Operating Expenses: Decreased to $12.3 million in Q1 2024 from $17 million in the previous year.

  • Operating Loss: GAAP operating loss was $10.2 million in Q1 2024, improved from $15.1 million in Q1 2023; Non-GAAP operating loss reduced to $7.5 million from $12.8 million.

  • Full Year Revenue Guidance: Increased to $29 million to $31 million for 2024.

  • Cash Position: Cash, cash equivalents, and short-term investments were approximately $33.6 million as of March 31, 2024.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Sonendo Inc reported a solid first quarter with revenue of $7 million, exceeding the $6 million guidance.

  • The company has successfully reduced sales and marketing expenses by 37% compared to the first quarter of 2023, contributing to a more efficient cost structure.

  • Non-GAAP gross margin improved significantly from 23% to 30%, a 700 basis points increase year-over-year.

  • Non-GAAP operating loss decreased from $12.8 million to $7.5 million, reflecting a 41% reduction and improved operational efficiency.

  • Sonendo Inc has increased its full-year 2024 revenue guidance to $29 million to $31 million, up from the previous range of $28 million to $30 million, indicating confidence in the company's reset strategy.

Negative Points

  • Total revenue of $7 million for the first quarter of 2024 was down from $8.7 million in the first quarter of 2023, indicating a year-over-year decline.

  • The company experienced lower PI sales volumes which negatively impacted revenue, despite an increase in PI average selling price.

  • Sonendo Inc is still facing challenges in achieving profitability, with a GAAP operating loss of $10.2 million for the first quarter of 2024.

  • The strategic shift away from targeting general practitioners (GPs) to focusing on endodontists may limit market expansion opportunities in the short term.

  • Despite improvements, the company anticipates moderated growth throughout the remainder of 2024 as it continues to manage cash proactively and allow time for the effects of the strategic reset to materialize.

Q & A Highlights

Q: Can you discuss the split between new console sales and upgrades, and how this might look for the rest of 2024? A: (Bjarne Bergheim - President, CEO, Director) We are prioritizing upgrades to the more reliable G4 consoles, which are less costly to service and improve efficiencies for doctors. This focus is intentional, and while the upgrade percentage may decrease over time, it is a strategic move to enhance peer-to-peer influence and drive adoption.

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Q: What are your expectations for gross margin progression throughout 2024? A: (Bjarne Bergheim - President, CEO, Director) We anticipate a gradual increase in gross margin, aiming to exit the year in the upper 30% range. This improvement will be driven by strategic sourcing, material cost reductions, and value engineering.

Q: How does the strategic shift away from general practitioners affect your plans for the cavity product currently under agency review? A: (Bjarne Bergheim - President, CEO, Director) While we remain excited about the potential of the cavity product, our current focus is sharply on endodontics. We are not prioritizing the cavity product at this stage and will continue to concentrate on our core strategic pillars.

Q: What are the financial results for Q1 2024, and how do they compare to the previous year? A: (Chris Guo - Interim CFO) Q1 2024 revenue was $7 million, down from $8.7 million in Q1 2023, primarily due to lower procedure instrument sales volumes, partially offset by higher average selling prices. GAAP gross margin improved to 28% from 23%, and non-GAAP operating loss decreased significantly due to reduced expenses.

Q: Can you provide more details on the financial impact of the strategic reset implemented in Q1 2024? A: (Bjarne Bergheim - President, CEO, Director) The reset has already shown positive impacts, with a reduction in non-GAAP operating loss and improvements in gross margin. We've refocused on core strategies, reduced unnecessary spending, and are realigning resources towards more profitable and sustainable areas.

Q: What are the long-term financial targets following the strategic reset? A: (Bjarne Bergheim - President, CEO, Director) For 2024, we've raised our revenue guidance to $29 million to $31 million. We aim for double-digit revenue growth in 2025 and significant improvements in gross margins, projecting them to reach the mid to upper 40% range by the end of 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.