All right, hello, everyone, and thank you for joining us throughout the day here at the Lytham Partners Fall 2024 Investor Conference. My name is Robert Blum, Managing Partner of Lytham Partners, and during this presentation, we welcome SenesTech, ticker symbol SNES on the NASDAQ. Joining us today from the company is Joel Fruendt, the company's Chief Executive Officer, and Tom Chesterman, the company's Chief Financial Officer.
Before I turn it over to management, I just want to remind everyone that the company is available for one-on-one meetings throughout the conference here. If you've not already scheduled your one-on-one meeting and would like to do so, you can send me an email. That's blum, B-L-U-M, @lythampartners.com, or visit the landing page for the conference. That's lythampartners.com/fall2024. From there, you can click on the Investor Registration button to make your one-on-one selection.
So, Joel and Tom, thank you so much for your participation in the event, and Joel, I guess I'll turn it over to you to get started here.
All right. Thank you, Robert. We appreciate the opportunity to present today at the Lytham Partners Fall 2024 Conference. So, as we go into the presentation, please be advised that we may be making forward-looking statements during today's presentation.
So at SenesTech, we are addressing one of the world's oldest and most challenging problems, which is rodent control, and we do it through a completely different way than it has ever been done before by addressing the root cause of the problem: reproduction. In essence, it's rodent birth control.
The existing solutions' effectiveness, namely poisons, is limited by the rats' reproduction rate, resistance, aversion, as well as the enhanced social and political limitations on the use of poison. I'll touch on all of these in a moment. As communities increasingly look to deploy sustainable, effective solutions, fertility control fits right in with that objective.
Products that can be paradigm-changing don't come along very often, but when they do, they have an opportunity to change the way things have been done for generations, and we can do that. So this is an investment conference, so let's look at a few highlights and key reasons why we believe SenesTech represents a compelling opportunity beyond what I just mentioned.
As you can see from the chart on the right, we have significantly grown revenues over the past few years with a 70% CAGR. We recently announced our Q2 2024 financial results, and those were highlighted by record revenues, with first half revenue up 62% compared to the first half a year ago.
These record results are being driven by orders for Evolve, our new soft bait product that was launched in January of this year, and I'll touch on that in greater detail shortly.
We are also making significant progress reducing our Adjusted EBITDA loss. The Q2 quarterly Adjusted EBITDA loss was the smallest in company history, as we strive to achieve our goal of positive operating cash flow as soon as possible in the coming quarters.
Beyond the growth trajectory of the company, we operate in a very large industry, with the company initially targeting a market in the U.S., which spends upwards of $1 billion annually on rodenticides. And importantly, we have a product that delivers value for our customers, showing up to 90% or more improvement in outcomes when added to integrated pest management programs.
And in the near future, our core fertility technology can be applied to other mammalian pest populations with the fertility product for a mouse that has been launched in May of this year.
When you look at this, this is really our why. Why do we believe fertility control is the answer, and why do other solutions fail? Traditional pest control tools like lethal poisons and traps seek to control the death rate and are therefore very reactive. The challenge is the incredible rate of reproduction of the rats.
Here's your rat fact of the day: Given sufficient food, water, and harborage, two breeding rats can result in 15,000 offspring after a single year. In fact, to add to that, the largest pest company in the world, Rentokil, commissioned an interactive study that revealed how a pair of rats could produce nearly 500 million descendants in just three years. 500 million.
You cannot poison, trap them, gas them, drown them fast enough to overcome their fertility.
You need to control the population by proactively reducing the birth rate. So our new tagline is: "Evolve. Restrict rodent reproduction." So having too many rats is a huge problem for society, but one worth spending millions on because they cost billions, and yet the problem's not a new one. It's an age-old problem, usually addressed with lethal options using poisons or certainly less than humane traps. These options are not keeping up.
On the contrary, it appears rat infestations are getting worse, and it's simply more than rats are a pest issue. They cause real impacts to society. From a public health standpoint, rats present enormous global public health risks and are significant vectors for disease. From a food supply standpoint, rats destroy 20%, yes, 20% of the world's stored food supply through consumption or contamination, and they're highly destructive.
They cause over $27 billion of infrastructure damage per year in the U.S. alone. So the current options of rodenticides or poisons can pose a very real danger to people, pets, and wildlife. Sometimes the wrong things get consumed and get poisoned. Our solutions are effective, humane, and environmentally friendly way of controlling this animal pest population through fertility control.
So as you can see on this side, on this slide, adding our fertility control solutions to an integrated pest management program has been proven to improve efficacy by over 90%. It's important to note, however, that different customers have different reasons to be satisfied.
In the poultry industry, rat infestations cost money as the rats consume or contaminate feed, as they feed on chicks, as they damage equipment, and as the labor required to control the infestation increases.
We completed two extensive studies in the poultry industry and one in a large urban setting. In each of these settings, we demonstrated a 90% or better improvement when added to the existing Integrated Pest Management program. 90% or better improvement, that's increased profits in the business setting and decreased rat complaints in the urban settings.
And now let's look at Evolve. So, we recently did a lab study where we show the results here of using Evolve as part of an IPM program, and a 90% population reduction in 12 months. So this new study only went through one breeding cycle, and the results were a 61% reduction in litter size after only one breeding cycle.
So this indicates an 85% or more reduction in population over six months compared to leaving populations untreated, and even more over longer periods.
We have started some longer-term field trials at customer locations, which are going very well, and we fully expect the efficacy to increase significantly over multiple litters with increased consumption and with real-world conditions. So, to point this out, this Evolve lab study was actually a little better than our first study years ago with ContraPest, that then went on to prove about a 90% effect, efficacy in longer-term field studies.
So, we expect Evolve will prove to be our most effective product to restrict rodent populations. Simply put, it works. Our initial product, ContraPest, unique, patented, it's a contraceptive technology that reduces or eliminates fertility in both male and female rats. It's delivered in liquid form, as they like to consume 10% of their body weight every day. It is palatable to the rats, sweet, fatty, and keeps the rats coming back for more.
And then we've introduced a number of systems for it, Elevate, which is a hanging feeder. And then we also have introduced the Ultimate System, as well as the newest system is the Isolate Bait System. The design combines the tank and tray in one unit, and deployment setup is done through a simple placement and peel-off seal. And users are showing up to 80% reduction in time and effort.
ContraPest works and meets some customer needs, but it doesn't meet all customers' needs, so that is why we developed Evolve. So, as I mentioned before, a key driver to our growth this year so far has been the introduction of Evolve, and it's quickly become the company's biggest-selling product, contributing more than 60% of revenue in the first half.
Our all-new soft bait product has similar efficacy to ContraPest, but it's in a format that is more familiar and easier to deploy, has excellent shelf life that's used in our distribution model, and is offered at a competitive price to traditional rodenticides. And it's also designated as a minimum-risk product by the EPA, pursuant to their Regulation 25(b) . Our active ingredient in Evolve is cottonseed oil. It has a well-documented record of efficacy affecting fertility in rats.
Similar to ContraPest, the low levels of the active ingredient 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 fertility effects. Evolve can be used anywhere rats are found. Its form is similar to tiny sausages. We've done that on purpose.
Simply place 2 to 12 pieces per location and update based on rat activity levels, and you would need to have a constant exposure to the product itself out in the field. And so, we recommend it be secured in a tamper-resistant bait station in areas where there's potential exposure to children, pets, or wildlife, or other non-target species.
But as I mentioned, Evolve is designated by the EPA as a minimum-risk product and is not a poison, so you also have the ability to broadcast the product. Evolve has dramatically increased our reach in terms of market and geographies. While we have only launched the product this year, it is evident from the initial response that Evolve is what retailers and distributors have been looking for from SenesTech.
Beyond Evolve Rat's continued growth and adoption, another key driver to our go-forward growth is our introduction of a mouse product, which was launched in May of this year. This mouse product utilizes the same revolutionary breakthrough fertility solution as Evolve, but to control mouse infestations, effectively doubling our addressable market opportunity, and the initial response has been very positive.
Expanding distribution. I mentioned that Evolve has a one-year-plus shelf life. Expanding distribution then is a key thing and Evolve has been a key driver here because we now have a product that we can put on our distributor shelves. They can get to the end user, and we can have success there. Expanding distribution has been a major focus of ours for the last three months.
Since Evolve's launch, we have signed 10 key international exclusive distribution agreements, from Hong Kong to Australia to the UAE. Each of the agreements requires an initial order of a full pallet minimum, which is around $10,000, and the annual minimums start at $100,000 for exclusive distribution rights, and those grow over time.
In agriculture, we now have 6 agriculture distributors in place. All have placed multi-pallet stocking orders, and they are addressing the agricultural market and some very lucrative agricultural opportunities. These distributors are focused on supplying product to the grain management area, egg production, protein production facilities management, and for crop production.
Also, in commercial pest management distribution, we have stocking distributors such as Veseris and their 77 locations, Target Specialty Products, DIY Pest Control, and SiteOne Supply to satisfy demand from their significant pest control customer base.
Our products are now much closer to the end users. Having new products is great, but we have to execute on a plan to expand our distribution and target very specific markets. So, to that point, we have very specific initiatives in place for each of our distribution channels, including international distribution, agribusiness, and pest management, as well as industrial, retail distribution, and e-commerce.
On the international side, we have 10 exclusive distributors on board, and we have just received full approval in Hong Kong. In industrial, we have a rep agency in place and are launching on Zoro.com and in discussions with substantial industrial distributors such as Grainger and Fastenal.
In the retail space, we're in the Ace Hardware system and their 5,800 locations. We are in discussions with Tractor Supply and have a proposal into the largest warehouse club in the U.S. and the world.
This should be key sales drivers for us. Using distribution to leverage and expand our sales reach is a key initiative for the year, and we are off to a great start. You can expect further news in the coming months as we further penetrate the retail and distribution networks. Finally, we are expanding the distribution to the do-it-yourself market, where we now have a dedicated Amazon store.
We have just been approved on Walmart.com and are launching on TractorSupply.com in the next two weeks. We believe all those will be key drivers to 2024 and beyond growth. While each of these channels and distribution partners and focusing on them, we have focused on a very specific set of target markets. These target markets are shown on the right.
Each of them behave differently, and we have designed our approach to each of them differently as well. SenesTech is the only manufacturer of commercially available EPA-registered rat birth control, which we believe bodes well for our opportunities with cities and municipalities. It is good to see that many cities are finally looking at tested and proven techniques, and how can they control the reproduction rate?
In general, how humanity is currently responding to too many rodents is just not working. With many decades of effort and traditional responses, the public health concerns and the risks just keep rising.
There's also a growing realization that there's too much collateral damage in the war on rodents, as evidenced by California's adoption of the Ecosystems Protection Act, which banned, under many circumstances, the four major second-generation anticoagulant rodenticides, and those are commonly used in pest control.
So there are many tailwinds in our favor. From a company perspective, we are executing, we are delivering against our success imperatives, we're selling better, we're improving our products, and offering the customers more choices. So Evolve is a game-changing product for SenesTech that will be a key driver to our sales growth, not only this year, but well into the future. So let me turn over to Tom Chesterman, our CFO, to review the financials. Tom?
... Thanks, Joel. 62.62% year to date. Revenues for the first six months of 2024 were $874,000, compared to $538,000 for the same period in 2023. This growth was driven by the Evolve product line, which was launched at the beginning of the year and is already 59% of total sales. The e-commerce channel, with both our own website and Amazon, and distributor sales represented over 60%... 65% of sales, as these more cost-efficient channels grow. As Joel mentioned, we anticipate the growth of these two sales channels, as well as the retail channel, will fuel ever-increasing growth over the next quarters. Cost of goods sold and gross margin have been steadily improving month over month since we launched Evolve.
Gross margin this quarter was 54%, up from 47% for the same period last year. Cash at the end of the quarter was $2 million. However, we subsequently executed a warrant transaction, which, raising an additional $2 million, which takes our runway into the first quarter.
On a pro forma basis, based on this warrant transaction, our shares outstanding were 1 million, and we have 1.2 million in warrants, most of which are struck at $4.35 per share and are split between an 18-month term and a 5-year term.
In addition, we still have an ATM in place for opportunistic At-the-Market issuances, and we're increasing our use of debt. Having long used lease financing for our capital expenditures, we're now in discussions for cashflow-based and purchase order-based financing.
With these trends, adding in the near-term potential Joel mentioned, we definitely see the potential for cashflow breakeven next year. I would even go so far as to say early in the year, given the reaction from large retailers, the growth potential of e-commerce, and the potential order sizes from big box and warehouse retailers. Back to you, Joel.
All right, to wrap things up, let me just state what I said on our earnings calls in the past. Our goal for 2024 is all about sales execution, increasing revenues, while remaining innovative through the introduction of new and innovative products to the market, such as our new mouse product and some other things that we have that we're working on right now.
So, we've started the year off on a high note, with strong growth in the first three quarters of the year, and we're looking to build on that, throughout the rest of 2024 and into 2025. My excitement is as high as it's ever been since I joined the company. I believe we have...
Now have the right mix of product offerings to fully attack the large and growing rodent control market, and it is a market that is desperately in need of innovation. Fertility control or restricting rodent reproduction is that innovation, and SenesTech and the products that we're putting on the market is clearly leading the way. Robert?
Great. Thank you, guys, for that very informative presentation here. I got time for a couple of questions here, if you guys could expand on a couple of topics here. First off, maybe on the international distribution front, you've talked about sort of a number of different opportunities. Any updates that you can provide to folks on the international side?
I think there's a lot of them. I think the most significant one is, you know, our full registration now in Hong Kong. So, as you know, our products are regulated products in the U.S. by EPA and in other countries by other environmental agencies. We first started working on Hong Kong to get the product registered in January of this year.
We sent product over there. It was used on a limited basis, and I'm happy to announce that they just signed off on a full registration for the product there. So that's gonna be a significant driver of business there as they're trying with the usual lethal killing methods, and the rodent population keeps going. So now they're gonna approach it from the reproductive end, and we're really excited about that.
One other note is, our exclusive distributor that's in the Netherlands has been working very hard on getting approval of the product in Europe, and we found an avenue for that. We've had some real success in getting some commitments from some of the agencies over there, and so we should be seeing some really big things coming out of them in the next quarter.
S o, two really big things, and at the same time, we're signing up more and more international distributors every month.
Okay, great. That's, that's good to hear. You know, you alluded to it, Joel. Tom, you alluded to a little bit in terms of some of the, the various, you know, retail opportunities. You know, maybe anything you can expand upon there, some of the Amazon stuff, any general outlooks there?
Yeah, so Amazon has been a great story for us. It took us a while to get on and get our store set up with some regulatory-type things. But once we were set up, what we were noticing is that our revenues each week were ramping up. So, you know, we started out doing you know, a couple of thousand dollars a month. At the last check, we're up to over $8,000 a week now.
So, we're actually very happy with the amount of demand that we're getting through that channel, and so it's very easy for us to tell customers, "Go to Amazon.com, Evolve Rodent Birth Control, and you can purchase our product there." And in addition, as I mentioned, we have two other online stores that we are going to be getting going in the next couple of weeks here.
Yep. All right, guys. Well, look, we're just about at the time. Thank you very much for your participation in the conference, for your presentation here today. I do want to remind everyone that is watching again, if you'd like to schedule a meeting with the management here, whether it be today or again after the conference, you can reach out to me.
That's Blum, B-L-U-M, @lythampartners.com, or again, visit the landing page for the conference there. Again, lythampartners.com/fall2024. Click on the Investor Registration button. We'll look to get you taken care of. So, Joel, Tom, thank you as always, and we look forward to speaking with you again here at the earnings call here in November.
Thank you.
All right. Thank you, Robert.