All right. Hello and Welcome to the SenesTech Fireside Chat. My name is Robert Blum, Managing Partner at Lytham Partners, and today I'll be moderating a Q&A discussion with Joel Fruendt, CEO at SenesTech, and Tom Chesterman, the company's Chief Financial Officer. As a reminder, SenesTech trades on the Nasdaq under the ticker symbol SNES. Joel, Tom, welcome.
Hi, Robert. Thank you.
Great. Let's jump right into it here. For those not familiar, provide a brief overview of SenesTech.
At SenesTech, we're a biotech and life sciences company that manufactures products that are used in the pest control industry, and we are disrupting the multi-billion dollar rodenticide industry. Products that are used to control rodents, and we have a scalable, science-driven solution that suppresses rodent reproduction and does it in a sustainable manner.
Why is having too many rats a problem?
Great question. Let's talk about something that you might not be familiar with, is rats are not just a problem. They're a global crisis. Rodents cause massive economic, ecological, and health damages globally. Over $27 billion annually in infrastructure damage just in the U.S. alone. 35 known diseases, including leptospirosis, hantavirus, salmonella, and the plague, are derived from rats. On top of that, they destroy nearly 20% of the world's food supply. That's a huge problem globally.
What are you focused on, reproduction? What are the current solutions that are used in the marketplace?
Most of the solutions are usually addressed using poisons that really are ineffective and, more importantly, harmful. The bigger issue is these poisons have a variety of issues. Some of those are non-targets and secondary poisoning. It harms humans, it harms pets, it harms wildlife, it harms livestock. Rodenticide resistance is growing, especially to anticoagulant baits. Rats are becoming resistant to these poisons. Rodenticides are increasingly being banned in places such as schools, prisons, organic farms, and in multiple jurisdictions. There are a lot of issues there with the poisons that are being used.
Let's talk about why a rodent birth control solution would work.
Yeah, this is really our why. It's like, why even bother with this? If you remember one thing and one thing only, it's that two breeding rats can produce 15,000 offspring in just one year with sufficient food, water, and shelter. This is a huge issue. They produce and reproduce at an extremely rapid pace. The lifetime expectancy for a female rat is roughly one year. During that one year, they'll have six to eight litters with six to ten pups per litter. In fact, the largest pest control company in the world, Rentokil, has an interactive study that showed a pair of rats could produce nearly 500,000 descendants in three years. Huge issue. Remember one thing, that's it, is they reproduce so fast that you can't kill them fast enough. They're intelligent, they're adaptive, they learn how to avoid adverse outcomes.
The reality of it is you can't poison them, drown them, trap them, or gas them fast enough to keep up with this birth rate. We're really the only company and product that are out there that focuses on the birth rate as opposed to the death rate. Reproduction is the start of it all. We're doing it in a very safe manner. There's no impact to our products on non-target species or secondary poisoning harms to humans, pets, wildlife. You've heard about owls that have had secondary poisoning by eating a rat that had ingested baits. None of that happens with our products. They're humane. They don't cause a painful death with rodenticides or traps. Our products allow them to live their natural life, which stops the chain of reproduction. They're user-friendly.
We now have a soft bait format that can be easily deployed by a user, either in bait stations or not. Most importantly, our products are scientifically proven to work. Our solutions have shown that we reduce rat populations by 90% when integrated into an IPM program, both in the lab and most importantly, in the field.
You've evolved your product offerings here lately. A little pun there. Discuss sort of the creation of your Evolve product line and how it's changed really the trajectory of this company here over the last year and a half or so.
Absolutely. We've created really two unique products. The first initial product that was registered in 2016 was ContraPest. ContraPest is a liquid-based solution registered by the EPA, and it's used primarily for professional applications. We needed something more. We needed a solid bait, some type of solid bait that could be used out in the marketplace. About a year ago, a year and a half ago, actually, we introduced Evolve. It significantly changed the company's trajectory. It's our top selling product. It really changed the game for us, including expanding the company's market and also our geographic reach, which is really important. Being a soft bait in the solid form, it's easy to deploy, so it's suitable for do-it-yourselfers and professional use. It has an EPA minimum risk designation.
What that means is it defines it as having no secondary poisoning of predators and scavengers and really no environmental contamination or bioaccumulation. Another point is it's economical with the initial price point being competitive with other baits and certainly more cost-effective over the longer term as you control your population. One of the big things is the product now has 18 months shelf life. It's an excellent product for distribution, for retail, and for international shipments.
Yeah, maybe talk about the moat, if you will, that you've sort of built around this now rodent birth control idea.
Yeah, certainly a lot of great things with our moat. Before I touch on that, let me just highlight a few key areas that highlight our defensible market position. We really have a moat on rodent birth control. It's built on science, regulatory trust, IP protection, and certainly category leadership. First, we have a regulatory head start. We have a FIFRA 25(b) minimum risk exemption, and we have 48 state and territory approvals in the U.S. Competitors would face 12 to 18 months of delay and complexity trying to navigate that. Secondly, our proprietary know-how is unique. We filed a patent, we have a trade secret formula, and we have our stability science on how the product is made and how it can be used. Of course, the bait palatability is a huge thing.
It's how will they like it out in the field, will they eat it, and we know that to be an excellent way of getting it out into the field with Evolve. Our label is not enough to really duplicate the product. While they may know the ingredients, they don't know the exact formulation. Combine that with exclusive data and trials on the product. We have efficacy studies, we have field trials that are going on in New York City, in Florida, and the University of California at Irvine. We also have many testimonials from users of the product. We really own the efficacy story on how well it works, and we also own the social proof on it. Finally, we're the first mover in key distribution channels.
We're on the Amazon store, we have retailers that are doing their own trials, and we have over 15 international exclusive distributor agreements now. We lead in key channels with very competitive pricing and getting in on the early shelf space. That also helps in the moat.
You know, you talked a little earlier about some of the bans that have taken place within certain jurisdictions. Talk about maybe some of the other broader macro tailwinds for the company here.
Yeah, we think that we've gone from some headwinds to really some strong tailwinds that really will fuel our momentum. Rat populations are increasing. That's a known fact. Rodenticide resistance is spreading, so they're becoming resistant to the poisons. There's a growing demand for a humane, safe, and sustainable alternative, and that's really accelerating. As that's happening, there's the public and regulatory pushbacks against poisons that are advancing just as rapidly.
Let's talk about the go-to-market strategy here a little bit more. Expand on the markets, the opportunities, the verticals, if you could.
Yeah, so we operate in a very large industry. You know, the company targeting a market in the U.S., a rodenticide market, which spends $1 billion roughly annually on rodenticides. Globally, that expands the market for rodenticide. It expands to $4.5 billion. Very massive verticals. Our products are the great thing when we're going to market with Evolve. They're applicable across six massive verticals. First, you have the consumer. It's like, OK, how's the consumer going to buy? Cities and governments who all have rodent problems and need a solution that addresses the growing rat populations. Of course, pest management and agribusiness. Agribusiness is huge for us because agribusiness has very specific economic damage that you can verify. Facilities management, food production facilities, those types of places, and of course, across the industrial spectrum, because I mentioned the damage that rodents do.
Industrials, manufacturing locations really need to have a rodent control program because they don't want the damage done to their equipment and to their electrical devices. Beyond those six market verticals, we have a multi-channel distribution strategy to address those markets. 60%+ of our revenue right now comes from e-commerce. That's derived from Amazon and Walmart.com, tractorsupply.com, and our own website where consumers can purchase the product. Another thing that we do is that we work with industry-leading distribution companies to address agribusiness. We use other distributors to address pest management and also other ones to address industrial markets. We have a direct sales team that are focused on the largest users, and we actually work directly with some of the largest users in cities. Another exciting thing is we're expanding into brick-and-mortar and big box retail.
One of the early adopters have been in the Ace Hardware system, and we have some Ace Hardware stores that are stocking our product. As we mentioned about Evolve having a great shelf life, we can now move into international customers. We have those 15 international distributors with more on the way. The way we work with them is they're responsible for regulatory approval in their countries, and they have to maintain minimum stocking amounts and yearly sales amounts for exclusivity in their countries. I can talk about that a little bit more in a moment.
Let's dive into maybe a couple of those points there. You mentioned 60% of your revenue is coming from e-commerce. I believe Amazon is probably the leader there. Maybe expand a little bit more on sort of the growth that you're experiencing within e-commerce.
Yeah, very exciting. We have large opportunities, and e-commerce, as I mentioned, is 60% or so of our revenues through e-commerce. That's a 78% increase from the year-ago period. Amazon, we started out in June. We actually really didn't get on there in any meaningful way until a year ago, in August of 2024. It's been growing about 10%- 15% month- over- month. Evolve is the key driver here. It's because consumers like it. It's easy to deploy, and it's very suitable for the do-it-yourselfers as well. We've expanded e-commerce presence from selling exclusively on our SenesTech e-commerce site. We're offering Evolve on Amazon, and of course, now we're on Walmart.com and tractorsupply.com and also diypestcontrol.com.
One thing that we've done that we're really proud of, too, is we've enhanced our website functionality on our own websites, and we're really using this as target marketing strategies, using target marketing strategies to drive our e-commerce business there as well.
All right, that's helpful. The other sort of big opportunity that certainly investors and many talk about are the cities and governments. You've announced a number of deployments in some major cities. Maybe expand a little bit more on cities and governments, that vertical in general.
Yeah, great vertical for us that we did not get much traction on in the first part of 2024. This is a vertical where we work with local municipalities and cities and government agencies to bring innovative and sustainable solutions for their pest management. Municipal deployments of Evolve are increasing significantly, especially over the last three months. For example, in the Wicker Park Bucktown Special Service area, right outside or in the city of Chicago, in the northwest side of the city, this was a program by their Chamber of Commerce. They wanted to find a way when we said they hate two things. They hate rats and they hate poisons. We talked to them about an Evolve program where they bought into it, and their crews installed bait boxes with Evolve Rat in the alleys behind their major thoroughfares.
Those deployments received extensive media coverage because they were doing things differently, and they're having great success with it. We've had a number of reorders. Their citizens in the neighborhoods now are buying it and using it around their homes as well. We're really proud of that. New York City was a little bit different. Our deployment began in April after the City Council in New York approved in September of 2024 a rat contraceptive pilot program, and they deployed our product. We're getting great consumption there, 100% consumption of our product, which is really what they're measuring because they know that if the rats consume it, they will restrict the reproduction of the rodents, which is really what they're after. We've done great things in the city of Baltimore.
They tested it, and they put it out for an RFQ, which they have a pest control company that is now doing the deployments for them. Los Angeles County is doing some of the same things, some on their own and then with some pest control companies. In San Francisco, our pest control partner, Pestec, has a large deployment going on there. Our team supported the deployment. It's a substantial opportunity, naturally, as their options for other rodenticides are limited there. We've got a number of great deployments going around the Boston area. We really expect those municipal deployments to drive our future growth. We really want to focus on high-impact areas. What we do in conjunction with the city officials is evaluating the effectiveness and reducing the populations and minimizing the public health and environmental risks that are present with other options.
What does a large full-scale municipal deployment look like? It could be a city that wants to do a 10-block area. It could be a city that wants to do 1,000 blocks. When they get past the pilot program, with the expansion of it, it could be $1 million in revenue annually.
You've talked about sort of transformational growth opportunities, certainly the government sector, cities and governments being one of them. Another one is the international opportunities. Maybe expand a little bit more on international expansion and the opportunity that presents itself there.
Evolve has really opened up international markets for us. We just couldn't get there with the ContraPest product. We developed a strategy, and it's like, OK, let's develop exclusive distribution relationships in high-growth international markets. What we're looking for are partners that demonstrate a commitment to our products by being willing to bring it into the country, and they have access to regulatory approval processes. We've done that, and we have approval and commercial product shipments in areas such as Hong Kong, the Netherlands, and the Maldives. We have some great pilot programs that are going on, and one of those is a deployment expected for later this year in Australia and New Zealand. When we ship out container-sized orders to the international customers, it tends to be $100,000 per container. A few large orders can really move the needle for us.
One more, I think, big transformational opportunity has always been the brick-and-mortar retail side of things. Maybe expand a little bit more on some of the recent agreements there.
Yeah, one of the big key developments there is, during the second quarter, we signed an agreement with Bradley Caldwell. Bradley Caldwell is a premier wholesale distributor serving over 8,000 farm, ranch, hardware, and pet supply dealers across mostly the northeastern U.S. What that partnership does for us is it significantly expands our national distribution footprint and gets our product Evolve directly into the hands of those rural retailers and independent dealers who serve America's agricultural communities. The great thing about Bradley Caldwell is they're stocking the product. Their initial order was eight pallets they have in their warehouse. They can ship our product out with other products to these retail outlets, and that's very exciting. Brick-and-mortar as a whole is up nearly 500% sequentially during the second quarter. It started from a small base, but we had sales of approximately $65,000.
We've seen that point where the sales are starting to expand. The other exciting thing is we've been in discussions with the two largest home improvement chains in the U.S. about carrying Evolve. I hope to have more to talk about that in the coming month. We always want to caution that the process to carry our products on retail store shelves tends to be lengthy. We're working through a lot of those in that timeline. As you can imagine, even an order for a small region of one of the large home improvement retailers could translate into transformational growth for SenesTech.
All right, very good. Let's let you take a breath there. Tom, let's jump into some financials. You reported second quarter numbers here recently. For those that may not have seen the report, you maybe talk a little bit more in some detail there, maybe starting on the revenue line.
Sure. Right. Right. Revenue is, of course, the top line importance to us right now. From a trailing 12-month perspective, we're doing about $2 million per year in revenue, and that's growing rapidly. More specifically, we're looking at the Evolve revenue line has increased 94%. It's now about 83% of our second quarter sales. ContraPest decreased approximately 45% and was 17% of our sales. It's not going away. It actually grew slightly quarter over quarter. There are still a number of loyal ContraPest customers, and there are a number of states, a couple of states, where Evolve has not yet improved. Kind of looking at the breakdown on the different verticals, we've talked about e-commerce that came in about 60%, a little bit less. It's up 78% compared to last Q2 of last year. Municipal sales saw a seven-fold increase from a year-ago quarter.
Deployments in Chicago and New York City. We think we can continue to grow this market vertical significantly. We had a small order amount of international sales during Q2. These tend to be very lumpy sales. We're waiting for follow-on orders from a few markets. We have some deployments coming out later this year, this quarter. We had more than $50,000 in in-and-out shipments in Q4. That's the kind of a high watermark so far. Other contributors during Q2 were kind of spread between agribusiness, commercial pest management professionals, zoos and sanctuaries, and a small amount, but a growing amount in brick-and-mortar retail.
If I could jump in on gross margins here, it's been a key objective to expand margins here. Where do those end up in the second quarter?
Yeah, gross margins are really driven by the Evolve product, which is a more profitable product to produce. Gross margins were 65.4% compared to 54.2% in Q2. We anticipate that that can continue to improve as we move forward, and the expansion into the new facility will help that. It'll also help us meet growing demand. We are expecting to see improvement there.
On the OpEx line, you've recently implemented some optimization plans. Maybe speak a little bit more to that.
Yeah, we've been very careful about not just decreasing our operating expenses, but really fine-tuning them, making sure that they are very well targeted to our growth objectives. We implemented an optimization plan in Q2. Our goal was to really bring down the burn rate to $1 million, the overall burn rate to $1 million per quarter. We've done it by pausing some of the new product development things, bringing some things in-house, looking outside when that's better, and really optimizing the direct sales efforts. Kind of pulling it all together, we believe our break-even point, cash break-even point, is somewhere around $6.5 milion- $7 million in annual revenues, or about a little more than $1.5 million per quarter. We're looking that that very definitely is achievable sometime in 2026, maybe even sooner if some of the big, big transformative events that Joel mentioned come through.
Maybe quickly on the balance sheet, talk about the balance sheet, cash position, et cetera.
Yeah, our balance sheet is in the best position it's been in many years, if not ever. We ended the quarter with $6.1 million in cash, following a successful $4.4 million one. We also have an ATM facility. We raised $3 million during the second quarter. In the beginning days of August, we brought in another $6.2 million in gross proceeds. We're now sitting at a pro forma cash position of about $12 million, which gives us runway well towards the end of 2027 and beyond.
All right, very good. We've got about a minute left here. Joel, maybe just to wrap things up, a few key takeaways for investors.
Yeah, so a few key takeaways. I think the first one would be we have a global market with regulatory tailwinds. As I mentioned, a billion-dollar U.S. rodenticide market, $4.5 billion globally. There's rising bans on rodenticides and pressure for humane, non-toxic alternatives. We're past the initial phases of regulatory approval and into deployment in a lot of those markets now. That's a key takeaway. Really, we're the first mover in rodent birth control. We're the only company that is offering a fertility control soft bait, Evolve, as EPA minimum risk designation. It really targets the root cause of overpopulation, which is reproduction. We have a very diverse and scalable go-to-market. We have distribution through Amazon, through Walmart.com, TractorSupply.com, major pest control, and agriculture distributors. We have some active pilots going on in major U.S. cities, Chicago and New York City for sure.
We have regulatory approvals in Hong Kong, the Netherlands, and Australia. New Zealand is going to be coming on board, the Maldives. We're excited about those opportunities. I think that when you look at it, we have a really lean and focused growth strategy. Our cash burn has been reduced by about $2 million annually. We have really some prioritized investments. We look at those in e-commerce, international, and government sales. They're all now showing traction. We should get a return on those investments very soon. We have strong revenue growth and expanding margin. Revenue is up 56% year- over- year. Gross margin improved to 65% in Q2 of 2025. We have a clear path to break even, to get to that $6.5 million- $7 million revenue mark. When exactly is that going to happen? It all depends on the size of the orders we're getting.
If we get some of those large orders sooner, it will be sooner in 2026 rather than later.
All right, very good. We've run out of time. Joel, Tom, thank you so much for participation here. I want to thank everyone for watching and spending time with us throughout the day here at the summit. If you'd like to schedule a meeting with management here, please send me an email. That's blum@lythampartners.com. Thank you so much to everyone for their participation. Joel, Tom, once again, thank you as always.
Thank you.
Thanks, Robert.
All right, that's a wrap on the Lytham Partners Consumer and Technology Summit. Big thank you to all of our viewers, participating companies, and our guest analysts for joining us today. If you missed anything, don't worry. Our entire event will be available on demand right after this, and all webcasts will also be available on our YouTube channel. Feel free to follow us on LinkedIn, so you're the first to know about all future events. If you'd like to learn more about Lytham Partners, visit our website at www.lythampartners.com. Thank you and have a great rest of your day.