All right. Hello everyone, and welcome to the SenesTech Fireside Chat. My name is Robert Blum, Managing Partner here at Lytham Partners. Up next, I will be moderating a Q&A discussion with Michael Edell, the Chief Executive Officer at SenesTech. Quick reminder, the company trades under the ticker symbol SNES on the NASDAQ. Let's get started. Michael, welcome.
Thank you. Good to be here.
Fantastic. For investors who may be new to the company, give sort of a real quick 30-second high level about the business. Maybe more importantly, it has been about a quarter since you took over as CEO, and maybe just under 200 days or so since you sort of first
Yeah
hopped into the company. Describe sort of the transformation that has taken place since you arrived.
Well, as you mentioned, it's been less than, I think, 90 days since I took over as CEO, and a total, since I was COO, about less than 200 days all in. Within that timeframe, there's a number of things that we have accomplished in such a short window. What have we built? We've defined and implemented a whole new corporate strategy, moving the company forward.
We've strengthened our leadership team. As you were aware, we brought on Jack Karabees, who's our Executive Vice President of Sales, and he started just July 1st, heading up the B2B efforts. We built out all of the processes and methodologies as well as the accountability for execution. We defined and prioritized the eight strategic B2B verticals that we're going after and how we're going to focus on those. We've implemented the B2B sales methodology.
We've completely rebuilt our e-commerce strategy by bringing those operations in-house, and you saw from Q2 some of the results at just the very beginning of that effort. We introduced our assessment and implementation services. We formalized a lot of that, and we've already launched that in July. We've advanced new product development initiatives with products that support the assessment services, and we've done all of that just in the last 200 days.
Now, the results from those efforts were, as you saw in the quarterly report, a record quarterly revenue, record e-commerce revenue, record gross profit, record gross margins, record Amazon sales, and we nearly tripled the e-commerce revenue, and nearly doubled the subscription revenue.
We reduced through this process, which is where the real magic is, we're reducing the monthly cash usage and extending our runway, and we're continuing the progress toward increasing the monthly run rate and having visibility to the company becoming cashflow break even. So all of that was done in just 200 days.
That was sort of a perfect high level overview, so let's dive into almost each one of those items that you just mentioned there.
Yeah.
Let's start on Amazon, right? You brought Amazon fully in-house earlier this year. What specific changes have driven this improvement in the revenues, the orders, subscriptions, customer conversion?
Well, when you manage your own brand and you are doing brand building, you can control the message and what is being communicated to the consumer, to the customer. But also as important, what you can do is you could take advantage of how you are going to be able to grow your market spend and still be able to acquire customers profitably, and then determine really how big of a market, how big can you grow that channel. E-commerce, unlike other companies that may just spend for spending's sake just to drive revenues, we only are going to spend based on growing that channel, continuing to grow it profitably.
What are the metrics that you are looking at to understand the ability to grow that, as you said, profitably?
Well, some of the key metrics that we have to look at are how much money that you spend and what is the return on that investment. You are looking at your ROAS, you are looking at your average order size on the various platforms, and then you are looking at how much of that business converts into subscription revenue long term.
How are you balancing the spend, the pricing, the promotions, growing that, but doing so without sacrificing, the economics that you are referring to here?
Well, one is if your margins are remaining intact or you are growing your gross profit margins, yet you are acquiring New- to-B rand, that is the Goldilocks. That is the perfect scenario. One of the things that you can see in our Q2 reporting is even though these revenues have doubled or tripled in some cases, you are not seeing the EBITDA numbers going the wrong way.
You are seeing those going the right way, and that is telling you that the cash that you are investing is paying off. The other thing to keep in mind is we are focused, laser focused on taking every single dollar that we possibly can and making sure that that impact is on something driving revenue.
I want to come back to that point in a moment here, but I want to touch also on the senestech.com website. We have, to this point, largely been talking about the Amazon switch over here. So, what improvements are you already seeing since you launched the new website in July, and what additional changes are planned to help increase conversion, subscriptions, repeat purchases?
Well, the new website was launched in July, and we have only just now started the advertising and market spend outside of Amazon, the non-Amazon universe. So all of the results that we are seeing in terms of increase in subscription base and so on, has just strictly come about because it is a cleaner website, less friction for the consumer, so they can make these buying decisions much faster, and then they can convert.
Subscription revenue has been something that you've talked about on your last conference call, on the most recent conference call as well. Both the revenue and the count reached record levels, as you mentioned at the very beginning here. Talk about some of the things that you're doing behind the scenes to improve that retention, increase the reorder frequency, and I guess really at the core, expand the lifetime value of customers.
Well, one of the first things we did is we redid all of the product pages, all of the product information, frequently asked questions, and are setting the proper expectation for those consumers that are looking for a product like ours to solve their particular problem.
By becoming more transparent and open about the process and how long it takes for this to solve a long-term problem, the feedback from the consumers has been very, very positive. The other thing is we've launched new packaging, which does a much, much better job of providing information to the consumer on what to expect. And the new packaging is just now hitting the market because we had such a large stockpile of old packaging.
Yep.
That we're just now right in mid changeover to the new packaging. Should start actually hitting consumers' front doorsteps in the next 60 days.
Okay, excellent. Really as e-commerce, but really the business continues to grow, what's the infrastructure, the inventory needs, the fulfillment investments, and just set up, what's going to be required to support this growth? Is everything in place already, or investments needed there?
No. The good news is we could double the size of the company, almost triple the size of the company, and we really will have no need for any major CapEx at all.
Okay. All right, good. Let's transition here to the B2B side of the equation. As you mentioned, recently had a new sales leadership there, building, I think you mentioned sort of a more structured B2B organization.
Yeah.
What has changed in the sales process, sort of the overall pipeline management and maybe just general sales accountability?
Well, a couple things have changed. One is we're very clear in the verticals that we're going after. There are eight verticals. The top four are the ones that have the main focus for us. They're the ones that are driving revenues today. When you look at those verticals, our approach is when you look at small, medium, and large size deals, that's how you build out your long-term pipeline.
The company historically has had almost all of its pipeline and opportunities were small to medium size. Robert, you've heard me say it before, if you want to close million dollar deals, you have to be proposing the million dollar deals. It's not just "Field of Dreams," you build it and they will come. It doesn't work that way.
For the large size opportunities, the team has to build that pipeline, and you need to be talking to the corporate side of the business in order to be proposing very, very large scale opportunities. The other thing is you need a multiplier effect when you have distribution, like we have distribution in pest management vertical.
Instead of us trying to lead the charge on that, what we need to do is tap into the 200 sales reps that are within these distribution partners, educate them, and get an army of folks that are out there selling the product. But you need to support those distributors, and you need to support those field teams with the right information.
How are you sort of prioritizing? You mentioned eight verticals, four of which I think you mentioned sort of are higher emphasis areas. What are the indicators that you're looking at to determine where you should be going after, where you should be increasing maybe the investment or just really the efforts towards converting these verticals into the opportunities that you believe are out there for them?
Well, in sales, it takes a lot longer in the cycle if you are creating need versus finding those that already have a need and supporting those. So you want your time and your energy of your teams to be speaking with those opportunities to say, "Listen, I know I have a problem, and I have a need, and I'm looking for a solution like yours." Big difference.
A big topic of conversation lately has sort of been the sales pipeline. As you sort of look at that pipeline on the B2B side of the equation, what are the markets that you're seeing, we'll just say, the strongest opportunity for conversion in a near-term period of time?
Well, the commercial and pest management and what we call third-party e-commerce, those three we are seeing a lot of activity and a lot of large opportunity. We also, Robert, you know, we launched our online B2B, which is part of our e-commerce strategy, and that is already making up 5%-6% of the e-commerce overall revenues.
It is also leading us into which markets and which verticals are already buying it, so that when a commercial real estate group or an apartment complex group is buying online, once they get beyond the first 10 pails of 12 lb Evolve, for example, and they are now getting ready to deploy it in a larger manner, that they are reaching out now and talking to our sales team to say, "Listen, I am ready to buy 100 or 200 or 1,000 of these units. What does that look like to support a larger deal?
Yeah. Okay. Maybe let us just talk about the ability to shorten, if there is the ability to shorten that B2B sales cycle, right? Moving customers from just interest or pilots or whatever sort of initial interest level you want to call it into these very large recurring commercial opportunities. What do you think are the one or two things that maybe yourself and Jack and the team are working on right now to help shorten those sales cycles?
Well, the sales cycle for the small deals is converting very quickly because somebody that has an office building can go and buy $2,000 worth of product online on the B2B side of it now. Those conversions are feeding the pipeline and are converting very quickly. The medium, the mid-level size deals, depending on the vertical, those take a bit longer because you have to get approvals, and you have to go through a process of purchase with those types of companies.
Government municipalities take quite a bit longer. You do not want all of your eggs in a government municipality bucket. You want it to be across more verticals and different size deals that you are involved in. The large deals, say a million plus, those types of deals just take longer because the approval process takes longer to get that type of opportunity through the pipeline.
One thing I have heard you say a couple of times now is sort of some of the B2B stuff rolling through the e-commerce side of the equation, right? You have also previously talked about e-commerce sort of being this umbrella of sorts to really help support the B2B. Your strategy when you came in, Amazon in-house, rebuilding the website. Talk about how one sort of leads into the other. It almost feels like a very strategic step of building out e-commerce to support the B2B and sort of vice versa.
Well, let us not forget, the e-commerce part of our business has significant opportunity. It alone is significant. It is much larger than most people might understand, but you can take a look at the numbers that we are doing, and we have not even scratched the surface yet on how big e-commerce is going to grow. The beauty of what we are doing, though, is as e-commerce continues to ramp, the building of the brand is very necessary as you build the commercial parts of your business.
Because everybody is going to look online, no matter if it is Home Depot or if it is a large chain of hotels or it is a large resort or it is a big ag producer or a poultry farm. Everybody goes online nowadays and wants to see what is the community, what is the world saying about your products.
With that in place, when we are talking to a particular prospect that understands they have a problem and they have a need, you have already kind of taken care of the basics, and then it just gets into the point of now let us talk about how we determine what you need to solve your particular problem.
Right. I know we only got a handful of minutes left here. I want to touch on ContraPest versus Evolve. ContraPest is still a big part of the story here. Talk about where you determine where sales efforts are, I guess we'll say, pitching ContraPest versus where the better fit might be on the Evolve side.
Well, ContraPest, in the last year, almost two years, ContraPest was not even sold by anybody on the direct sales team. There was a big shift and a push when Evolve was launched years ago. ContraPest solves a very specific problem because it's liquid-based. Our team is actually selling ContraPest and Evolve because, in some cases, we have deals that we're working on now where ContraPest and Evolve are going into the same implementations and deployment.
Interesting.
It's incredible because now you're getting a one-two punch with the liquid and the solid bait, and that had never been done historically.
All right. I want to touch a little bit about the assessment services that were launched in July, completed the first customer deployment as well. Talk a little bit about how the service is priced, what are the resources required to deliver, and how quickly this can become a meaningful contributor to the business?
Well, we've had the people and the knowledge in-house in the company for a long time, but we've just recently packaged it up in a manner starting in July. We proposed it, and we closed the business, and the way it was priced is there are track plates, track tunnels that we use that get deployed to a particular customer environment, and that provides all of the assessment data that you're going to get out from the field.
We take this information, we price it for track plates, track tunnels, that's priced out, and then there's services that we offer on a daily basis where we come out on site. We run all of the tracking information through our AI model, which then can assess how much of a problem that particular customer has. We can provide the services where we go out and deploy.
A number of proposals we have out today are we show a customer how to deploy the assessment tools, and then we run the AI on the back end to provide them the data analytics for their problem. The good news is that a customer can run this on a regular basis to really understand over time, how is the problem being impacted, right?
Are the populations decreasing and are we in the right spots? Are there any areas of concern that are showing a large increase in traffic? All of these services that we offer and we price out, they all lend and directly lead right into a scenario that goes right into the deployment and quoting of the proposal to solve that problem.
This really can be either just an upfront revenue generator or it can be a recurring if you're doing the ongoing assessment every month or every quarter. Am I understanding that correctly?
Correct. We have proposals out right now that are quarterly. They want us to come back in and either directly provide those services or quarterly they will send in the track plate pictures and we run it through our AI to do the assessment and heat mapping and data gathering.
All right, excellent. We are almost at the end of the time here, Michael. What should people be looking for over the next 12 months or so to demonstrate that the recent growth is really repeatable going forward here?
Well, we have two quarters now. First quarter was the first indication of the direction the company was going in. Q2 is even more of that, and then you will start to see even bigger growth, and more as we move into Q3 and Q4 as the B2B team develops.
All right. Very good. Well, we will leave it there. Michael, thank you so much for your participation here in the summit. Thank you, of course, everybody, for watching. We have additional presentations and fireside chats coming up, so everyone please stick around. Have a great rest of the day. Michael, again, thank you so much for your time here today.
Yeah. Thanks, Robert. Have a great day.
Appreciate it. All right, Michael, thank you very much for your participation today here in the summit and your insights into the future opportunity there at SenesTech. Okay, quick reminder, if you are just tuning in, all of our webcasts will be available to watch on demand after the summit here. Okay, up next, I will sit down with Andre Garber, the Interim Chief Executive Officer here at Now Vertical. Please stick around. We will be right back.