Thanks for coming. I'm Morgan Frank, the CEO at Sanuwave. Let's kick it off. Forward-looking statements. I'm sure you've seen a million of these. Don't believe anything anybody says, et cetera. Investment highlights. Sanuwave's a commercial stage medical device company. We sell the UltraMIST Directed Energy System into the $76 billion U.S. wound care space. It's a FDA-cleared product, Category I nationwide CMS reimbursement code, expansion potential into Medicaid and private payer. It's classic kind of razor blade model. 55%-65% of the revenue comes from consumables. $44 million of revenues in 2025. $9.3 million in Q1 of this year. Gross margins in the high 70s. We did kind of a 30% cash EBITDA margin last year. That margin's about 12% in Q1. Broad portfolio of IP, over 60 patents, many of them foundational in use patents in the space.
Wound care is undergoing a major transition right now. There's a move to sort of evidence-based medicine. There's a move away from what turned out to be perhaps some excessive reimbursement in the skin substitute space. This is really moving to align the needs of patients and physicians and payers. The big theme in the market right now is moving to an analysis of an overall cost of the episode of care. What actually does it cost to heal a patient's wound? Wound care is the biggest little market nobody ever heard of. It's $76 billion in the U.S. That's just counting the big categories. Diabetic foot ulcers, venous leg ulcers, Hospital-Acquired Pressure Injuries. There are over 7 million Americans living with chronic wounds and over 10.5 million patients with a wound or ulcer in 2019.
It's all the classic drivers, aging population, more people in hospital, et cetera. This is sort of the opportunity in the U.S. People ask a lot of questions about, like, "Well, where do these go? Where would you sell an UltraMIST System? Where would you place it?" It's hospital wound care centers, physician offices, skilled nursing facilities, assisted living facilities, hospitals, home health, ambulatory surgery, hospice, rehab. There are probably around 100,000 places in the U.S. you could conceivably put or you could reasonably put an UltraMIST System. We have somewhere on the order of 1,300 systems in the field right now that are active. We're at somewhere in the neighborhood of 1.5% market penetration. The other interesting opportunity for us right now is the expansion in coverage. We have a nationwide CMS code, five-digit code, 97610. Schedule I.
What we aren't on are all of the Medicaid formularies. Medicaid is different. It's done state by state. I think right now we're probably on. I reserve the right to be off by one or two on this, so please don't hold me to this with ultimate precision, but I think we've got reimbursement exceeding $300 a procedure in about nine states, and then over $100 in maybe another 10-12. There's a lot of opportunity there because Medicare is 47% of wound care. Medicaid is another 16%-20%. That can be a 40% increase in the addressable market for our existing customers, where they just have the ability to do wound care for more of the patients they see. That's the ultimate and low-hanging fruit is help your customer treat a larger percentage of the patients that they see.
We're also looking at some additional markets, dermatology, aesthetics, reconstructive surgery, burn, the radiation burns from nuclear oncology. Lots of potential expansion here. This is sort of a new slide for us. A lot of you haven't seen this. This is why do wounds become chronic? What is a chronic wound? Why isn't it healing? This is a quote from David Armstrong at the USC School of Medicine. I don't know, some of you guys may know him. He's the closest thing podiatry has to a rock star. It's sort of a weird concept, but when you walk around SAWC with him, the guy's got groupies. It's really interesting. What he's basically saying is why does a wound become chronic? A wound is chronic not just because it's not doing the things it should be doing, because it's doing too many things.
Every inflammatory pathway is firing. Every destructive enzyme is active. The wound is working incredibly hard. It's just working really hard at staying sick. You get caught in this inflammatory stage, and you can't get into the proliferative stage where you're actually going to make new tissue and you're going to heal. The wound is acting against itself. When the wound is inflamed, when the wound thinks it's infected, it's producing all manner of proteases. These are just nasty little chemical scissors that slice everything they touch to pieces. You can't build anything while these things are there. I'm going to skip two slides ahead here because this is a new deck. No deck survives contact with the enemy. It actually works much better with the slides in the other order, so bear with me.
Pablo Picasso famously told us that good artists borrow and great artists steal. I've completely stolen this framing from Armstrong. He cast this as this is Control-Alt-Delete for a wound. You're literally rebooting the wound and the wound bed. You're getting it to stop all of the processes that shouldn't be running, and you're getting it to start all of the processes that should be running. You have to get control of the wound, the peri-wound, debride the necrotic tissue, get the senescent cells and the debris out. You got to get the cells firing again. You want to get them revascularizing. You want to have fibroblasts proliferating, building collagen, and you need to delete the stuff that's going to keep this wound histologically hostile. That's bacterial load. That's biofilm. Now we can jump back to method of action. This will make more sense.
Ultimately, how does UltraMIST work? You've got a 40kHz ultrasonic transducer, produces energy. You drip saline in front of it, atomizes the saline. That gets used as a carrier medium. Right. The way you can get away with being non-contact here is by hyper-humidifying the air between the transducer and the wound. Hyper-humidified air can carry 18 times as much energy as dry air, and you need to put the energy on the wound. The saline hits the wound, you get cavitation bubbles in the saline. They rapidly expand and explode. That's how you're debriding the wound. My engineers hate this, but it's kind of like scrubbing bubbles, but for necrotic tissue. It's also sufficiently violent that it actually cracks the hard shells on bacteria and kills them by lysing them.
You can get a two to three log reduction in bacterial loads and break the biofilms in wounds that keep them inflamed and keep your sort of immunoresponse going. You're also then triggering a whole bunch of mechanotransductive pathways where the cell itself is told to heal. It starts producing VEGF. It starts producing all of the things. The fibroblasts start proliferating again. You get collagen deposition in a healthy membrane. That's how wounds that won't heal start to heal and heal really quickly. Right? This is the system. You can see the picture. It's 7 lbs, highly portable. Consumable. The sterile applicator is snapped onto the front for each treatment. Easy to use, reduces pain, speeds healing. It's one of the only things in wound care that's painless.
We sort of like to pitch this with, "Wound care doesn't have to suck." You can actually get better without this being horribly painful. I don't know if you've ever seen a manual debridement where they actually take a scalpel and scrape all the edges of the wound off. That's painful. This isn't. The 3- 20-minute treatment time. These are the studies. You get kind of a 2x- 3x increase in healing rate. You get 80% pain reduction over four weeks versus 20% at standard of care. We've done over 2 million procedures in the lifetime of this product. We did 325,000 last year. 18 peer-reviewed studies, eight RCTs. It's a great product. It really works. The biggest challenge you have in wound care is that it's literally you need to show people. Healing is believing is real.
This is a relatively low-trust space. This guy, this patient, was actually the chief medical officer of a Chicago hospital. Those top three images are three months of a wound not healing. This is a guy who runs a hospital and couldn't figure out how to get his wound to heal. The bottom series are two and a half weeks of UltraMIST treatment. You have to reboot the wound. It's not going to heal. If some of these processes, if the bad processes are still running, the wound won't heal. If the good processes aren't running, the wound won't heal. That's what a reboot looks like. It's three months of going nowhere, turning into two and a half weeks of you can have your life back. Ultimately, in any med device like this, there's three constituencies that matter. There's the patient, there's the physician, there's the payer.
Everybody wants different things, right? The patient wants to get better. They want their wound care not to be horrible. The physician would like the patient to get better and would also like to make some money while he does it, because they're not running charities. The payers would like the patient to get better because that saves them money. Right? That's the key, right? You can see the sort of cheeky example here at the right. If you're treating a wound, which of these two things do you want rubbed on your large open owie, right? Nobody picks scalpel. This is my favorite series because this is actually my uncle. This is my Uncle Tony.
He had a necrotic mass taken out of the back of his hand, and the plastic surgeon who was treating this wound was literally putting a ball of gauze soaked in antiseptic in that hole, wrapping it in ACE, and was going to leave that wound open for five months while the swelling went down enough to close it with surgery. We took him home, put him in his comfy chair, and treated him with 6 weeks of UltraMIST, closed the wound entirely. He's got his hand back. I do Thanksgiving with this guy. He's cooking with that hand again. The doc was like, "Yeah, you got a 50/50 chance of using it." That's the difference you can make if you reboot the wound. That's why the patient cares. Why does the physician care? 97610 code, nationally accepted for Medicare.
We're the only product that has high-quality clinical evidence for efficacy as non-contact, non-thermal ultrasound. That's required to bill this code. Other people have tried, but they tend to get recouped because you're not following the instructions. The consumables, we sell you a consumable for every procedure. Lists at $100, maybe you pay $80. You get paid, the average reimbursement in the country is around $402. It's up very slightly this year from last year. Doctor makes $400 for six minutes of work, pays us $80, and off they go. That's 90-ish procedures to pay for the device. That's typically kind of 10- 13 patients, assuming that kind of average $400 rate. The physician economics on this are great. The paybacks are rapid. For the payer economics, this is a study that was done in hospital patients looking at deep tissue injuries in ICU.
This is a huge problem. HAPI, the Hospital-Acquired Pressure Injury, has become the number 2 reason that hospitals are sued, and it's threatening to become number 1. I brought my mom in here. She didn't have a big wound on her butt when I brought her in the door. Why does she have one now, right? It's obviously your fault, doctor. These things are incredibly expensive. You get a pressure injury, it's $20,000-$150,000 to fix. This was a head-to-head RCT with UltraMIST versus standard of care. 80% of patients that got UltraMIST resolved at a Stage II , a partial thickness or less. 70% of patients that got standard of care progressed past a Stage IV , which is full thickness. What's past a stage 4?
It's usually a stage 4 where the wound itself is so full of crap that you can't see to the bottom of it to know that it's a stage 4. Those are the kind of wounds where you're going into surgery. You could lose your limb, you could lose your life. That's the difference. From our standpoint, simple model, razor blade system lists at $30,000 applicators, single use listed $100. Obviously, nothing sells at list in med device, but we don't discount too much. The applicators are defensively single use. They have an RFID chip in them. As soon as you use them, they code. The system won't turn on without an uncoded RFID. All our manufacturing's in the U.S. We have an enormous amount of upside capacity. I'm sorry, does anyone have any water? I've been speaking all day. I'm just brutally parched.
Yeah, I should have brought it up with me. That was a mistake. Bottom line, all the manufacturing's in the U.S. We haven't had any tariff problems. We keep an eye on all of it. Lots of upside potential. We're not going to be limited there. I literally told the team, "If we catch lightning in a bottle, we're not leaving any lightning on the table." We want to be able to fill all of the orders that we get. Thank you so much. Obviously, kind of the elephant in the room here is what's been going on in wound care right now. The only way you can really think about it is there was a bubble. That Chinese curse of may you live in interesting times, I have a much more profound understanding of that right now than I did six months ago.
The skin subs were $100 million market. They grew to $15 billion. That was mostly on price. The average price per square centimeter rose from $100 to $3,000. CMS just cut pricing to $127 a square. A $15 billion space got a 97% price cut. That has just put enormous amounts of stress on the space. People have been getting recouped, clawed back. Doctors have been getting put out of business in droves. The industry's also moving on. It's basically saying, "Well, what now? What do we do? What's the next thing?" That actually plays into our hands because everyone is asking now, "Where's the evidence?" Well, we have the evidence. We want the patients to get better. Great. We can do that for you. We just need to kind of get through this air pocket of people adapting to, wow, my business has changed, right?
Mobile wound care has changed a lot. It used to be you could see three patients a week, put a $100,000 allograft on them. That's a nice business, right? Without that, everybody has to start looking at, does my business have route density? Can I actually see enough patients in a day to cover the provider? Am I getting real results that CMS is not going to ding me for? This industry's growing up, and it's doing it sort of in a sudden spasm rather than gradually. I think ultimately it's a good thing. We're seeing a lot of players who've been kind of on the sidelines for the last few years and didn't want to play in the bubble stepping up. These are the big guys. We call it the elephant board. It's the elephant size accounts that we're hunting, where we have real engagement.
These aren't sort of aspirational. These are people with whom we already have relationships, with whom we're working, where we're doing demos. We sized this the other day, that list is starting to look like the size of the company. These people are huge, the patient volumes that they see are phenomenal, but they move more slowly. This isn't kind of the Wild West of the last few years. These are people who say things like, "Hey, have you been through the value analysis committee?" "Hey, have you been through the usage committee?" It's a longer road. It will take longer to get these folks across the finish line. Once you get them in, they're really high volume, and they tend to be really sticky, great customers.
Mayo Clinic has been one of our top customers for six or seven years, and they're wonderful people to work with. They do everything right. That's what we're looking for. The patients and the wounds haven't gone away. The number of wounds in America isn't any smaller. Somebody is going to treat these patients. They still need care. It's just a question of getting from here to there. This is fundamentally a consumables model. Apparently, the consumables didn't render quite as well as we hoped. We have 1,382 active systems in the field at the end of Q1. We sold 626 of those systems in 2025, 97 in Q1. The Q1 of 2026 was a record quarter for applicator unit volume. We're on pace to set a new record this quarter. This deck will be up on our website, you don't need to take pictures.
You can download it. It's sort of simple, right? Where it's how many systems in the field times how many times a day does that system get used times the price for consumables is the consumables revenue. It's just a simple razor blade model with high margins, the goal is to get these things into the hands of the high-usage customers and to treat a lot of patients. These are our financials. We did $44 million of revenue last year, which is up 35% year-over-year. That threw off $13.6 million in cash EBITDA, which is about a 30% cash EBITDA margin. That's what things look like when we're running pretty well. This current air pocket will pass, I think that that's a reasonable sort of business model to say when things are healthy and things are going well, those are reasonable metrics to presume. Right?
That's it. Wound care is going through sort of a payer-led shift into evidence-based medicine, this is happening whether wound care wants it or not, because the payers are insisting. This is a system that aligns the incentives of the patients and the payers and the providers. We're in a great spot to benefit here, we're going to stand with our customers. We're going to make this work. These are the moments when you forge a franchise. Nobody remembers the friends who were there for the party. They remember the friends that were there when it was tough, we're going to get through this with our customers, I think we come out of this much, much stronger. That's what we got for you today. I guess at this point, we can go for questions.
What are the margins between the consumables and the systems?
What are the margins between the consumables and the systems? They're actually really similar. They might be slightly higher on the razor than the razor blade, actually. We did just get, this quarter, our new four-cavity mold for making applicators was finally qualified. It took an extra quarter and a half or so because things are like that sometimes. It's now up and running. That will take some more expense out of our applicator sales. We probably won't see that bump in margins until maybe Q4 because we use FIFO accounting, and we keep six or seven months of applicator stock on hand. That should help margins. That should bump margins up a little further.
I certainly share your hope that you guys will get through the air pocket, could you take a stab at some scenarios of what that looks like specifically? Who shifts behavior in terms of patients, providers, payers? What does it look like for you guys to get through there?
Sure. What does it look like for us to get through the air pocket? Who's going to be shifting behavior? Some of it is a realignment where there was a time where, as a mobile wound care provider, you could have low route density because you had high revenue density per stop. Revenue density per stop just dropped a lot because skin sub pricing dropped a lot. You have a situation where route density matters. It's can you see 8- 10 patients a day? I think the one place where there's something we'll have to give is rural care, where if you're driving up to the back of beyond and doing 90 minutes of windshield time to treat a patient, when you get up there, you actually tend to get paid less because the CMS reimbursements are wage-indexed to local wages.
There's going to need to be some sort of rural supplement to keep those patients served, or things are going to get bad out there. I haven't really seen the solution for that yet, but I suspect something has to give because the costs of letting that get out of control. An amputation costs between $750,000-$1.5 million, and diabetic foot ulcers are by far the leading cause of amputation in America. I think there will be fewer people providing wound care. I think they'll be bigger and more sophisticated. I think they're going to be focused more on route density, doing it right, doing the billing right. We're starting to see some interesting shifts where hospitals themselves are starting to get into mobile wound care, and that's something we hadn't seen before. It's an interesting piece of vertical integration where you already know the patient.
You've already got their chart. Maybe you can discharge them a little earlier because you know they're going to get good care at home. You send them home, you do wound care there, and you make sure that the care is good enough that they don't come back. You don't want that wound reopening because if the patient leaves the hospital, the wound reopens, and they come back, the hospital eats it, right? They don't get paid to close the same wound a second time in six months. Keeping that patient healthy at home makes sense. It feels like the whole thing has to become a little more holistic. You're going to stop treating the patient as an individual thing at a place and time and a point of care, and you're going to start looking at how does this whole patient work episodically.
CMS is starting to make people track it, where if you cheap out and skimp on a patient's care and it winds up costing him more down the road, they're going to stop blaming that cost on him. They're going to start blaming it on you and say, "Well, it was your fault. You're the one who let it get bad." It feels like we're going to have to rearrange a little bit around those principles, but I suspect it winds up being better for everyone once we have.
On the elephants that you're targeting , how big are those?
The question is how big is an elephant? It varies. To make that list, you probably need to be at a bare minimum, kind of a 50 or 60 unit potential. Some of these guys are 150, some of them are 300. I think there's one that might be 600. The answer is some of the elephants are really big. There was one in particular, they see 250,000 patients a year. How many of them are applicable to UltraMIST? I'm not sure yet. We're working on that. How much of it can we capture? I'm not sure yet. We're working on that. Ultimately, this is the execution.
What will govern the sort of success or failure of the next two years is just how well we execute on getting the elephants through the funnel. That's kind of where the game is. The good news is we have relationships with them now. We know who they are. We feel like we're making some progress. It's going to come down to our executing.
How do you feel? I know you hired some new sales folks last year. How do you feel about that team? When you were getting smaller accounts. Now it seems like a very important-
Well, it's a part of the reason why we brought that sales force on, right? One of our board members was sort of the head of sales for Abiomed. Our now head of sales was his number two. Our head of commercial ops was his head of commercial ops. We've basically put the Abiomed team that took that place from $14 million to $400 million back together. These are the people who know how to herd elephants. That's why we brought them in. All right. I'm told there might be time for one more. Don't have to be. I hear there are drinks too. Perfect. Thank you, guys. I appreciate it.