Good day, everyone, and welcome to the SANUWAVE Q2 Earnings Call. [Operator Instructions] Please note this call may be recorded [Operator Instructions] It is now my pleasure to turn the conference over to Morgan Frank, Chairman and CEO of SANUWAVE. Please go ahead.

Thank you very much. Good morning, and welcome to SANUWAVE's second quarter 2021 earnings call. Our Form 10-Q was filed with the SEC last night, and our earnings release we issued this morning, along with our updated presentation, which was made available on our website in the Investors section. It's useful to refer to this during the presentation. It really does provide useful information, I promise. So joining on the call this morning is Peter Sorensen, our CFO. And after the presentation, we will open the call up to Q&A. We'll begin with everybody's favorite, forward-looking statements and other disclosures. This call may contain forward-looking statements. Such are statements referring to our future financial results, production expectations, plans for future business development activities, investments are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company's ability to control. A description of these risks and uncertainties and other factors that could affect our financial results is included in our SEC filings. Actual results may differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update any forward-looking statements. Certain percentages discussed in this call are calculated on the underlying whole dollar amount and, therefore, may not recalculate from the rounded numbers used for disclosure purposes. As a reminder, our discussion today will include non-GAAP numbers. Reconciliations between our GAAP and non-GAAP results can be found in our recently filed 10-Q for the period ended June 30, 2025. So now that we are absolved of any potential sins of prognostication, let's get the good bit. Q2 was another strong performance for SANUWAVE, up 42% year-on-year on the top line and bringing us to 51% year-on-year for the first 6 months of 2025. We…

Thank you, Morgan. The second quarter was a strong one for SANUWAVE, with revenue reaching a new Q2 record and growing 42% year-over-year. This performance reflects continued momentum in our commercial strategy and growing demand for UltraMIST. We also delivered meaningful year-over-year improvement in gross margins, which underscores the operating leverage inherent in our model and our disciplined approach to cost management. Overall, we remain focused on driving sustainable, profitable growth. Let's now take a closer look at the financials for the quarter. Revenue for the 3 months ended June 30, 2025, totaled $10.2 million, an increase of 42% as compared to $7.2 million for the same period of 2024. This growth was within our previous guidance of 40% to 50%. Gross margin as a percentage of revenue amounted to 78.3% for the 3 months ended June 30, 2025, versus 73.2% for the same period last year. This represents an increase of about 510 basis points, which can be attributed to reduced cost on UltraMIST system production and a strategic focus on pricing for UltraMIST systems and applicators. For the 3 months ended June 30, 2025, operating income totaled $1.9 million, which is slightly down by the $0.1 million compared to the same period last year. Operating expenses for the 3 months ended June 30, 2025, amounted to $6.1 million compared to $3.2 million for the same period last year, an increase of $2.9 million. However, this change was largely driven by an increase in noncash stock-based compensation expense of $1.1 million versus Q2 2024 in which there was no stock comp expense as well as there is a release of a historical accrual in Q2 2024 of $579,000, which reduced our reported GAAP operating expenses by that amount that did not recur this quarter. Net income for the 3…

Thanks, Peter. So moving on to guidance. As we stated in our press release, we're guiding to $12 million to $12.7 million in Q3 revenues. Obviously, Q3 is a tough comp for us as it's up against the pigs or python quarter last year in which we had one really large sale sort of tipped the scales and drive a surge to an 89% year-on-year growth rate. Pigs seem to be somewhat difficult animals to forecast. And while we're certainly out looking for them and see a fair bit of potential, we're not including any of that in the guidance above. We're really still in the learning phase on how to time forecasting with these bigger customers and how they ramp up when they do say yes. I think we'd rather err on the side of conservatism. So -- but our annual guidance remains unchanged. As ever, I want to thank the SANUWAVE team for all of the hard work and the commitment and the trust. Companies exist downstream with their cultures, and this won't only exist because of ours. So we have thoroughly outgrown our existing headquarters, especially the warehouse and shipping facilities. We're moving to our new office space about a mile away at the end of next week. And I'm sure the team will desperately miss the old carpets, but we'll manage, as always, to adapt and overcome. So thanks, everyone. And with that, I will open it up to the operator for questions.

[Operator Instructions] Our first question will come from Kyle Bauser with ROTH Capital Partners.

Thanks for all the updates, and great progress here. Maybe I'll start on margins. So glad to hear the enhanced production process for the applicators, still on track for Q4. Can you give us a sense as to how this might impact gross margin? I mean, you've generated some nice scale. It seems like the business is poised for some pretty nice operating leverage, especially given the commercial infrastructure is in place, this production process is nearing completion. I'm just kind of trying to get a sense of how much drops to the bottom line at this point for incremental sales from an EBITDA standpoint as well.

So obviously, the purpose in creating a new applicator design is both to increase the capacity to produce applicators and to get the cost down a bit. We suspect, and Peter, correct me if I'm wrong here, but we suspect we can pick up probably 350, 400 basis points of additional margin on the applicators with the new design. So it seems that this is...

Yes. It will take some time to get to that as well, too, just because we've got -- we've tried to hold about 6 months of inventory on our applicator. So we need to bleed off our existing cost on our current applicators before we start really seeing that impact, but we should see that in early 2026.

Yes. So it should be sort of a steady fade in because we're not -- we're using a kind of a blended cost as our cost basis. So it will flow through gradually, but will flow through.

Okay. Appreciate that. And 13 reps, sounds like that's a pretty good number. Can you envision needing to build that out or you feel pretty good about kind of covering the math at this point?

I think we are -- at this point, there's a certain amount of let's get everybody really up-trained and firing. I think we made a lot of progress there at the 2-day sort of all hands and teach-in. It really feels like a qualitatively strong group now, and folks who are doing a lot to help each other and kind of share best practices. Will we potentially add a few more people? Yes, I think that -- it's certainly something we're looking at. Are there some sector- specific folks who make sense? Do we want to stir -- I mean we're now getting the size where we have to start thinking about do we need regional managers, what is the next step. I mean, obviously, breaking up the U.S. into 12 regions is still means you've got some pretty big territories. And so ultimately, yes, we're looking at it. We don't have any -- it will be -- I wouldn't be surprised if we acquire a few more reps over the rest of the year. But I think at this point, we're pretty much where we need to be to have real national coverage.

Got it. And I'm glad to hear that you're working internally as well on kind of the marketing program. I think you mentioned you plan to bring that live in October. As you kind of map out the opportunity in the U.S. across wound care centers and physician offices and skilled nursing facilities and assisted living facilities, what -- I guess, where are you spending most of your time in focus or the patient types or conditions that UltraMIST resonates with that you've kind of tailored this marketing program towards?

So to a great extent, one of the things we're focusing on in the marketing program is moving more to a kind of a market of one marketing stance where we can actually target a bunch of these things individually, create specific plans for specific wound types, for specific patient types, for specific user types. And so a lot of it is going to be starting to really both differentiate and target the offering, so that we can engage with mobile wound care, with nursing homes, with skilled nursing facilities with -- increasingly, I think we've probably been neglecting hospitals a bit. We're starting to engage there with a bit more focus. I think there's also -- obviously, you have a lot of opportunity in podiatry, in wound care centers. And so I think it really becomes a question of tailoring the offerings such that you're tailoring the offering to both the wound and the customer type, beginning to show people this is really how you can use this product and then getting over the hump of people saying wound care is not a high-trust environment, right? Like there are -- when you walk in with a shiny new thing and say, "This is the best wound care since moldy bread," the -- you met with an understandable amount of skepticism, and I think you're getting to key folks, getting to high enough usage rates in markets that everyone says, "Oh, I've heard of this thing. I've seen people use it. I hear they're getting great results. I should go take a look," really matters. And so some of it is going to be pushing for very specific regional and critical mass.

Appreciate that. And maybe just lastly, any update on the senior secured debt that's coming due?

There we go. We had an internal bet on how long we could go on this call without somebody asking that. So yes, I guess it's probably fair we give something of an update. I think as we've sort of long discussed to be -- we were looking at the refinancing of our debt as sort of a cost of capital equation, right? And so we're looking at do we want to do this as deb, do we want to this as equity, like what's the choice. And so we ran an internal process to look at what our debt options were. And we received several term sheets that we thought were very attractive. And we chose one and are currently in the process of working to close it. So I can't really get into too much more detail right now. Like I can't name the counterparty, but I think people will be favorably inclined towards both the lender and the terms. It's a significant improvement over what we have.

[Operator Instructions] We'll take our next question from Chris Plahm with Tall Pines Capital.

Great start to the year. Actually, the last gentleman took my first question on the debt. But I was curious also how you look at the elephant hunting now with the new team you have in place. I know you said you have a national account manager. Can you maybe talk a little bit about who do you have that maybe you've sold systems to that have a big runway with a couple of hundred locations, and maybe the pipeline for maybe new large elephant hunting?

Yes. I mean -- sure. I mean, obviously, for competitive reasons, we want to be a little bit careful about naming folks. But there are a number of key initiatives that we've gotten pretty interested in. We were recently added to the approved vendor list on one of the largest sort of hospital chains and networks in the U.S. And so if that's become a very -- if that's become an interesting hunting ground for us, we're looking at a number of folks who have considerably larger footprints, like people who have several hundred locations. And I think the -- it's sort of early days, right? I mean, we hired our new key accounts rep in second week of July. So I mean, he's been here almost a month now. So yes, we're going to start expecting things any day now. But it's always a little bit difficult to guess exactly how these guys are going to perform, right? The big customers like this tend to be more careful. They're also structured differently, right? Some of them are kind of tipping point accounts where there's one sort of national decision maker. And if they say yes, you sort of go on a large number of units. Others are sort of we'll approve this and now you have a honey license, but have to go get each one individually, though they seem to get -- and they seem to get easier the more you get on board, right? They're sort of if you penetrate a network like that, there's kind of like a -- there's sort of a flip over point where the question changes from why should I use this thing to, hey, why aren't you using this thing yet? Don't you see the rest of your peers are doing? And so it's -- we're building some real momentum there. But I mean, it's obviously we've -- we're kind of a month in. It's a little early to be making much in the way of really concrete prognostications.

It appears we have no further questions in the queue. I'll turn the program back to the speakers.

I think I might have one more question.

Apologies. We do have a question now from Albert Hanser from Kestrel.

Nice job. Fun to see the execution. In all the momentum and good news, sometimes I think, the IP aspect gets overlooked, and I noticed on your website in the deck, which I haven't seen before, in the broader deck, you now have a slide on the IP and 140 patents. Can you just talk more about the value of those patents and where they lie? And just give us a broader landscape of kind of the foundation under which you're building the company.

Well, you couldn't come up with an easier question. Okay. So I mean, fundamentally, yes, SANUWAVE is sitting on a large patent portfolio that includes a lot of things to do with shockwave and with ultrasound. Obviously, we see some of them as sort of core protection of our ability to operate. We're -- it's something we're also looking to extend as we begin looking at new things we can do with the UltraMIST platform. Obviously, we have in the past monetized some of these patents. We have 1 relationship with [indiscernible] to potentially utilize some of our shockwave patents around some vascular conditions. I can't really speak to that any further in sort of concrete specifics beyond what we have out in the public market, which is that they paid us $2.5 million last year to really buy -- to basically buy an option that would allow them to pay sort of a mid-single-digit million fee to then go out and assert some patents on which there would be a rev share on the back end with any sort of collection. We are always sort of looking at the patent portfolio and saying, what else can we do with this. We get interest from time to time from folks about licensing or acquiring patents. But I don't that I can really say anything else that's concrete on that topic at this time.

[Operator Instructions] I'm showing we have no further questions over the phone at this time.

Great. Well, thank you, everyone, for joining us this morning, and we look forward to speaking to you next quarter.

This concludes today's program. Thank you for your participation, and you may disconnect at any time.