SNWV: Q3 Results. Financing Update - Analyst Blog

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SNWV: Q3 Results. Financing Update

By Brian Marckx, CFA


On November 14, 2012 SANUWAVE ( SNWV) announced financial results for the third quarter ending September 30th. Revenue was generally in-line although slightly lower than our estimate. More importantly, given that SNWV is focused on conserving capital as they ready for the start of the supplemental trial, is that operating expenses and cash burn continue to come down and were lower than what we had expected. The other positive news is that SNWV is near closing on additional financing which, along with the cash balance, should get them through to the beginning of 2013 at which point trial enrollment is expected to commence and another, larger cash raise is expected to be consummated.

Q3 revenue came in at $178k compared to our $255k estimate. Operating expenses continue to fall sequentially, coming in at $1.5 million, down , which dipped $457k or 25% from Q1 2012, reflect management's tight control on costs and cash.

Management continues to manage expenses and cash well with operating expenses flat from Q2 at $1.5 million and below our $1.6 million estimate. As a reminder, following the December 2011 FDA major deficiency letter, when it was evident that dermaPACE would not make it to the market in the near-term, management announced that they were implementing cost-cutting initiatives to preserve capital. These initiatives started bearing fruit immediately, with op expenses falling $1.9 million through the first 9 months of 2012 compared to the same period in 2011. Part of these efforts included slashing headcount, which fell from 29 to 18 from Q3 2011 to Q3 2012.

Q3 net income and EPS were ($1.5) million and ($0.07) compared to our ($1.5) million and ($0.06) estimates - the difference in EPS a result of us overestimating the outstanding share count - as a reminder, as we noted in a previous update we used a placeholder assumption that financing would come in the form of equity. We have now removed this assumption as financing will likely come in the form of convertible debt (which we assume is eventually converted to equity in later periods).


Cash used in operations was $1.04 million in Q3, roughly flat from $1.01 million in Q2, and down from $1.49 million in Q1. SANUWAVE exited Q3 with $361k in cash and equivalents, down from $1.4 million at the end of Q2.

We think management has done a commendable job minimizing cash burn and cutting expenses where possible. Nonetheless the company will need to raise additional capital and indicated in the Q3 earnings release and 10-Q that they expect to sell $1.25MM in convertible debt in the very near-term and hope to close on a bigger capital raise by the end of Q1 2013.

Please visit Brian Marckx's coverage page at to access a free copy of the full research report.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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