Sonendo, Inc. [SONX] Conference call transcript for 2022 q1
2022-05-10 20:38:03
Fiscal: 2022 q1
Operator: Good afternoon and welcome to the Sonendo, Inc. Q1 2022, Earnings Conference Call. My name is Brika (ph), and I'll be today's event specialist. . And with that, I would like to hand over to our host of today's call, Matt Bacso, please go ahead when you're ready.
Matt Bacso: Thanks, Operator. Good afternoon. And thank you for participating in today's call, joining me from Sonendo, are Bjarne Bergheim, President and CEO, and Michael Watts, CFO. Earlier today Sonendo released financial results for the quarter ended March 31st, 2022. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. All forward-looking statements, including those relating to our operating trends and future financial performance, the impact of COVID-19 on our business, expense management, expectations for hiring, growth in our organization, market opportunity, revenue guidance, commercial expansion, and product pipeline development are based upon our current estimates and various assumptions. Few statements involve material risks and uncertainties that can cause actual results or events to materially differ from those implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements for a list in description of the risks and uncertainties associated with our business, please refer to the risk factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 23rd, 2022, and available on EDGAR, and in our other public reports filed periodically with the SEC. This conference call contains time-sensitive information and is accurate only as of the live broadcast on May 10th, 2022, senator disclaims any intention or obligation except as required by law, to update or revise any financial projections of forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will now turn the call over to Bjarne.
Bjarne Bergheim: Hey, thanks Matt. Good afternoon everyone, and thank you for joining us. For today's call, I will provide opening comments and a business update, followed by Mike, who will provide additional detail regarding our quarterly results and updated 2022 guidance before opening the call to Q&A. Total revenue for the first quarter of 2022 was $9 million above our estimates, provided during the Q4, 2021 earnings call, representing growth of 22% over Q1 of 2021. Growth in the quarter was primarily driven by continued increase procedure utilization and increased GentleWave console sales. As a reminder, first quarter capital equipment sales are typically our lowest seasonally adjusted quarter, following heightened calendar year and demand, which is influenced by various factors including tax benefits. Overall, we're very pleased with our start to the year. As of March 31st, GentleWave's ending install base was approximately 850 units, compared to approximately 710 units on March 31st 2021, representing growth of 20%. Mike will later provide more details on our quarterly financial results, and additional detail regarding full year 2022 guidance. Before providing a business update, I wanted to address two topics that have had a broad scale impact across the medical device industry. First being COVID, while we did see a slight temporary slowdown in patient volumes early in the quarter due to Omicron, this did not appear to materially impact performance. Based on our estimates, and what we're hearing anecdotally from endodontist, patient volumes are currently trending at or near pre -COVID levels. While our growth is heavily predicated on our ability to penetrate to root canal market and sell consoles to new users, the durability of patient volumes in offices is a positive sign that the end market is strong, and there's demand for our technology. Second are the supply chain headwinds impacting the global economy. That's a reminder on our last earnings call in March, we communicated variability in the supply chain of certain raw materials, which cost us to incur additional costs in the fourth quarter of 2021, and first quarter of 2022. The impact has been limited to our procedure instruments, and despite this disruption, all customer orders were fulfilled in the first quarter of 2022. While our operations team has made considerable progress in navigating through this dynamic period, the supply chain environment has become incrementally more challenging. Although raw material supply variability is slightly to continue for the remainder of the second quarter, we believe we have sufficient capacity to meet our revenue targets. In future quarters, we expect to risk to gradually mitigate as we recover safety stock positions, as overall volumes transition to CleanFlow procedure instruments, which in most instances do not utilize the same raw materials and suppliers as our legacy procedure instruments. Now, turning to quarterly business updates, starting with CleanFlow. On April 20th, we announced the full commercial launch of CleanFlow ahead of the American Association of Endodontists, or AAE, Annual Meeting in Phoenix. The timing of this announcement and launch was critical as AAE is our largest and most important industry conference of the year. While we have been working diligently through our limited market release, AAE was a great event which allowed us to showcase our new procedure instrument to the entire market and allow customers to perform or observe a procedure using an extracted tooth in our booth in what we call a test drive. As a company, we have built a reputation on providing superior clinical outcomes, and delivering a positive patient experience. This was in full display at AAE as the Sonendo team reinformed the benefits of CleanFlow to not only existing, but prospective customers. Specifically, with CleanFlow, we have improved the GentleWave procedure by removing certain steps. With the practitioner now only needing to open and prepare the tooth to allow the procedure instrument to be put in place. During educational and clinical demonstrations at AAE, CleanFlow's simplicity and ease of use resonated with the endodontic community, which gives us more confidence in not only the CleanFlow launch, but to also in our ability to drive increased utilization at the practice level. As a reminder, the CleanFlow procedure instrument works with our existing consoles, so there is no need for existing customers to buy a new machine to access this latest technology. This will allow us to ship CleanFlow procedure instruments to new customers, and seamlessly convert existing customers. Another reason why we're so excited about CleanFlow is that we have a clear pathway to improve our contribution margin for consumables. CleanFlow was a major component of our future higher gross margin expansion and pathway to profitability. Given the simpler to sign up CleanFlow compared to the previous generation procedure instruments, there are fewer components which lowers material costs and allows for easier assembly, which we believe will drive increased production efficiencies at higher volumes. From an operation standpoint, we have expanded manufacturing capacity. We have developed strong relationships with key suppliers who have insured durability to meet increasing demand. We continue to strive to manufacture the highest quality product for our customers. To ensure a successful rollout to CleanFlow, we have been working to optimize every step of the supply chain from molds to final assembly and packaging process. All our efforts are focused on scaling processes to manufacture at higher volumes. Additionally, our full market release will ensure our commercial and clinical education teams can provide a world class onboarding experience for new customers. As a reminder, we will continue to manufacture and sell our current generation procedure instruments for current gentlemen customers with the goal of educating and converting them overtime, allowing them to transition at their own pace. Conversely, our strategy will be to primarily train new customers using CleanFlow to ensure immediate adoption. Given this dynamic and the fact that we have an approximate 850 GentleWave installed base, we expect to full adoption of CleanFlow may take up to 24 months, as we expand the commercial use in a responsible and considerate manner. Turning to our commercial strategy, our bifurcated sales team remains an important driver of growth as we penetrate our core market of approximately 17 million root canal procedures performed annually in North America, representing a market opportunity of approximately $1.9 billion. As of March 31st, we more than doubled the size of our commercial sales team when compared to June 30th, 2021. Over the past year, the key addition is the building of our consumable rep team. We believe this team will be an integral part of our growth and execution in 2022 and beyond. Given the number of capital and consumable reps we have hired, our plan is to maintain the size of our commercial team at this level for the near term as we focus on sales force effectiveness, initiatives, and sales execution before expanding further. In connection with the expansion of the number of consumable reps and bifurcation of our sales force, we're starting to see early signs of increased productivity and pipeline generation from our capital reps, who are now fully focused on selling capital equipment to new customers. As a reminder, prior to the establishment of the consumable rep team, capital reps spent roughly 50% of their time servicing existing accounts. Regarding procedure instrument trends, we continue to receive positive feedback from new accounts that have completed our updated training protocol, as compared to legacy customers. While still early, we believe this is a positive indicator of increased utilization, as these endodontists are becoming more comfortable not only with the technology, but also being able to treat a broader range of root canal cases. As our sales force matures, specifically consumable reps, we believe their consistent training with new and existing customers will drive average utilization rates higher, as they support the clinical workflow, practice workflow, and patient demand generation for our doctors. Lastly, in April, we announced an amendment to our credit agreement with Perceptive Credit Holdings, which provided Sonendo an additional $20 million over available credit by extending the borrowing deadlines for two tranches of $10 million to September 2022 and June 2023, respectively. In addition to our strong balance sheet consisting of $66 million of cash, this restructuring provides optionality if needed, to further support the growth of our business. In summary, we have a revolutionary technology backed by compelling clinical data in KOL support. Our focus continues to be investing and expanding our commercial infrastructure to penetrate the endodontist channel to make GentleWave the standard of care for Root canal therapy. Additionally, we will continue to prioritize gross margin expansion in clinical practice efficiency with the full commercial launch of CleanFlow. With that, I will turn the call over to Michael Watts, Sonendo's Chief Financial Officer. Mike.
Michael Watts: Thanks Bjarne, as previously mentioned, Sonendo total revenue for the First Quarter of 2022 was $9 million compared to $7.4 million for the First Quarter of 2021, an increase of 22%. Growth in the quarter was primarily driven by increased procedure instrument sales, and increased GentleWave console sales. In the first quarter, GentleWave console revenue was $2.1 million compared to $1.8 million in the first quarter of 2021. GentleWave console 11, selling prices in the quarter, were roughly $60,000, an increase of approximately 6% compared to the prior period, while flat sequentially compared to the fourth quarter of 2021. Turning to procedure instruments, pi revenue was $4.3 million compared to $3.3 million in the first quarter of 2021, an increase of 29%. PI revenue growth was driven primarily by increased procedure instrument sold and roughly mid-single-digit percentage increase in average selling prices compared to the prior year period. Procedure announcements on the quarter totaled approximately 66,000 representing growth of 20% compared to the prior year period. Total software revenue for the first quarter was $1.8 million compared to $1.6 million in the first quarter of 2021, an increase of 13%. The increase was driven primarily by new licenses and services. Gross margin for the first quarter of 2022 was 25% compared to 23% in the first quarter of 2021. The increase in gross margin was driven primarily by improved overhead absorption and average selling price, partially offset by increased costs relating to supply chain. As Bjarne stated earlier, we are closely monitoring our supply chain and working with vendors to mitigate any potential disruptions. As a result of our increased opportunity area, we expect pressure on gross margins to continue into Q2. Total operating expenses in the first quarter of 2022 were $16.8 million compared to $11.6 million in the same period of the prior year. The increase was driven primarily by higher personnel-related expenses, commercial expansion, as well as higher general and administrative cost, primarily legal and accounting associated operating as a public company. Loss from operations was $14.6 million in the first quarter of 2022 compared to $9.8 million in the first quarter of 2021. Net loss was $15.5 million for the first quarter of 2022 compared to $10.9 million in the first quarter of 2021. Our cash and cash equivalents as of March 31st, 2022, was approximately $66 million, while our long-term borrowings totaled $30 million. As Bjarne previously mentioned, on April 6th, we expanded our credit to include an additional $20 million subject to certain milestones of which we have yet to access. We believe this funding will provide the liquidity and capital resources needed to support our growth in our current business in 2022 and beyond. Moving to our financial guidance. As we move forward in 2022, we have several positive structural tailwinds, including a larger sales force, increased underlying demand for GentleWave, and the full commercial launch of CleanFlow. For 2022, we continue to expect annual revenue to range between $40 to $43 million, representing year-over-year annual growth between 20 and 30%. Given the supply chain dynamic mentioned previously, we expect our second quarter of 2022 gross margins to be in line with the first quarter of 2022. That said, as we transition into the back half of 2022, we expect sequential gross margin expansion with positive contribution from the adoption of CleanFlow and increased volume. At this point, I'd like to open up the call for questions.
Operator: Thank you. We will now begin the question-and-answer session. . The first question we have from the phone lines today comes from Jason Bednar of Piper Sandler. Your line is now open.
Jason Bednar: Hey. Good afternoon, everyone. Congrats on the results here and thanks for taking the questions. Bjarne, I was hoping we could start with the full-year revenue guidance of $40 million to $43 million. How are you feeling with the setup here for the rest of the year now that we're more than a third of the way into 2022? It seems to us externally like the story is tracking too or had a plan, but it will be great to hear how you see the rest of the year unfolding. And along those lines, because you could you discuss how you see the cadence playing out for new system sales and procedure instrument sales as we think through the progression of the year and consider those PI supply chain dynamics you referenced in prepared remarks.
Bjarne Bergheim: Hey, Jason, and thank you. Thanks for joining our call and thanks for the question. So obviously we're very happy with the first quarter of this year. And as we sit here today, we also feel good about Q2. We've launched CleanFlow successfully at the AAE. We see strong demand for consoles, and obviously we saw significant science of that at the AAE. We also see strong patient and procedure volumes. And like we talked about before, we can obviously monitor these trends live here across our console install base. But like I talked a little bit about in our prepared remarks, we are seeing some temporary supply chain headwinds specifically with the procedure instrument packaging. So because of that, we've decided to apply somewhat level of conservatism here on our numbers and reaffirm the total $40 million to $43 million number despite the top-line beat here in Q1. But so, in summary I would feel that we continue to feel good about that guidance. With respect to new system sales, we see strong demand for consoles and I think that's something that was very apparent. I think also during the AAE, really exciting conference for us. We had a busy booth, we had great activity level, and I think that is a strong leading indicator for not just console sales here in Q2, but also leading indicator for what we should expect to see into the year.
Jason Bednar: That's all maybe just to clarify really quick and it sounds like maybe they would've been some upward bias or don't know if you're willing to point to the upper end of that guidance. I'm just trying to figure out if there's anything that's constraining you on delivering on the procedure instrument side here in 2Q or at this fiscal year remaining conservative given the supply chain dynamics that are out there right now.
Bjarne Bergheim: Yeah, Jason, I would say there's probably a little bit of both. Like we alluded to, we -- the thing that we're looking at right now is of course the temporary supply chain headwinds associated with procedure instrument packaging. Let me just give maybe a little bit more color on that. And specifically, what we're talking about are the plastic lids that we have that we put on top of the single used procedure instrument kits. So this is something that is in short demand right now across the med-tech industry. Good thing for us though, is that as part of the CleanFlow launch, we have already made step two transition to a lower cost, more elegant pouch. In other words, a different way to package the procedure instrument. So because of these supply chain constraints of these plastic lids, we're not speeding up the transition to these pouches. And coincidentally, we have very strong inventory position on pout shows. So when we make dot transition, we will be in much stronger shape. But again, I just want to reaffirm here, Doug, we still feel good about the overall and guidance for the year.
Jason Bednar: All right. Very helpful in making sure the color. If I could ask one more, there has been some mix feedback regarding the state of the capital equipment demand out there in dental market. But by and large, it's still pretty healthy in the US. Bjarne, you made some pretty encouraging comments here regarding activity at AAE. Maybe just talk generally outside of AAE the feedback you're hearing out there regarding the willingness to invest in new capital and what does your funnel sales leads look like today versus maybe where we sat three months to six months ago?
Bjarne Bergheim: Sure. First, let me just give some color on AAE because I think that helps frame the question a little bit. We just talked about obviously, great activity level at the AAE, which is like we think, a leading indicator that we have -- that our pipeline is building and in fact have a strong pipeline. I just also want to give one additional, perhaps color on the AAE. I had the opportunity to visit AAE call it 10 years ago, when the conversation on the financial floor was really all about files, and we had large file manufacturers having large booths discussing files. Then Sonendo came along and started to introduce this concept that it's not about the file, it's about how you clean and disinfect. And we see now when we come there today, or rather when we attended AAE, the file manufacturers have significantly smaller booths. The conversation is not around files anymore, it is about how we're going to clean and disinfect these teeth. So we think that is a leading indicator for where this industry is going. Effectively if we see an industry that's really right for disruption, so that's the AAE. Let me just comment on the capital equipment demand across the industry, and I think it's, obviously there's a number of different dental companies that are giving insight into the overall market. I think what's important for us is to make the distinction between elective versus non-elective procedures. We are obviously in the space of non-elective procedures, and when patients need to get a root canal, we believe they will get that root canal. So like we've talked about before, we also obviously have a strong value prop, and I think as you have these external dynamics in the market, I think doctors will look for new revenue sources, and I think when applied correctly, GentleWave can really be really an opportunity to really obviously improve the overall efficiency at the practice and increase the overall revenue for those practices. So taking all that in and kind of summarizing that, we feel good about the sales funnel that we're developing and that we continue to develop into the year.
Jason Bednar: Thanks so much. Very helpful.
Operator: Thank you. Your next question comes from John Block of Stifel. Your line is open John.
Unidentified Analyst: Great. Hey guys, this Tom stepping on for John. Thanks for the questions. I want to start on consumables with small handful, Bjarne key talked about the early traction with the consumable reps so far, kind of your thoughts on the ramp or contribution to results. Maybe do you still feel good about that six month ramp you've talked about? And then to confirm one item, Bjarne I lead you said utilization was a growth driver year-over-year, just want to clarify that. So is utilization up year-over-year on the quarter. Sorry, and I will ask one, Mike. can you help us with just how we should think about the cadence of pi utilization for the rest of the year.
Michael Watts: Hi Tom, it's Mike. I'll start with the answers working backwards and then we'll go to your first part of the question. So we think of cadence for utilization of what we have talked about and Bjarne can expand upon this when we talk about attraction with the consumable reps, that the consumable reps now are being introduced to a lot of their customers and they're getting very good reception on that. And they're also training new customers. And we new protocol for training that we mentioned, and we believe that training protocol is driving more utilization from the start with these customers. And as we go back to our new accounts and we train them, we see more and further procedure adoption. So we would expect as utilization to step up sequentially as these consumable reps are able to work through their accounts over the coming months. With respect to utilization within the quarter, what we essentially saw year-over-year was as at a macro level, utilization was essentially in line per account year-over-year. But what we are seeing is increased utilization net with our new accounts, and then also our existing accounts driving further adoption as well. So I'll pass it back to Bjarne.
Bjarne Bergheim: Yes. Thanks Mike, and thanks for your question Tom. Maybe I'll start off by saying that -- just give some high-level commentary on our commercial team here, they've seen a lot of sales teams across dentistry, and I have to say that I believe that we have even more professional sales team not just on the capital sales side, but also in the consumable sales side. So to your point, the time we did higher, obviously more capital sales reps, more consumables sales reps in Q4 of last year. We've spent a lot of time and focus now on training these reps. And we're starting to see the early signs that we're getting better utilization in the accounts where we have consumable reps. But to our earlier point and to your question, we expect to see more meaningful increases in the second half of this year. So yes, so we're still we still believe that that six months ramp that we've previously talked about.
Unidentified Analyst: Got it. That's helpful if I compare that to supply chain a bit, sorry to go back here and you've given some very helpful color on just how you think these challenges play out. Can you just talk to your level of confidence invisibility a bit if you're just able to flesh that out. And then as we tack onto that, Mike, is there maybe a 4Q exit we should think about on gross margins? I know you again, give some good color on the cadence there, but might be helpful just as we think about maybe 2023.
Bjarne Bergheim: Tom, good question. And the reason why we wanted to specifically highlight the instrument packaging here is that we just wanted to give that full transparency on what is going on. And I think for us, if we look at all the different things happening on the supply chain side, and with everything that we know today, like we alluded to in our initial comments, we believe that most of these things will be solved for by middle of this year, so that is obviously what we see today. So we have good confidence, when we talk specifically about the conversion to this pouch that we just talked about. We have good confidence in that, and that is also obviously -- by the way, it's another thing that will help facilitate lower margins for the business. Maybe just want to give some additional comments as maybe setting this up also a little bit for how Mike is going to talk about some of the elements for the margin side, because, the pathway to improve margin is something that's really important to us, and those are the pathway to profitability, something that we're working on and is very important to us. And the CleanFlow launch is the biggest leverage that be having the business here to really drive margins. So the faster we can convert customers over to CleanFlow, obviously that's going to be a significant driver of gross margin. We're going to continue to obviously, work on our contribution margins on CleanFlow. We think we have some opportunities there as we go forward. We're also going to continue to increase overhead absorption, meaning expanding the business, selling more console, driving utilization like we've talked about. And so what -- and this goes back to really your earlier question as well. While we see -- while we are under some pressure now because of supply chain, we see this as a temporary issue and underlying programs that we have are on track to get us to our gross margin target. So maybe that's a good point to hand over to you for some additional comments, Mike.
Michael Watts: No, I think that's a great segue. When we announced the full commercialization of CleanFlow in April, it was great exciting time for us, very exciting at AAE, and we're already seeing positive momentum in utilization and feedback on the procedure instrument. We're anticipating that we're going to see good adoption, customers are asking for it, and we'll also see further improvements in the cost structure of CleanFlow as we start to ramp up the volumes and replaces our existing molds instrument. So we'll see those sequential gross margin improving as we stated in the past. We haven't given specific guidance on gross margins, but I think the way we should think about that as we work through the volumes and improve both adoption and everything, something in order of magnitude, low 30s as a percentage of gross margin. So what we would expect is we exit the year and then as our volumes grow higher into 2023, we'll see that uptake begin to accelerate into the year of 2023. So I hope that really helps.
Unidentified Analyst: Very helpful. And if I can squeeze into just a quick clarification question, I might've misheard. Is the conversion to the pouch, is that margin neutral or -- sorry, I just want to clarify that.
Bjarne Bergheim: Yeah. Good question, Tom, that actually helps us on the margin. So it's simply -- device simpler way of packaging this more elegant and also lowers the cost of the packaging and plus it takes up less space and it's easier for us on the manufacturing line.
Unidentified Analyst: Perfect. Thanks.
Bjarne Bergheim: Thank you.
Michael Watts: Thanks, John.
Operator: Thank you. We now have Nathan Rich of Goldman Sachs, your line is now like to Nathan.
Nathan Rich: Hey, good afternoon and thanks for the questions. Bjarne, maybe to start. Can you talk about what the console selling cycle looks like - post the conference like? The first time you've had one in person in a few years. And what the expanded sales force that you now have, how quickly do you think the interest you saw that event can translate into system placements?
Bjarne Bergheim: Thanks, Nate. I think there is a range of answers for your questions. When we have a busy boost, like we had at the AAE, there will definitely be certain number of consoles that are close on the convention floor. But there will also be initiation of conversations with doctors. They maybe go through a test drive like we talked about in our prepared remarks where they clean a tooth. Our sales reps will start that conversation with the doctor and how this can be incorporated into their practice and then we make closer console a week after the console or four weeks after the AAE event. So I think the way we should view AAE is that this is really a way to really build our pipeline, not just for the quarter, but for the rest of the year. And this gave us a lot of touch points and significantly increased our pipeline for the year.
Nathan Rich: Okay, great. And maybe a follow-up for Mike. You mentioned additional 20 million of liquidity on the credit facility. Could you maybe just talk about how you're thinking about cash needs for the business over the next year or so. And do you feel like the current liquidity levels are kind of sufficient to fund those leads that you have.
Michael Watts: Yeah. Thanks Nathan. When we were looking at -- like all businesses we're continuing looking at our options and sources of capital and perceptive has been a great partner in that, so we're certainly appreciative that we're able to secure that additional $20 million. We're looking at all other sources as well, on our ongoing basis, but right now we're in a very good position and our main priority is to continue invest in the business and drive growth, and increase our GentleWave install base. And then also continue to support our sales team as they drive utilization.
Nathan Rich: Great. Thanks very much for the questions.
Bjarne Bergheim: Thank you, Nate.
Operator: Thank you. . We now have another question on the line from Erin Wright of Morgan Stanley. Please go ahead when you're ready.
Erin Wright: Great. Thanks. Thanks for the questions here. With the rollout of CleanFlow at this point, it sounds you still anticipate the 24 month transitions there. Could that be expedited at all if you did see some of the supply chain dynamics persist here?
Bjarne Bergheim: Yes. Good question, Erin. Obviously, we're early in our launch of CleanFlow. We're going to continue to execute on the plan that we have, and just to give you a high-level overview of the key elements of that plan, obviously, we already have some customers that are already onboarded with CleanFlow, and we're going to continues to support them. But all new GentleWave customers going forward that are buying and consoles and being trained on GentleWave will now be trained on CleanFlow. And then the third element of this is that we are going to convert our existing install base of 850 customers, and this is where our consumable sales team will come in and play a significant part of actually converting those customers. And I think you're asking a good point, Erin, in terms of are there ways to speed that up? Yes, there are. And I think we've taken perhaps measured and perhaps a little bit of a conservative approach to that two-year conversion. But for us, the reason why we're going to continue to really push to convert that faster is that that ultimately helps us drive improved margins in the business. So you're going to see on our side here and in our consumable sales team, they're going to be working -- we're going to be working hard to really convert those customers quicker such that we can get access to better margins quicker.
Erin Wright: Okay, got it, great. It's interesting how you were mentioning that the change in conversation at AAE, and with a focus on more on some of the disruptors such as yourself in the industry here, and I guess you've seen well ahead of the game, but have you seen any competitive response out there? And how have the industry constituents evolved around this? And on the flip side of that, are there opportunities for partnerships across the industry as well? Thanks.
Bjarne Bergheim: Yeah. Good question. Yes. It's really fascinating to see that conversion and how conversations have changed at the AAE because those large file companies that had those large booths, they don't have large booths anymore and they don't have a strong presence anymore and the conversations like we talked about have changed to cleaning this infection. Regarding competitive response, if you look across the entire industry of endodontics, there are no new technologies that have been introduced into this field for the last one or two decades. There are obviously companies out there that are trying to take re-spend existing technologies now because of Sonendo's success, try to go directly against us. But we're still, like we talked about in our last one, and that we've talked about in other other areas, we're very confident that we have a superior technology in terms of enabling good cleaning and disinfections in the teeth and enabling good outcomes in endodontics. So we don't see anything on the horizon that can really compete head-to-head with us from an outcome perspective and provide something obviously that patients want for treating their root canal procedures. So with regards to the partnering side, I think the -- obviously that's something that we'll continuously be the monitoring. But we think that big value-creation opportunity here in the business, Erin, it's just to continue to build on the GentleWave technology that we have, continue to build around the GentleWave platform and to continue to drive efficiencies in these procedures. And then obviously continue to convert the market to GentleWave. We are doing less than 2% of procedures across root canal therapy in the United States and Canada today, so obviously we see a very large opportunity ahead, and we're very bullish on our ability to continue to take share and grow the business within that -- within this market.
Erin Wright: Great. Thank you so much.
Bjarne Bergheim: Thanks, Erin.
Operator: Thank you. As that was our final question I would like to hand it back to Bjarne for some closing remarks.
Bjarne Bergheim: Thank you, Operator. Let me just close up. I think that we appreciate everyone spending time with us today. Mike and I look forward to meeting many of you as we go forward, both at future investor conferences and also for individual meetings. Have a great day.
Operator: Thank you for joining. That does conclude today's call. Please have a lovely day, you may now disconnect your lines.
