SanuWave Health’s Cms Rule Timelines and Growth Expectations Clash in 2026 Q2 Earnings Call

Date of Call: Aug 7, 2026

Financials Results

• Revenue: $9.7 million, a decrease of 3% compared to $10.1 million in the prior year quarter
• Gross Margin: 76.2%, a decrease of approximately 183 basis points year-over-year from 78.1%

Business Commentary:

Strong Applicator Sales Performance:

• SanuWave set a new all-time record for applicator unit volumes, up 13% sequentially from Q1 and 27% year-on-year, with applicator revenues up 8% sequentially and surpassing the previous record from Q3 2025, representing a 13% year-over-year increase.
• This growth was driven by continued strong demand across the active installed base, indicating customer confidence in the Ultramist product despite industry challenges.

Challenges in System Sales:

• System sales were significantly impacted, with the Ultima system revenue declining approximately 34% to $2.3 million from $3.4 million.
• The decline was attributed to financial pressures across the industry, increased availability of new systems, and the profound cannibalization effect from the sale of used Ultramist devices in a consolidated market.

Recurring Core Business Growth:

• The recurring core applicator business, represented by consumables, parts, and accessories, grew approximately 13% year-over-year, with an increase of 12% to $7.3 million.
• This growth was sustained despite industry challenges, showcasing the resilience of the consumables segment.

Impact of CMS Reimbursement Changes:

• CMS proposed a significant reimbursement reduction for Ultramist, potentially decreasing from $397 to approximately $316 in 2027, based on changes to relative value units and a conversion factor.
• This change is driven by CMS's goal of accurate data-driven payment, and SanuWave, along with users, plans to comment on the proposed rule to ensure data accuracy and completeness.

Withdrawal of Fiscal Year 2026 Revenue Guidance:

• SanuWave withdrew its previously issued fiscal year 2026 revenue guidance due to market conditions and Medicare reimbursement developments.
• The company will not provide quarterly or annual guidance until there is greater clarity, expecting to reassess after CMS publishes its final rule.

Sentiment Analysis:

Overall Tone: Negative

• Revenue declined 3% YOY. Operating loss of $0.3 million compared to operating income of $1.4 million prior year. Company withdrew FY2026 revenue guidance due to challenging market conditions, including Medicare reimbursement uncertainty.

Q&A:

• Question from Sean Westrope (DeepSell Capital): Just wanted to ask on kind of the breakdown on your customer side versus kind of like the for-profit area. kind of like your mobile wound care versus hospital and kind of like other like non, I guess, for-profit seeking businesses. What's kind of the breakdown between those two groups?
  Response: Customer model delineation is fuzzy with many hybrids; historically, mobile has been a larger use case, but hospital customers like Keologics represent a slower-to-ramp but more sticky and long-term segment.

• Question from Sean Westrope (DeepSell Capital): Can you just give us a little more color on how you're getting to the 316 number?
  Response: Based on CMS-proposed RVUs (Work: 0.39, Practice Expense: 9.24, Malpractice: 0.01) multiplied by conversion factor of 32.84, resulting in an estimated reimbursement rate of $316 for 2027.

• Question from Sean Westrope (DeepSell Capital): In terms of the process that you guys are going through to resubmit, is there any indications on when you will get any feedback on that, or is that just wait until the final rule and you kind of hear that?
  Response: 60-day comment period ends September 14; final rule expected around first week of November. Company plans to meet with CMS and submit comments.

Contradiction Point 1

Timeline for CMS Rule Finalization and Feedback

Contradiction on when feedback on comments is received before the final rule.

What are your thoughts on DeepSell Capital's recent earnings performance? - Sean Westrope (DeepSell Capital)

2026Q2: The comment period lasts 60 days, ending on September 14, 2026. The company and customers will submit comments and seek meetings with CMS. A final rule is anticipated in early November (around the first week), traditionally falling within that tight timeframe. - Morgan Frank(CEO)

When can feedback be expected after resubmitting comments to CMS, or must we wait until the final rule? - Sean Westrope (Deep Cell Capital)

2026Q2: There is a **60-day comment period** ending September 14, 2026. The company and customers will submit comments and seek meetings with CMS. The final rule is expected to be announced around the **first week of November 2026**. There is no hard date for feedback before the final rule; the outcome will be known then. - Morgan Frank(CEO)

Contradiction Point 2

Growth Expectations and Seasonal Trends

Confidence in strong back-half growth contradicts the forward-looking statement about a slower ramp with hospitals.

Sean Westrope (DeepSell Capital) - Sean Westrope (DeepSell Capital)

2026Q2: Forward-looking, hospital customers (like Keologics) are slower to ramp but bring 'super tanker momentum' once established. - Morgan Frank(CEO)

What is the customer mix between for-profit (e.g., mobile wound care) and non-profit (e.g., hospitals) businesses? - Ian Cassel (IFCM)

2026Q1: The confidence stems from a combination of seasonal trends and specific market engagements... with the second half typically up about 48% year-over-year on average. - Morgan Frank(CEO)

Contradiction Point 3

Growth Trajectory and Sales Pipeline Outlook

The expected timing for growth acceleration appears inconsistent.

Sean Westrope (DeepSell Capital) - Sean Westrope (DeepSell Capital)

2026Q2: The company expects the rest of the year to be better than Q1... The back half of 2026 looking very promising. - Kyle Bauser(ROTH Capital)

What is the breakdown of customers between for-profit and non-for-profit businesses? - Carl Byrnes (Northland)

20260327-2025 Q4: It's a bit early to be definitive. - Carl Byrnes(Northland)

Contradiction Point 4

Operational Model for Reseller Relationships

The financial model for resellers is described as significantly different but without clear quantification.

Sean Westrope (DeepSell Capital) - Sean Westrope (DeepSell Capital)

2026Q2: Selling to resellers at wholesale price results in a higher operating margin fall-through compared to the previous model of paying commissions to distributors. The exact margin difference was not quantified. - Kyle Bauser(ROTH Capital)

Explain the methodology behind the 2027 reimbursement estimate of $316 (down from $397)? - Kyle Bauser (ROTH Capital)

20260327-2025 Q4: The company has not provided specific EBITDA guidance. Historically, incremental revenue has translated to EBITDA with a drop of approximately 50%. - Carl Byrnes(Northland)