Sonendo Inc (SONX) Q1 2023 Earnings Call

Investor webinar replay

Replay transcript excerpt

in higher volume practices. This has led to an entire mix of G4 systems relative to the G3 system and higher ASP. The general wave G4 launch is progressing well, and our sales team reports that the demand pipeline remains strong. To support the expected growth in G4, we're working to transform assembly from our third-party partner to our Laguna Hills facility. where we currently assemble the G3 console. We believe that this will give us more oversight in the initial launch stages of the G4 and enable greater control of our supply chain and manufacturing. Additionally, co-locating product development and console assembly will facilitate iterative improvements and efficiencies that we think will produce margin growth and product improvement benefits in the near term. This will allow us to accelerate responses to in-market feedback, as well as to ensure a timely delivery and installation while maintaining customer satisfaction with our product. As for procedure instrument sales, we saw sales for third quarter totaling $5.7 million, representing a 32% increase year-over-year. While we're encouraged by the significant jump in consumables, we believe that this figure will normalize somewhat in the second quarter as some customers purchased a surplus of inventory ahead of the price increase that was effective February 1st. We were pleased to see a considerable increase to our gross margin, improving sequentially from 27% in the fourth quarter of 2022 to 31% in Q1. The increase was driven by clean flow PI conversion rates among our customers, benefits to our new PI pricing program and operating efficiencies in our consumable production line. As we continue to scale the company toward a single procedure instrument, we'll be able to recognize further growth in our gross margin...