8-K
Sonendo, Inc. (SONX)
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of Report (Date of earliest event reported): November 12, 2024 |
|---|
Sonendo, Inc.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 001-40988 | 20-5041718 |
|---|---|---|
| (State or Other Jurisdiction<br>of Incorporation) | (Commission File Number) | (IRS Employer<br>Identification No.) |
| 26061 Merit Circle, Suite 102 | ||
| Laguna Hills, California | 92653 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
| Registrant’s Telephone Number, Including Area Code: (949) 766-3636 | ||
| --- |
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | SONX | OTC Markets |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On November 12, 2024, Sonendo, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended September 30, 2024 (the “Press Release”). A copy of the Press Release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Discussion of Non-GAAP Financial Measure
In the Press Release, in addition to financial measures reported in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), the Company provides various non-GAAP financial measures, including (1) gross profit and gross margin excluding certain excess and obsolete inventory charges, long-lived asset impairment charges, and stock-based compensation expense (“Adjusted Gross Profit” and “Adjusted Gross Margin”), (2) earnings (loss) before income tax expense, interest and financing costs, net, depreciation and amortization, excluding certain excess and obsolete inventory charges, stock-based compensation expense, long-lived asset impairment charges and transaction and financing costs related to the Company’s attempted acquisition of Biolase (“Adjusted EBITDA Loss”), and (3) the sum of net cash used in operating activities and purchases of property and equipment (“Free Cash Flow (Burn)”).
Management believes that the presentation of Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA Loss and Free Cash Flow (Burn) (collectively, the “Non-GAAP Measures”) is useful in helping identify the Company’s core operating performance and enables management to consistently analyze the period-to-period financial performance of the core business operations. Management also believes that the Non-GAAP Measures will enable investors to assess the Company in the same way that management has historically assessed the Company’s operating results against comparable companies with conventional accounting methodologies. The Company’s definition for each of the Non-GAAP Measures has limitations as an analytical tool and may differ from other companies reporting similarly named measures. Non-GAAP Measures should not be considered measures of financial performance under GAAP, and the items excluded from (or, in the case of Free Cash Flow (Burn), included in) such Non-GAAP Measures should not be considered in isolation or as alternatives to financial statement data presented in the financial statements as an indicator of financial performance or liquidity. These Non-GAAP Measures should be considered in addition to results prepared in accordance with GAAP but should not be considered a substitute for or superior to GAAP results.
Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit and Adjusted Gross Margin represent GAAP Gross Profit and GAAP Gross Margin, respectively, excluding the impact of the following items recorded in cost of sales:
- Excess and obsolete inventory charges related to recently discontinued products. Management excludes this item when evaluating the Company’s operating performance because of its unusually occurring nature and the significant volatility of these charges, which are related to infrequent discrete decisions to phase out or discontinue specific products.
- Impairments of long-lived assets. Management excludes this item when evaluating the Company’s operating performance because these amounts represent costs that are capitalizable as purchases of long-lived assets, but for GAAP purposes are then immediately impaired under ASC 360. Such immediate impairments are not indicative of the Company’s ongoing operational performance.
- Stock-based compensation. Management excludes this item when evaluating the Company’s operating performance because it is a non-cash expense.
Adjusted EBITDA Loss
Adjusted EBITDA Loss consists of GAAP earnings (loss) before income tax expense, interest and financing costs, net, depreciation and amortization (“EBITDA”), excluding the impact of stock-based compensation, excess and obsolete inventory charges related to recently discontinued products, impairments of long-lived assets and transaction and financing costs related to the Company’s attempted acquisition of Biolase, recorded herein. In addition to the explanations provided above, the Company’s excludes transaction and financing costs related to the Company’s attempted acquisition of Biolase in the calculations of Adjusted EBITDA because such amounts are infrequent and highly volatile in nature because acquisitions are not a core component of the Company’s strategy nor its recurring operations.
Free Cash Flow (Burn)
Free Cash Flow (Burn) is calculated by subtracting (adding) cash used to purchase property and equipment expenditures from (to) net cash flows provided by (used in) operating activities. Free cash flow is an important indicator of how much cash is generated or used
by the Company’s business operations, including capital expenditures. Management uses free cash flow to measure progress on its capital efficiency and cash flow initiatives.
For a reconciliation of the Non-GAAP Measures presented herein to the most directly comparable GAAP financial measure, please see the “Reconciliation of GAAP to Non-GAAP Measures” section in the Press Release.
The Company may, in the future, incur expenses of a nature similar to many of the non-GAAP adjustments described above, and exclusion (or inclusion) of these items from (in) its Non-GAAP Measures should not be construed as an inference that all of these costs are unusual, infrequent or non-recurring.
Item 9.01 Financial Statements and Exhibits.
The following exhibits are furnished as part of this report:
| Exhibit Number | Description |
|---|---|
| 99.1 | Press Release issued by Sonendo, Inc., dated November 12, 2024 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Sonendo, Inc. | |||
|---|---|---|---|
| Date: | November 12, 2024 | By: | /s/ Bjarne Bergheim |
| Bjarne Bergheim<br>President and Chief Executive Officer |
EX-99.1
Ex. 99.1
Sonendo, Inc. Reports Third Quarter 2024 Financial Results
LAGUNA HILLS, CA – November 12, 2024 – Sonendo, Inc. (“Sonendo” or the “Company”) (OTCQX: SONX), a leading dental technology company and developer of the GentleWave® System, today reported financial results for the third quarter ended September 30, 2024.
Recent Highlights
- Generated $8.0 million total revenue for the third quarter of 2024 and carried over a double-digit console backlog for the third straight quarter;
- Drove substantial increases in GAAP gross margin and adjusted gross margins (non-GAAP) to 41.2% and 42.6%, respectively, based primarily on lower manufacturing and console warranty costs;
- Significantly reduced GAAP operating loss to $7.5 million and adjusted EBITDA (non-GAAP) loss to $5.1 million, a 57% and 54% improvement, respectively, compared to the third quarter of 2023; and
- Significantly reduced free cash flow burn to $4.3 million, a 59% year-over-year reduction.
“We are pleased by the results we reported for the third quarter and remain encouraged by our continued successful execution of the strategic reset we embarked on earlier this year,” said Bjarne Bergheim, President and Chief Executive Officer of Sonendo. “While we are disappointed that we were not the winning bidder in the bankruptcy auction for the acquisition of Biolase, we remain committed to our customers, our shareholders and our employees. The executive team, along with our Board of Directors, continues to evaluate the various financing options and other strategic alternatives for Sonendo. We will update these important stakeholders as we make any decisions with respect to those options.”
Third Quarter 2024 Financial Results
Except as otherwise indicated, the GAAP and non-GAAP financial measures presented in this press release exclude discontinued operations associated with the Company’s divestiture of its TDO practice management software segment in March 2024.
Total revenue was $8.0 million for the third quarter of 2024, a 2% decrease compared to third quarter of 2023. GentleWave console revenue totaled $1.9 million, a 10% decrease compared to the third quarter of 2023. The Company maintains an active user base of more than 800 customers. Procedure instrument revenue totaled $5.1 million, compared to $5.1 million for the prior year quarter. Other product revenue totaled $1.1 million for the third quarter of 2024, a $0.1 million year-over-year increase.
GAAP gross margin for the third quarter of 2024 increased to 41.2%, compared to 10.8% for the third quarter of 2023. During the third quarter of 2023, the Company recorded in cost of sales a $1.3 million impairment charges of long-lived assets. Adjusted gross margin (non-GAAP) for the third quarter of 2024 was 42.6% compared to 27.8% for the prior year quarter.
Total operating expenses for the third quarter of 2024 totaled $10.1 million, a $7.3 million reduction compared to the prior year period.
Operating loss totaled $7.5 million for the third quarter of 2024, a $9.9 million reduction compared to the prior year quarter. Adjusted EBITDA (non-GAAP) loss totaled $5.1 million, a $5.9 million reduction compared to the prior year period.
Net loss from continuing operations totaled $7.5 million for the third quarter of 2024, a $9.9 million reduction compared to the prior year quarter.
Free cash flow burn (non-GAAP), which the Company defines as the sum of net cash used in operating activities and purchases of property and equipment, totaled $4.3 million for the third quarter of 2024, a $6.1 million improvement compared to the prior year quarter.
As of September 30, 2024, the Company’s cash and cash equivalents and short-term investments totaled $17.3 million, and there were $17.8 million of principal payments outstanding under its term loan facility.
Ex. 99.1
About Sonendo
Sonendo is a commercial-stage medical technology Company focused on saving teeth from tooth decay, the most prevalent chronic disease globally. Sonendo develops and manufactures the GentleWave® System, an innovative technology platform designed to treat tooth decay by cleaning and disinfecting the microscopic spaces within teeth without the need to remove tooth structure. The system utilizes a proprietary mechanism of action, which combines procedure fluid optimization, broad-spectrum acoustic energy and advanced fluid dynamics, to debride and disinfect deep regions of the complex root canal system in a less invasive procedure that preserves tooth structure. The clinical benefits of the GentleWave System when compared to conventional methods of root canal therapy include improved clinical outcomes, such as superior cleaning that is independent of root canal complexity and tooth anatomy, high and rapid rates of healing and minimal to no post-operative pain. In addition, the GentleWave System can improve the workflow and economics of dental practices.
For more information about Sonendo and the GentleWave System, please visit www.sonendo.com. To find a GentleWave doctor in your area, please visit www.gentlewave.com.
Forward Looking Statements
This press release includes forward-looking statements (statements which are not historical facts) within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, express or implied forward-looking statements relating to the Company’s anticipated business and financial performance on an on-going basis. You are cautioned that such statements are not guarantees of future performance and that our actual results may differ materially from those set forth in the forward-looking statements. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions; speak only as of the date they are made; and, as a result, are subject to risks and uncertainties that may change at any time. Factors that could cause the Company’s actual results to differ materially from these forward-looking statements are described in detail in our registration statements, reports and other filings with the Securities and Exchange Commission, including the “Risk Factors” set forth in our Annual Report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q. Such filings are available on our website or at www.sec.gov. We undertake no obligation to publicly update or revise forward-looking statements to reflect subsequent developments, events, or circumstances, except as may be required under applicable securities laws. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise.
Use of Non-GAAP Financial Measures
Sonendo’s financial results are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). In this press release, the Company also presents various non-GAAP financial measures, including adjusted gross margin, adjusted EBITDA loss and free cash flow burn (collectively, the “Non-GAAP” measures). The following tables present reconciliations of various financial measures calculated in accordance with GAAP to those Non-GAAP measures that exclude (or, in the case of free cash flow burn, include) items specified in the tables. The GAAP measures shown in the tables below represent the most comparable GAAP measure to the applicable non-GAAP measures shown in the table. For further information regarding the nature of these exclusions or inclusions, why the Company believes that these non-GAAP financial measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the Company’s Current Report on Form 8-K regarding this press release filed today with the SEC available on the SEC’s website at www.sec.gov and on the “Investors” page of the Company’s website at https://investor.sonendo.com.
Investor Contact:
Gilmartin Group
Greg Chodaczek
IR@Sonendo.com
Ex. 99.1
SONENDO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| December 31, | |||||
|---|---|---|---|---|---|
| 2023 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 13,096 | $ | 14,009 | ||
| Short-term investments | 4,188 | 32,773 | |||
| Accounts receivable, net | 4,445 | 4,790 | |||
| Inventory | 11,487 | 11,074 | |||
| Prepaid expenses and other current assets | 508 | 1,969 | |||
| Current assets of discontinued operations | 1,000 | 656 | |||
| Total current assets | 34,724 | 65,271 | |||
| Property and equipment, net | 691 | 461 | |||
| Operating lease right-of-use assets | 2,592 | 2,703 | |||
| Other assets | 124 | 128 | |||
| Non-current assets of discontinued operations | — | 9,597 | |||
| Total assets | 38,131 | $ | 78,160 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 686 | $ | 1,142 | ||
| Accrued expenses | 3,202 | 3,072 | |||
| Accrued compensation | 2,008 | 2,413 | |||
| Operating lease liabilities | 884 | 1,250 | |||
| Current portion of term loan | 10,800 | 24,900 | |||
| Other current liabilities | 1,535 | 1,844 | |||
| Current liabilities of discontinued operations | — | 700 | |||
| Total current liabilities | 19,115 | 35,321 | |||
| Operating lease liabilities, net of current | 1,570 | 1,423 | |||
| Term loan, net of current | 6,084 | 12,467 | |||
| Other liabilities | 396 | 530 | |||
| Total liabilities | 27,165 | 49,741 | |||
| Commitments and contingencies | |||||
| Stockholders’ equity: | |||||
| Preferred stock, 0.001 par value; authorized —10,000,000 shares; issued and outstanding - none | — | — | |||
| Common stock, 0.001 par value; authorized — 500,000,000 shares; issued and outstanding— 418,038 shares as of September 30, 2024 and 317,737 shares as of December 31, 2023 | 84 | 64 | |||
| Additional paid-in-capital | 462,555 | 458,357 | |||
| Accumulated other comprehensive loss | 3 | 11 | |||
| Accumulated deficit | (451,676 | ) | (430,013 | ) | |
| Total stockholders’ equity | 10,966 | 28,419 | |||
| Total liabilities and stockholders’ equity | 38,131 | $ | 78,160 |
All values are in US Dollars.
Ex. 99.1
SONENDO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(In thousands, except share and per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Revenue, net | $ | 8,036 | $ | 8,163 | $ | 23,397 | $ | 25,604 | ||||
| Cost of sales | 4,726 | 7,279 | 14,970 | 23,227 | ||||||||
| Gross profit | 3,310 | 884 | 8,427 | 2,377 | ||||||||
| Operating expenses: | ||||||||||||
| Selling and marketing | 3,642 | 6,954 | 12,858 | 22,628 | ||||||||
| General and administrative | 4,872 | 7,708 | 13,952 | 20,257 | ||||||||
| Research and development | 1,588 | 2,787 | 5,345 | 8,478 | ||||||||
| Total operating expenses | 10,102 | 17,449 | 32,155 | 51,363 | ||||||||
| Operating loss | (6,792 | ) | (16,565 | ) | (23,728 | ) | (48,986 | ) | ||||
| Interest and other expense | (744 | ) | (884 | ) | (3,443 | ) | (2,202 | ) | ||||
| Loss before income tax expense | (7,536 | ) | (17,449 | ) | (27,171 | ) | (51,188 | ) | ||||
| Income tax expense | — | — | — | — | ||||||||
| Loss from continuing operations, net of tax | (7,536 | ) | (17,449 | ) | (27,171 | ) | (51,188 | ) | ||||
| Income from discontinued operations, net of tax | — | 469 | 5,508 | 1,147 | ||||||||
| Net loss | $ | (7,536 | ) | $ | (16,980 | ) | $ | (21,663 | ) | $ | (50,041 | ) |
| Other comprehensive income (net of tax): | ||||||||||||
| Unrealized (loss) gain on short-term investments | 5 | 24 | (8 | ) | 55 | |||||||
| Comprehensive loss | $ | (7,531 | ) | $ | (16,956 | ) | $ | (21,671 | ) | $ | (49,986 | ) |
| Net loss per share from continuing operations – basic and diluted | $ | (15.77 | ) | $ | (37.01 | ) | $ | (57.18 | ) | $ | (108.93 | ) |
| Net income per share from discontinued operations – basic and diluted | $ | — | $ | 0.99 | $ | 11.59 | $ | 2.44 | ||||
| Net loss per share – basic and diluted | $ | (15.77 | ) | $ | (36.02 | ) | $ | (45.59 | ) | $ | (106.49 | ) |
| Weighted-average shares outstanding – basic and diluted | 477,857 | 471,427 | 475,188 | 469,934 |
Ex. 99.1
SONENDO, INC.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(unaudited; in thousands; except percentage)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Gross profit | $ | 3,310 | $ | 884 | $ | 8,427 | $ | 2,377 | ||||
| Gross margin | 41.2 | % | 10.8 | % | 36.0 | % | 9.3 | % | ||||
| Adjustments: | ||||||||||||
| Excess and obsolete inventory reserve related to recently discontinued products | 100 | — | 341 | 2,917 | ||||||||
| Impairment of long-lived assets | — | 1,341 | 161 | 1,341 | ||||||||
| Stock-based compensation expense | 14 | 44 | 324 | 262 | ||||||||
| Adjusted gross profit | $ | 3,424 | $ | 2,269 | $ | 9,253 | $ | 6,897 | ||||
| Adjusted gross margin | 42.6 | % | 27.8 | % | 39.5 | % | 26.9 | % | ||||
| Loss from continuing operations, net of tax | $ | (7,536 | ) | $ | (17,449 | ) | $ | (27,171 | ) | $ | (51,188 | ) |
| Adjustments: | ||||||||||||
| Interest and other expense | 744 | 884 | 3,443 | 2,202 | ||||||||
| Depreciation and amortization | 75 | 402 | 203 | 1,152 | ||||||||
| Excess and obsolete inventory reserve related to recently discontinued products | 100 | — | 341 | 2,917 | ||||||||
| Stock-based compensation expense | 630 | 1,739 | 3,854 | 5,654 | ||||||||
| Impairment of long-lived assets | — | 3,392 | 161 | 3,392 | ||||||||
| Transaction and financing costs related to Biolase acquisition | 874 | — | 874 | — | ||||||||
| Adjusted EBITDA | $ | (5,113 | ) | $ | (11,032 | ) | $ | (18,295 | ) | $ | (35,871 | ) |
| Cash Flows | ||||||||||||
| Cash flow used in operating activities | $ | (4,311 | ) | $ | (10,216 | ) | $ | (21,718 | ) | $ | (36,557 | ) |
| Purchases of property and equipment | — | (216 | ) | (161 | ) | (843 | ) | |||||
| Free cash flow (burn) | $ | (4,311 | ) | $ | (10,432 | ) | $ | (21,879 | ) | $ | (37,400 | ) |