Revenue Nearly Tripled - Momentum Grows as ContraPest Usage Expands
SenesTech, Inc. (NASDAQ:SNES) 2Q20 results were very encouraging, with total revenue nearly tripling Y/Y to $71,000 and nearly doubling Q/Q. The company’s product, ContraPest, is a liquid bait that acts as a contraceptive to reduce rodent populations. Using ContraPest in conjunction with other rodenticides maintains rat populations at significantly reduced levels, which is key to controlling this population that is estimated to cause significant economic damage to food supplies and human health across the globe.
SNES’ 2Q20 sales growth is particularly impressive in light of the economic slowdown and given that the company only began to commercialize ContraPest in a meaningful way just about one year ago. To support long-term sales growth, SNES has focused on expanding its distribution channels and generating data on ContraPest’s efficacy, particularly as part of an integrated pest control program. In fact, the company continues to generate proof of concept for its PMP (pest management professionals) customers that by reducing the rodent population, ContraPest can help them reduce their recurring service costs.
‣ Acquire new customers – adding sales reps
‣ Retain existing customers - monthly subscription model & recurring revenue
The company’s commercialization strategy, focused on the long term efficacy and cost effectiveness of ContraPest, is centered on three key drivers: 1) acquire new customers, primarily in residential consumer and service provider segments, 2) retain existing customers with an emphasis on the company’s recurring revenue monthly subscription model, and 3) grow the customer base and revenue. SNES added 63 new accounts in 2019 and an impressive 208 to-date in 2020 despite the economic slowdown. The company is also expanding its sales rep team. In terms of retaining and moving customers to a recurring revenue format, in July almost 14% of customers purchased ContraPest under the company’s monthly subscription model.
The company’s target to continue to expand its customer base and move beyond PMP includes a greater focused on retail buyers. SNES has added a new (launched in March 2020) e-commerce platform enabling direct-to-consumer sales. SNES indicated that the e-commerce platform has recorded strong month to month growth from the direct-to-consumer market. Not only does the e-commerce channel help with retail sales, but the platform also serves as another venue for PMPs, as well.
With the economic downturn, SNES reduced headcount. Operating expense was down nearly 30% both Y/Y and Q/Q in 2Q20. This, combined with the strong Y/Y revenue improvement, led to a much narrower operating loss ($1.6m compared to $2.3m in 2Q19). As economic activity resumes, SNES intends to focus on revenue generating positions when it adds staff, including adding new sales reps, as noted. SNES also intends to focus on lowering production costs as it expands sales, as well as analyzing additional less costly contraceptives to augment its product line.
PPP (payroll protection program) and an April $4.3m capital raise helped SNES strengthen its balance sheet. The company ended 2Q20 with $4.7m in cash compared to $1.9m at YE19.
Converting Pilots to Sales: District of Columbia & San Fran
Multi-month pilot program shows ContraPest efficacy in reducing rat populations in DC Health’s integrated pest management program
The District of Columbia, like other markets, has reopened many eateries and public spaces where food is served. This means that it must refocus its efforts to contain the rat population. SNES has worked with DC to provide proof of concept about ContraPest’s efficacy as part of an integrated rodent control program.
In a four month study, rat populations declined by anywhere from 50% to 88% when ContraPest was deployed. The District of Columbia has indicated it will be deploying ContraPest on a widespread basis as its budget permits. Management believes over time this could translate into annual sales of $50,000 to $100,000+ for SNES.
Similar work is underway in San Francisco. The San Francisco Recreation and Parks Department attained a 65% reduction in rodent populations by including ContraPest in an integrated pest management program. Importantly, the 65% metric is incremental to the rodent population reduction achieved by conventional programs before including the use of ContraPest. Moreover, legislation in California (AB1788) to ban certain rodenticides could be another catalyst for ContraPest growth, as the product is environmentally responsible and approved for use in most environmentally sensitive situations.
ContraPest Use in Poultry Industry Is Another Potential Revenue Driver
Another channel SNES is addressing is controlling the rodent population on poultry farms. This application has been shown to produce 50% to 87% reductions in rodent populations, with an average sustained reduction of 61%. This target market also enables SNES to test a modified, easier-to-use dispenser system that the company expects to submit to the EPA for approval in 2020. EPA approval of the new dispenser system could open the door for expanded sales and marketing for ContraPest.
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