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DATE

Friday, Aug. 7, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Morgan Frank
• Chief Financial Officer - Peter Sorensen

TAKEAWAYS

• Revenue -- $9.7 million, a 3% decrease from $10.1 million, reflecting a sharp decline in capital equipment sales for SANUWAVE Health, Inc. (SNWV -11.17%).
• UltraMIST Applicator Revenue -- $7.3 million, a 13% increase from $6.4 million, representing the core recurring revenue driver for the business.
• UltraMIST System Revenue -- $2.3 million, a 34% decline from $3.4 million, driven by financial pressure across the wound care industry and increased availability of used systems.
• Applicator Unit Volume -- Growing 27% year over year and 13% sequentially, setting a new record for the company.
• UltraMIST Systems Sold -- 82 units, a decrease from 116 units in the prior year quarter and 97 units in the first quarter.
• Active Systems -- 1,411 units at the end of the second quarter, up from 1,382 at the end of the first quarter.
• Used System Sales -- 40 to 60 units estimated in the secondary market, which management identified as a significant source of cannibalization for new system sales.
• Gross Margin -- 76.2%, a decrease of 183 basis points from 78.1%, due to a shift in revenue mix toward consumables and lower wholesale pricing through resellers.
• Operating Loss -- $0.3 million, compared to operating income of $1.4 million in the prior year, reflecting higher personnel, legal, and research and development expenses.
• Net Loss -- $0.7 million, or $0.08 per share, compared to net income of $0.6 million in the same period last year.
• Adjusted EBITDA -- $1.2 million, a decrease from $3.2 million, driven by higher operating expenses and lower gross margin dollars.
• Operating Expenses -- $7.7 million, an increase of $1.3 million, which included $1.6 million in stock-based compensation.
• Cash and Cash Equivalents -- $9.4 million as of June 30, 2026.
• Term Loan Principal Payments -- $2.9 million in scheduled payments made during the first half of the year.
• Inventory -- $7.1 million, an increase from $5.9 million at year-end 2025.
• Proposed Medicare Reimbursement Cut -- $316.59 estimated for 2027 under the Physician Fee Schedule proposed rule, a reduction from the current $397 average for code 97610.
• Proposed HOPD Reimbursement Increase -- 14% proposed rise for UltraMIST in the hospital outpatient setting for 2027.
• Fiscal Year 2026 Guidance -- Withdrawn by management due to market uncertainty and pending final Medicare reimbursement determinations.
• Interest Expense -- $0.5 million, a decrease of $1.4 million following the company's debt refinancing in Sept. 2025.
• Sales Tax Benefit -- $0.9 million favorable year-over-year swing resulting from the resolution of voluntary disclosure agreements with state tax authorities.

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RISKS

• Frank stated, "As the number of UltraMIST customers, some of them quite large, have closed up shop in recent quarters, this has created an unprecedented market for used UltraMIST devices, which wound up having profound cannibalization effects on our business during the quarter."
• Frank warned that if the proposed Physician Fee Schedule rule goes into effect, "reimbursement for UltraMIST would drop from its present $397 average to approximately $316 in 2027, with further reductions to follow in 2028."
• Management noted that a 95% reduction in skin substitute reimbursement has caused significant financial distress and closures among wound care practitioners, who represent the company's primary customer base.

SUMMARY

Management reported a decline in total revenue as record growth in the core UltraMIST applicator business was offset by a sharp contraction in capital equipment sales. The company attributed the weakness in system sales to a challenging wound care market where significant changes to Medicare reimbursement for skin substitutes have triggered practitioner consolidation and the emergence of a secondary market for used devices. While recurring consumable revenue reached record levels, the company faces potential headwinds from a proposed 2027 Medicare rule that suggests a material reduction in reimbursement rates for its primary treatment code. Management withdrew full-year 2026 guidance until there is greater clarity on the final regulatory rules expected in the fourth quarter.

• CEO Frank noted that the used system market created "profound cannibalization effects," with approximately 40 to 60 units sold through secondary channels rather than the company during the quarter.
• The company is shifting its commercial focus toward hospital outpatient and long-term care facilities, which management described as "sticky, long-term customers with high usage rates."
• CEO Frank characterized the current wound care environment as having a "95% haircut" for skin substitute pricing, impacting a market previously valued at $14 billion.
• Management confirmed that the UltraMIST reimbursement code 97610 has been nominated as a "mispriced code" by CMS, prompting the company to organize a formal response during the 60-day comment period ending Sept. 14.
• CEO Frank noted that while mobile wound care has historically been a large use case, new hospital customers provide "supertanker momentum" once the longer adoption ramp-up is complete.
• The company achieved a $0.9 million favorable swing in state and local sales tax expenses as final settlements for voluntary disclosure agreements came in below previously accrued amounts.

INDUSTRY GLOSSARY

• UltraMIST: An FDA-cleared therapy that uses low-frequency ultrasound delivered through a saline mist to promote wound healing.
• CMS: Centers for Medicare & Medicaid Services, the federal agency that administers national healthcare programs.
• HOPD: Hospital Outpatient Department, a facility that provides medical services not requiring an overnight stay.
• RVU: Relative Value Unit, a measure used by Medicare to determine provider reimbursement based on resource consumption.
• Allograft: A tissue graft from a donor used in wound care treatments, currently facing significant reimbursement changes from CMS.
• VDA: Voluntary Disclosure Agreement, a program allowing companies to disclose and pay past-due taxes to state authorities under mitigated penalties.

Full Conference Call Transcript

Operator: Hello and welcome everyone joining today's SANUWAVE Earnings Call. [Operator Instructions] Please note this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Morgan Frank, Chairman and CEO of SANUWAVE. Please go ahead.

Morgan Frank: Thank you, Leslie. So welcome to the SANUWAVE second quarter 2026 earnings call. Our Form 10-Q was filed with the SEC last night, along with our earnings release, and our updated presentation was made available on our website in the Investor section. Please refer to that during the presentation. Joining me on the call is Peter Sorensen, our CFO, and after the presentation, we will open the call to Q&A. Let me begin with the forward-looking statements and other disclosures. This call may contain forward-looking statements, such as statements relating to future financial results, production expectations, plans for future business development activities, and expectations regarding the impact of changes in reimbursement levels and tariff rates.

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are beyond the company's ability to control. Description of these risks and uncertainties and other factors that could affect our financial results are included in our SEC filings. Actual results may differ materially from those projected in the forward-looking statements. The company undertakes no obligation to update any forward-looking statement. Certain percentages discussed in this call are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes. As a reminder, our discussion today will include non-GAAP numbers.

Reconciliations between our GAAP and non-GAAP results can be found in our recently filed 10-Q for the period ended June 30, 2026. Okay, so as we discussed in several of our recent press releases, Q2 actually started out fairly strong, and applicator sales remained so during the whole quarter, setting a new all-time record for both unit volumes, up 13% sequentially from our previous record in Q1 and 27% year-over-year, and for applicator revenues, up 8% sequentially from Q1 and surpassing the previous record from Q3 2025. These were up 13% year-over-year. We know that the release looks like it should be 14%. That's the whole number rounding issue that we mentioned.

The divergence on price is predominantly from a shift to a reseller model and the company selling applicators at wholesale prices. Overall, during the quarter, applicator sales went largely to plan and on model. We take this to be a good sign about customer confidence in the UltraMIST product, especially in such a difficult market in which so many wound care providers have gone BK or closed their doors as a result of CMS changes to skin sub reimbursement and clawbacks of reimbursement associated with that modality. As we've said in the past, neither the wounds nor the patients have gone away. And so as the number of practitioner entities drop, we continue to see significant consolidation in the space.

This has all been much as we expected. Where Q2 meaningfully diverged from plan and expectation was on the system sales side. As the number of UltraMIST customers, some of them quite large, have closed up shop in recent quarters, this has created an unprecedented market for used UltraMIST devices, which wound up having profound cannibalization effects on our business during the quarter. I mean, I suppose if one were inclined to see good news here, it would be that at least people are buying them. Obviously, the bad news is that they weren't buying them from us. So many have asked about whether and to what extent we can size the impact that this had on the quarter.

The honest answer to this is it's pretty difficult. Because while we've seen a number of these transactions directly, either through the sales process or as new users reach out to us, there's simply no way to know what percentage of the overall trend we're capturing. So our best guess is that used systems accounted for 40 to 60 system sales in the quarter. But again, and just to be really clear here, it's difficult to be precise. And this is our best estimate. Customers buying applicators through resellers who are unable to check a serial number against the original purchaser's list would not necessarily be visible as having bought a used system.

Obviously, the same is true for existing customers who simply added another system. This also makes active systems a little tricky to calculate just now and creates the potential to undercount somewhat. But based on our ordered-within-the-last-six-months, less those we know have closed their doors, even if it was fewer than six months ago methodology, our count for active systems at the end of Q2 was 1,411, up 29 from the 1,382 at the end of Q1. Wound care has been quite a market over the last 12 months. The announcement of the pricing drop for skin subs to $127 a square centimeter took a $14 billion space and gave it something on the order of a 95% haircut.

Reported CMS billing for 2026 thus far bears this out. Clawbacks on past payments have sucked huge amounts of money out of the space, and this has put quite a few practitioners out of business as many were users of both UltraMIST and allograft, so this has had a profound effect on the health of our customer base. The used systems coming up for sale stand testament to this. Hopes that 2027 might see a skin sub reimbursement pricing rise were not met when CMS provided early guidance on this topic.

We did get some positive news from the calendar year 2027 Hospital Outpatient Prospective Payment System proposed rule, released July 2, which proposes to increase reimbursement for UltraMIST by 14% for 2027 when used in the hospital outpatient setting, a place of service that includes a number of our customers and has been an increasing focus for us. Then on July 14, CMS calendar year 2027 Physician Fee Schedule proposed rule was released, and obviously this is not as good. 97610 was nominated as a mispriced code and changes to reimbursement suggested.

If, and I really want to emphasize that this is still a proposed and not final rule, this rule were to go into effect, our read is that reimbursement for UltraMIST would drop from its present $397 average to approximately $316 in 2027, with further reductions to follow in 2028. We disagree with a number of the assumptions CMS is using to arrive at these figures, and while getting into particulars is not appropriate in this venue, suffice it to say that both we and a great number of UltraMIST users, both professional and academic, plan to participate in this comment period.

Honestly, it's been gratifying to get such a significant inpouring of support, and we'll make the most of it. Having a product that your users truly love and believe in, and that is changing and saving patient lives, and that provides profound savings to the overall system is a good place from which to start. I mean, just to take an example, diabetic foot ulcers are the #1 cause of lower extremity amputations in the U.S. every year, with 130,000 such amputations and an estimated lifetime cost of over $600,000 per patient emerging from each. The cost to the system from UltraMIST is de minimis relative to the potential for savings, which are enormous.

Its role in underserved rural markets has been particularly large as well. So while SANUWAVE wholeheartedly supports CMS's goal of accurate, data-driven payment, our goal in this comment period will be to ensure that the data that drives this decision is in fact both accurate and complete, and that it represents full practitioner costs and the systemic benefits of providing treatment under 97610, which of course is the intent of these rules and of this system. The comment period runs through September 14, and we expect the final rule to be announced in or around the first week of November.

I mean, we wouldn't be the first company to get such a proposed rule overturned or reassessed, and we're going to try very, very hard to be the next one. We believe that there is a strong case to be made. In the meantime, we continue the longer-term push into indications like burn, hospital-acquired pressure injury, post-acute, hospital inpatient, hospital outpatient, pediatric, and long-term care facilities, both to expand the reach of our product and because such users tend to be sticky, long-term customers with high usage rates.

These groups take longer to win over, but the groundwork we've laid over the last 9 to 12 months is starting to bear some fruit here, and we're optimistic about continuing to make progress. With that, I'll now turn you over to Peter Sorensen, our CFO, who can walk you through the rest of our financials.

Peter Sorensen: Thank you, Morgan. Revenue for the second quarter came in at $9.7 million, a decrease of 3% versus $10.1 million in the prior year quarter. Speaking directly to this decrease, the softness was concentrated in capital or system sales, while the recurring core applicator business held up well. UltraMIST applicator revenue grew 13% year-over-year, with applicator unit volume up 27% year-over-year, reflecting continued strong demand across our active installed base. Before turning to the financials in more detail, a brief update on the sales tax matter we discussed on prior calls and in our filings. We have now finalized voluntary disclosure agreements with a number of applicable states and have begun remitting the amounts due under them.

As we work through the remaining states, the VDA process continues to do what it is intended to do, limiting the look-back period and abating penalties in many jurisdictions. In several cases, final settlements have come in below the amounts we had previously accrued. We continue to push this to completion with our third-party tax advisors and expect to finalize the remaining agreements as responses come in. With that, let's take a closer look at the financial results for the quarter. Revenue for the 3 months ended June 30, 2026, totaled $9.7 million, a decrease of 3% compared to $10.1 million for the same period of 2025.

The year-over-year decrease was driven by lower UltraMIST system revenue, which declined approximately 34% to $2.3 million from $3.4 million, reflecting weaker capital sales amid financial pressure across the industry and increased availability of new systems in the market. This was partially offset by continued growth in consumables. UltraMIST applicator revenue, the recurring core of the business, grew approximately 13% year-over-year. On a reported basis, our consumables, parts, and accessories line, which is primarily applicators but also includes parts and other miscellaneous items, increased approximately 12% to $7.3 million from $6.5 million. Gross margin as a percentage of revenue for the 3 months ended June 30, 2026, was 76.2%, a decrease of approximately 183 basis points year-over-year from 78.1%.

The decline was driven primarily by a shift in revenue mix toward consumables and away from higher-margin system sales, together with lower average selling prices resulting from a higher mix of reseller or wholesale pricing. Operating loss for the 3 months ended June 30, 2026, totaled $0.3 million, a swing of approximately $1.7 million compared to operating income of $1.4 million in the same period last year. That swing reflects roughly $0.4 million of lower gross margin and roughly $1.3 million of higher operating expenses. OPEX for the quarter were $7.7 million compared to $6.4 million in the prior year quarter, an increase of approximately $1.3 million.

By category, G&A expense increased approximately $0.5 million, sales and marketing increased approximately $0.2 million, R&D increased approximately $0.4 million as we continue to invest in product development, and depreciation and amortization increased approximately $0.1 million. Approximately $0.4 million of that $1.3 million increase, roughly 1/3 was non-cash stock-based compensation spread across G&A, sales and marketing, and R&D. Within G&A, higher personnel costs, higher legal and professional fees, and higher bad debt expense together more than accounted for the increase.

These were partially offset by an approximately $0.9 million favorable year-over-year swing in state and local sales tax, so the prior year sales tax charge gave way to a net benefit this quarter from the resolution of our VDAs at amounts below previously accrued balances. Setting that sales tax benefit aside, the underlying increase in operating expense reflects our continued investment in headcount, R&D, and commercial capabilities. Despite these increases, we remain focused on disciplined cost management and expect operating leverage to improve as revenue scales. Net loss for the 3 months ended June 30, 2026, was $0.7 million, compared to net income of $0.6 million for the same period in 2025.

The year-over-year change was driven primarily by the swing in operating results I just described. Below the operating line, total operating expense actually improved to $0.4 million from $0.9 million. Interest expense fell approximately $1.4 million year-over-year following our September 2025 refinancing with JPMorgan, partially offset by the recurrence of a $1 million non-cash gain on the change in fair value of derivative liabilities recognized in the prior year quarter. EBITDA for the 3 months ended June 30, 2026, was positive $0.1 million. Adjusted EBITDA was positive $1.2 million compared to $3.2 million in the same period last year. The year-over-year decline reflects the lower operating results, including our continued investments in headcount, R&D, and commercial expansion.

Total current assets amounted to $23.2 million as of June 30, 2026, versus $24.6 million as of December 31, 2025. Cash and cash equivalents totaled $9.4 million as of June 30, 2026. During the first half of the year, we made $2.9 million in scheduled principal payments on our term loan and remained in compliance with all covenants under our JPMorgan credit agreement. To summarize, the second quarter was a more challenging one on the top line with capital sales pressured by the industry environment. At the same time, the recurring core of our business continued to grow, our balance sheet liquidity remained sound, and we stayed disciplined on costs.

We're grateful for the continued trust and support of our stakeholders. As we move through the balance of 2026, we remain focused on operational discipline, expanding adoption of UltraMIST and positioning SANUWAVE for sustained profitable growth. With that, I'll turn the call back over to Morgan.

Morgan Frank: Thanks, Peter. So, with regard to guidance, we're going to adopt a cautious stance here, and therefore, owing to the market conditions, including the Medicare reimbursement developments discussed previously, SANUWAVE is withdrawing its previously issued fiscal year 2026 revenue guidance, which should no longer be relied upon. The company will not provide quarterly or annual guidance until there is greater clarity on these topics and expects to reassess this after CMS publishes its final rule, which is anticipated in the fourth quarter of 2026. So as ever, I want to express my gratitude to the SANUWAVE team for all the hard work and the commitment and to our customers, especially who have been so engaged and supportive.

Thanks to all of you. And so that's it for prepared remarks. Leslie, can we please open it up to questions?

Operator: [Operator Instructions] Our first question comes from Sean Westropp with Deep Sail Capital.

Sean Westropp: I just wanted to ask on the kind of the breakdown on your customer side versus kind of like the for-profit, your 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 2 groups? And I'm not looking for an exact number, I'm just kind of...

Morgan Frank: Yes, I mean, so, yes, I understand the impulse. One of the reasons that we have been sort of hesitant to provide that number with any real clarity is that it's sort of a fuzzier topic than one might expect at first pass. Like, we just, we have a lot of customers whose models are hybrid. And so, you know, who have kind of in, you know, who have brick-and-mortar facilities, who have mobile, some of which are combinations of HOPD and mobile, and like, video or -- so it's -- the delineation is not as sharp as you might expect. And so, it's sort of difficult to -- it's difficult to sort of size with any precision.

The -- I mean, the upshot is, yes, we have obviously, you know, historically, there's been a lot of, we've done a lot of work in mobile. That tends to be one of the larger use cases, or has historically been one of the larger use cases for UltraMIST. As we go forward with groups like Healogics and a number of our hospital customers, the complexion of that changes somewhat. These customers tend to be slower to ramp up, but kind of have that sort of supertanker momentum once they get going.

Sean Westropp: Great. That makes sense. That makes sense. Thanks for that. If I could just ask one follow-up. You mentioned the kind of the numbers on the CMS reimbursement a little on what you guys think on the proposed side. I think it was, like, 397 down to 316. Can you just give us a little more color on how you're getting to the 316 number? And that would be helpful.

Morgan Frank: Sure. So, in the proposed rule, it all sort of breaks down to what CMS calls RVUs, Relative Value Units. And we're able to, those have been multiplied by a conversion factor that gets you to the actual dollar values. So basically, you sum your RVUs for work, for practice expense and for malpractice, you get a total RVU count. You then multiply that by a conversion factor, which we believe is going to be 32.84 in 2027. And so the -- our understanding is that the proposed work RVU is 0.39, the practice expense RVU is 9.24, and the malpractice RVU is 0.01, which makes a fair bit of sense.

Like, I don't know if there's ever been a malpractice claim associated with UltraMIST. So that gets you to a total of 9.64. Our estimation is that gets you to a total of 9.64 RVUs. You then multiply that by the non-QP conversion factor of 32.8409, and that gets us to an estimate of $316.59.

Sean Westropp: Got it. Got it. That was helpful. And 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 waiting until the final rule when you kind of hear that?

Morgan Frank: So, yes, it's a complicated process. There's a 60-day comment period. Obviously, we're going to do things like seek a meeting with CMS and see what we can achieve that way. Both we and customers will submit comments. I believe that 60-day period ends on September 14. And then the final rule will likely be announced in or around the first week of November. That's been sort of -- I don't think there's a hard and fast date for it, but that's been traditionally, that's been a very tight range.

Operator: Thank you for your question. At this time, there are no further questions in the queue, and I will now turn our meeting back to Morgan Frank.

Morgan Frank: Great. Well, thank you, Leslie, and thank you, everyone for participating this morning. And we'll speak to you again next quarter.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.