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Peter Sorensen

Again, achieving 10% sequential growth from last quarter's previous record, as well as strong year-over-year growth of 47%.
In addition to top line expansion, we also saw continued improvement in gross margins both year over year and sequentially, reinforcing the strength of our business model. We continue to execute on our goal of rapid profitable growth. With that, let's take a closer look at the numbers.
Revenue for the three months ended December 31, 2024, totaled $10.3 million, an increase of 47% as compared to $7 million for the same period of 2023. This growth is in line with their previous guidance of 40% to 50%.
Gross margin as a percentage of revenue amounted to 77.9% for the three months end of December 31, 2024, versus 69.1% for the same period last year. For the three months end of December 31, 2024, operating income totaled $2.5 million which is an improvement of $1.5 million compared to the same period last year, which aligns with our continued initiative to drive towards profitable growth and managed spend effectively.
Operating expenses for the three months end of December 31, 2024, amounted to $5.5 million compared to $3.8 million for the same period last year, an increase of $1.7 million. This change was largely driven by an increase in non-cash expense of stock com of $1.5 million as we granted stock options to our employees and Board of Directors for the first time in over six years.
Net loss for the three months end of December 31, 2024, was $12.7 million compared to net income of $18.2 million for the same period in 2023. The decrease in net income was primarily due to a change in the fair value of derivative liabilities, which was a $20.3 million gain in 2023 versus a $13.3 million loss in 2024. Most of the derivative tail wagging should be behind us in future quarters as part of the note and warrant exchange that Morgan alluded to that we completed in Q4 2024.
EBITDA for the three months ended December 31, 2024, was negative $9.7 million. However, adjusted EBITDA for the three months ended December 31, 2024, was a positive $3.7 million versus $0.7 million for the same period last year, an improvement of $3 million year over year.
We'd like to take a moment to walk through the bridge from EBITDA to adjust to EBITDA this quarter, particularly to highlight several non-cash infrequent items related to cap table restructuring and clean-up activities completed in October 2024.
First, consistent with our historical practice, we adjusted EBITDA to the non-cash change and fair value of derivative liabilities primarily related to the quarterly evaluation of warrants. This adjustment reflects the impact of warrants that were exchanged for common stock in October.
Additionally, we adjusted for a non-cash gain recognized from the conversion of principal and interest associated with our convertible notes, which were also exchanged for common stock. The gain resulted from our stock price being below the note conversion price at the time of exchange, $12 per share versus the $15 issuance price.
We further adjusted EBITDA for legal settlement and severance expense totaling $156,000 during the fourth quarter. And finally, we adjusted EBITDA to exclude stock-based compensation, which is a non-cash expense. This adjustment was partially offset by the release of certain historical accruals following our Board of Directors' decision to remove their previously accrued cash compensation. Going forward, the Board of Directors' compensation will be paid in stock options as opposed to cash.
As previously discussed with our operating expenses, we're pleased to be able to grant stock options to our employees and Board of Directors in Q4 for the first time in over 6 years. A detailed reconciliation and further breakdown of adjusted EBITDA that can be found in our recently filed 10-K and accompanying press release.
We remain focused on executing our financial strategy, driving operational profitability, and maintaining disciplined management of operating expenses. Total current assets amounted to $18.4 million as of December 31, 2024, versus $9.8 million as of December 31, 2023. Cash totaled $10.2 million as of December 31, 2024.
We appreciate the continuous support of Sanuwave through this transformative past year and look forward to building on this momentum in 2025. With that, I'll turn the call back over to Morgan.

Thanks, Peter.
So moving on to guidance, as you likely saw in our press release, we're guiding to $8.4 million to $9 million in revenue for Q1, which would represent 45% to 55% growth from Q1 of 2024. Q1 is always a somewhat seasonally slower period for medical device, including both systems and consumables as both budgets reset and sort of customer deductibles.
We're expecting a slightly smaller drop on a percentage basis versus Q4 than the drop that occurred in Q1 of 2024 as compared to Q4 of 2023. But alas, Q1 seasonality remains a fact of life and lifestyle. So for the year, we're initiating guidance of $48 million to $50 million in revenues representing a 50% year-on-year growth rate plus or minus 3%.
We feel good about our opportunity, about our sales funnel and about our sales and production teams and their ability to generate and meet demand. I mean, it's sort of wild to me, it's already been 22 months for me here as CEO. I guess time flies when you're having fun, and it really does seem like we're getting the good part here.
I just want to reemphasize that none of this just happens. Companies exist downstream of their culture, and I could not be more proud or grateful to the team at Sanuwave. And as ever, our highest reward for good work is more work. So, we keep at it, and we look forward to speaking to you again soon about our further progress.
And with that, let's open the call up to questions. Margo, if you could begin to keep them up.

Question and Answer Session

Operator

(Operator Instructions)
[Chris Flam], [Tall Pines Capital].

I noticed you guys hired a new Head of Sales back in January. Can you walk us through what's changing versus last year and how it's going so far?

Sure, yeah, good question. So I mean, we started 2024 with two sales people, we ended the year with 9. And we will likely end Q3 also with about 9, but 3 of them will be different than the 9 that we ended Q4 with.
Ultimately, sort of the change in strategy is reflective of kind of the -- our change in the perception of the best way to sell and market this product. Like we have moved to you know to a deeper more sort of consultative sale where, you know, we're going past sort of the easy economics of engaging with customers and trying to find ways to build long-term partnerships where we are built, we're built into their treatment plans, their therapy plans, even their patient enrollment guidelines.
And so, this takes a different kind of sale. It tends to come more from the top down, you know, we're starting to engage with because we've discussed some substantially larger customers. And so, we've changed the sales force and the sale and the Head of Sales as a way to reflect that.
We're really excited about hiring Tim Warren. He is -- I'm not sure if you're aware he's the -- so Tim was the number 2 for our Board member, Jeff Blizzard, when Jeff was the Head of Sales at [Abiumed]. And so, you know, these are sort of the two guys that took that company from $15 million to $400 million. And so, you know, he came highly recommended and we're really excited to get the band back together again with those two.

Operator

Karl Burns, Northland Capital Markets.

You noted in your prepared comments that no customer represented more than 7% of revenue. And I'm wondering with the 135 ultra misplacements or installs in the fourth quarter, how you might care to rise them, these placements with respect to large, multi-order enterprise type accounts or small kind of 1, 2 system order accounts and the same with respect to your outlook for 2025. And this is obviously as you move to a larger customer focused.

So it's -- the answer to that question gets a little bit complex. We certainly sold a number of 1s and 2s in the quarter. We were excited to see a substantial number of new customers in the quarter. We're also excited to see some of our existing customers growing their businesses substantially.
We had one significant size customer in the quarter come back and order, I believe, almost 20 systems. So you know, it's going to be a mix. And I think, you know, as we sort of think about planning for our base business, you know we're assuming sort of an ongoing pace of smaller sales of ongoing uptake from our existing customers and we're sort of looking at the really big potential sales that might be out there as upside.
It's still it's still early for us in terms of getting to grips with exactly how some of these bigger customers are going to want to roll out, whether they want to, whether they want to do things all at once, whether they want to do things on a more measured pace. And so, you know, I think it's difficult to give too much guidance about that.
But you know, what we are gearing up for internally is to be able to take yes for an answer in a situation like that where we're trying to build our -- we're trying to build up our inventory of systems quite substantially, we're currently manufacturing ultimate systems at a pace of about 25 a week and we're working to be able to double that on 60 days of notice. That's sort of the challenge I've given to the ops team is, we need to -- if we need to double that, let's be able to do it in 60 days and I think we're starting to get close to being ready to do that, or at least able to do that. It's probably a better way to describe that.

And you know, with respect to larger customers, I mean, with -- you know, essentially, 20 plus placement orders, is there any way that you can manage that so there's not lumpy scenarios in any particular quarter?

Well, I mean, I'm not -- I guess I'm not entirely sure what you mean by manage it just from a standpoint of -- if somebody wants to put. Getting systems in the field is obviously our goal and systems in the field generate consumables, and so, from our standpoint, we're always sort of excited to do that earlier.
And you know, to get more patients under care, so I think you know that there's -- it is going to continue to be like when we give guidance, I think we sort of like to talk about what we think the base rate of the business likely is and this is what we plan to, you don't want to build your business on the assumption that there's going to be a pig for the python every quarter. But I think when they come, we want to be able to move with them quite rapidly.

Operator

Ian Castle, IFCM.

I was wondering if you could provide some color on advancing additional kind of confirmatory studies and also maybe perhaps new studies to potentially open up more use cases for UltraMIST.

Yeah, sure. It's a good question.
I guess we're looking at it a couple of ways. Obviously, with the company now on sort of sounder financial footing, it's great to be able to start to think about these things again. We've started some more concerted outreach with some of our KOLs, with some of the researchers who have done some studies in the past.
I think we'll -- a couple of our customers have some very significant repositories of data. And so, I think a couple of you know, at least 1 or 2 will likely have papers, posters at SAWC this year, one I know of that has an interest -- that actually has an interesting new application of the product. I don't want to get into too much detail and steal their thunder, but we're excited about that.
As we go back and look, but those obviously, would tend to be retrospective data analysis. I think as we go forward and say, okay, what prospective studies would we want to do going forward, there are a number thatm have been interesting to us, particularly, several that were done in the past showed really promising results but that were simply underpowered.
We had some study -- we had a study in, it's up on our website, like we have a study in 2015 on the split thickness donor sites that result from skin grafts. And despite only having 27 people in the study, it hits statistical significance on time to re-epithelialization, time to -- first time to know drainage, and very nearly hit stat hig on wound recurrence at 6 weeks.
And you know, that's a big deal because these split thickness wounds are, they're really painful and they have a nasty tendency to come back. The recurrence rate at 6 weeks under standard of care was 45% and the recurrence rate at 6 weeks under UltraMIST was 8%. And so, you know to only kind of hit a 06 p-value there was obviously it's disappointing, but I think it really was just a fun mean. If we can replicate that with a larger study size that is if that's sufficiently powered, that seems like a really interesting application and I think that there are a number of other places we could take that sort of idea.
Recurrence rates are a big cost. They're a big fear in things like diabetic foot ulcers, like there are lots of places where it stands to reason that we could have a useful effect on recurrence rates. I think getting into the clinic and trying to validate it could get pretty interesting. So, you stay tuned on that. I think over the next over the next quarter or two, we should start to get some concrete plans in motion.

Operator

Thank you. And at this time, we have no further questions. I'd like to turn the call back over to Morgan Frank for any final or closing remarks.

Well, thank you, guys. I appreciate everyone attending this morning and have a great Friday.

Operator

Thank you. Ladies and gentlemen, that does conclude today's program. Thank you for your participation. You may disconnect at any time.