SenesTech, Inc. (SNES) Earnings

Management highlights

- Three-Pillar Reinforcing Growth Strategy * Use direct e-commerce to build ContraPest and Evolve brand recognition, educate the new rodent fertility control category, and build a recurring revenue base. E-commerce performance builds trust that supports B2B sales engagement with professional and institutional customers. * Grow B2B sales through a new vertically focused, professional sales organization targeting eight priority segments. * Expand addressable market through new products, services, and partnerships, leveraging customer data and awareness from e-commerce to accelerate B2B growth. - B2B Organizational & Strategic Updates * Jack Karabees joined as new Executive Vice President of Sales in July to build a structured commercial organization with vertical-specific targeting, pipeline development, conversion accountability, and improved forecasting, moving away from a one-size-fits-all prospecting approach. * New sales team additions (regional sales manager, director of marketing) joined in July. Vertical-specific sales materials, ROI models, case studies, and industry-aligned messaging are in development to focus on customer business outcomes rather than just product features. * Eight priority verticals: third-party e-commerce partnerships, pest management, commercial, agribusiness, zoos/sanctuaries, government, retail, and international markets. Resources will be prioritized based on early adoption and opportunity size, with pest management identified as a top priority. * International expansion follows a partner-led model: experienced local partners lead regulatory approval (with Synestec providing technical/commercial expertise) and fund regulatory costs, generating early revenue and positioning for commercial launch post-approval. Recent expansion into Bermuda adds to existing presence in the U.S. Virgin Islands and Belize. - New Service Launch * Rodent infestation assessment services launched in July, with the first deployment completed. The service combines trained field personnel, physical monitoring tools, and proprietary AI to establish an objective baseline of infestation size and location, then provides customized treatment plans, placement support, and ongoing monitoring. * Assessment services generate incremental revenue with limited added infrastructure, improve product efficacy and customer confidence, build a proprietary performance database, and position Synestec as a full-service rodent population management expert rather than just a product company. - Financial Performance Highlights * Gross profit rose 68% QoQ to a record $567,000, with gross margin improving 510 basis points QoQ and 810 basis points YoY to a company record 73.6%. Margin growth reflects favorable channel mix, stronger direct channel economics, pricing discipline, and lower raw material costs. * Net loss improved sequentially to $1.8 million from $2.1 million in Q1. Adjusted EBITDA loss improved 15% QoQ to $1.4 million. * Ended Q2 with $5.1 million in cash and cash equivalents, with quarterly cash burn of $1.7 million driven by elevated raw material purchasing and severance payments. Cash burn declined to $298,000 in June from $917,000 in May.

Guidance

Management provided no specific numerical forward guidance for revenue growth, profitability timelines, or capital raising. Key general forward-looking statements include: - The core priority is to repeat Q2 2026's strong performance, scale e-commerce, improve conversion/subscription/retention metrics, and translate commercial momentum into continued improvements in adjusted EBITDA and cash efficiency. - Management expects it will take two additional quarters for the new B2B sales organization to demonstrate progress on closing large-scale contracts. - Current cash on hand is sufficient to support the current operating plan and ongoing operating improvements.

Segment performance

Total company revenue for Q2 2026 was $770,000, up 23% year-over-year (YoY) and 56% sequentially quarter-over-quarter (QoQ). - E-commerce segment: Record revenue of $511,000, up 206% YoY and 186% QoQ. In-house managed Amazon revenue rose 473% QoQ to $349,000, own platform revenue increased 31% QoQ to $155,000, and DTC subscription revenue grew 89% QoQ and 142% YoY. E-commerce contributed 66.4% of total Q2 revenue. - B2B segment: Reported revenue of $259,000, down from $350,000 in Q1 2026 and $460,000 in Q2 2025. Excluding one-time order carryover, core B2B revenue increased 11% QoQ; excluding prior-year one-time bulk and initial stocking orders, core B2B revenue increased 14% YoY. B2B contributed 33.6% of total Q2 revenue. By product: - Evolve: Revenue of $662,000, up 27% YoY, representing 86% of total product revenue (up from 83% YoY). - ContraPest: Revenue of $107,000, up 2% YoY and 43% QoQ from $75,000.

Risks & headwinds

The company disclosed the following key risks: - New B2B strategy and organizational restructuring are still in early execution, with full leadership and team alignment only completed in mid-July 2026, so results from the new approach will take time to materialize. - Cash burn is expected to continue until the company reaches profitability, requiring future capital raising. - International expansion and large government/municipal contracts depend on third-party regulatory processes and customer procurement timelines outside of the company's control. - Prior independent trials in Washington D.C. and New York City were not conducted with company support, and no near-term orders are expected from those regions.

Analyst Q&A

• Q: Which of the eight priority verticals will be prioritized first, and why is retail ranked last? /

  A: The priority order for near-term focus is: 1) third-party e-commerce, 2) pest management, 3) commercial, 4) agribusiness, 5) zoos and sanctuaries, 6) government, 7) retail, 8) international. Retail is ranked lower because large national/regional retailers require proven consumer demand before they will allocate shelf space to the new product category; as e-commerce builds this proof of demand, retail will become a larger growth opportunity.

• Q: How has the shift from distributor sales to direct sales impacted margins, and has this shift been successful? /

  A: The shift to direct sales and away from low-margin distributor discounting and end-of-quarter promotional deals has been very successful. It took approximately five months to clear out the legacy low-margin transaction structure, and this strategic shift is a primary driver of the significant gross margin improvement seen in Q2 2026.

• Q: Has the 14% core YoY B2B revenue growth achieved the company's internal targets? /

  A: The primary internal goal for Q1 and Q2 was not to hit a specific revenue target, but to implement the new pipeline tracking, analytics, and B2B sales process framework. This implementation was completed by the end of Q2, and the company now has clear visibility into B2B pipeline, close rates, and sales timelines that was not available previously.

• Q: Why does the company require international partners to fund regulatory approval processes, and which markets have ongoing activity? /

  A: The company shifted away from self-funding regulatory efforts in international markets because this approach consumed significant resources with no near-term revenue. Now, the company only pursues markets where qualified local partners fund the regulatory process, limiting Synestec's capital risk. Active efforts include ongoing deployment in New Zealand, ongoing regulatory review in Australia, and no current activity in India or other Asian markets.

• Q: Will profitable growth require future capital raising? /

  A: Management declined to provide specific forward guidance on timing for new capital raising. The company confirmed it is aware of its future capital needs, and prioritized demonstrating strong execution in Q2 first to make any future capital raising efforts significantly easier.