SANUWAVE Health, Inc. (SNWV) Earnings

Management highlights

• Core Applicator Business Performance - Applicator sales set a new all-time record in Q2 2026, with unit volumes up 13% sequentially from the previous Q1 2026 record and 27% year-over-year, and revenue up 8% sequentially from Q1 2026 and 13% year-over-year, beating the prior record set in Q3 2025. - Strong applicator demand is viewed as a signal of sustained customer confidence in the Ultramist product, even amid widespread industry disruption from CMS reimbursement cuts for related wound care modalities that have forced many competitors and providers out of business. • Industry Consolidation and Active Install Base - Widespread provider closures have led to significant market consolidation, as expected by management, and created an unprecedented supply of used Ultramis devices that cannibalized new system sales in the quarter. - As of Q2 2026 end, SanuWave counted 1,411 active Ultramis systems, a net increase of 29 from 1,382 at the end of Q1 2026, though undercounting is possible due to unrecorded used system transfers. • CMS Reimbursement Updates - The 2027 Hospital Outpatient Prospective Payment System proposed rule includes a 14% reimbursement increase for Ultramist used in hospital outpatient settings, a high-priority growth market for the company. - The 2027 physician fee schedule proposed rule lists the 97.610 billing code for Ultramist as mispriced, and suggests a reimbursement cut from the current average of $397 to approximately $316 in 2027, with additional cuts planned for 2028. SanuWave and a large group of supporting clinical users will participate in the public comment period to push for reassessment, arguing the CMS analysis uses incomplete and inaccurate data that ignores the significant systemic cost savings Ultramist delivers (e.g., avoiding costly lower extremity amputations for diabetic foot ulcer patients). The comment period closes September 14, 2026, and a final rule is expected in early November 2026. • Strategic Growth Initiatives - Management is executing a long-term push to expand Ultramist adoption into new indications and customer segments including burns, hospital-acquired pressure injuries, post-acute inpatient care, hospital outpatient care, pediatrics, and long-term care facilities. These customers tend to be more sticky, long-term users with higher usage rates, and early progress from 9-12 months of groundwork is beginning to deliver results. • Operational Updates - The company has finalized voluntary disclosure agreements (VDAs) for outstanding sales tax obligations with multiple US states, and final settlements have consistently come in below previously accrued reserve amounts. The VDA process is limiting look-back periods and abating penalties as expected, and the company continues working to finalize remaining agreements. - The company remained in full compliance with all covenants under its J.P. Morgan credit agreement after making $2.9 million in scheduled term loan principal payments in the first half of 2026, and ended Q2 2026 with $9.4 million in cash and cash equivalents.

Guidance

• Due to ongoing industry uncertainty from CMS reimbursement changes and current market conditions, SanuWave is withdrawing its previously issued full fiscal year 2026 revenue guidance, and the prior guidance should no longer be relied upon. • The company will not issue new quarterly or annual guidance until greater clarity on CMS reimbursement outcomes is achieved. Management plans to reassess guidance after CMS publishes its final 2027 reimbursement rule, which is expected in the fourth quarter of 2026.

Segment performance

For Q2 2026, SanuWave's total revenue was $9.7 million, a 3% year-over-year decrease from $10.1 million in Q2 2025. 1. System (capital) segment: Revenue decreased 34% year-over-year to $2.3 million, down from $3.4 million in the prior year quarter. This segment accounted for approximately 23.7% of total Q2 2026 revenue. 2. Consumables/Applicator (recurring core) segment: Primarily consisting of applicators plus minor parts and accessories, revenue increased approximately 12% year-over-year to $7.3 million, up from $6.5 million in the prior year quarter. Applicator revenue alone grew 13% year-over-year, with applicator unit volume up 27% year-over-year. This segment accounted for approximately 75.3% of total Q2 2026 revenue. Overall gross margin for Q2 2026 was 76.2%, a 183 basis point year-over-year decline, driven by a mix shift toward lower-margin consumables and lower average selling prices from an increased share of wholesale/reseller applicator sales.

Risks & headwinds

• The proposed 2027 physician fee schedule reimbursement cut for Ultramist, if finalized, would lead to a 20% reduction in per-procedure reimbursement that would likely negatively impact product demand and revenue. • Widespread industry disruption from prior CMS reimbursement cuts to related skin substitute wound care products has forced many SanuWave customers out of business, leading to a large supply of discounted used Ultramis systems that are cannibalizing new system sales, with no visibility into the full magnitude of this impact. • The company faces ongoing sales tax exposure in multiple US states, though the VDA process has reduced expected total costs relative to prior accruals. • Customer bankruptcies and industry stress have increased bad debt expense for the company.

Analyst Q&A

• Q: Can you share the customer breakdown between mobile wound care for-profit providers and hospital/non-profit customers? /

  A: Management notes the distinction is blurry because many customers operate hybrid business models that mix multiple service types and settings. Historically, mobile wound care has been the largest use case for Ultramist, but the company's growing push into hospital segments is gradually shifting this mix. Hospital customers take longer to ramp up adoption but deliver stable, long-term growth once integrated.

• Q: How did SanuWave calculate the projected $316 2027 reimbursement under the proposed physician fee schedule? /

  A: The calculation is based on CMS's proposed relative value units (RVUs) for the 97.610 code: 0.39 for work, 9.24 for practice expense, and 0.01 for malpractice, totaling 9.64 RVUs. This total is multiplied by the expected 2027 non-QP conversion factor of 32.8409, resulting in an estimated reimbursement of $316.59 per procedure.

• Q: What is the timeline for feedback on SanuWave's comments on the proposed reimbursement cut? /

  A: The mandatory 60-day public comment period closes September 14, 2026, after which CMS will review all submissions. A final rule is traditionally published in the first week of November 2026, and there is no earlier formal feedback process. SanuWave plans to request a meeting with CMS to make its case in addition to submitting written comments with customer and clinical stakeholder support.