NASDAQ: SNES
Richard Hantke: Hello everyone. My name is Richard Hantke with Zacks Small Cap Research, and welcome to another episode of our CEO Chat series. Today we've got SenesTech (NASDAQ: SNES), which is involved with rodent birth control solutions, which is kind of interesting. We'll get into that. Zacks has it under coverage with our analyst M. Marin. In her most recent report a few weeks ago, she raised her 2026 revenue target by 20%, and she's got a $3.50 price target on the company. Today we've got the CEO of the company, Michael Edell. Welcome, Michael. We're going to get into a few questions. How are you?
Michael Edell: I'm great. And just so you know, it's Se-nesTech.
RH: We had a big discussion yesterday on how to pronounce it. Se-nesTech, got it.
ME: Yeah, it took me a bit to make sure I got that right, but it's SenesTech, and I'm the new CEO.
RH: Congratulations. We've got just a few questions we're going to get into here. First question is simply the typical opening question: tell us about SenesTech.
ME: At the high level, SenesTech is the leader and is the one that introduced rodent birth control in order to control rodent populations. That's the simplest way to think of it. Instead of trying to manage the death rate, we manage the population and the birth rate. Our thinking is very simple: if you can take the rodent population and rodent infestations and manage the population over a period of time, you get rid of the challenge you have with killing rats — you can't kill them all. Two rats can turn into 15,000 rats in just a year. It's a very simple concept: if you can manage the population control, you can keep those infestations and the rodent population to a manageable level.
RH: Now, will you define rodent, because a lot of people have a broader definition of rodent than what you're technically going after?
ME: Rodents are mice of all different types and varieties, and rats — could be roof rats, Norwegian rats. There's a whole set of different types of rats around the country and around the world. We manage both those species.
RH: Got it. Now, who else does what you do? Investors want to know.
ME: Nobody. We're the only game in town.
RH: Interesting. That's an opportunity and a challenge. You're the only game in town — how come?
ME: There are a variety of reasons. One is that the company has been proving the efficacy and the science that backs and supports what we're talking about to consumers and B2B. Also, the population and the regulatory environment behind pest management. Three years ago, there was only one state that was regulating the use of pesticides, rodenticides, and traps. Now, just three years later, there are ten states that are implementing or have implemented changes to the regulatory process. All of those tailwinds are really driving the need for this type of product now compared to five years ago.
RH: Got it. Now let's talk about the company's business model. Those familiar with the company know that over the last year you've been building a more sustainable, long-term growth model — doing a lot on the B2C side, bringing Amazon and Shopify under direct control, but also looking at eight different verticals on the B2B side. Can you put it all together for us?
ME: The transformation over the last six to eight months — the first part was on e-commerce. We brought all of that in-house, so we control and manage it. E-commerce in itself is an enormous market opportunity, and we're just barely scratching the surface, as you can see from the Q1 and Q2 numbers we've published. You're seeing doubling and tripling over the last two quarters, and it's now two-thirds of the revenue of the business.
But e-commerce accomplishes another thing for us: it's creating brand awareness, and you need that brand awareness to drive your B2B efforts and make those easier. On the B2B side, we've completely revamped that team and are now running a professional B2B sales team going after much larger opportunities.
RH: Getting a professional sales organization certainly makes sense. What does that do for your margins, though? That's obviously some additional cost.
ME: There's additional cost, and B2B margins are slightly lower than what you'd see on the e-commerce side, but that's where you get the much, much larger opportunities. You're talking million-dollar proposals versus selling to 10,000 consumers. You still need both to drive the growth of the company, to get it to a proper size.
RH: Got it. Back to the DTC, direct-to-consumer, side: bringing Amazon and Shopify in-house certainly makes sense, but it's easier said than done, I'd guess. Was it a major undertaking? What did that take to bring them under your control?
ME: It was a major undertaking. I have 25 years of e-commerce experience, so I know how to do it. I've done it before. Having e-commerce lead the charge was a fundamental change in the business.
RH: I'm going to swing back to the B2B side. You mentioned you have eight verticals you're going after. I don't know that we have time to talk about all eight, but maybe you want to prioritize a few for the viewers.
ME: When you think of the eight verticals — commercial, pest management, ag, and property — the key is that even though we're across multiple verticals, each has its own sales cycle, so you want a proper mix. For example, government and municipalities take longer than warehouse or food manufacturing and copackers. As you build your pipeline, you want it spread across deals with shorter-to-midterm sales cycles as well as the much larger ones that could take as much as a year. But they're substantially larger than what the company has dealt with in the past.
RH: Interesting. You've mentioned strategic assessment services. What exactly is that, and how does it add value to what you're doing?
ME: We have our products in birth control, our Evolve and ContraPest brands, as part of an integrated pest management solution; we fit within rodent population management. But one of the things we discovered very quickly, talking to both consumers and B2B customers, was that when I'd ask, “Do you know how big your rodent infestation problem is?” almost across the board, people weren't sure how bad the problem was. There were sightings of rats, rat droppings, things along those lines, that didn't give a clear indication of how big the problem really was.
Because we already have the science and the people and processes to manage these types of efforts, we came up with an assessment services option, which includes track plates, track tunnels, and AI technology to read those track plates and assess how big a problem they have, how many rats are in a particular area, and what the movement and numbers look like. Our assessment can help determine that. We can not only tell you where the problems are, but how much activity there is in any of those areas, which makes it a lot easier when you're deploying your solution to take care of the population problem itself.
RH: That was being handled by other outfits ahead of time — some kind of assessment — and you're more or less soup to nuts, so to speak?
ME: Quite frankly, nobody's doing the assessment. The way the assessment was run is: if you found a dead rat in a trap, that was the assessment: you have a rat problem. But we're talking about methodologies that have been used by countries to actually figure this out. New Zealand has the largest tracking system in the world, and they've really perfected it. We deployed and followed a lot of those methodologies and brought them here into the United States, so we can go into an entire city and assess all their hotspots and how big of a problem they have. Then we can come back and continuously monitor that over a period of time to see if the solutions being offered are making an impact using data and analytics, not guesswork. Five traps with dead rats in them doesn't mean your problem is solved. It doesn't work that way.
RH: Excellent. How's the traction on these initiatives? Can you quantify it a little bit? I know you've talked about goals of increasing revenues and managing your cash burn, which are obviously logical goals.
ME: If you look at Q1 and our recent Q2 announcements, we're breaking records. We had record revenues last quarter, and we're just at the very early stages of this strategy, so the numbers are matching what we're actually committing to and saying. Regarding recurring revenue, we have the highest recorded recurring and subscription revenue ever in the company's history, because it's a focus of ours now.
RH: At the beginning of this, I said our analyst raised her four-year revenue estimate on you by 20%, so she's recognizing what you're doing. One final question: the stock seems to be underperforming. You've touched a 52-week low recently, and it's been trending down. I've got to ask why. Is it a lack of awareness by investors, lack of understanding, no comps out there? Is there some underlying issue with the company they need to be aware of?
ME: I think we're in the early, early days. I think a lot of people are waiting to see how our performance plays out, and if we actually executing on the strategy. Now that we've got our second quarter under our belt and are clearly demonstrating our execution, it's eventually going to be reflected in the stock price. Today it's not. But as time marches forward, as we move into Q3 and Q4, people are going to take a look as we make these announcements and see the growth and development of the company. I think eventually the stock price will catch up to where the business is actually trending.
RH: It's a good entry point for new investors? Good entry point.
ME: I'm a buyer.
RH: There you go — that's what they like to hear. We're going to leave it at that, Michael. Really appreciate your time.
If you want more information on the company, go directly to the company's website. I'm sure there's a lot of information there, including contact information. Also, please take a look at the report on scr.zacks.com. You can see our latest report on the company and our other Zacks reports. Really appreciate your time, Michael, and thank you, everyone, for tuning in.
ME: Thanks, Richard. I appreciate it.
SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you. Please visit our website for additional information on Zacks SCR.
DISCLOSURE: Zacks Investment Awareness (ZIA) is a Zacks SCR product. The Zacks SCR analyst conducting this Chat hereby certifies that the views expressed accurately reflect the personal views of the analyst about the subject securities and issuer. Zacks SCR certifies that no part of any analyst’s compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this Chat. Zacks SCR believes the information used for the creation of this Chat has been obtained from sources considered to be reliable, but we can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.
This text is not a verbatim transcript. This transcript has been edited and does not reflect the video-recording exactly. You may find the video recording in its entirety here. Full Disclaimer HERE.