Looking through the trading update and quarterly for SomnoMed some positive indicators which may see results improve considerable going forward and thus see share price improve accordingly.

Firstly SomnoMed although operating in a competitive landscape has reached 860,000 pataints worldwide and are clearly meeting the needs for sufferers of Obtrusive Sleep Apnea (OSA) whom do not require CPAP.

Revenue for the half ending 31st December were 45.1m up 13% (7% constant currency). In annualising this we are approaching 100m in revenue and with a gross margin of 61-62% this revenue is SHOULD be meaningful enough to allow positive operating cashflow and in turn profitability to flow though over the next year.

What is of interest ?

1. Operational Impacts in Q2 - In Q2 SomnoMed operationally were impacted by 8/23 milling machines being down for 2 weeks (which are all back up and running). Growth run rate to that point was 15% with an estimated revenue impact off 900k for the quarter. This has been resolved and do not expect to see such impacts to results moving forward.
2. Growth in revenue across the globe is solid at low double digit however currency movement has provided significant assistance.
3. What is of interest is the move to finally reign in costs. Neil flagged this at AGM in November 2023 and stated we will see significant costs eliminated in the second half of 2024.

Unpacking this there were some positive signs in the release of 4C for Q2 whereby product costs fell 30% to $6,345,000 comparable to Q1 and if they can hold this % will be a significant contributor to the improved financial results going forward.

To further elaborate on Neil's comments re shareholders reaping the benefits of significant cost improvements in the second half i am anticipating costs as a % of revenue to be at 95% of lower.Over the past eight quarters costs as a % of revenue has varied enormously from as low as 83% to 144%.

If costs of 95% to revenue were to be achieved, consistently operating cashflow will be positive to the tune of $1.1m -$1.2m for Q3 and Q4. The assumption regarding revenue is that SomnoMed will grow revenue at 10% above Q3 and Q4 last year.

The consistency regarding cost control is key for SomnoMed and when combined with 10% growth in revenue should see 2024-2025 Operating Cashflow exceed 5million.

Is this was to occur it the current market capitalisation of 53.8m presents value as i would expect a higher multiple to be paid for the cash being generated.

Disc- Hold in RL and SM

SOM - Quarterly-Appendix-4C-Cash-Flow-Report.pdf

SOM Q2 2024.pdf

Took the opportunity to top up stock today at 64c.

Although the price of the capital raise (60c) and the dilution it is representing (SOI increase from 78.6m to 100m or 27%) is not what i would be attracted to but I can understand the purpose.

SomnoMed future sits with Rest Assure.

This is not new and well understood and was instrumental to drove the valuation to just shy of 200m market capitalisation in November 2021.

As it currently sits the MC is 62.9m prior to capital raise.

It may be that concerns are well and truly baked into the share price and time will tell if this proves to be a great opportunity.

Why i topped up ?

Overall the for me the thesis is still in check although there are concerns to keep a watch on including :

• competition impacting growth and
• the Rest Assure roll out not gaining traction across the globe.

Revenue year on year has risen since 2014 ( 26m 2014 to 83m 2023) and EBITDA remains positive across the past 5yrs.

Looking forward management are targeting 12% revenue growth in 2024 which is on track as stated in the market update last week.

More broadly management are targeting 20% CAGR with 10% EBITDA in 2027.

If this was to occur we would see revenue reach approximately 160m and EBITDA 16m.

This may be a stretch as we currently stand but if this was to transpire or to the mid point I believe current SP and pessimism would reflect good value.

Interested to know other's views in current developments.

Disc: Hold in RL and SM

Somnomed FY results released this morning and has gone into trading halt this pending capital raise $15.5m @ 60c

Investor call at 430pm today

Plenty to digest ...

Look forward to working through the detail ...

FY23-results-and-Capital-raising (1).PDF

SOM FY 2023 Investor-presentation.pdf

SomnoMed Q4 and FY results were released this week.

Looking back to see what was guided at AGM for FY23

Som AGM-Investor-Presentation.PDF

FY23 guidance • Revenue growth of at least 20% • EBITDA1 of at least $2m • CAPEX investment c.$7m

Actual FY 23 Results

1. GrowthRev growth 15% .
2. EBITDA 2mil plus .
3. Capex 6.4m

SOM Q4 Appendix-4C.PDF

Two out of three areas achieved with positive display of cost control.

Revenue miss for the year was driven predominantly by Q4 where growth reduced 10% (constant currency 3% ).

Why ?

Change in Nth America of the reimbursement rules (ie, non refundable) and coding structures for oral appliances.

Management have submitted new application for the FULL reimbursement coding for the Somnomed Avanti as action point to address this slowdown.

Will look to the FY results for a update for Q1 2024.

In Europe growth was reduced due to two specific markets which management explain has been addressed and expected to be improved. The markets themselves weren't mentioned and the issue itself wasn't outlined ?

In assessing if the cause of the revenue miss impacts the underlying thesis , i would say no but we we will need to closely monitor the coming quarters to see if this low growth rate is not a new trend indicating slowing growth rates to persist.

Management have historically been reliable and delivered on commitments reflective of 810,000 people using a Somnomed product.

Q4 outside this was solid with receipts $21,884,000 taking FY 23 receipts to $82,497,000.

Costs

Product Manufacturing costs were lower by 9.2% comparative to the FY 23 costs which i assume reflects good inventory position. Similarly administration and corporate costs were also well down for the quarter.

Advertising costs in Q4 were up over 20% comparative to FY 23 run rate which plays into the slowing uptake and need to gorw the pipeline of sales. Staff costs were steady fort he quarter.

Interest costs have been rising and in Q4 were $505,000 up over 10% for the quarter comparative to FY 23 .

Q4 saw Somnomed post cash flow positive result of 2.5m.

Opportunity

Rest Assume looms and is within reach for a roll out by years end with the submission to FDA occurring in the coming weeks and an answer expected to be provided in 120 days.

FY 26 Aspiration

Over 1.5 million patients treated • >20% CAGR revenue growth to c.$150m • Stable product gross margin • Target EBITDA1 margin >10% of total revenue to c.$15m Invest EBITDA1 into future horizons to accelerate growth Advance the acceptance and adoption of technology enabled oral appliance treatment solution for OSA patients Actual

Providing management a pass to address the revenue issues and recommence the journey of 20% revenue growth.

Additionally when factoring in the Rest Assure approval in North America which may come through in due in Q2 FY24 may prove to be the catalyst to propel growth to the 2026 targets.

If 20% revenue is achieved over next three years to FY2026 the aspiration $150m revenue will be within reach.

Similarly if EBITDA of 10% is achieved by 2026 this would equate to 15mill.

From a valuation stand point at 89c (28th July 2023) and MC 73m Somnomed is trading at

5x 2026 EBITDA and less 0.5 x sales.

Valuation $2.02

Revenue 2026 circa $150m

EBITDA $15mill

Multiple to EBITDA 15x

Discounted back 10% p.a

SOI increase 1% pa to 80.97

Disc: Held IRL 4% and SM 8%

Pleasing results in Q1 2023 by SomnoMed specifically in relation to the revenue increase and traction across the globe.

Revenues across USA , Asia up 33 % on a constant currency basis and Europe up 12% for the quarter.

In FY 2022 revenue growth was 33% in americas, 15% across Europe and 1% across Asia.

Interesting product costs were 2.3m higher in Q1 2023 than Q4 in 2022 compared with with sales of 2.3m less .

I am anticipating that the business is building inventory for the purposes of forward demand . Something to keep an eye out on.

Patient's now exceed 740,000 which is a gain of 25,000 for the quarter compared to Q4 2022 and run rate set to exceed 100,000 for FY 2023.

Will watch for further expansion over the coming quarter's .

Holder in RL and SM

Working through Somnomed results this morning.

Very impressive.

Q4 Rev up 32% to 21.3m (even with Asia impacts due to China and Australia lockdowns)

Europe and USA rev up 37% and 42% respectively

CF positive 3.3m . Wow

FY rev 72.58m and expect to be EBITDA breakeven when results officially released next month.

Balance sheet 15.66m cash and now growing

Trading at 1.35x revenue FY 22 and what looks to be 1x FY23 revenue.

715,000 patients to date worldwide

What is most impressive is the work work with Rest Assure and its next phase ....

Love what the business is doing and how this is translating to good business performance .

Disc. Holder SM and RL

Call out to Michael . Cheers

Following on from earlier post regarding getting a somnomed device fitted i received my somnomed weekend after easter with a home visit

It was a seamless process and took approx 20min overall.

Understanding how the device works and ability to alter the length of the bands to provide the result of bringing the jaw line forward and in turn opening up the airways was important to understand.

The mould provided fits tight and firm without being invasive . Easy to maintain.

From the first night I have seen improvements both via measuring via snore lab app and personally comparing my quality of sleep before and after.

The comfort when using it is easy to get use to and you feel the way the the device works as you breath as it provides better airflow.

My snoring reduced by 90% especially in the severe and loud threshold.

Over the past week i have been able to sleep right through each and every night which varies from 6-8hrs per night and the quality of my sleep has no doubt improved with deeper sleep transpiring. (this was not the case prior)

The benefits as a result throughout the day are obvious in the sense i am more alert and attentive and higher energy levels.

Most importantly my wife is herself enjoying a good night sleep . Happy wife Happy life ....

When i wake and remove the mouth piece its fair to say you can feel the way the device works as my bite is not normal . The return to normal only takes approx 30min .

Big tick and one of the best investment i have personally made on my health and one that my wife says we should have done earlier.

The exciting aspect is no doubt the rest assure technology which will provide me data as the user on my nightly quality of sleep.

I also see this as the opportunity to obtain regular income .

Snore lab is $5.99 per month or $19.99 for the year.

Good long runway to go and can see the attraction

Thanks Michael for the pitch and providing the inspiration to reach out and do something about this .

Following Mushroompanda presentation i was keen to see how such a device could help me personally as i knew i had some form of sleep apnoea and it was getting worse (wife was keen for sure).

Unlike Rhino once making the phone call to SomnoMed in the south east of Melbourne via email a representative from SomnoMed by the name of John Harrison (Dentist) called me back the next working day .I believe John new and worked with the founder of SomnoMed . John is older and a retired Dentist and travels different areas of Melbourne doing 3-5 consults per week working as a contractor for somnomed.

Not sure if this is a issue for SomnoMed from an investment perspective in that having qualified dentists signing up clients comparative to the monies they would earn as a dentist ? The fee John charged for the home visit and follow up fitting ( which is yet to happen) is $665 with SomNoMed mouth piece costing $1285.

So far i have undertaking a sleep study which cost $521 but my medicare eligibility will return $300 .

Interesting without sleep scientist to do this you would not receive the rebate or any returned monies from your private health insurance.

Chris whom is the owner of Home Sleep came to my home and installed the unit on me at 9pm (many points of measure and thorough in his approach) and compiled the data the next morning when i when and met in Cheltenham. This process took approximately 1 hr. Data was very good and gave a good snapshot as to the problem and dangers .

Chris was extremely knowledgeable on the industry and is a strong believer that dentists are the key to enabling this need to be fulfilled.

Interesting Chris outlined it is uncommon to see patients like myself in which they are taken a more proactive approach to importance and value this solution can provide for myself and partner. He indicated he sees more extreme CPAT cases which come his way.

Chris did comment that one thing that can have an immediate improvement in the results can be simply sleeping on your side and not on your back allowing your passage way to not close as easily, something i have kicked into religiously.

Chris then referred me to John Harrison the Dentist to come and visit me again at my home and conduct the moulds necessary to get my mouth guard in order to address my sleep apnoea.

John spent 45 minutes discussing the process and what he needed to do which was take three moulds of my mouth and confirm my bite to forward onto SomnoMed to make the mouth piece. This is expected to take two weeks.

I will provide an update after being fitted with the device and its effectiveness.

It is expected with me sleeping on my side and the use of SomnoMed device and having a pillow which keeps my head supported there is 80-90% success rate .

So far a really good experience and easy to navigate and a worthwhile investment if it pays off.