SenesTech (SNES) is the only manufacturer of US EPA-registered and accepted products for the reduction of reproductive capacity in rodents. That approach is more effective than just killing the pests:
 

With that rate of reproduction, poisons and other means simply can't keep up and that's exactly the experience from the last 50 years.

The company is on the up for various reasons:

• The introduction of new products; Evolve^TM Soft Bait
• Opening up multiple new sales channels that are scaling fast
• Increasing margins and decreasing OpEx in dollar terms

Evolve products

The company introduced new products in 2024, the Evolve Soft Bait, which has cotton seed as the active ingredient reducing sperm production in males and suppressing ovulation in females.

Compared to its previous product ContraPest, it comes with an improved form factor, economic price point, proven efficacy, and lengthy shelf life, the company is addressing all the key product attribute requirements communicated to us by the industry:
 

The company's website has some FAQs here. There are two versions of Evolve, Evolve Rat was introduced in October 2024 and is already available in 47 states. It's off to a flying start as in Q3/24 it was already responsible for 52% of the company's sales.

Then there is Evolve Mouse, introduced in May 2024, doubling the TAM and reaching already 17% of revenue in Q3 and available in 35 states, but it's a matter of time before it's approved in all 52 states, which simply depends on some remaining administrative steps.

Studies

The company's website has studies on older products like ContraPest (and multiple testimonials from satisfied customers), but it's a liquid product that has some limitations as to where it can be used suffers from limited shelf life, and is also more expensive than other products.

Evolve's active ingredient is cottonseed oil, which is different from the active ingredient in its older ContraPest product which uses 4-Vinylcyclohexene diepoxide (VCD) and triptolide.

Cottonseed oil disrupts both male and female rats reproductive systems, according to rodontologist Michael H. Parsons (involved in the New York trial):

It makes them sterile by depleting all stages of ovarian follicles in the female and disrupting spermatogenesis in the male... Apparently it’s got a very short half-life, so it’s metabolized very quickly. So an animal that consumes a rat that has died while having the contraceptives in its system is not going to have any effects.

The company did three studies with (paying) customers. One was with a large east coast city (which most people assume was Washington D.C.), one with a west coast poultry farm, and one with an east coast poultry farm. Since the poultry farms were paying customers, the company has never disclosed their names.

Several additional studies are underway to demonstrate the effectiveness of Evolve in real-world scenarios:

• Trials with an East Coast agricultural firm focusing on Evolve's application in a sugarcane operation.
• A leading pest management professional is deploying Evolve in a housing area at a West Coast university campus.
• A Western university is conducting a laboratory efficacy trial for Evolve Mouse.
• A leading pest control firm is conducting a California Department of Pesticide Regulation-funded study on sustainable alternatives to rodenticide use.

There are a couple of slides in the IR deck illustrating the effectiveness of targeting reproductive capacity as a means of pest control, here is one:
 

But there is no source supplied. There is a second one on the effectiveness of Evolve:
 

These graphs are based on an efficacy study at an Arizona university that was required by some states to be able to approve Evolve. It was a lab study that showed:

• Male and female rats consumed Evolve each day over the 8 weeks of exposure and did so while chow and water were freely provided, demonstrating palatability and willingness to continuously feed.
• No toxicity or difference in weight or other adverse health effects were observed during or following treatment with Evolve.
• Rats had up to 61% reduction in fertility compared to controls after one breeding round.
• Based on this data, a projected growth model illustrates that with continued Evolve treatment for 12 months, the bait would prevent population growth by upwards of 90%.

Competition

We've already stressed that Senestech is the only manufacturer of US EPA-registered and accepted products for reducing the reproductive capacity of rodents. Evolve is the first and only soft bait product featuring technology that targets rodent populations by using non-lethal methods to restrict fertility.

That doesn't mean there is no competition but it does mean it competes with traditional pest control products, like poisons.

Risk

Rodontologist Michael H. Parsons from the New York trial argues that all it takes is a rat not liking the product and they will produce offspring that have a higher propensity not liking the product while the rats that do like the products have no offspring. 

After several generations (which happen fast), there could be a problem, reducing the effectiveness of this approach.

But given the rapid take-up of the product, it looks like this risk isn't manifesting itself, at least not yet.

Growth drivers

• Online sales
• Retail 
• Municipalities
• International growth

Online sales

Apart from selling through its website, the company has other e-commerce sites lined up:

• Diypestcontrol.com (Nov 2023)
• Amazon (May 2024)
• Walmart.com (Nov 2024)
• TractorSupply.com (Feb 2025)

Distributors

 

• A global leader in irrigation solutions for sustainable agriculture (Jan 2024)
• Poppe Enterprises for the Grain Management Market (Jan 2024)
• Wilco Distributing for the Agriculture and Professional Rodent Pest Management Market (March 2024)

The agricultural market is very valuable because rodents have a considerable economic impact. 

Retail

• Ace Hardware stores (Nov 2023)
• Walmart (Nov 2024)
• Bug Off Pest Control Center of New York City (Jan 2025)

Municipalities

• New York City trial (Oct 2024)
• Baltimore (Jan 2025)

The New York trial will start in April and run for at least a year in two zones. The Baltimore deployment looks to start sooner but will also be evaluated after some time.

International

• Registration in Puerto Rico (Dec 2023)
• Distribution deal for Hong Kong and Macau (Dec 2023)
• Expanded distribution deal for UAE (Jan 2024)
• Distribution deal for Singapore (Feb 2024)
• Distribution deal for Australia and New Zealand (Feb 2024)
• Distribution deal for the Netherlands (Feb 2024)
• Trial in the US Virgin Islands (June 2024)
• Registration in Hong Kong (Oct 2024)
• Distribution deal with SMark for India (Feb 2025)

There was additional color on the Q3CC, they got a multi-pallet order from the Netherlands, the largest order in its history and are close to receiving a container-sized order from Hong Kong. For reference (Q3CC):

We estimate the pallet is about a $10,000 order, while a container contains 10 pallets.

They are also in the final stages of selecting distributors for Pakistan, Chile, Brazil, and Taiwan.

 

New facility and new products

The company has already secured a larger facility to accommodate increased production capacity "without dramatically increasing our facility costs" (Q3CC). The company will move to the new facility in H1/25.

Management also mentioned that new products were coming but didn't give any specifics, these will come in the next quarters.

Finances

Growth is certainly speedy:
 

Data by YCharts

But one should also notice the increase in gross margins:
 

Data by YCharts
 

And the factors behind that nearly doubling in gross margins are quite promising:

• Product mix, the strong shift towards Evolve products, which carry higher margins.
• The company made adjustments to packaging, which further boost gross margins.

From the Q3CC:

Evolve product pipeline represents a lower-cost and higher-margin opportunity for SenesTech, and this is proving out. Ever-improving manufacturing operations give us both pricing and margin flexibility. Gross margin this quarter was a new record of 65%, up from 49% for the same period last year. 

Another promising sign is that OpEx is actually declining considerably in dollar terms:
 

Data by YCharts
 

Combine strong revenue growth and margin expansion with falling OpEx and cash flow can only improve:
 

Data by YCharts

How does this look quarterly:
 

Data by YCharts
 

The cash outflow was $1.4M in Q3 and will likely be less still in Q4, the company is nearing cash flow breakeven, which management expects to reach somewhere in FY25.

The jury is still out on whether they have enough cash to last until they start generating cash, the company has $2.5M in cash, but they also have access to debt and have an ATM facility, which they will use sparingly and opportunity.

There was a warrant conversion in August providing them $2M in new financing.

In any case, even if they do need cash, we don't think they need a lot so we don't think there is much, if any chance of a huge dilutive financing. 

Valuation

Data by YCharts

Just 1M shares, but there are more to come:

• 1.3M warrants at an average exercise price of $12.63.
• 6K options (with another 147K not vested).
• The company had $220K in debt (notes payable) and $2.5M in cash.

We're not including these warrants, while they are obviously diluting, they would also bring in $5.65M in cash if they are all exercised and won’t change the valuation metrics all that much.

So at $3.5 per share, we have a market cap of $3.6M and an EV of just $1.3M. With the single analyst expecting FY25 sales at $4.2M, the shares trade at a low 0.3x EV/S even if that same analyst still expects an EPS loss of $6.24 for FY25.

Including the warrants changes the equation to 2.33M shares fully diluted at $3.5 per share yields a market cap of $8.15M and an EV of $5.85M and the EV/S becomes 1.4x that's still very modest and keep in mind we're excluding the cash ($5.65M) that the warrants would bring in.

Conclusion

We see multiple reasons to be bullish on the shares:

• They have introduced hit products with the Evolve rat and mouse products, which have been introduced only recently and are scaling rapidly. Together, they were already good for 69% of revenue in Q3. This means that growth could very well accelerate or at least stay at a high level now slower growth older products become less important and revenue gets dominated by Evolve.
• The company is closing one retail/distribution/international deal after another and the potential size of these (Amazon, Walmart, India, etc.) can have a huge impact. Most of these deals haven't even started to deliver, it looks like the company is set on a long-term growth path.
• Evolve carries considerably higher gross margins compared to their previous products, we've already seen gross margins expanding very significantly and there is more room for expansion on that front.
• Operating costs have actually been falling considerably in dollar terms (let alone as a percentage of revenue), producing rapidly improving financials with the company approaching cash flow breakeven.
• There is something of a residual risk that Evolve will disappoint in real-world settings if some rats/mice avoid it, although there is no evidence this is happening. The other risk is dilution, which doesn't seem a big risk at the moment to us, given the speed of the uptake and the margin improvement.

 

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SenesTech Expands Rapidly With Evolve, Poised For Breakout Growth In 2025

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