STRATA Skin Sciences Inc. Q1 2023 Earnings Call
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Speaker 2: Greetings. Welcome to the Stratis Against Sciences
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Please note, this conference is being recorded. Joining on today's call will be Bob Moschip, Chief Executive Officer and Chris Lestervitz, Chief Financial Officer.
Earlier today, Strata released financial results for the quarter and in March 31, 2023. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that the management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions.
of the Private Security's litigation reform act of 1995. Any statements contained in this call that do not relate to matters of historical facts, or relate to expectations, or prediction of street events, results or performance are for the statements.
All four looking statements, including without limitation, those relating to our operating trends
These statements involve material risks and uncertainties that could cause actual results to these events to materially differ from those anticipated or implied by these four-licking statements.
Accordingly, you should not place undue reliance on these statements.
For a list and description of the risks and uncertainties associated with our business, please refer to the risk factors section of our public filings with the SEC, including our annual report on form 10K for the year ended December 31, 2022. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 15, 2023. Strata disclaims any intention or obligation.
except as required by law to update or revise any financial projections or for the statements whether because of new information, future events or otherwise.
Also, during this presentation, you refer to domestic growth recurring buildings, which is a non-GAAP financial measure.
A reconciliation of this non- GAAP financial measure to the most directly comparable GAAP financial measure is available in the company's earnings release for the first fiscal quarter and in March 31, 2023, which is accessible on the SEC's website and posted on the Investee Relations page of Striders website at www.striderscansciences.com.
And with that, I'll turn the call over to Bob Mossch. Thank you. And thank you all for joining us in today's call. We are excited to announce strong first quarter revenues of $7.6 million, representing the strongest first quarter since 2016.
Contributing to our first quarter success was our acute focus on strata strategic priorities, flexibility in capital equipment sales, and ramp up with the clear X posted official broad launch in January .
Extract our 308 nanometer eczema laser used to treat psoriasis, vitiligo, and eczema has reached 916 placements domestically.
When looking at extract, our focus is on increasing placements.
One way we are making meaningful impact is through partnerships with group locations or partner practices.
As of March 31st of this year, we have penetrated 17% of group accounts in the United States.
There remains a great opportunity for us to sell and to group practices and place multiple units at a time.
Additionally, we are measuring the safety and efficacy of X-track and treating VITAL IGO. We see this opportunity to capitalize on the noise being created by the approval of OPSILOR for the topical treatment of VITAL IGO.
TTC advertising on TV, we expect we'll drive the ligal patients into dermatology practices to seek treatment.
As we have previously mentioned, our Salesforce continues to convert Ferrous users to our Extract Partnership program.
We remain on track with our goal and have converted 86 accounts to date.
TheraClear X, our acne device acquired in 2022, officially launched more broadly in January of this year.
Has exceeded our expectations in terms of placements. In the first quarter alone, we placed 44 TheraClear X devices and sold over 3,000 TheraClear treatment codes. We expect this momentum to continue to ultimately make an impact on 2023 revenues.
Over the past quarter and into the remainder of the year, our sales team's focus is on the extract and theracryl messaging.
Our Advanced Sales Training ensures that the sales team is equipped with the knowledge and the sealed materials to sell strutus products.
Virtual events, along with group practice events, are two ways we are expanding our messaging of extract and theoretical X.
In addition to our focus on advanced sales training, we are increasing our participation in industry conferences.
For the first half of the year, we have 10 conferences, we have already attended or plan on attending.
Conferences are a great way for the strata team to stay connected with the scientific community. Conversely, conferences allow us to keep the community a prize of the progress we are making on our offerings.
We plan to continue our scientific engagement efforts throughout the remainder of the year.
On the international front, this month we signed an agreement in India. Our plan is to continue exploring other market opportunities where we believe there is a need for photo therapy solutions.
Strider recently entered into an exclusive three-year distribution agreement with spectra medical for the distribution of extract.
There are clear X and V-track.
Spectra of medical is India's leading distributor of dermatology medical devices.
We believe we will be able to make an impact on the market in India as there is a need for Vidaligo treatments with the estimate of 8.8% of India's 1.4 billion population suffering from Vidaligo.
Furthermore, 80% of young adults from the onset of puberty and 30 years of age in India suffer from acne alone.
India is a great market for strata as there is no currently available ex-relaser solutions for photo therapy treatments. This partnership provides us with an opportunity to offer this population an effective non-pharmaceutical treatment solution to a range of dermatologic conditions.
We expect to receive regulatory approval in India later this year, and for revenues to begin in the first quarter of 2024. Once we receive approval, we would expect extract treatments to be covered by insurance and Therracal X to be covered by a mixture of insurance and cash pay. In Israel, the two most prominent hospitals purchased extract Exmer laser.
and we are continuing to remain flexible with our SEALS model of X-TRAC.
which we believe has allowed us to consistently achieve continued year over year growth.
With that, I will now turn the call over to Chris to review financials.
Thank you Bob. Revenues for the first quarter of 2023 were 7.6 million as compared to revenues of 7 million in the first quarter of 2022.
Global recurring revenues in the first quarter were 5.2 million, as compared to global recurring revenues of 5.1 million for the first quarter of 2022.
Equipment revenues for the first quarter were $2.4 million, a 19.5% increase as compared to $2 million for the first quarter of 2022.
For the first quarter of 2023, non-GAAP , extract, gross domestic recurring buildings were $4.7 million as compared to $5 million in the first quarter of 2022.
Overall, gross profit for the first quarter was $4.4 million, or 58% of revenues as compared to $4.1 million, or 59% of revenues for the first quarter of 2022.
The decrease in gross profit was primarily the results of a change in product mix with higher sales of dermatology procedures equipment, which has a lower margin than dermatology recurring procedures, and due to higher material costs.
Looking ahead, we expect gross margins throughout their remainder of 2023 to be in the low to mid-60s with some quarterly fluctuation based on the mix between recurring revenues from system placements and equipment sales.
Operating expenses were $7 million as compared to $6.4 million in the first quarter of 2022. The increase was driven by scoping costs for engineering projects.
General administration expenses also increased to 2.9 from 2.7 for the three months end in March 31st, 2022.
The increase in lead expenses was primary during by the cost associated with our 2022 year-end audit, including valuation work and related legal expenses.
Net loss for the first quarter of 2023 was 2.8 million, or a loss of 8 cents per basic and diluted common share. As compared to the net loss for the first quarter of 2022, of 2.5 million or a loss of 7 cents per basic and diluted common share. At March 31, 2023, cash and cash equivalence was 4.
and are looking forward to building upon this strong base in the coming quarters.
With that, Bob and I would like to open the call for questions.
Thank you.
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And our first question comes from the line of Jeffrey Cullen with Latin Bird Downman. Please proceed with your question.
Hi Bob and Chris, how are you? Hey Jeff, how are you?
Just fine, so just a few questions from Aaron.
unfair clear could you talk any about utilization trends that you're seeing looks like
51 treatments per unit that's out there in the marketplace for the first quarter. Was that, particularly during the new patients or follow-up patients and then agreed into utilization and also could you talk about any publications underway or that we'll be seeing?
Sure, so thanks for the question. TheraClear, you know, we really focused on placements last quarter, exceeded what we originally said as a goal of 25, we had 44. So when they, we place a device, a TheraClear device in a Durham practice, they also come with codes, which they purchase. So a lot of the 3000 codes that are out there are some inventory that's built up.
Kind of early in the stage of the launch to see how much pull-through we're actually getting. Our goal is to try to enroll two patients per week, which it's gonna take some time to build up to that, but we think that will certainly give us a nice return on those machines on a yearly basis.
And the coding is per treatment, not per patient. Per treatment, exactly.
Okay, got it. Can you talk if you remember it's four to six treatments per patient?
If you remember it's 4 to 6 treatments per patient.
Got it. Okay. Can you talk a little bit about the spectra? Was there any upfront there and will be agreement?
It's for both platforms, but will it be both sales of devices as well as
for both platforms, but will it be both sales of devices as well as per use?
or will run differently. Sure. So we're really excited about partnering up with Spectra. They are a represent on number of US dermatology medical device companies already, so they're very well known in the Indian market. There was no upfront and we anticipated capital equipment sales as we've been doing in other international markets.
There won't be a code being sold to them. It'll strictly be a capital cut missile.
Got it, okay. And Chris, did you say low 50s or low 60s on margins for the balance of the year? 60s.
Got it. Okay. And then lastly, Bob, perhaps talk to us a little bit about the the M&A environment and any work you're doing as far as adding on other equipment onto your platform and also some of the work you've been doing on other markets as far as
distribution or direct arrangements? Sure. Yeah, as you know, we've been actively looking to add additional products to the bag as we call it. Both medical devices and primarily are focused as always on medical device opportunities.
skin cancers, warts, hyperhydrosis, you know, those types of conditions, acne, obviously we did with Ferroclear. So we are continuing to focus in that as well as we've looked through and talked to some companies about potentially adding OTC products. I think you and I have talked about that being complementary to what we're already doing.
When patients go to a dermatology practice, even if they're treated with a device, they're typically walking out with something, you know, whether it's prescription or no T.C. moisturizer or an acne wash or something like that. And we think there's an opportunity for us to capitalize on that. So we continue to have discussions with other companies and hopefully...
In the near future we can get something done where we can add something else new to our portfolio. Okay, perfect. Those are for us. Thanks for taking the questions. Thanks, Jeff. And we have reached the end of the...
Questioning as a session, I'll now turn the call back over to Bob, Moe Shuffle, close remarks.
Thank you. Again, we'd like to thank you all for participating in today's call. We appreciate you continuing support, and we look forward to updating the community on our achievements as they develop.
And this concludes today's conference and you made this connection line at this time. Thank you for your participation.
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