Q2 2024 STRATA Skin Sciences Inc Earnings Call

Joseph Pantginis, George

Operator: Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the STRATA Skin Sciences, Inc. second quarter 2024 financial results and corporate update conference call. At this time, all participants are in a listen-only mode.

Unknown Executive: Ladies and gentlemen, thank you for standing by.

Unknown Executive: Good afternoon and welcome to the Strata Skin Sciences Inc. 2nd Quarter, 2024, Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press one star, then one on your telephone keypad. To withdraw your question, please press star, then two. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet, and it's also being recorded for playback purposes.

Speaker Change: Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Stratis Skin Sciences, Inc. second quarter 2024 financial results and corporate update conference call.

Speaker Change: At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Speaker Change: To ask a question, please press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

Operator: Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through February 14, 2025. I would now like to turn the call over to Joey. Dela Houssi, of CoreIR, the company's investor relations firm. Please go ahead.

Speaker Change: Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes.

Unknown Executive: A webcast replay of the call will be available approximately one hour after the end of the call through February 14th, 2025.

Speaker Change: A webcast replay of the call will be available approximately one hour after the end of the call through February 14, 2025.

Joey Stella Hussi: I would now like to turn the call over to Joey, Stella Hussi of Core IR, the company's Investor Relations firm. Please go ahead, sir.

Joey: I would now like to turn the call over to Joey.

Joey: Della Husi of CoreIR, the company's investor relations firm. Please go ahead, sir.

Unknown Executive: Thank you, Betsy.

Joey Dela Houssi: Thank you, Betsy. Good afternoon, and thank you for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended June 30, 2024. A copy of that press release can be found on the company's website at www.strataskinsciences.com under the Investors tab.

Unknown Executive: Good afternoon, and thank you for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended June 30th, 2024. The copy of that press release can be found on the company's website at www.StratiskinSciences.com under the Investors tab.

Speaker Change: Thank you, Betsy. Good afternoon, and thank you for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended June 30, 2024.

Della Husi: The copy of that press release can be found on the company's website at www.strataskinsciences.com under the Investors tab.

Unknown Executive: Joining me on today's earnings call from Stratiskin Sciences management team are Dr. Dole of Raffiali, Chief Executive Officer, and Chris Lesterbitts, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address Stratiskin Sciences' expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Stratiskin Sciences' most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC and Stratiskin Sciences' press release that accompanies this call, particularly the cautionary statements in it.

Joey Dela Houssi: Joining me on today's earnings call from STRATA Skin's Sciences Management Team are Dr. Dolev Rafaeli, Chief Executive Officer, and Chris Lesovitz, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address STRATA Skin science's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.

Speaker Change: Joining me on today's earnings call from Stratiskin Sciences Management Team are Dr. Dolev Rafaeli, Chief Executive Officer, and Chris Lesovitz, Chief Financial Officer.

Speaker Change: During this call, management will be making forward-looking statements, including statements that address Stratoscan science's expectations for future performance or operational results.

Speaker Change: Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.

Speaker Change: for more information about these risks.

Speaker Change: Please refer to the risk factors described in the Stratus Conscientive, most recently filed annual report on foreign TNK and subsequent periodic reports followed with the SEC and Stratus Conscientus press release that accompanies this call, particularly the cautionary statements in it.

Unknown Executive: The content of this call contains time-sensitive information that is accurate only as of today, August 14th, 2024. Except as required by law, Stratiskin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

Speaker Change: The content of this call contains time-sensitive information that is accurate only as of today, August 14, 2024.

Speaker Change: Except as required by law, Stratascan Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to CEO Dr. Dolev Rafaeli.

Dolev Rafaeli: It is now my pleasure to turn the call over to CEO Dr. Dole of Raffiali. Thanks, Joey, and good afternoon to everyone on the call. During the second quarter, we made continued financial and strategic progress in turning our business around. Total revenue of 8.4 million grew 2% year-over-year. Total operating expenses declined approximately $860,000 or 14% year-over-year, and are lost from operations declined by $1.5 million to roughly $500,000 from approximately $2.0 million.

Joey Dela Houssi: For more information about these risks, please refer to the risk factors described in STRATA Skin Sciences' most recently filed annual report on Form 10-K and subsequent periodic reports followed with the SEC and STRATA Skin Sciences' press release that accompanies this call, particularly the cautionary statement. The content of this call contains time-sensitive information that is accurate only as of today, August 14, 2024. Except as required by law, STRATA Skin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to CEO, Dr. Dolev Rafaeli. Thanks, Joey, and good afternoon to everyone.

Dolev Rafaeli: During the second quarter, we made continued financial and strategic progress in turning our business, Total revenue of $8.4 million grew 2% year over year. Total operating expenses declined approximately $860,000, or 14% year-over-year, and are lost from operations, declined by $1.5 million to roughly $500,000, from approximately $2.0 million last year. On the last quarterly earnings call, I mentioned that we expected to ramp our DTC marketing span into year-end to create additional patient awareness, about extract and its ability to treat psoriasis, eczema, and vitiligo. Thank you, everybody, that is still the plan.

Speaker Change: Thanks, Joey, and good afternoon to everyone on the call.

Speaker Change: During the second quarter, we made continued financial and strategic progress in turning our business around.

Speaker Change: Total revenue of $8.4 million grew 2% year-over-year.

Speaker Change: Total operating expenses declined approximately $860,000 or 14% year-over-year.

Speaker Change: and our loss from operations declined by $1.5 million to roughly $500,000 from approximately $2.0 million last year.

Dolev Rafaeli: last year. On the last quarterly earnings call, I mentioned that we expected to ramp our DTC marketing spend into year end to create additional patient awareness about extract and its ability to treat psoriasis, eczema, and vitiligo, and that is still the plan. Our DTC results thus far are encouraging as we grew the number of extractations appointments in the second quarter from our first quarter levels. Additionally, our cost per lead and cost per appointment metrics thus far in 2024 are lower than that seen in 2021 when we were less focused on DTC, like we are now.

Speaker Change: On the last quarterly earnings call, I mentioned that we expected to ramp our DTC marketing span into year-end to create additional patient awareness.

Speaker Change: about extract and its ability to treat psoriasis, eczema, and vitiligo, and that is still the plan.

Dolev Rafaeli: Our DDC results, thus far, are encouraging, as we grew the number of extract patients appointments in the second quarter, from our first quarter 11. Additionally, our cost per lead and cost per appointment metrics thus far in 2024 are lower than that seen in 2021 when we were less focused on DTC like we are now. Given our DTC success thus far in the first half of 2020. We have extended from our initial DTC focus in just four marketing areas in the metro northeast. 28 active marketing areas with a more national focus on regeneration. Our Gross Domestic Recurring Billing in the second quarter were down 6% year-over-year following the first quarter decline of 3% year-over-year.

Speaker Change: Our DDC results, thus far, are encouraging.

Speaker Change: As we grew the number of extractations appointments in the second quarter.

Speaker Change: Well, more first quarter levels.

Speaker Change: Additionally, our cost per lead and cost per appointment metrics thus far in 2024 are lower than that seen in 2021 when we were less focused on DTC like we are now.

Dolev Rafaeli: Given our DTC success thus far in the first half of 2024, we have expanded from our initial DTC focus in just four marketing areas in the Metro Northeast to 28 active marketing areas with a more national focus on lead generation. Our gross domestic recurring billing in the second quarter, we're down 6% year over year, following the first quarter decline of 3% year over year. We continue to believe we are near trough levels, and with increased DTC efforts, we will turn positive on this metric. These last two quarters of low and mid single-digit declines are in contrast to year-over-year declines of 15%, 12%, and 14% in the second quarter 2023, third quarter 2023, and fourth quarter 2023, respectively.

Speaker Change: Given our DDC success thus far in the first half of 2020 forward.

Speaker Change: We have expanded from our initial DTC focus in just four marketing areas in the metro northeast to 28 active marketing areas with a more national focus on lead generation.

Speaker Change: Our Gross Domestic Recurring Billing in the second quarter were down 6% year-over-year following the first quarter decline of 3% year-over-year.

Dolev Rafaeli: We continue to believe we are near trough levels and with increased DTC efforts, we will turn positive on this mess. These last two quarters of low and mid-single-digit declines are in contrast to year-over-year declines of 15%, 12%, and 14% in the second quarter 2023, third quarter 2023, and fourth quarter 2023, respectively. With respect to our strategy of redeploying underperforming extractive, in our installed, Evidence that we are committed to this strategy lies in our installed base of extract devices declining from 907 units at the end of the first quarter to 881 units at the end of June.

Speaker Change: We continue to believe we are near trough levels and with increased DTC efforts we will turn positive on this metric.

Speaker Change: These last two quarters of low- and mid-single-digit declines

Speaker Change: are in contrast to year-over-year declines of 15%, 12%, and 14% in the second quarter 2023, third quarter 2023, and fourth quarter 2023, respectively.

Dolev Rafaeli: With respect to our strategy of redeploying underperforming extract devices in our installed base, evidence that we are committed to this strategy lies in our installed base of extract devices declining from 907 minutes at the end of the first quarter to 881 minutes at the end of June. Again, this is a concerted effort to redeploy our devices in clinics that can drive higher utilization and procedural volume, or sell such devices. This effort helped the second quarter equip the gravity you increase by 11% from 2.8 million dollars in the second quarter of 2023 to 3.1 million dollars in the second quarter of 2024.

Speaker Change: With respect to our strategy of redeploying underperforming extractive devices.

Speaker Change: in our installed base.

Speaker Change: Evidence

Speaker Change: that we are committed to this strategy lies in our installed base of extract devices declining from 907 units.

Speaker Change: at the end of the first quarter to 881 units.

Dolev Rafaeli: Again, this is a concerted effort to redeploy our devices in clinics that can drive higher utilization and procedural volume or sell such devices. This effort helped the second quarter equipment revenue increase by 11% from $2.8 million in the second quarter of 2023 to $3.1 million in the second quarter of 2023. We plan to continue opting to optimize our extracts footprint here in the US in the coming. If we are successful in the coming... And it will take some time in driving utilization to levels seen before the COVID-19 pandemic.

Speaker Change: Again, this is a concerted effort to redeploy our devices in clinics that can drive higher utilization and procedural volume, or sell such devices.

Speaker Change: This effort helped the second quarter equipment revenue increase by 11% from $2.8 million in the second quarter of 2023 to $3.1 million in the second quarter of 2024.

Dolev Rafaeli: We plan to continue to optimize our extract footprint here in the US in the coming quarters. If we are successful in the coming quarters, and it will take some time in driving utilization to levels seen before the COVID-19 pandemic. We could increase our annual revenue by approximately 8 million dollars and at incrementally higher margins without having to increase the install base.

Speaker Change: We plan to continue to optimize our extract footprint here in the U.S. in the coming quarters.

Speaker Change: If we are successful in the coming quarters, and it will take some time, in driving utilization to levels seen before the COVID-19 pandemic.

Dolev Rafaeli: We could increase our annual revenue by approximately $8 million and at incrementally higher margins without having to increase things. Our domestic install base of TheraClear X device, continues to grow, and we ended the second quarter at 117 devices in the U.S. as compared to 92 at the end of the first quarter. During the second quarter, more patients were pre-approved for photopneumatic acne treatment with the TheraClearX device than in the first. Recent published studies, highlighted in press releases over the past few months point to a growing body of evidence with respect to the effect to the effectiveness and safety of our TheraClearX platform for mild to moderate to Our goal is, for dermatologists and patients alike, to have increased awareness of our photopneumatic treatment and see it as a viable alternative in the large acne treatment market, either as, Monotherapy, or as an adjunct.

Speaker Change: We could increase our annual revenue by approximately $8 million and at incrementally higher margins without having to increase the install fees.

Dolev Rafaeli: Our domestic install base of in the US has compared to 92 at the end of the first quarter of 2022.

Speaker Change: Our domestic install base of THERACLEAR-X devices

Speaker Change: continues to grow. And we ended the second quarter at 117 devices in the U.S. as compared to 92 at the end of the first quarter.

Dolev Rafaeli: School. During the second quarter, more patients were pre-approved for photonomatic acting treatment with the therapy or x-device than in the first quarter. Recent published studies in highlighted impression releases over the past few months point to a growing body of evidence with respect to the effectiveness and safety of our therapy or x-platform for mild to moderate attack. Our goal is for dermatologists and patients alike to have increased awareness of our photonomatic treatment and see it as a viable alternative in the large acting treatment market either as monotherapy or as an adjunct therapy. As study results show, it can be effective in either scenario.

Speaker Change: During the second quarter, more patients were pre-approved for photopneumatic acne treatment with the TheraClearX device than in the first quarter.

Speaker Change: Recent published studies,

Speaker Change: highlighted in press releases over the past few months points to a growing body of evidence with respect to the effect to the effectiveness and safety of our TheraClearX platform for mild to moderate deaf.

Speaker Change: Our goal is, for dermatologists and patients alike, to have increased awareness of our photopneumatic treatment and see it as a viable alternative in the large acne treatment market, either as

Speaker Change: Monotherapy, or as an adjunct therapist.

Dolev Rafaeli: As study results show, it can be effective in either scenario. We are focused on growing a thorough clear ex-presence with the National Dematology Clinical Groups accounts that accounts for nearly 40% of the extracting soil base, along with high, Since the end of the second quarter, we completed a financing that raised $2.1 million in gross proceeds. I believe in our strategy focus and approach and showed the confidence I have by participating in this offering. Similarly, insiders and long-standing existing institutional shareholders also participated demonstrating their conviction in our corporate direction.

Speaker Change: As study results show, it can be effective in either scenario.

Dolev Rafaeli: We are focused on growing our therapy or x-presence with the national dermatology clinic groups accounts that accounts for nearly 40% of the x-tretyne stool base, along with high acting volume accounts across all regions. Since the end of the second quarter, we completed a financing that raised $2.1 million in growth proceeds. I believe in our strategy focus and approach and showed the confidence I have by participating in this offering. Similarly, insiders and longstanding existing institutional shareholders also participated in demonstrating their conviction in our corporate direction. The proceeds will be used to continue our turnaround and growth efforts.

Speaker Change: We are focused on growing our TheraClearX presence with the National Dermatology Clinic Group's accounts that account for nearly 40% of the extract installed base, along with high acne volume accounts across all regions.

Speaker Change: Since the end of the second quarter, we completed a financing that raised $2.1 million in gross proceeds.

Speaker Change: I believe in our strategy focus and approach and showed the confidence I have by participating in this offering.

Speaker Change: Similarly, insiders and long-standing existing institutional shareholders also participated, demonstrating their conviction in our corporate direction.

Chris Lesovitz: The proceeds will be used to continue our turnaround and growth. Now I'd like to turn the call over to Chris, who will review our financial results in more detail. Thank you, Dolev, Our total revenue for the second quarter of 2024 was $8.4 million, versus $8.3 million in the second quarter of 2023. Global Net Returning Revenue for the second quarter of 2024 was $5.3 million versus $5.5 million in the second quarter of 2023. Excluding Deferred Billings and Other Gap Adjustments, Extract Gross Domestic Recurring Billings were $4.7 million in the second quarter of 2024, down 6% from $5.1 million in the second quarter of 2023.

Speaker Change: The proceeds will be used to continue our turnaround and growth efforts.

Christopher Lesovitz: Now, I'd like to turn the call over to Chris, who will review our financial results in more detail. Chris?

Chris Lesovitz: Equipment revenue was $3.1 million in the second quarter of 2024 versus $2.8 million in the second quarter of 2023. International Sales of Extract and V-Track Devices compromised the majority of equipment revenue in both periods. Gross profit increased to $4.9 million for the three months ended June 30, 2024 from $4.3 million during the same period in 2023. As a percentage of revenues, the gross profit was 58.5% for the three months ended June 30, 2024, as compared to 52.3% for the same period in 2023. Total operating expenses in the second quarter of 2024 were 5.4 million versus 6.3 million in the second quarter of 2023.

Unknown Executive: Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Strata Skin Sciences Inc. 2nd quarter, 2024, Financial Results and Corporate Update Conference call.

Speaker Change: Now, I'd like to turn the call over to Chris, who will review our financial results in more detail.

Christopher Lesovitz: Thank you, Dolor. Our total revenue for the second quarter of 2024 was $8.4 million versus $8.3 million in the second quarter of 2023. Global net recurring revenue for the second quarter of 2024 was $5.3 million versus $5.5 million in the second quarter of 2023. Excluding deferred buildings and other gap adjustments, extract gross domestic recurring buildings were $4.7 million in the second quarter of 2024, down 6% from $5.1 million in the second quarter of 2023. Equipment revenue was $3.1 million in the second quarter of 2024, versus $2.8 million in the second quarter of 2023. International sales of extract and V-track devices compromised the majority of equipment revenue in both periods.

Chris Lesovitz: Thank you, Dolev.

Chris Lesovitz: Our total revenue for the second quarter of 2024 was $8.4 million versus $8.3 million in the second quarter of 2023.

Unknown Executive: At this time, all participants are in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press one star than one on your telephone keypad. To withdraw your question, please press star than two.

Chris Lesovitz: Global Net Recurring Revenue for the second quarter of 2024 was $5.3 million versus $5.5 million in the second quarter of 2023.

Speaker Change: Excluding deferred billings and other gap adjustments, extract gross domestic recurring billings were $4.7 million in the second quarter of 2024, down 6% from $5.1 million in the second quarter of 2023.

Unknown Executive: Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through February 14th, 2025.

Speaker Change: Equipment revenue was $3.1 million in the second quarter of 2024 versus $2.8 million in the second quarter of 2023.

Speaker Change: International sales of X-TRAC and V-TRAC devices compromised the majority of equipment revenue in both periods.

Christopher Lesovitz: Gross profit increased to $4.9 million for the three months ended June 30, 2024, from $4.3 million during the same period in 2023. As a percentage of revenues, the gross profit was 58.5% for the three months ended June 30, 2024, as compared to 52.3% for the same period in 2023. Total operating expenses in the second quarter of 2024 were $5.4 million versus $6.3 million in the second quarter of 2023.

Joey: I would now like to turn the call over to Joey, Stella Hussi of Core IR, the company's investor relations firm. Please go ahead, sir. Thank you, Betsy.

Speaker Change: Gross profit increased to $4.9 million for the three months ended June 30, 2024, from $4.3 million during the same period in 2023.

Speaker Change: As a percentage of revenues, the gross profit was 58.5% for the three months ended June 30th, 2024, as compared to 52.3% for the same period in 2023.

Joey: Good afternoon and thank you for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended June 30th, 2024. The copy of that press release can be found on the company's website at www.StratuskinSciences.com under the Investors tab.

Speaker Change: Total operating expenses in the second quarter of 2024 were $5.4 million versus $6.3 million in the second quarter of 2023, a 14% reduction.

Joey: Joining me on today's earnings call from Stratuskin Sciences Management Team are Dr. Dole of Rapiali, Chief Executive Officer and Chris Lesovitz, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address Stratuskin Sciences expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.

Christopher Lesovitz: Our cash equivalents restrict cash position of 6.8 million at June 30, 2024, along with our credit facility with Mid-Cap Financial, supports our growth initiatives and leaner cost structure. We continue to believe we can execute on our strategic goals for the 2024 given our current financial position. As of June 30, 2024, the company had 3,506,025 common shares outstanding.

Chris Lesovitz: A 14% reduction... Our cash, cash equivalents and restrict cash position of $6.8 million at June 30, 2024, along with our credit facility with MidCap Financial, supports our growth initiatives and leaner cost structure. We continue to believe we can execute on our strategic goals for the 2024, given our current financial position. As of June 30, 2024, the company had 3,506,025 common shares outstanding. Reflective of the one for ten reverse split in early June. The subs are going to the end of the second quarter.

Speaker Change: Our cash equivalents and restrict cash position of $6.8 million at June 30, 2024, along with our credit facility with MidCap Financial, supports our growth initiatives and leaner cost structure.

Speaker Change: We continue to believe we can execute on our strategic goals for 2024 given our current financial position.

Speaker Change: As of June 30, 2024, the company had 3,506,025 common shares outstanding, reflective of the one for 10 reverse split in early June .

Joey: For more information about these risks, please refer to the risk factors described in Stratuskin Sciences most recently filed annual report on form 10K and subsequent periodic reports filed with the SEC and Stratuskin Sciences press release that accompanies this call, particularly the cautionary statements in it. The content of this call contains time-sensitive information that is accurate only as of today, August 14th, 2024. Except as required by law, Stratuskin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.

Christopher Lesovitz: Reflective of the 1 for 10 reverse split in early June. Subs are going to the end of the second quarter. We raised 2.1 million gross proceeds through the sale of 665,136 shares. With insider participation in this financial, showing the conviction and strategy plan, ability to execute, and path profitability.

Chris Lesovitz: We raised 2.1 million gross proceeds through the sale of 665,136 shares, with insider participation in this financing showing the conviction in STRATA's strategic plan, ability to execute, and path to profitability. That concludes my prepared remarks, and I'd like to turn the call back over to Dolev for any remaining comments. Thank you, Chris.

Speaker Change: Subsequent to the end of the second quarter, we raised $2.1 million in gross proceeds through the sale of 665,136 shares.

Speaker Change: With insider participation in this financing showing the conviction and STRATA's strategic plan ability to execute and path to profitability

Dolev Rafaeli: That concludes my prepared remarks, and I'd like to turn a call back over to Dolev for any remaining comments.

Speaker Change: That concludes my prepared remarks and I'd like to turn the call back over to Dolev for any remaining comments.

Dolev Rafaeli: Thank you, Chris. And we shared on this call our strategy remains consistent with prior communications. Our execution is on track and the conviction for management and shareholders closes to the story remains resolute as reflective in the recent capital ways where these shareholders contributed approximately 50% of the gross capital reasons.

Dolev Rafaeli: As we shared on this call, our strategy remains consistent with prior communications. Our execution is on track, and the conviction from management and shareholders closest to the story remains resolute, as reflected in the recent capital raise, where these shareholders contributed approximately 50% of the gross capital. I would also like to provide a fond farewell to Chris, as he will be leaving STRATA Skin to pursue other interests.

Dolev Rafaeli: Thank you, Chris.

Dolev Rafaeli: As we shared on this call, our strategy remains consistent with prior communications.

Dolev Rafaeli: It is now my pleasure to turn the call over to CEO Dr. Dole of Rapiali. Thanks, Joey, and good afternoon to everyone on the call. During the second quarter, we made continued financial and strategic progress in turning our business around. Total revenue expenses declined approximately $860,000 or 14% year-over-year, and are lost from operations declined by $1.5 million to roughly $500,000 from approximately $2.0 million less, last year. On the last quarterly earnings call, I mentioned that we expected to ramp our DTC marketing spend into year end to create additional patient awareness about extract and its ability to treat psoriasis, eczema, and ditalygo, and that is still the plan.

Dolev Rafaeli: Our execution is on track, and the conviction from management and shareholders closest to the story remains resolute, as reflected in the recent capital raise where these shareholders contributed approximately 50% of the gross capital raise.

Dolev Rafaeli: I would also like to provide a farm farewell to Chris as he will be leading strategy to pursue other interests. We thank you for his years of service as our chief financial officer and wishing well in the future and the efforts.

Speaker Change: I would also like to provide a fond farewell to Chris as he will be leaving Stratisteam to pursue other interests.

Dolev Rafaeli: We thank him for his years of service as our Chief Financial Officer and wish him well in the future and day. We welcome John Gillings, who brings many years of private equity investment management and equity research experience and will be the key financial officer of the company moving forward. Now I'd like to turn the call over to the operator so that we can begin the questions and answer session. Operator? Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star than the number one on your channel. If your question has been answered and you wish to withdraw your request, you may do so by pressing star, then two.

Speaker Change: We thank him for his years of service as our Chief Financial Officer and wish him well in the future endeavors.

Dolev Rafaeli: We welcome John Gillings, who brings many years of private equity investments management and equity research experience, and will be the key financial officer of the company really forward.

Speaker Change: We welcome John Gillings, who brings many years of private equity investment management and equity research experience and will be the key financial officer of the company moving forward.

Unknown Executive: Now I'd like to turn the call over to the operator so that we can begin the questions and answer session. Operator?

Speaker Change: Now I'd like to turn the call over to the operator so that we can begin the questions and answers session. Operator?

Unknown Executive: Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star from the number one on your telephone. If your question has been answered and you wish to withdraw your request, you may do so by pressing star, then two. If you are using a speaker phone, please pick up your handset before entering your request and speaking on the call.

Speaker Change: Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star then the number 1 on your telephone.

Dolev Rafaeli: Our DTC results thus far are encouraging, as we grew the number of extractations appointments in the second quarter from our first quarter levels. Additionally, our cost per lead and cost per appointment metrics thus far in 2024 are lower than that seen in 2021 when we were less focused on DTC like we are now. Given our DTC success thus far in the first half of 2024, we have expanded from our initial DTC focus in just four marketing areas in the Metro Northeast to 28 active marketing areas with a more national focus on lead generation.

Speaker Change: If your question has been answered and you wish to withdraw your request, you may do so by pressing star then 2.

Operator: If you are using a speaker phone, please pick up your handset before entering your request and speaking on the call. One moment, please, for the first question. The first question today comes from Jeffrey Cohen with Ladenburg-Bauman, please go ahead. Hi, thank you. This is Destiny on for Jeff.

Speaker Change: If you are using a speakerphone, please pick up your handset before entering your request and speaking on the call.

Unknown Executive: One moment, please, for the first question.

Speaker Change: One moment, please, for the first question.

Jeffrey Cohen: The first question today comes from Jeffrey Cohen with Ladenberg-Dalman. Please go ahead.

Speaker Change: Joseph Pantginis,

Speaker Change: The first question today comes from Jeffrey Cohen with Ladenburg Bauman. Please go ahead.

Destiny Buch: Hi, thank you.

Destiny: I wanted to maybe start with some of the, well, the agreement and the approval in Japan, how there's a minimum number of units that have to be purchased per the agreement. I'm wondering if you can give a little more color on that, and then just remind us how international equipment sales impact, excuse me, margins, and if we should see any changes or fluctuations as you launch more heavily in Japan. First of all, good afternoon, Destiny. It's nice to talk to you.

Destiny Buch: This is Destiny on for Jeff. Thank you for taking our questions. I wanted to maybe start with some of the, well the agreements and the approval in Japan, how there's a minimum number of units that have to be purchased per the agreement. I'm wondering if you can give a little more color on that and then just remind us how international equipment sales impact rate, excuse me, margins and if we should see any changes or fluctuations as you launch more heavily in Japan.

Speaker Change: Hi, thank you. This is Destiny on for Jeff. Thank you for taking our questions.

Destiny: I wanted to maybe start with some of the, well, the agreement and the approval in Japan.

Dolev Rafaeli: Our gross domestic recurring billing in the second quarter were down 6% year over year following the first quarter decline of 3% year over year. We continue to believe we are near trough levels and with increased DTC efforts, we will turn positive on this metric. These last two quarters of low and mid single digit declines are in contrast to year over year declines of 15%, 12% and 14% in the second quarter 2023, third quarter 2023, and fourth quarter 2023 respectively.

Speaker Change: to speak. Thank you. Thank you for having us. Thank you. Thank you very much for your time talk. Thank you. Take care. Thank you. Find a technique, if you want to find one,

Speaker Change: A minimum.

Speaker Change: Number of units that have to be purchased per the agreements I'm wondering if you can give a little more color on that and then just remind us how

Speaker Change: International Equipment Sales Impact, excuse me, Margins.

Speaker Change: and if we should see any changes or fluctuations as you launch more heavily in Japan.

Dolev Rafaeli: First of all, good afternoon, Destiny Buch, nice to talk to you. Internationally, we are active in multiple markets; the four biggest markets are in Japan, South Korea, China, and the Middle East. Each one has a unique agreement, but in general, they all have the option to purchase capitalist that can outlight. Or to place devices in the market. Specifically, in Japan, we started working about 15 years ago. In our first entry into the Japanese market, it was with the detractive voices, which are extender-length technology voices. We have about 450 devices or accounts in Japan, which is the largest market share of the relevant technology of the time.

Speaker Change: First of all, good afternoon, Destiny, nice to talk to you. Internationally, we are active in multiple markets. The four biggest markets are Japan, South Korea, China, and the Middle East.

Dolev Rafaeli: Internationally, we are active in multiple markets. The four biggest markets are Japan, South Korea, China, and the Middle East. Each one has a unique agreement. But in general, they all have the option to purchase capital with an outlay, or to place devices in the mind. Specifically in Japan, we started working about 15 years ago, and our first entry into the Japanese market was with the VTRAC devices, which are eczema-lent technology devices.

Speaker Change: Each one has a unique agreement, but in general, they all have the option to purchase capital if they can outright.

Dolev Rafaeli: With respect to our strategy of redeploying underperforming extract devices in our installed base evidence that we are committed to this strategy lies in our installed base of extract devices declining from 907 minutes at the end of the first quarter to 881 minutes at the end of June. Again, this is a concerted effort to redeploy our devices in clinics that can drive higher utilization and procedural volume or sell such devices. This effort helped the second quarter equip the gravity you increase by 11% from $2.8 million in the second quarter of 2023 to $3.1 million in the second quarter of 2024.

Speaker Change: or to place devices in the market.

Speaker Change: Specifically, in Japan, we started working about 15 years ago in our first

Speaker Change: entering to the Japanese market was with the V-Track devices, which are Exmer-Lent technology devices. We have about 450...

Dolev Rafaeli: We have about 450 devices or accounts in Japan, which is the... Largest Market Share of the Relevant Technology of the Country. We started converting these over to extracts about six years ago. In Japan, things move slower because of the... because the country is more conservative in terms of making changes.

Speaker Change: Devices or Accounts in Japan, which is the largest market share of the relevant technology of the time.

Dolev Rafaeli: We started converting these over to extracts about six years ago. In Japan, things moved slower because the country is more conservative in terms of making changes. So, the first wave was with key opinion leaders, and there were multiple clinical studies published in Japanese and in English by key opinion leaders in Japan supporting the clinical efficacy, but also the better results that you can get with excellent laser, namely Extract. We are now up to approximately, I don't have the exact number in front of me, but we're up to approximately 100 devices of extract in Japan, many of which are replacements to the old detractive voices, some of which are with newer, younger doctors.

Speaker Change: We started converting these over to extracts about six years ago, and

Dolev Rafaeli: We plan to continue to optimize our extract footprint here in the US in the coming quarters. If we are successful in the coming quarters and it will take some time in driving utilization to level seen before the COVID-19 pandemic, we could increase our annual revenue by approximately $8 million and at incrementally higher margins without having to increase the install base. Our domestic install base of X devices continues to grow and we ended the second quarter at 117 devices in the US as compared to 92 at the end of the first quarter.

Speaker Change: In Japan, things move slower because of the...

Speaker Change: because the country is more conservative in terms of making changes. So the first wave was with key opinion leaders and there were multiple

Dolev Rafaeli: So the first wave was with key opinion leaders and there were multiple... Clinical Studies published in Japanese and in English by key opinion leaders in Japan supporting the clinical research. Effectively, but also the better results that you can get with Action Malaysia in the evening. Um, we are, uh, we are now, up to approximately, I don't have the exact number in front of me, but we're up to approximately 100 devices of X-TRAC in Japan, many of which are replacements to the old V-TRAC devices, some of which are with newer, younger doctors.

Speaker Change: clinical studies published in Japanese and in English by key opinion leaders in Japan supporting the clinical efficacy but also the better results that you can get with with eczema laser namely X-STRAT.

Speaker Change: We are now...

Speaker Change: Up to you.

Dolev Rafaeli: School. During the second quarter, more patients were pre-approved for photonomatic acting treatment with the therapy or x-device than in the first quarter. Recent published studies in highlighted impression releases over the past few months point to a growing body of evidence with respect to the effectiveness and safety of our therapy or x-platform for mild to moderate attack. Our goal is for dermatologists and patients alike to have increased awareness of our photonomatic treatment and see it as a viable alternative in the large acting treatment market either as monotherapy or as an adjunct therapy.

Speaker Change: Approximately, I don't have the exact number in front of me, but we're up to approximately a hundred devices of X-Track in Japan, many of which are replacements to the

Speaker Change: Olds, B-Track devices, some of which are with newer younger doctors.

Dolev Rafaeli: The Japanese market is characterized with two things. One, they do more placements than chapter-equipment purchases because they want the consistency of knowing how much they pay and getting the technological support and the amazing support of the device. And two, the leading blockers want to have the best assist the most advanced technology. It took us about a year and a half to get the Japanese FDA adhered to the momentum, and the momentum is the most advanced level of technology that the extract has. So, the momentum itself got cleared by the US FDA in late 2021, and it took us about a year and a half to get through the Japanese FDA.

Dolev Rafaeli: The Japanese market is characterized with two things. One, they do more placements than capital equipment purchases because they want the consistency of knowing how much they pay and getting the technological support and the maintenance support of the device. And two, the leading blockers want to have the best, the fastest, the most advanced technology. Um, it took us, um.., about a year and a half to get the Japanese FDA clearance for the momentum, and the momentum is the most advanced level of technology that the extract has.

Speaker Change: The Japanese market is characterized with two things.

Speaker Change: They do more placements than capital equipment purchases because they want the consistency of knowing how much they pay and getting the technological support and the maintenance support of the device.

Speaker Change: And two, the leading blockers want to have the best, the fastest, the most advanced technology.

Dolev Rafaeli: As study results show, it can be effective in either scenario. We are focused on growing our therapy or x-presence with the national dermatology clinic groups accounts that accounts for nearly 40% of the extracting stool base along with high acting volume accounts across all regions.

Speaker Change: It took us...

Speaker Change: about a year and a half to get the Japanese SVA cleared, cleared for the momentum.

Speaker Change: and the Momentum is the most advanced level of technology that the X-TRAC has.

Dolev Rafaeli: So the momentum itself got cleared by U.S. FDA in late 2021, and it took us about a year and a half to get through the Japanese FDA, and we anticipate that the volumes of devices going into Japan are going to remain more or less stable, somewhere around the 40 devices, most of which are going to be 40 devices a year, most of which are going to be placements, some of which are going to be outright sales, and these devices are going to be gradually migrating from the older Velocity 7 extract technology to the momentum. I'm not sure I fully answered the question, I think you also asked about margin. So I want to point out something that's going to provide an answer to your question about Japan, but also a more fuller answer.

Speaker Change: So the momentum itself got cleared by U.S. FDA in late 2021.

Dolev Rafaeli: Since the end of the second quarter, we completed a financing that raised $2.1 million in growth proceeds. I believe in our strategy focus and approach and showed the confidence I have by participating in this offering. Similarly, insiders and longstanding existing institutional shareholders also participated demonstrating their conviction in our corporate direction. The proceeds will be used to continue our turnaround and growth efforts.

Speaker Change: And it took us about a year and a half to get through the Japanese FDA.

Dolev Rafaeli: And we anticipate that the volumes of devices going into Japan are going to remain more or less stable, somewhere around the 40 devices. Most of which are going to be 40 devices a year, most of which are going to be placements, some of which are going to be outright sales, and these devices are going to be gradually migrating from the older Velocity 7 to Extract technology to the Momentum. I'm not sure I fully answered the question. I think you also asked about margins. So, I want to point out something that provides an answer to your question about Japan, but also a more forward answer.

Speaker Change: And we anticipate that the volumes of devices going into Japan are going to remain more or less stable.

Speaker Change: Somewhere around the 40 devices, most of which are going to be 40 devices a year, most of which are going to be are going to be placements.

Speaker Change: Some of which are going to be outright sales.

Speaker Change: and...

Speaker Change: And these devices are going to be gradually migrating from the older Velocity 7 XTRAX technology to the Momentum. I'm not sure I fully answered the question. I think you also asked about margins.

Christopher Lesovitz: Now I'd like to turn the call over to Chris who will review our financial results in more detail. Chris? Thank you, Dolor. Our total revenue for the second quarter of 2024 was $8.4 million versus $8.3 million in the second quarter of 2023. Global net recurring revenue for the second quarter of 2024 was $5.3 million versus $5.5 million in the second quarter of 2023. Excluding deferred buildings and other gap adjustments, extract gross domestic recurring buildings were $4.7 million in the second quarter of 2024, down 6% from $5.1 million in the second quarter of 2023.

Speaker Change: So, I want to point out something that's going to provide an answer to your question about Japan but also a more fuller answer.

Dolev Rafaeli: So when you look at the gross margin of the company, the second quarter of 2024 has a higher gross margin than at 2023. But it's more important to look at that time past. So if you look at 2019 and in 2021, so the two years traveling the COVID pandemic, at which time the revenue mix of the company was about one third capital equipment sales and two thirds recurring revenue, the overall gross margin of the company was very close to 70%, and we ended Q224 at 58.

Dolev Rafaeli: So, when you look at the gross margin of the company, the second quarter of 2024 has a higher gross margin than 2023. But it's more important to look at that time pass. So, if you look at 2019 and 2021, so the two years traveling the COVID pandemic, at which time the revenue mix of the company was about one third capital equipped with sales and two thirds returning revenue, the overall gross margin of the company was very close to 70%. in the end of 2-24 at 58%. And if you want to bridge that gap between 58% and 70%, it almost completely lies not in the change of mix and sales of capital equipment outside of the U.S., but more in the fact that the company had a lot of depreciation of the install base and amortization of the acquisitions flow through the cost of goods.

Speaker Change: So, when you look at the growth margin of the company,

Speaker Change: The second quarter of 2024 has a higher gross margin than 2023.

Speaker Change: But it's more important to look at that time past. So if you if you look at

Christopher Lesovitz: The equipment revenue was $3.1 million in the second quarter of 2024 versus $2.8 million in the second quarter of 2023. International sales of extract and V-track devices compromised the majority of equipment revenue in both periods. Gross profit increased to $4.9 million for the three months end of June 30th, 2024, from $4.3 million during the same period in 2023. As a percentage of revenues, the gross profit was 58.5% for the three months end of June 30th, 2024, as compared to 52.3% for the same period in 2023.

Speaker Change: 2019 and in 2021, so the two years straddling the COVID pandemic.

Speaker Change: at which time the revenue mix of the company was about one-third capital equipment sales and two-thirds return revenue. The overall gross margin of the company was very close to 70%.

Speaker Change: and the end of Q224 at 58%.

Dolev Rafaeli: And if you want to bridge that gap between 58% and 70%, it's. Gormas completely lies not in the change of mix and sales with capital equipment outside of the US, but more in the fact that the company had a lot of depreciation of the install base and amortization of the acquisitions flow through the cost of it. We are dealing with both of them. The Amortization of the Acquisitions, we're dealing through.., right down of the Tangibles, which happened at the end of the last year.

Speaker Change: And if you want to bridge that gap between 58% and 70%, it's...

Christopher Lesovitz: Total operating expenses in the second quarter of 2024 were $5.4 million versus $6.3 million in the second quarter of 2023. A 14% reduction Our cash equivalents and restrict cash position of 6.8 million at June 30, 2024, along with our credit facility with mid-cap financial, supports our growth initiatives and leaner cost structure. We continue to believe we can execute on our strategic goals for the 2024 given our current financial position. As of June 30, 2024, the company had 3,506,025 common shares outstanding, reflective of the one for ten reverse split in early June.

Speaker Change: almost completely lies not in the change of mix.

Speaker Change: and Sales of Capital Equipment Outside of the U.S.

Speaker Change: but more.

Speaker Change: In the fact that the company had a lot of depreciation of the install base and amortization of the acquisitions flowed through the cost of goods.

Dolev Rafaeli: We are dealing with both of these. The amortization of the acquisitions we're dealing through a lightdown of the intangibles, which happened at the end of last year. And the depreciation is dealt with in what we do in the domestic market, removing non-productive devices away from accounts that are not productive and using the equipment for capital equipment sales. So we're actually using a device that's partially depreciated and filling it away from the capital equipment. So if you look at the financials, you'll be able to see two things. The one thing which I believe you are pointing to, which is the gross margin, for the other thing is if you look at the cash flow statement, you'll see that our cash flow for investment purposes went dramatically down because in Q2 2023, we were at 3.5 million dollars, where in Q2 2024 we're at 1 million.

Speaker Change: We are dealing with both of these. The amortization of the acquisitions, we're dealing through...

Speaker Change: of the Intangibles, which happened at the end of last year. And the depreciation is dealt with in what we do in the domestic market, removing non-productive devices away from

Dolev Rafaeli: And the depreciation is dealt with in what we do in the domestic market, removing non-productive devices away from from accounts that are not productive, and using the equipment for capital equipment sales. So we're actually using a device that's partially depreciated, and selling it away from the Capitol. So if you look at the financials, you'll be able to see two things. The one thing which I believe you were pointing to, which is the gross margin, but the other thing is if you look at the cash flow statement, you'll see that our cash flow for investment purposes went dramatically down because in Q2 2023, for the six months, we were at $3.5 million, where in Q2 2024, we're at $1 million. So we used $2.5 million less. Why?

Dolev Rafaeli: The subs are going to the end of the second quarter, we raised 2.1 million gross proceeds through the sale of 665,136 shares, with insider participation in this financial show in the conviction and the strata strategic plan, ability to execute and path the profitability. That concludes my prepared remarks and I'd like to turn a call back over to Dolev for any remaining comments. Thank you Chris. As we shared on this call, our strategy remains consistent with prior communications. Our execution is on track and the conviction for management and shareholders closes to the story, remains resolute, as we've selected in the recent capital raise where these shareholders contributed approximately 50% of the gross capital raise.

Speaker Change: from accounts that are not productive and using the equipment for capital equipment sales. So we're actually using a device that's partially depreciated and selling it away from the capital equipment.

Speaker Change: So, if you look at the financials, you'll be able to see two things, the one thing which I believe you are pointing to, which is the gross margin.

Speaker Change: But the other thing is, if you look at the cash flow statement, you'll see that...

Speaker Change: Our cash flow for investment purposes went dramatically down because in the

Speaker Change: in Q2 2023,

Speaker Change: We were at 3.5, for the six months we were at 3.5 million dollars where in Q2 2024 we're at 1 million. So we used 2.5 million dollars less. Why? Because we're not increasing that install base, we're actually doing the opposite.

Dolev Rafaeli: I would also like to provide a farm farewell to Chris, as he will be leading strategy to pursue other interests. We thank you for his years of service as our chief financial officer and wishing well in the future and difference.

Destiny Buch: So we use two and a half million dollars less. Why? Because we're not increasing that install base, we're actually doing the opposite. And that is helpful, both from a cash flow perspective, as well as gradually over time, it's going to reduce the depreciation that flows through the PNL and increase the margin back to where it is supposed to be, which is closer to 70%. Okay, got it. Got it. And that actually kind of leads into my next question. Can you talk a bit about how much more shrinkage, if you will, that you're expecting on the install base?

Dolev Rafaeli: Because we're not increasing that install base. We're actually doing the opposite, and that is helpful both from a cashier perspective, as well as gradually over time, it's going to reduce the depreciation that flows through the PNL, and.., and increase the margin back to where it is supposed to be, which is closer to selling. Okay, got it. Got it. And that actually kind of leads into my next question.

Speaker Change: And that is helpful, both from a capital perspective, as well as, gradually over time, it's going to reduce the depreciation that flows through the P&L.

Dolev Rafaeli: We welcome John Gillings who brings many years of private equity investment management and equity research experience and will be the key financial officer of the company willing forward.

Speaker Change: and increase the margin back to where it is supposed to be, which is closer to 70%.

Dolev Rafaeli: Can you talk a bit about how much more shrinkage, if you will, you're expecting on the installed base and for the quarter? Obviously there were more removals from unproductive accounts than additions based on math. But I'm curious to know how many additions you had or new placements, I should say, you had in the quarter. And then tied to that as well, which I'm sure you'll touch on in your answer, are there any changes to the parameters that you're using to determine if an account is unproductive or is that state pretty consistent through the first half of the year. So I'll start from the last question. The parameters are the same.

Unknown Executive: Now I'd like to turn the call over to the operator so that we can begin the questions and answer session. Operator. Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star than the number one on your telephone. If your question has been answered and you wish to withdraw your request, you may do so by pressing star then two. If you are using a speaker phone, please pick up your handset before entering your request and speaking on the call. One moment please for the first question.

Speaker Change: Okay, got it, got it. And that actually kind of leads into my next question. Can you talk a bit about how much more shrinkage, if you will, you're expecting on the installed base? And for the quarter,

Dolev Rafaeli: And for the quarter, obviously, there were more removals from unproductive accounts than additions based on math. But I'm curious to know how many additions you are, or new placements, I should say, you had in the quarter. And then tied to that as well, which I'm sure you'll touch on in your answer, are there any changes to the parameters that you're using to determine if an account is unproductive? Or is that state pretty consistent through the first half of the year? So I'll start from the last question. The parameters are the same. We're removing an account as we don't see a future without account.

Speaker Change: Obviously,

Speaker Change: There were more removals from unproductive accounts than additions based on math, but I'm curious to know how many additions you, or new placements, I should say, you had in the quarter. And then tied to that as well, which I'm sure you'll touch on in your answer, are there any changes to the parameters?

Speaker Change: that you're using to determine if an account is unproductive or is that stayed pretty consistent through the first half of the year?

Jeffrey Cohen: The first question today comes from Jeffrey Cohen with Ladenberg-Dalman. Please go ahead. Hi, thank you. This is Destiny on for Jeff. Thank you for taking our questions.

Dolev Rafaeli: We're removing an account if we don't see a future with that account. So if that account is either a non-user or a dabbler, and it doesn't make any sense to leave the device out there with them and provide service, so provide technical service as well as providing the sales team support to that account and the reimbursement. In terms of the numbers, I just want to provide a perspective of mongers and Ludenburg has been graceful enough to cover in terms of research in this business for some years now.

Speaker Change: So, I'll start from the last question, the parameters are the same, we're removing an account if we don't see a future with that account.

Dolev Rafaeli: So if that account is either a non-user or a legal device out there with them, provide service, provide technical service as well as providing the sales team support to that account and the reimbursement support. In terms of the numbers, I just want to provide a perspective of numbers in Londonberg has been graceful enough to cover in terms of research in this business for some years now. So what I'm going to do now is I'm going to just go back a few years. In 2018 and 19, we've done the same thing. You can turn around. We removed more than we placed for a period of time in order to stabilize what's needed in the field.

Destiny Buch: I wanted to maybe start with some of the, well, the agreements and the approval in Japan and how there's a minimum number of units that have to be purchased per the agreement and wondering if you can give a little more color on that and then just remind us how international equipment sales impact, excuse me, margins and if we should see any changes or fluctuations as you launch more heavily in Japan. First of all, good afternoon, Destiny Buch, nice of talking.

Speaker Change: So it's just that account that we were...

Speaker Change: and Non-User or a Dabbler and it doesn't make any sense to leave the device out there with them and provide service, provide...

Speaker Change: So it provides technical service as well as providing the sales team.

Speaker Change: Support to that account and the reimbursement support.

Speaker Change: In terms of the numbers, I just want to provide a perspective of numbers and Ladenburg has been...

Speaker Change: graceful enough to cover, in terms of research, this business for some years now. So what I'm gonna do now is I'm gonna just go back a few years.

Dolev Rafaeli: So what I'm going to do now is I'm going to just go back a few years. In 2018 and 2019, we've done the same thing. We do turn around, we remove more than we placed for a period of time in order to stabilize the what's needed in the, in the field.

Destiny Buch: Internationally, we are active in multiple markets, the four biggest markets are in Japan, South Korea, China, and Middle East. Each one has a unique agreement, but in general, they all have the option to purchase capitalist that can outlight. This is a great agreement for two place devices in the market. Specifically, in Japan, we started working about 15 years ago. In our first entry into the Japanese market was with the detractive devices, which are extender-length technology devices.

Speaker Change: In 2018 and 2019 we've done the same thing. We did a turnaround, we removed more than we placed for a period of time in order to stabilize what's needed in the

Dolev Rafaeli: And then, and then a year later, in 2019, we placed, A hundred and sixty accounts, new accounts. And we removed approximately 70. So we grew by net 90.

Dolev Rafaeli: And then a year later, in 2017, we placed 160 accounts, new accounts, and we removed approximately 70. So we grew by net-to-9. I anticipate the same thing to happen here. So what we're doing now, and you will be able to notice this through the average revenue per device, what we're doing now is we're trying to use the opportunity as a wake-up call for them to say, you have been a great user in the past; you stopped using or you're using last. Here's your opportunity to grow; let us help you grow. So that becomes an opportunity.

Speaker Change: in the field. And then a year later, in 2019, we placed 160 accounts, new accounts, and we removed approximately 70. So we grew by net 90.

Speaker Change: I anticipate the same thing to happen here. So what we're doing now and

Dolev Rafaeli: And I anticipate the same thing to happen here. So what we're doing now, and.., and you will be able to notice this through the average revenue per device. What we're doing now is we're trying to remove as many as we can that are dabblers or non-users, and or give this as a use use the opportunity as a wake up call for them to say, you have been, you have been a great user in the past, you stopped using or you're using last here's your opportunity to grow let us help you grow so that becomes an opportunity.

Destiny Buch: We have about 450 devices or accounts in Japan, which is the largest market share of the relevant technology of the time. We started converting these over to extracts about six years ago. In Japan, things moved slower because the country is more conservative in terms of making changes. So the first wave was with key opinion leaders, and there were multiple clinical studies published in Japanese and in English by key opinion leaders in Japan supporting the clinical efficacy, but also the better results that you can get with extender laser, namely extract.

Speaker Change: and you will be able to notice this through the average gravity per device. What we're doing now is we're trying to remove as many as we can

Speaker Change: that are dabblers or non-users.

Speaker Change: and or give this as a use the opportunity as a wake-up call for them to say

Speaker Change: You have been a great user in the past, you stopped using or you're using less.

Dolev Rafaeli: We have some in which that wake up call works and they becoming more productive and some that we end up using, removing and you were right pointing out that we removed more than we, Thank you. Thank you. Thank you. We actually placed, in Q2, seven devices. So you're right, you can do the math.

Speaker Change: Here is your opportunity to grow. Let us help you grow.

Dolev Rafaeli: We have some in which that wake-up call works, and they become more productive, and some that we end up using, removing, and you are right pointing out that we remove more than we placed. We actually placed in Q2 7 devices. So you're right; you can do the math, replace 7, and remove more. I anticipate that towards the end of this year, the net removals are going to stop and there's going to be net placements. Is that going to happen in Q3 or Q4? I don't know yet, but it will happen for sure after we start seeing the average revenue per device expanding.

Speaker Change: So that becomes an opportunity. We have some in which that wake-up call works and they're...

Speaker Change: becoming more productive, and some that we end up removing, and you were right pointing out that we removed more than we placed.

Dolev Rafaeli: We placed seven and removed more. I anticipate that towards the end of this year, the net removals are going to stop and there's going to be net places. Is that going to happen in Q3 or Q4? I don't know yet, but it will happen for sure after we start seeing the average revenue per device expanding. So we need to see utilization going up in the accounts that we keep. Their utilization should go up, and when it goes up, we're going to start adding more accounts.

Speaker Change: We actually placed, in Q2, seven devices. So, you're right, you can do the math. We placed seven and we moved more. I anticipate that towards the end of this year, the net removals are gonna stop and there's gonna be net placements.

Destiny Buch: We are now up to approximately, I don't have the exact number in front of me, but we're up to approximately 100 devices of extract in Japan, many of which are replacements to the old detractive devices, some of which are with newer younger doctors. The Japanese market is characterized with two things. One, they do more placements than chapter-equipment purchases, because they want the consistency of knowing how much they pay and getting the technological support and the means and support of the device.

Speaker Change: Is that going to happen in Q3 or Q4? I don't know yet. But it will happen for sure after we start seeing the average revenue per device expanding.

Dolev Rafaeli: So we need to see utilization going up in the accounts that we keep. The utilization should go up, and when it goes up, we are going to start adding more accounts. Again, I'm going to point you back to historical numbers. In 2018, we ended the year with approximately $7,200 per device per quarter. We ended 2019 with $7,500 per device per quarter, which was more usage and also more accounts. We ended the second quarter at approximately $5,369 per quarter, which is equivalent to what we had in 2023. I would like to see Q3 expansion of that number, and then Q4 expansion of that number, and then we're going to start seeing net expansion in the number of devices.

Speaker Change: So we need to see utilization going up in the accounts that we keep.

Speaker Change: Your utilization should go up. And when it goes up, we are going to start adding more accounts. Again, I'm going to point you back to historical numbers.

Dolev Rafaeli: Again, I'm going to point you back to historical numbers. In 2018, we ended the year with approximately $7,200 per device per quarter, we ended 2019 with $7,500 per device per quarter, which was more usage and also more accounts. We ended the second quarter at approximately $5,369 per device, which is equivalent to what we had in 2023.

Speaker Change: In 2018, we ended the year with approximately $7,200 per device per quarter, we ended $2,019 with $7,500 per device per quarter, we ended the year with $7,500 per

Destiny Buch: And two, the leading blockers want to have the best assess the most advanced technology. It took us about a year and a half to get the Japanese FDA adhered to the momentum. And the momentum is the most advanced level of technology that the extract has. So the momentum itself got cleared by US FDA in late 2021, and it took us about a year and a half to get through the Japanese FDA.

Speaker Change: which was more usage and also more accounts.

Speaker Change: We ended the second quarter at approximately 60...

Speaker Change: Sorry, $5,369.

Speaker Change: per device.

Speaker Change: which is equivalent to what we had in 2023. And I...

Dolev Rafaeli: And I.., would like to see Q3 expansion of that number, and then Q4 expansion of that number, and then we're going to start seeing net expansion in the number of the... Okay, got it. Thank you for that. That color.

Destiny Buch: And we anticipate that the volumes of devices going into Japan are going to remain more or less stable, somewhere around the 40 devices, most of which are going to be 40 devices a year, most of which are going to be placements, some of which are going to be outright sales. And these devices are going to be gradually migrating from the older velocity 7 extract technology to the momentum.

Speaker Change: We'd like to see Q3 expansion of that number, and then Q4 expansion of that number, and then we're going to start seeing net expansion in the number of devices.

Destiny Buch: Okay, thought it. Thank you for that color. I appreciate it.

Destiny: I appreciate it. I guess lastly, I am impressed that your marketing in 2024 is actually looking better than it did in 2021. And I'm just wondering if there have been any changes to call out that are causing that? Are you in new channels? Are you using different messaging?

Speaker Change: Okay, got it. Thank you for that, that color. I appreciate it. I guess lastly, I am impressed that your marketing in 2024 is actually looking better than it did in 2021.

Dolev Rafaeli: I guess lastly, I am impressed that your marketing in 2024 is actually looking better than it did in 2021, and I'm just wondering if there have been any changes to call out that are causing that. Are you in new channels, are you using different messaging, or is it just based surely on having more experience and more data to pull from your previous DTC marketing? It's a combination of everything you said, plus the fact that we haven't been advertising for approximately two years, and when you go back into markets that were dormant for a period of time, it is very helpful in terms of cost or leads and cost or appointment.

Speaker Change: And I'm just wondering if there have been any changes to call out that are causing that. Are you in new channels? Are you using different messaging? Or is it just—

Dolev Rafaeli: Or is it just.., based sheerly on having more experience and more data to pull from from your previous DTC marketing. It's a combination of everything you said, plus the fact that we haven't been advertising for approximately two years. And when you go back into markets that were dormant for a period of time, it is very helpful in terms of cost per lead and cost per appointment. We also have, again, as a matter of fact, we have more availability in terms of number of accounts now. So it's easier to place them into an appointment.

Dolev Rafaeli: I'm not sure I fully answered the question, I think he also asked about margins. So I want to point out something that's going to provide an answer to your question about Japan, but also a more forward answer. So when you look at the gross margin of the company, the second quarter of 2024 has a higher gross margin than 2023. But it's more important to look at that's tied past. So if you look at 2019 and 2021, so the two years traveling the COVID pandemic, at which time the revenue mix of the company was about one third capital equipped with sales and two thirds returning revenue, the overall gross margin of the company was very close to 70%, in the end of 2-24 at 58%.

Speaker Change: based sheerly on having more experience and more data to pull from your previous DTC marketing efforts.

Destiny: And yes, the experience helps. Got it. Alrighty, that does it for us. Thank you for taking the question. Absolutely.

Speaker Change: It's a combination of everything you said, plus the fact that we haven't been advertising for approximately two years.

Speaker Change: And when you go back into markets that were dormant for a period of time, it is very helpful in terms of cost-per-lead and cost-per-appointment.

Dolev Rafaeli: We also have, again, as a matter of fact, we have more availability in terms of number of accounts now, so it's easier to place them into an appointment and immediately experience helps. Got it.

Speaker Change: We also have, again, as a matter of fact, we have more availability in terms of number of accounts now. So it's easier to place them into an appointment. And yes, the experience helps.

Destiny Buch: All righty, that does it for us. Thank you for taking the questions. Absolutely. Thank you, Distance.

Speaker Change: Got it. Alrighty, that does it for us. Thank you for taking the questions.

Operator: Thank you, Dr. Pantginis. As a reminder, if you would like to ask a question, please press star and one to be joined into the question queue. This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. I want to thank all of you for participating in today's call and for your interest in STRATA Skin Sciences. We look forward to sharing our progress on our next quarterly conference call when we report our third quarter 2024 financial results, likely in November.

Unknown Executive: To reminder, if you would like to ask a question, please press star and one to be joined into the question queue.

Dustin: Absolutely. Thank you, Destin.

Dolev Rafaeli: And if you want to bridge that gap between 58% and 70%, it almost completely lies not in the change of mix and sales with capital equipment outside of the U.S., but more in the fact that the company has more than depreciation of the install base and amortization of the acquisitions flow through the cost of goods. We are dealing with both of these. The amortization of the acquisitions we're dealing through a light down of the intangibles, which happened at the end of last year.

Speaker Change: To remind her, if you would like to ask a question, please press star and one to be joined into the question queue.

Speaker Change: Thank you for watching, and I'll see you in the next video.

Unknown Executive: This concludes our question and answer session.

Unknown Executive: I would like to turn the conference back over for any closing remarks. Thank you, Betsy. I want to thank all of you for participating in today's call and for your interest in STRATA Skin Sciences.

Speaker Change: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks.

Speaker Change: Thank you, Betsy. I want to thank all of you for participating in today's call and for your interest in STRATA Skin Sciences. We look forward to sharing our progress on our next quarterly conference call when we report our third quarter 2024 financial results, likely in November .

Unknown Executive: We look forward to sharing of all this on our next quarterly conference call when we report our third quarter to 2024 financial results, likely in November. Thank you, and have a good day.

Dolev Rafaeli: And the depreciation is dealt with in what we do in the domestic market, removing non-productive devices away from accounts that are not productive and using the equipment for capital equipment sales. So we're actually using a device that's partially depreciated and filling it away from the capital equipment. So if you look at the financials, you'll be able to see two things. The one thing which I believe you were pointing to, which is the gross margin, for the other thing is if you look at the cash flow statement, you'll see that our cash flow for investment purposes went dramatically down.

Unknown Executive: The conference is not concluded. Thank you for attending today's presentation.

Operator: Thank you and have a good day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021, Maria Sinistra source document 19INGS.org commemoration of the 1990 advantages of not having to pack a suitcase on a long-distance flight. Starring director newora.org denkmatic, [inaudible] Joseph Pantginis,

Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Unknown Executive: You may now disconnect.

Speaker Change: [inaudible]

Dolev Rafaeli: Because in Q2 2023, we were at 3.5 million dollars where in Q2 2024, we were at 1 million. So we used 2.5 million dollars less, why? Because we're not increasing that install base, we're actually doing the opposite.

Destiny Buch: And that is helpful both from a cash flow perspective, as well as gradually over time, it's going to reduce the depreciation that flows through the PNL and increase the margin back to where it is supposed to be, which is closer to 70%. Okay, got it. Got it.

Dolev Rafaeli: And that actually kind of leads into my next question. Can you talk a bit about how much more shrinkage, if you will, that you're expecting on the install base. And for the quarter, obviously there were more removals from unproductive accounts than additions based on math. But I'm curious to know how many additions you are or new placements, I should say, you had in the quarter, and then tied to that as well, which I'm sure you'll touch on in your answer. Are there any changes to the parameters that you're using to determine if an account is unproductive, or is that stayed pretty consistent through the first half of the year?

Dolev Rafaeli: So I'll start from the last question. The parameters are the same. We're removing an account if we don't see a future without account. So if that account is either a non-user or a dabler, it doesn't make any sense to leave the device out there with them and provide service, provide technical service as well as providing the sales team support to that account and the reimbursement support. In terms of the numbers, I just want to provide a perspective of numbers and Londonberg has been graceful enough to cover in terms of research.

Dolev Rafaeli: This business was some years now, so what I'm going to do now is I'm going to just go back a few years. In 2018 and 19, we've done the same thing. You do to turn around, we removed more than we placed for a period of time in order to stabilize what's needed in the field. And then a year later, in 2017, we placed 168 counts, new accounts, and we removed approximately 70.

Dolev Rafaeli: I anticipate the same thing to happen here. So what we're doing now and you will be able to notice this through the average revenue per device, what we're doing now is we're trying to remove as many as we can that are davelers or non-users and or give this as a use. Use the opportunity as a wake-up call for them to say, you have been a great user in the past, you stopped using or you're using last.

Dolev Rafaeli: Here's your opportunity to grow, let us help you grow. So that becomes an opportunity. We have some in which that wake-up call works and they become more productive. And some that we end up using, removing and you were right pointing out that we remove more than we placed.

Dolev Rafaeli: We actually placed in Q2, 7 devices. So you're right, you can do the math, replace 7 and remove more. I anticipate that towards the end of this year, the net removals are going to stop and there's going to be net placements. Is that going to happen in Q3 or Q4, I don't know yet, but it will happen for sure after we start seeing the average revenue per device expanding. So we need to see utilization going up in the accounts that we keep.

Dolev Rafaeli: The utilization should go up and when it goes up, we're going to start adding more accounts. Again, I'm going to point you back to historical numbers. In 2018, we ended the year with approximately $7,200 per device per quarter. We ended 2019 with $7,500 per device per quarter, which was more usage and also more accounts. We ended the second quarter at approximately $5,369 per device, which is equivalent to what we had in 2023.

Dolev Rafaeli: I would like to see Q3 expansion of that number and then Q4 expansion of that number and then we're going to start seeing net expansion in the number of devices. Okay, thought it. Thank you for that color. I appreciate it.

Dolev Rafaeli: I guess lastly, I am impressed that your marketing in 2024 is actually looking better than it did in 2021. And I'm just wondering if there have been any changes to call out that are causing that. Are you in new channels? Are you using different messaging? Or is it just based surely on having more experience and more data to pull from from your previous DTC marketing? It's a combination of everything you said, plus the fact that we haven't been advertising for approximately two years.

Dolev Rafaeli: And when you go back into markets that were dormant for a period of time, it is very helpful in terms of cost or leads and cost for appointment. We also have, again, as a matter of fact, we have more availability in terms of number of accounts now, so it's easier to place them into an appointment. And the experience helps. Got it.

Unknown Executive: All righty, that does it for us. Thank you for taking the question. Absolutely. Thank you, Distance. As a reminder, if you would like to ask a question, please press star and one to be joined into the question queue. This concludes our question and answer session.

Unknown Executive: I would like to turn the conference back over for any closing remarks. Thank you, Betsy. I want to thank all of you for participating in today's call. And for your interest in STRATA Skin Sciences, we look forward to sharing of all this on our next quarterly conference call when we report our third quarter to 2024 financial results, likely in November. Thank you, and has a good day. The conference has not concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.