Q1 2025 STRATA Skin Sciences Inc Earnings Call

Operator: Good afternoon and welcome to the STRATA Skin Sciences first quarter 2025 financial results conference. All participants will be in a listen-only mode.

Good afternoon, and welcome to the strata skin Sciences first quarter 2025 financial results Conference call.

All participants will be in a listen only mode.

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Jules Abraham: At this time, I'd like to turn the floor over to Jules Abraham from the company's investor relations firm, CoreIR. Sir, please go ahead. Thank you, operator. Good afternoon and thank you for participating in today's conference.

At this time I'd like to turn the floor over to Jules Abraham from the company's Investor Relations firm core IR. Sir. Please go ahead.

Jules Abraham: Thank you operator, good afternoon, and thank you for participating in today's conference call.

Jules Abraham: Earlier this afternoon, the company released its financial results for the quarter ended March 31, 2025. A copy of that press release can be found on the company's website at www.strataskinsciences.com under the Investors tab.

Earlier. This afternoon. The company released its financial results for the quarter ended March 31st 2025, a copy of that press release can be found on the company's website at www Dot strata skin sciences dot com under the investors tab.

Jules Abraham: Joining me on today's earnings call from STRATA Skin Sciences Management Team are Dr. Dolev Rafaeli, Chief Executive Officer, and John Gillings, Vice President. 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. or looking statements involve risks and other factors that may cause actual results to differ materially from those. For more information about these risks, please refer to the risk factors described in STRATA Skin Science's most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC and STRATA Skin Science's press release that accompanies this call, particularly the cautionary statement.

Speaker Change: Joining me on today's earnings call from strata skin Sciences management team are Dr. Golar, Raphael Chief Executive Officer, and John Gillies, Vice President Finance during this call management will be making forward looking statements, including statements that address strata skin sciences expectation 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 strata skin Sciences. Its most recently filed annual report on Form 10-K, and subsequent periodic reports filed with the SEC and Stratus.

Speaker Change: Can you sorry, its press release that accompanies this call, particularly the cautionary statements.

Jules Abraham: The content of this call contains time-sensitive information that is accurate only as of today, May 14th, 2025. 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.

Speaker Change: The contents of this call contains time sensitive information that is accurate only as of today may 14 2025.

Speaker Change: 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.

Dolev Rafaeli: It's now my pleasure to turn the call over to CEO, Dr. Dolev Rafaeli. Thank you, Jules, and good afternoon to everyone on During the first quarter of 2025, we continued to execute on the multifaceted turnaround strategy we introduced a little over a year ago. Our strategy focuses on generating higher per-device recurring revenue by optimizing extract device placements and use in our partnership model-driven physician practice. We are succeeding in assisting our install base, achieving higher numbers of procedures, and optimally utilizing the resources we provide. through our Elevate360 consulting model, facilitating higher patient conversion and increased device utilization in underperforming dermatology partner.

Speaker Change: It's my pleasure to turn the call over to CEO, Dr deliver alfieri Dulles.

Speaker Change: Thank you Jos and good afternoon to everyone on the call.

Speaker Change: During the first quarter of 2025, we continue to execute on the multi faceted turnaround strategy, we introduced a little over a year ago.

Speaker Change: Our strategy focuses on generating higher per device recurring revenue by optimizing extract device placements and use in our partnership model driven.

Speaker Change: In practice, we are succeed we are succeeding in assisting our installed base achieving higher numbers of procedures and optimum optimally utilizing the resources we provide.

Speaker Change: Through our elevate 360 consulting model facilitating higher patient conversion and increased device utilization in underperforming dermatology partner clinics. We are also seeing strong performance generated from our expanding direct to consumer marketing efforts, which.

Dolev Rafaeli: We are also seeing strong performance generated from our expanding direct-to-consumer marketing efforts, which have achieved increased extract leads and thereby more robust patient appointments volume and higher device utilization. These efforts coalesce with strong performance, growing recurring revenue per device across our domestic install base of approximately 850. This approach is building a more efficient, more profitable business for our stakeholders with growth in recurring revenue and higher margins with lower operating We are helping our partner clinics that seize upon the opportunity to grow with us, create better opportunities and better experiences for those patients who are more likely to be treated at a more dedicated and experienced The opportunity to increase utilization of X-TRAC devices is significant.

Speaker Change: Have achieved increased extract leads and thereby more robust patient appointment volume and higher device utilization.

Speaker Change: These efforts correlate with strong performance growing recurring revenue per device across our domestic installed base of approximately 850 devices.

Speaker Change: This approach is building a more efficient more profitable business for our stakeholders with growth in recurring revenue and higher margins with lower operating expenses, we are helping our partner clinics that seize upon the opportunity to grow with us create better opportunities and better.

Speaker Change: Experiences for those patients who are more likely to be treated at a more dedicated and experienced clinic.

Speaker Change: The opportunities are to increase utilization of extra devices is significant. Moreover, we are seeing positive results from the refocus of our DTC strategy, we generated over 1000 appointments in the first quarter with a number of unique patients for which strata has handled the insurance benefits being up.

Dolev Rafaeli: Moreover, we are seeing positive results from the refocus of our DTC strategy. We generated over 1,000 appointments in the first quarter with a number of unique patients for which STRATA has handled insurance benefits being up 33% versus Q1 of 2024, combining both organic and DTC growth. In addition, we continue to expand our Elevate360 consulting program which we began rolling out in Q4 2024. By providing deeper analytics, we are helping physicians understand and realize the financial opportunities associated with patients they already see in their clinic and those they have prescribed but did not follow through with extra schedules.

Speaker Change: Up 33% versus Q1 of 2020 for combining both organic and DTC growth. In addition, we continued to expand our elevate 360 consulting program, which we began rolling out in Q4 2024 by providing deeper analytical analytics, we are helping physicians understand.

Speaker Change: Understand and realize the financial opportunities associated with patients they already see in their clinic and those they have prescribed but did not follow through with extra scheduling.

Dolev Rafaeli: The process helps implement better practices in their clinic operations. In addition, Elevate360 provides them with comprehensive resources and hands-on assistance to execute those best practices, resulting in significant improvement. within their clinics in just about every facet of their office. While we are still in the early stages of implementation, initial results have shown dramatic increases in existing device utilization within the small number of clinics already affected, as well as growing demand for expanding the number of clinics utilizing X-TRAQ from physicians who previously struggled to fully utilize the device. Dovetailing with this, our discipline in removing underutilizing devices ensure we can supply these additional devices in the most capital-efficient way, often with only very minor refurbishment costs.

Speaker Change: The process helped implement helps implement better practices.

Speaker Change: In their clinic operations. In addition, Lv 360 provides them with comprehensive resources and hands on assistance to execute those best practices, resulting in significant improvement.

Speaker Change: Within their clinics in just about every facet of their operations.

Speaker Change: Well, we are still in the early stages of implementation initial results have shown dramatic increases in existing device utilization within the small number of clinics already affected as well as growing demand for expanding the number of clinics utilizing extract from physicians who previously.

Speaker Change: Struggled to fully utilize the device.

Speaker Change: Particularly with this our discipline in removing under utilizing devices and sure. We can supply. These additional devices in the most capital efficient way often with only very minor refurbishment work.

Dolev Rafaeli: Our Elevate 360 consulting program does require significant time from our sales and clinical staff. So broad expansion across our domestic market is expected to be a multi-quarter effort. But the potential payoff is significant. As a framework of reference, average revenue of extract device in the US in 2024 was roughly $22,000. In 2019, average revenue per extract device in the US was nearly $30,000. On 850 devices, roughly our current US install base, this would generate an additional $6.8 million of revenue, with only very modest increase in the cost of sales from depreciation of any refurbishment. Our Q1 2025 marks the fourth consecutive quarter of a year-over-year growth in average net recurring revenue per device in the US, a strong indication that our strategy is delivering the intended results.

Speaker Change: L. O 360 consulting program does require significant time from our sales and clinical staff. So broad expansion across our domestic market is expected to be a multi quarter effort, but the potential payoff is significant.

Speaker Change: As a framework of reference average revenue of extra device in the U S. In 2024 was roughly $22000 in 2019 average revenue per extract device in the U S was nearly $30000 on 850 devices roughly our cards.

Speaker Change: U S install base this would generate an additional $6 $8 million of revenue with only very modest increase in the cost of sales from depreciation of any refurbishment work.

Speaker Change: Our Q1 2025 marks the fourth consecutive quarter of a year over year growth in average net recurring revenue per device in the U S. A strong indication that our strategy is delivering the intended results. The last time the company had four.

Dolev Rafaeli: The last time the company had four quarters in a row of year-over-year growth in net recurring revenue per device in the US was 2009. We're actively tackling the headwinds of our gross domestic recurring billing. has experienced caused by combination of changes in reimbursement rates and challenges in broader indication coverage. beyond psoriasis by working with KOLs, the American Academy of Dermatology, the American Medical Association, as well as the legislature, in an effort to expand coverage. The AMA has recently held a CPT editorial panel discussion that reviewed the potential indication expansion of the eczema or laser CPT codes, and STRATA anticipates favorable outcomes in the near future, building on the same panel decision to narrow the use of these codes to only eczema or laser technology earlier in 2020.

Speaker Change: Quarters in a row of year over year growth in net recurring revenue per device in the U S was 2019.

Speaker Change: We're actively tackling the headwinds of our gross domestic recurring billing.

Speaker Change: <unk> has experienced caused by combination of changes in reimbursement rates and challenges in broader indication coverage beyond psoriasis by working with Kols. The American Academy of Dermatology, The American Medical Association as well as the legislature in an effort to expand <unk>.

Speaker Change: Rich D. A M may has recently held a CPT editorial panel discussion that we viewed the potential indication expansion of the excimer laser CPT codes and strata anticipate favorable outcomes in the near future building on the same panel decision to narrow the use.

Speaker Change: All of these codes to only excimer laser technology earlier in 2020 for.

Dolev Rafaeli: Turning briefly to the THERACLEAR-X device, we reached an installed base of 160 THERACLEAR-X devices in the US at the end of the first quarter, up from 140 devices at the end of Q1 2020. In addition, while TheraClear remains a smaller portion of our revenue, it is steadily gaining traction, having grown in excess of 50% on a year-over-year basis in six of our last seven quarters, including Q1 2021. As mentioned previously, STRATA focuses on partner clinics that adopt the billing of the insurance reimbursed CPT code for use of the TheraClearX device over clinics that opt for cash payments.

Speaker Change: Turning briefly to the therapy. Your exit device, we reached an installed base of 160 therapy or ex devices in the U S. At the end of the first quarter up from 140 voices at the end of Q1 2024. In addition, while there are clear remains a smaller portion of our revenue.

Speaker Change: It is steadily gaining traction having grown.

Speaker Change: In excess of 50% on a year over year basis in fix over less seven quarters, including Q1 2025.

Speaker Change: As mentioned previously Stretta focuses on partner clinic that adopt the billing of the insurance reimbursed CPT code for use of the therapy or X device over clinics, then opt for cash payments and the 1000 patients submitted for reimbursement in Q1 2025.

Dolev Rafaeli: And the 1,000 patients submitted for reimbursement in Q1 2025 show a 138% increase over the 438 submitted just a year ago, with pre-authorized rates exceeding 85%. Our international business achieved another strong quarter with sales of $2.5 million, up 8% versus the prior year period, with equipment sales up 13% and recurring treatment revenue up 27%, partially offset by a decline of 5% in parts and maintenance. Performance in the first quarter was strong. We are pleased with the traction our turnaround strategy has gained and the increase in demand for cost-efficient and effective treatments in international markets. Anecdotally, we have shared over social media an image of one of our devices in China that has treated, in nine years, 9,876 patients with just over 6.8 million doses.

Speaker Change: So 138% increase over the 438 submitted just a year ago with three authorized rates exceeding 85%.

Speaker Change: Our international business achieved another strong quarter with sales up to $45 million up 8% versus the prior year periods with equipment sales up 13% and recurring treatments revenue up 27%, partially offset by a decline of 5% in parts and maintenance.

Yeah.

Speaker Change: Performance in the first quarter was strong we are pleased with the traction our turnaround strategy has gained and the increase in demand for cost efficient and effective treatments in international markets.

Speaker Change: Anecdotally, we have shared over social media and image of one of our devices in China that has treated in nine years 9876 patients with just over $6 8 million doses.

Dolev Rafaeli: The same clinic now uses four new devices in tulips. While we are cautiously eyeing the potential negative impact of tariffs on near-term sales, we look forward to the expansion of the number of clinics and devices used in all of our international markets as we deploy recurring revenue placements in addition to the traditional capital sales.

Speaker Change: The same clinic now uses for new devices in two locations. While we are cautiously I the potential negative impact of tariffs on near term sales. We look forward to the expansion of the number of clinics and devices used in all of our international markets as well.

Speaker Change: We deploy recurring revenue placements in addition to the traditional capital sales model.

John Gillings: Now I'd like to turn the call over to John, who will review our financial results in more detail. John? Thank you, Dolev. Our total revenue for the first quarter of 2025 was $6.8 million, up 1% compared to Q1 2024. Global recurring revenue for the first quarter of 2025 was $4.7 million, also up 1% versus the prior year period. Excluding deferred billings and other gap adjustments, XTRAC gross domestic recurring billings were $4.1 million in the first quarter of 2025, as compared to $4.6 million in the first quarter of 2024. Equipment revenue was $2.1 million in the first quarter of 2025, up 1.4% versus the first quarter of 2024.

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

John Gillies: Thank you our total revenue for the first quarter of 2025 was $6 8 million up 1% compared to Q1 2024.

John Gillies: Global recurring revenue for the first quarter of 2025 was $4 7 million also up 1% versus the prior year period.

John Gillies: Excluding deferred billings and other GAAP adjustments extract gross domestic recurring billings were $4 1 million in the first quarter of 2025 as compared to $4 6 million in the first quarter of 2020 for equipment revenue was $2 1 million in the first quarter of 2025 up one 4% versus the first quarter of <unk>.

John Gillies: 24.

John Gillings: Gross profit increased to $3.6 million for the three months ended March 31, 2025, up from $3.1 million during the same period in 2024. This resulted in gross margin of 53.5% for the first quarter of 2025, compared to 45.6% for the same period in 2024. The increase in gross margin was driven primarily by continued efficiency gains in our recurring revenue business and the absence of a one-time inventory write-off that impacted the equipment margins in Q1 2024, but did not recur in Q1 2025. Total operating expenses in the first quarter of 2025 were $5.7 million versus $6 million in the first quarter of 2024, a reduction of 5% year-over-year.

John Gillies: Gross profit increased three to $3 6 million for the three months ended March 31, 2025 up from $3 1 million. During the same period in 2024. This resulted in gross margin at 53, 5% for the first quarter of 2025 compared to 45, 6% for the same period in.

John Gillies: 2024, the increase in gross margin was driven primarily by continued efficiency gains at our recurring revenue business and the absence of a one time inventory write offs that impacted the equipment margins in Q1, 2024, but did not recur in Q1 2025.

John Gillies: Total operating expenses in the first quarter of 2025 or $5 7 million versus 6 million in the first quarter of 2024, a reduction of 5% year over year engineering and product development expenses declined 60% due primarily to reduced head count and project specific consulting expense that did not recur.

John Gillings: Engineering and product development expenses declined 60% due primarily to reduced headcount and project-specific consulting expense that did not recur in Q1 2025. Selling and marketing expenses declined 1%, driven by reductions in compensation and consulting expenses, which more than offset planned increases in DTC spending. Finally, G&A expenses declined 5% versus the prior year period due to reduced compensation expense more than offsetting modest increases in accounting, legal, and consulting expenses. Given the seasonally lower revenue we consistently experience in the first quarter of each year, it tends to be the most challenging quarter for margins, EBITDA, and cash flow.

John Gillies: In Q1 2025.

John Gillies: Selling and marketing expenses declined 1% driven by reductions in compensation and consulting expenses, which more than offset planned increases in D. T. P. D T C spending.

John Gillies: Finally, G&A expenses declined 5% versus the prior year period due to reduced compensation expense more than offsetting modest increases in accounting legal and consulting expenses.

John Gillies: Given the seasonally lower revenue, we consistently experienced in the first quarter of each year. It tends to be the most challenging quarter for margins EBITDA and cash flow our focus on expanding margins and controlling costs resulted in an improvement of $732000 and non-GAAP adjusted EBITDA.

John Gillings: Our focus on expanding margins and controlling costs resulted in an improvement of $732,000 in non-GAAP-adjusted EBITDA, our best first quarter adjusted EBITDA since Q1 of 2022. Turning to the cash flow statement, our cash burn in the first quarter was $749,000, an improvement of roughly $800,000 versus cash burn of $1.55 million in the prior year period. We exited Q1 2025 with cash, cash equivalents, and restricted cash of $7.8 million. This total cash balance includes $1.3 million of restricted cash related to the sales tax audit accrual we made in Q3 of last year. As of March 31st, 2025, the company had 4,171,161 common shares outstanding.

John Gillies: Our best first quarter adjusted EBITDA since Q1 of 2022.

John Gillies: Turning to the cash flow statement, our cash burn in the first quarter with 749000, an improvement of roughly 800000 versus cash burn of $1 five 5 million in the prior year period.

John Gillies: We exited Q1 2025 with cash cash equivalents and restricted cash of $7 8 million. There's total cash balance includes $1 3 million of restricted cash related to the sales tax audit accrual we made in Q3 of last year.

John Gillies: As of March 31, 2025, the company had $4 million 171161 common shares outstanding.

Dolev Rafaeli: That concludes my prepared remarks, and I'd like to turn the call back over to Dolev for any remaining comments. Thank you, John. Our consistent execution and focus on cost containment continues to drive improvements in our research.

John Gillies: That concludes my prepared remarks, I'd like to turn the call back over to Don for any remaining comments the list.

John Gillies: Yeah.

John Gillies: Thank you John our consistent execution and focus on cost containment continues to drive improvements in our results that said despite a strong start of the year. We believe it is important to caution investors about the potential impact of tariffs on our international business.

Dolev Rafaeli: That said, despite a strong start of the year, we believe it is important to caution investors about the potential impact of tariffs on our international economy. The rhetoric and posture that took place during the first quarter had no meaningful impact on our discussion. And it is too early in the second quarter to reasonably assess the potential impact. But if If the situation is not resolved, we would expect to see meaningful reduction in international revenue.

John Gillies: The rhetoric and poster that took place during the first quarter had no meaningful impact on our business and it is too early in the second quarter, two reasonably assess the potential impact, but if the situation is not resolved we would expect to see.

Meaningful reduction in international revenue.

Operator: We hope to be able to offer greater clarity on the second quarter call, which we expect Now I'd like to turn the call over to the operator so that we can begin the question and answer. Operator. Ladies and gentlemen, at this time, we'll begin that question and answer session. To ask a question, you may press star and then one on your touch-tone phone. You are using a speakerphone. We do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star 1.

John Gillies: We hope to be able to offer greater clarity on the second quarter call, which we expect.

John Gillies: To hold in mid August now I'd like to turn the call over to the operator, so that we can begin the question and answer session operator.

John Gillies: Okay.

John Gillies: Ladies and gentlemen at this time I'll begin the question and answer session.

John Gillies: To ask a question you May press Star and then one on your touched on phones.

John Gillies: We are using a speaker phone, we do ask that you place you've got the handset hired a pressing the keys to ensure the best sound quality.

John Gillies: To withdraw your question you May press again once again that is star and then wanting to join the question queue, we will pause momentarily to assemble the roster.

Operator: Once again, that is star and then one to join the question queue will pause momentarily to assemble the roster.

Jeffrey Cohen: Our first question today comes Jeffrey Cohen from Ladenburg-Bauman. Please go ahead with your question. Hi Dolev and John, thanks for taking our questions.

Our first question today comes from Jeffrey.

Speaker Change: Jeffrey Cohen from Ladenburg Thalmann. Please go ahead with your question.

Speaker Change: Hi, John Thanks for taking our questions. So I'm wondering if you could.

Jeffrey Cohen: We're wondering if you could talk about TheraClear a little bit as far as Pipeline Numbers as far as Q2 or maybe full year aspirational numbers, where you plan to get to on the fleet and any learnings out there.

Speaker Change: Talk about there are clear a little bit as far as the pie.

Speaker Change: I played in that.

Speaker Change: Numbers as far as Q2, maybe before your aspirational numbers. What are you planning to go through all the fleet and any learnings out there in the marketplace.

Dolev Rafaeli: Hi Jeff, good afternoon, this is Dolev. I'm not sure I understand the question. You want the pipeline of numbers for what?

Speaker Change: Hi, good afternoon, if you'd go live I I'm not sure I understood. The question you want the pipeline of numbers for what.

Dolev Rafaeli: So if you could talk about TheraClear placements, what you're finding out there in the marketplace, and how that looks for the year. Absolutely. So I'll touch on three items. One, our install base keeps growing. Now, as you know, we own about 250 devices. We have about 160 of them deployed. That was part of the preferred remarks. About just over half of these are deployed with accounts that are billing insurance. We provided in the preferred remarks the number of Patients that went through our reinvestment support team and that is up 138% as compared to Q1 2024.

Speaker Change: Or if you could talk about.

Speaker Change: There are clearer placements, where you're finding out there in the marketplace and how.

Speaker Change: How that looks for the year.

Speaker Change: Oh, absolutely so.

Speaker Change: I'll touch on three items, one our installed base keeps growing now as you know well we own about 250 devices. We have about 160 of them deployed that was part of the prepared remarks are about.

Speaker Change: Just over half of these or deployed with accounts that are really.

Speaker Change: Insurance, we provided in the prepared remarks, the the number of.

Speaker Change: Oh.

Speaker Change: Patients that went through our reimbursement support team and that is up.

Speaker Change: 138% as compared to.

Dolev Rafaeli: So we're at about 1000 compared as compared to We anticipate, as we said in previous calls, we anticipate to be able to have full deployment of our install base towards the end of 2025 or the beginning of 2026, at which point we can put more into CAPEX. So we're utilizing our existing CAPEX, and once we get to a point where that CAPEX is stretched to its full extent, then we're going to increase the CAPEX. The The individual patients, the value of a patient to us is somewhere in the range of $50 to $60 per treatment, times six treatments.

Speaker Change: Q1 2024.

We're at about a thousand compared as compared to.

Speaker Change: Just over 400 last year.

Speaker Change: So that keeps on growing we anticipate as we said them.

Speaker Change: In previous calls, we anticipate to be able to have.

Speaker Change: Full deployment of our install base towards the end of 2025 at the beginning of 2026.

Speaker Change: At which point, we can we can.

Speaker Change: Cause more into Capex, so we're utilizing our existing capex and once we get to a point, where the capex is stretched to its full extent than working Hum increased capex investment.

Speaker Change: Hum.

Speaker Change: The individual.

Speaker Change: Individual patients the value of Oh, the patient to us.

Speaker Change: Is is.

Speaker Change: Somewhere in the range of 50 to $60 per treatment.

Speaker Change: Hi, six treatments.

Dolev Rafaeli: And so if you take a thousand patients that went through our reimbursement team in the first quarter and you multiply it by six and then you multiply it by 50, you get to the value of these patients. This is in addition to patients that have been in the pipeline previously. And that is in addition to the accounts that are paying for non-patients. Non-Insurance Reimbursement. Capital Equipment we own that we invested in, we want to have that fully deployed, and then we want to have as many of these billing insurance and extending the usage. Our usage which was very focused on a small number of groups of clinics in the Northeast in the beginning of 2024, is now expanding geographically.

Speaker Change: And so if you take if.

Speaker Change: If you take 1000 patients that went through our reimbursement team in the first quarter and you multiply it by six and then the multi cloud. He bought 50 you get to the value of these patients. This is in addition to patients that have been in the pipeline previously.

Speaker Change: That is in addition to the to the accounts that are paying or non.

Speaker Change: Non insurance reimbursement for these these are.

Speaker Change: The numbers, we share and it keeps on going in the right direction, we want to have full deployment of the.

Speaker Change: Capital equipment, we own that we invested in we want to have that fully deployed and then we want to have as many of these building insurance and extending the usage of our usage.

Speaker Change: Which was very focused on on a small number of <unk>.

Speaker Change: Groups of clinics in the northeast in the beginning of 'twenty 'twenty. Four is now expanding geographically, we have mail group group of clinics up and down the east coast in the Midwest as well as in the West coast and in each one of these groups are utilizing it successfully which means that within the group we start seeing expand.

Dolev Rafaeli: We have now groups of clinics up and down the East Coast, in the Midwest, as well as in the West Coast. And each one of these groups are utilizing it successfully, which means that within the group, we start seeing expansion. So again, going back to the to the example I used before, when we started doing this in the beginning of 2024, we had a small number of groups in the in the in the Northeast. One of these groups that started with one in January of 2024 is now up to 14 devices. The other one is going to actually be surpassing that number in in devices.

Speaker Change: And so again going back to the to the example, I used before when we started doing this at the beginning of 'twenty 'twenty four.

Speaker Change: We had a small number of groups in the in the in the northeast.

Speaker Change: One of these groups that started with one in January of 'twenty 'twenty. Four is now up to 14 devices. The other one is going to actually be surpassing that number in and devices. So it takes us a few quarters not only for the group of clinics to adopt the digitally.

Dolev Rafaeli: So it takes a few quarters, not only for the group of clinics to adopt the billing process from a compliance and regulatory perspective, but also for the providers to prescribe and to get the patients the patient flow coming in. We're very happy with the number of patients that are being submitted for for reimbursement support. We're very happy with the with the pre-authorization, pre-approval of these patients, which is at the level of about 85%. So every every 100 patients were to get pre-authorization for over 85 of them. This is true across payers across the different regions.

Speaker Change: Losses from a compliance.

Speaker Change: Compliance and regulatory perspective, but also for the providers, who prescribe and to get the patients the patients locally in we're very happy with the number of patients that are being submitted for for reimbursement support and we're very happy with the would be a pretty awful.

Speaker Change: Musician preapproval of the patients which is at the level of above 85%. So every every 100 patients were to get Preauthorization for over 85 of them are if this is true across payers across the different regions. So it's true across many many insurance companies.

Dolev Rafaeli: So it's true across many, many insurance companies. I hope I answered That's helpful to us.

Speaker Change: I answered the question.

Speaker Change: That's helpful to US could you talk to me about utilization trolls or timing that you're seeing as far as analysis for an account to.

Dolev Rafaeli: Could you talk any about utilization trends or time that you're seeing as far as analysis for an account to become mature out there for therapy? Yes, so as I mentioned, one patient is worth for us six treatments times approximately fifty bucks, so that's three hundred dollars, and if our goal is to be at, from a cost of goods perspective, the cost of goods of a therapeutic is about half as much as extract, so the extract, sorry, the extract breakeven is at about eighteen thousand dollars, and the therapeutic breakeven is at about nine thousand dollars a year, so it's somewhere in the twenty five hundred dollars a quarter.

Speaker Change: Become mature out there for fear of clearer.

Speaker Change: Yes, so as I mentioned.

Speaker Change: One patient.

Speaker Change: It's for US a six to eight months' time, approximately 50 Bucks. So that's 303.

Speaker Change: $300.

Speaker Change: And.

Speaker Change: If our goal is to be at.

Speaker Change: From a cost of goods perspective, the cost of goods of apparel players about half as much as extra so the app store soybean exports breakeven.

Speaker Change: Is it about $18000.

Speaker Change: And the therapy, a breakeven has been about $9000 a year. So it's.

Speaker Change: Somewhere in the $2500 a quarter.

Speaker Change:

Dolev Rafaeli: Residue Per Device, where we break even on the device. So if you divide 2,500 by 50, that's 50 procedures per quarter or 200 per year. So if we had 1,000 patients in Q1, and each one did six procedures, that's 6,000 procedures in Q1 or 24,000 in the year. I hope that helps. You can use these numbers for your analysis. Yep, that's perfect.

Revenue per device, where we we are breakeven on the voice. So if you divide a 2500 by 50 that's 50.

Speaker Change: 50 procedures.

Speaker Change: Per quarter or 200 a year.

Speaker Change: So if we had a thousand patients in Q1 and each one big six procedures. That's 6000 procedures in Q1 were 24000 in the year I hope that that helps them.

Speaker Change: But you can use these numbers.

All of this.

Speaker Change: Yeah, that's perfect. Okay, one more question tiny but in your Q.

Jeffrey Cohen: Okay, one more question. Timing on your queue. John, please confirm, I think we're going to be filing tonight. John? I apologize. Can you repeat the question? I couldn't hear it clearly. The time is on the key. Oh yeah, that should go through later tonight. Perfect. Okay. Thanks for taking our questions. Thank you, Jeff. Once again, if you would like to ask a question, please press star and one.

Speaker Change: Don Please confirm I think we're gonna be filing Tonight.

Speaker Change: John.

I apologize can you repeat the question I couldn't hear it clearly.

Speaker Change: The time, you got to keep driving on filing of the Q.

Speaker Change: Oh, yes that should go through later Tonight.

Speaker Change: Perfect. Okay. Thanks for taking our questions.

Speaker Change: Thank you Jeff.

Speaker Change: No.

Speaker Change: Once again, if he would like to ask a question. Please press star one.

Jeremy Pearlman: Our next question comes from Jeremy Pearlman from Maxim Group.

Speaker Change: Our next question comes from Jeremy Pearlman from Maxim Group. Please go ahead with your question.

Jeremy Pearlman: Please go ahead with your question. Okay, thank you. Good evening. So the first question is related back to tariffs. You know, he said it could have a depending how it plays out, it could have an impact in second quarter in international business. Is there any potential impact on the on your domestic business? I know you have You have called your install base or you do have those devices out there. So I guess those wouldn't have those wouldn't come under if you produce those manufacturing outside of the U.S. It wouldn't that you still use have them in inventory.

Jeremy Pearlman: Okay. Thank you.

Speaker Change: So the first question is related back to Paris.

Speaker Change: It could have depending how it plays out could have an impact in second quarter in the international business is there any potential impact.

Speaker Change: The impact on the on your domestic business I know you have.

Speaker Change: You have called you install base. So you do have those devices out there. So they've got those wouldn't have those won't come under if you produce those manufacturing outside of the U S that you still have them in inventory so that wouldn't be but is there any other potential tariff impact on on your domestic business.

Dolev Rafaeli: So that wouldn't be. But is there any other potential tariff impact on your domestic?

Dolev Rafaeli: First of all, good afternoon. Thank you, Jeremy, for asking the question. Our supply chain is very mildly impacted by tariff because we manufacture and source most of the material locally. We do have some peripheral impacts because suppliers take advantage of the tariff situation to rate prices, but that also happened in 2024. It's not tariff specific. We are not directly impacted by the tariff on the supply chain side.

Jeremy Pearlman: First of all good afternoon, and thank you Jeremy for asking the question.

Jeremy Pearlman: Our our supply chain is very mildly impacted by tariffs because we because we manufacture and source most of the most of the material locally we will have some or we do have some peripheral impact because of the suppliers take advantage.

<unk>.

Jeremy Pearlman: On the tariff situation.

Jeremy Pearlman: Wage voices.

Jeremy Pearlman: That also happened in 2024, it's not pair of specific we're not directly impacted by the tariff on the supply chain side.

Dolev Rafaeli: We are impacted by the tariff on the outbound into Unknown Executive, Jeffrey Cohen, Louie Toma, Destiny Buch, Unknown Executive, Jeremy Pearlman, that we provide the parts free of charge, the entity on the ground, the distributor, would have to import them. And in a situation where there is a 145% tariff, our free of charge parts is going to cost them 145%, the list. where it was six or 8% previously. So that is an impact that we cannot quantify at this point.

Jeremy Pearlman: We are impacted by the tariffs on the on the outbound into.

Jeremy Pearlman:

Jeremy Pearlman: Into non U S markets.

Jeremy Pearlman: Most specifically the the Asian markets and that is that impact is not only on new sales, but it's also on service and warranty support because even in a situation where we have warranty obligations.

Jeremy Pearlman: Beth.

Jeremy Pearlman: That we provide the parts free of charge.

Jeremy Pearlman: The entity you're on the ground with disorder, we'd have to import them in a situation where the there is 145% tariffs.

Jeremy Pearlman: Our free of charge parts has been of course the mm 145%.

Speaker Change: This voice.

Jeremy Pearlman: It was.

Speaker Change: So 8% previously.

So that that is a that has an impact that we cannot quantify at this point we're not.

Dolev Rafaeli: We're not clear yet on what is the meaning of the 90-day reprieve for Q, which is mostly straddling Q2, but we're definitely not clear on what's going to happen beyond that. I hope I answered the question. Okay. Yes, I understand. Thank you for that.

Speaker Change: Clear yet on what what what is the meaning of the 90 day reprieve for Q, which which is mostly mostly straddling.

Speaker Change: Q2.

Speaker Change: But we're definitely not clear on what's going to happen beyond that I hope I answered the question.

Speaker Change: Yeah I understood. Thank you for that and then and then moving to the extract it seems like the install base with flat sequentially. You had roughly 864 at the end of this quarter and at the end of 2024 is this is it fair to say that you basically we've hit a bottom of your install base and now is the focus going to be.

Jeremy Pearlman: And then moving to the extract, it seems like the install base was flat sequentially, had roughly 864 at the end of this quarter and at the end of 2024.

Dolev Rafaeli: Is it fair to say that we've hit a bottom of your install base, and now is the focus going to be on the current install base increasing the utilization, or you're going to also look to sign on new clinics as well while you're focusing on the – how should we look at your focus going forward in the rest of 2025? You're going to see both. So if you look at high points versus low points in terms of install base, we own on our balance sheet and in our warehouse approximately 100 devices that can be redeployed tomorrow morning because we own them.

Speaker Change: On the the current installed base, increasing utilization or are you going to also look to you know.

Speaker Change: Sign on new clinics as well, while you're focusing on the how should we look at your focus going forward and the rest of the 2025.

Speaker Change: Youre going to see both so if you look at it.

Speaker Change: If you look at high point versus low point in terms of the install base we.

Speaker Change: We we are we own on our balance sheet and you know warehouse approximately 100 devices that can be redeployed.

Speaker Change: So more and more of them because we own them.

Speaker Change: The the redeployments.

Dolev Rafaeli: The redeployment, the one part you can't see is the net difference. So the removal versus redeployment of devices. So what you see is a net number. The net number of devices out there represents some removals, some redeployments. And I would look at this as a low point. I would look at this as we would try to start expanding. But while we expand, we're still removing non-performing accounts and expanding into more productive accounts.

Speaker Change: The one part you can see as the next difference so the removal versus <unk>.

Speaker Change: Redeployment of devices. So what you see is a net number.

Speaker Change: The net number of devices out there represents some removals, some redeployments and I I would look at this is the low point I would look at this as though as we would fly too.

Speaker Change: It starts expanding but.

Speaker Change: While we expand we're still removing.

Speaker Change: Non performing accounts and expanding into.

Speaker Change: More productive accounts, let me point out one thing that was in the prepared remarks, and I just want to make sure.

Dolev Rafaeli: Let me point out one thing that was in the prepared remarks, and I just want to make sure the point comes across. We started implementing in Q4 of 2024 a process that we call Elevate 360. Most specifically what we do there is we go into accounts that we believe are strategically positioned to grow, however, they are in a point in time in which if they don't grow, we're going to remove them. And we offer them the following steps. First, we help them with the analytics. So we show them how many patients with the conditions they have seen over the last year.

Speaker Change: The point comes across.

Speaker Change: We started implementing in Q4 of 2020 for a process, we call elevate $2 60.

Speaker Change: Most most specifically what we do there as we go into accounts that we believe are.

Speaker Change: Strategically positioned to grow however, they are in a.

Speaker Change: Point in time in which if they don't grow we were going to remove them and we offer them.

Speaker Change: The following steps first we.

Speaker Change: We help them with the analytics. So we showed them how many patients with the conditions. They have seen over the last year now we've done this now for multiple offices and the average number is approximately 1000, that's a lot of patients that we showed them.

Dolev Rafaeli: Now we've done this now for multiple offices, and the average number is approximately 1,000. That's a lot of patients. Then we show them how many of these 1,000 patients on average. They have 1,000 patients in one year. How many of these 1,000 patients have they prescribed for extract? Which means how much of the available market they have in the clinic have they captured into prescriptions? And the average there is about 15%. So call it the 150%. Let me just remind you that one patient is worth about $3,000 for that doctor. So, if they converted all of these 150 patients into procedures and billing and revenue, that means $450,000 for them.

Speaker Change: How many of these 1000 patients on average.

Speaker Change: They have it in 1000 patients and one year, how many of these 1000 patients as they prescribe for extra which means how much of the available market. They have in the clinic they captured into prescriptions and.

Speaker Change: The average there is about 15% so call it the 150 patients.

Speaker Change: Let me just remind you that one patient is worth about $3000 without doctor. So if they converted all of these 150 patients into procedures and billing and revenue that means $450000 without that individual patients is worth one.

Dolev Rafaeli: That individual patient is worth $1,000 for us. So, if they had converted all of these 150 patients into procedures and paid us for the procedures, That individual patient is worth approximately $1,000 to us, so $160,000. However, when you look at the average revenue per device, we are very far from that number. So what we show them on the third line is how many patients they actually have in treatment. Now, why do we need to show them? Because they are not equipped at being able to look at these numbers. They see throughput numbers. They see how many individual patients they have seen in the clinic that day, how many procedures they have built.

Speaker Change: For us so if they could have converted all of these 150 patients into procedures and paid us with the procedures.

Speaker Change: That individual patient is worth approximately $1000 to us so $150000. However, when you look at the average revenue per device. We are very far from that number. So what we showed them on the third line is how many patients. They actually have been treatment now why do we need to show them because theyre not equipped.

Speaker Change:

Speaker Change: Being able to look at these numbers they see throughput numbers they see how many patients how many individual patients they have seen in the clinic that be how many procedures. They have built but they cannot see the numbers the way we look at that.

Dolev Rafaeli: But they cannot see the numbers the way we look at them. Then we have a discussion with the person in charge. And the person in charge would be either an owner of an individual clinic or a small group of clinics, or it's going to be the private equity that owns a much bigger group of clinics. We show them what is the upside, and we say, okay, here is what needs to happen. You need to have a champion, someone who's going to lead this, someone who's going to consolidate this on your side, someone who's going to see that as many patients as possible are prescribed.

Speaker Change: Then we have we have a discussion with the.

Speaker Change: With the person in charge of the person in charge would be either an owner of an individual clinic or a small group of clinics or it's going to be.

Speaker Change: The private equity that owns a much bigger group of clinics, we show them what is the upside and we say, okay heres what needs to happen you need to have.

Speaker Change: You need to have a a a a champion someone someone who's going to lead to someone who is going to consolidate this on your side someone who's going to see that as many patients as possible are prescribed and then those developer squad.

Dolev Rafaeli: And then of those that are prescribed, even though we do most of the Reimbursement and Reimbursement Supports. We get them the pre-authorization. As many of those that got the pre-authorization would be scheduled into procedure and then would be followed on.

Even though we do most of the.

Speaker Change: Reimbursement.

Speaker Change: Reimbursement support so we get them the preauthorization.

Speaker Change: As many of those that got the Preauthorization would be scheduled into procedure and then will be followed on.

Dolev Rafaeli: For those clinics that... We were able to go through the full process, starting in Q4 of 2024, we have seen tremendous upside. The tremendous upside is not only reflected in that individual account, but also across other clinics they own. So I'm going to use one example.

Speaker Change: For those clinics that.

Speaker Change: We were able to go through the hoop losses, starting in Q4, a place when before we have seen tremendous upside.

Speaker Change: The the tremendous upside is.

Speaker Change: Not only reflected in that individual account, but also across other clinics they own so I'm going to use. One example, we have where we had an account that was on its way to be removed.

Dolev Rafaeli: We had an account that was on to be removed. We have done Elevate360 in October of 2024. And that account, which used to be, in our terms, used to be a $30,000 to $40,000 account, which was in 2021-2022, went down to a $13,000 revenue until October of that year, and generated to us $28,000 in Q4 2024, which means it was very successful in that individual clinic. However, the owner of that clinic now has deployed the same approach across seven more clinics. So now we have eight. So that comes into a partial answer to your previous question.

Speaker Change: He has done elevate 60 in October of 'twenty, 'twenty, four and bad accounts, which used to be in our terms used to be a 30 to 40000 dollar accounts, which was in 'twenty 'twenty. One 'twenty two AR went down to a $13000 revenue until <unk>.

Speaker Change: October of that year end.

Speaker Change: Generated two us $28000 in Q4, 'twenty 'twenty, four which means it was very successful and that individual clinic.

Speaker Change: Over the owner of that clinic now has deployed the same approach across seven more clinics and now we have eight so that comes into it in a partial answer to your previous question. So we have not redeploy seven devices that were sitting in our inventory.

Dolev Rafaeli: So we have now redeployed seven devices that were sitting in our inventory into seven new clinics that are going to be more productive, just because we have done that process. So it's not only that one individual account that was there since 2019 and was good in 2021, 2022, but was not good in 23 and 24. This account was not removed, it became a very productive account. In addition to that, we have seven more accounts that over Q1 and Q2 of 2025 have shown to be very productive.

Speaker Change: Into seven new clinics that are going to be more productive.

Speaker Change: Just because we have done that pulses. So it's not only that one individual account that was there since.

Speaker Change: 2019 was good in 2021 'twenty two what was not good in 'twenty, three and 'twenty four.

Speaker Change: This account was not removed it became very.

Very productive accounts in.

Speaker Change: In addition to that we have seven more accounts that over Q1 and Q2 of 2025.

Speaker Change: Shown to be very productive.

Dolev Rafaeli: We will be able in the coming quarters to share more information about that as this becomes more systemic and not just individual accounts. As I said in the prepared remarks, we are now deploying this across dozens of accounts, where in Q4 we were in a small number of accounts and now we're approaching 100 accounts in which we utilize this. This gives us a better ability to either... Make them better, deploy across more clinics that they own, or remove faster. Just show them what is the potential, get a clear answer why they're not utilizing it. And if they're not utilizing it, remove it.

Speaker Change: We will be able in the coming quarters to share more.

Speaker Change: Inflammation without death as this become more.

Speaker Change: Systemic and not just individual accounts.

Speaker Change: As I said in the prepared remarks, we're now deploying this across dozens of accounts where in Q4, we were in a small number of accounts and lower.

Speaker Change: Approaches 100 accounts in which we will utilize this this gives us a better ability to either.

Speaker Change: Makes them better.

Speaker Change: Deploy your costs more clinics that they own.

Speaker Change: Or we moved faster just show them what is the potential.

Speaker Change: Get a clear answer to why they're not utilizing it.

Speaker Change: And and if they're not utilized to get remove it but if they are willing to.

Dolev Rafaeli: But if they are willing to put the efforts into, and it's a range of things, but put a lead person on the business, make sure that the front desk schedules people, make sure that we can do online scheduling for the patients, make sure that billing goes out according to instructions, and many, many other details, then it becomes very productive. I hope I answered that.

Speaker Change: Put the efforts into.

Speaker Change: And it's a range of things, but first put up.

Speaker Change: A lead person on the business.

Speaker Change: Made sure that the front desk schedules people make sure that we can do online scheduling for the patients make sure. The billing goes out according to instructions I mean, many many other details then it becomes very productive I hope I answered the question.

Jeremy Pearlman: Yeah, no, that was very helpful. And then just this one quick follow up question. So you said now you're roughly doing this to 100 accounts. It's Elevate360.

Speaker Change: Yeah, No that was very helpful. And then just as one quick follow up question. So you said now you have rapid units to 100 accounts. It's elevate three six is that is what are the what's the just a quick percentage of clinic in your installed base that you think this would be helpful for.

Dolev Rafaeli: Is that is what other what's the just a quick percentage of clinics in your install base that you think this would be helpful? The number 100 represents, we have 25 territory managers, and it represents four per territory. So we went from having five accounts in October of 2024, we wanted to see if it works, so we went with five, we selected five, and it was, We operate in three regions, but it was one per region, and then one region had more accounts. And then once we saw that working, we selected four accounts per territory, each territory manager.

Speaker Change: The number 100 represents we have 25 territory managers and it represents four per territory. So we went from having all five accounts in October of 2024.

Speaker Change: We wanted to see it works. So we went with five we selected five and it was.

Speaker Change: We operate in three regions, but it was it was a it was one per region and then the one region have more accounts.

Speaker Change: And then once we saw that working we we selected four accounts per territory. Each territory manager, we have 25 territory managers and if you take our 850 plus.

Dolev Rafaeli: We have 25 territory managers. And if you take our 850 plus or minus, 850 net accounts, divide this by 25, you'll see that each territory manager has approximately 35, 37 accounts, so that is a 10% penetration.

Speaker Change: Plus or minus 850.

Speaker Change: Net accounts divide this by 'twenty five you'll see that each territory manager has approximately 35 37 accounts, though deaths.

Speaker Change: Is a 10% penetration, though if you go back to the prepared remarks, you'll you'll realize that it's it's a lot of consulting works because we have to go in and not only.

Dolev Rafaeli: Now, if you go back to the prepared remarks, you'll realize that it's a lot of consulting works, because we have to go in, and not only Collect the data and analyze it, but we need to present it to them, so they need to put in effort. So just for the sake of explanation, last night we had a dinner meeting with one of these accounts. The owner had to collect 13 providers, so 13 doctors had to be there. We were there. We presented the numbers. We showed them what they need to do. They had to make their own decisions, because we cannot tell them how to practice medicine.

Speaker Change: Collect the data and analyze it but we need to present it to them. So they need to put an effort. So just for the sake of the explanation.

Speaker Change: Last night, we had a dinner meeting with one of these accounts are the older had to collect the 13th providers 13 doctors have to be there. We were there we presented the numbers we showed them what they need to do they had to make their own decisions with it because we can't we cannot tell them how to practice medicine, so they need to make their own decisions whether they were.

Dolev Rafaeli: So they need to make their own decisions whether they want to do this and how they want to do this and how they want to implement the procedures internally. If they do this, we're going to handhold them, handhold the execution in the clinic. We're going to be providing them with reporting, with top-line numbers and analytics of what they do. But that's why we went from 5 to 100. Once we see this at 100, which means 4 per territory, we're going to be able to do that. Approximately 35 per region, then we will be able to expand beyond.

To do this and how they wanted to do this on how they want to implement the procedures internally.

Speaker Change: If they do this we're gonna handhold them.

Speaker Change: Handhold. The proceed the execution in the clinic, we're gonna be providing them with with reporting with wood topline numbers.

Speaker Change: Analytics of what they do but that's why we went from five to 100 once we see this.

Speaker Change: At a hub grid, which means four per territory, where.

Speaker Change: Approximately 35 per region.

Then we will be able to expand beyond that.

Dolev Rafaeli: So that's why, in the prepared remarks, we say we put a lot of resources.

Speaker Change: That's why in the prepared remarks, when we say we put a lot of.

Speaker Change: Resources into that.

Dolev Rafaeli: Okay, great. Thank you for all that information.

Speaker Change: Okay, great. Thank you for all that information I'll hop back in the queue.

Unknown Executive: I'll hop back in the queue.

Speaker Change: Thank you.

Dolev Rafaeli: And at this time, in showing no additional questions, I'd like to turn the floor back over for any closing comments. Thank you everyone for participating in today's call, we look forward to seeing all of you again in mid-August when we will be presenting the results of the second quarter. Thank you so much and have a great day.

Speaker Change: And at this time in showing no additional questions I'd like to turn the floor back over for any closing remarks.

Speaker Change: Thank you everyone for participating in today's call. We look forward to seeing all of you again.

In mid August when we will be presenting the results of the second quarter.

Speaker Change: Thank you so much and have a great evening.

Operator: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you.

Speaker Change: And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.

Operator: You may now disconnect.

Speaker Change: Okay.

Speaker Change: [noise].