Q3 2025 Strata Skin Sciences Inc Earnings Call
Speaker #1: Ladies and gentlemen, thank
Speaker #1: you for standing by. Good afternoon and welcome to the STRATA Skin Sciences, Inc. Q3, 2025 financial results and corporate update conference call. All participants will be in a listen-only mode.
Speaker #1: ahead.
Speaker #2: Thank you, Arielle, and
Speaker #2: good afternoon, everyone, and thank you all for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended September 30th, press release can also be found on the company's 2025.
Speaker #2: www.strataskinsciences.com Joining me on today's earnings call from Strataskins Sciences Management Team under the Investors tab. Executive Officer, and John Gillings, Vice President of Finance.
Speaker #2: forward-looking statements, including statements that expectations for future performance or A copy of that operational results. address Strataskins Sciences' Forward-looking statements involve risks and other factors that may cause actual results to During this call, management will be making differ materially from those statements.
Speaker #2: For more information about these risks, please refer to the risk factors described in Strataskins Sciences' most recently filed annual report on Form 10-K and subsequent periodic reports filed with the SEC and Strataskins Sciences' press release that accompanies this call, particularly the cautionary statements within.
Speaker #2: Call contains time-sensitive information. The content of this call is accurate only as of today, November 13, 2025. Except as required by law, Strata Skin Sciences disclaims any obligation to publicly update or revise any information after this call.
Speaker #2: It's now my pleasure to turn the call over to Strataskins Sciences.
Speaker #3: Thank you, Jules, and good afternoon to everyone on the call. During the third quarter of
Speaker #3: Thank you, Jules, and good afternoon to everyone on the call. During the third quarter of
Speaker #3: the progress will be the expands reimbursement Dolev. treatments to include multiple inflammatory and autoimmune skin conditions beyond their original psoriasis the revision of these codes indication, enabling coverage for conditions such as vitiligo, atopic dermatitis, mycosis eligibility for excimer laser fungoid, lichen cutaneous T-cell planus, alopecia areata, and lymphoma better known as CTCL.
Speaker #3: Among approximately 30 indications. The implication of these changes are pivotal to our future business, and that of our partners. As they to patients in exponentially expand our need, while creating a meaningful increase in potential revenue from procedures which, until now, would reach.
Speaker #3: While the effect on January 1, not be within 2027, we have commenced the process to expand this change to private payers opportunity to provide services as well.
Speaker #3: The latest progress of the revisions are set to go into codes is the Centers recognition of these expanded of Medicare and CMS, has recognized both the existing psoriasis-only codes and the expanded ones in its calendar year 2026 Medicare Physician Fee Schedule, Medicaid Services, or the 2027 reimbursement codes.
Speaker #3: final rule, publication, which will then reflect into have previously indicated, these additional reimbursement codes open our addressable market to over 30 million patients expanding our total available market by threefold.
Speaker #3: In addition to submitted economic data, we have supported a potential increase in the reimbursement rates for each of our codes, which the CMS 2026 final rule has indicated will be reviewed for consideration.
Speaker #3: We've also continued to strengthen our practice innovative DTC campaign. Elevate 360 focuses on improving utilization of the partner clinics by supporting the implementation of best practices to drive optimal use of extract lasers.
Speaker #3: Since the beginning of 2025, 2025, 99 of consulting model and our our approximately 838 clinics operating under our extract usage agreement have entered the Elevate 360 program.
Speaker #3: While this has resulted in an average of 7% growth year over year for those businesses, completing a review as a part of the program's design.
Speaker #3: Additionally, average gross billings per device for all 838 of our US partner clinics of 5,981 dollars for the third quarter of 2025 increased 8.5% versus the third quarter of the highest gross 2025, and represents billings per device since the fourth quarter of 2022.
Speaker #3: Turning back to Elevate clinics in the first half of 2024, and after adopting the Elevate 360, I want to share a specific 360 program, clinics, and revenue example of a partner contribution from the account increased tenfold.
Speaker #3: which began with two By providing deeper expanded to nine partner better understand the financial opportunities associated with the patients they already see in their clinics and those they have analytics we help these prescribed but did not follow through with extract scheduling.
Speaker #3: We expect that these become exponential in the coming year, with the addition of new reimbursement opportunities resulting from the expansion of kinds of improvements will indications for which extract treatment will become available.
Speaker #3: Turning to Theraclear X, while the remain while this remains a small but growing portion of our revenue, we reached an important milestone with the regulatory approval and subsequent initial commercial placement in Mexico.
Speaker #3: We believe the continued international expansion of both the extract and Theraclear X technologies represents significant opportunity for growth and value generation. During the third quarter, we continued to experience challenges in our international business, which we believe is attributable mainly to the current trade policy of the United States government, and pressuring our total revenue for the creating uncertainty update on our case against laser quarter.
Speaker #3: of false and misleading statements in its marketing. We believe we are strongly positioned in this suit and have the potential to be awarded significant damages.
Speaker #3: injunction issued late last year was very helpful in Turning to limiting any further damage to Additionally, an optic regarding its use our domestic recurring business.
Speaker #3: We are our position that laser pleased that the court agreed with optic Korea the parent of laser optic America as well as another entity which was used as the face for laser optics US sales efforts should be added as our ability to collect defendants.
Speaker #3: the meantime, the We believe this will result in injunction and clearly and clarity offering offered by the litigation allowed us to engage multiple dermatology clinics that damages.
Speaker #3: had been previously misled by false claims about the In palace solid state lasers. To date, over 20 such laser optic buyers have partnered back with STRATA under our program or have purchased extract eczema lasers directly from us.
Speaker #3: Which represents more than 1 million dollars in annual capital and recurring revenue. Emphasizing extract as the recognized gold standard in the targeted UVB therapy.
Speaker #3: With that, I'd like to turn the call over to John Gillings, who will review our financial results in more detail.
Speaker #3: John.
Speaker #2: Thanks, Dolev.
Speaker #2: Our total revenue for the third quarter of 2025 was 6.9 million, down 20% compared to Q3 of 2024. This was driven primarily by the challenging international environment, Dolev described.
Speaker #2: That said, recurring revenue remained solid with gross code sales up 4.1% and net US recurring extract revenue up 2.8%. Global recurring revenue of 5.5 million increased 3% year over year and equipment revenue of 1.4 million decreased 60% in the third quarter of 2025 compared with the prior year period.
Speaker #2: Gross profit for the third quarter of 2025 was 4.2 million, or 60% of revenue. Gross margin was roughly flat versus the prior year period.
Speaker #2: Total operating expenses were 5.4 million in the third quarter of 2025 versus 6.9 million in the prior year period. The meaningful reduction was primarily due to higher costs in the prior year period related to a one-time 1.8 million accrual for sales tax in New York State recorded in G&A in the third quarter of 2024, and settlement gains booked this quarter for roughly 680,000.
Speaker #2: Net loss for the third quarter of 2025 was $1.6 million, or EPS of negative $0.36 per basic and diluted common share. This compares to a net loss of $2.1 million, or EPS of negative $0.51 per basic and diluted common share in the third quarter of 2024.
Speaker #2: Adjusted EBITDA was slightly positive in the quarter compared to negative 240,000 in the comparable quarter of the prior year, the improvement was driven primarily by lower operating expenses.
Speaker #2: During the quarter, we raised 2.2 million net in a straight common registered direct offering. Cash and cash equivalents that September 30th, 2025, were 7.1 million.
Speaker #2: That concludes my prepared remarks, and I'd like to turn the call back over to Dolev for any remaining comments. Dolev.
Speaker #3: Thank you, John. In summary, our team is extremely passionate about our business, focused on driving growth. We are excited about what lies ahead, including a seasonality stronger fourth quarter 2025.
Speaker #3: The tripling of our patient population with expanded indications for use of our eczema laser and favorable reimbursements trends. That said, we believe it is important to continue to remind investors about the lingering impact of tariffs on our international business.
Speaker #3: While there were no meaningful impacts on our business in the first quarter, we saw some weakening in China in the second quarter and continued weakness in the third quarter.
Speaker #3: We hope to move past these issues and hope to be able to offer greater clarity on the fourth quarter call, which we expect to hold in early March.
Speaker #3: Now, I'd like to turn the call over to the operator so that we can begin the question and answer session.
Speaker #3: Operator.
Speaker #4: Thank
Speaker #4: you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing any keys.
Speaker #4: To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Jeff Cohen of Lattenberg Thalman.
Speaker #4: Please go
Speaker #4: ahead. Hi, this
Speaker #5: is Destiny on for Jeff. Thank you for taking our questions. Could you maybe talk to the average revenue per device in the third quarter and any trends you're seeing going into the fourth quarter in terms of treatment volumes?
Speaker #3: Yes, hi Destiny. Nice hearing from you. As I mentioned in my prepared remarks, the average revenue, the gross average revenue per device was $5,981, just shy of $6,000.
Speaker #3: It's the highest average revenue per device we had since 2022. We're in a growth trend. If you follow the last few quarters, you'll see this is growing.
Speaker #3: And it's growing because of the increased utilization of devices, which is driven mostly by two things. One, we're removing nonproductive devices, so we're moving them back into inventory.
Speaker #3: That helps us in not having to build new devices, not having to invest in CapEx. We own these devices. They're on our balance sheet.
Speaker #3: And two, we're focusing on increasing utilization through our Elevate 360 and our normal DPC operations. And we anticipate this to continue going up. As you can recall, just three years ago, our average revenue per device was in the range of 7,500.
Speaker #3: So we see this as a huge opportunity because if we could increase our average revenue per device from 6,000 to 7,500, that's 6,000 dollars per device per year, times the 800 and some devices, just that is an increase in top line of about 5 million dollars.
Speaker #3: So we're very aggressively pursuing that, and we're using these two tools. Removing nonproductive devices and increasing utilization on the existing ones. We do anticipate that towards the end of this year, our installed base is going to start increasing again.
Speaker #3: I hope I answered
Speaker #3: your question. Yes, you
Speaker #5: did. Thank you. And then sticking on the theme of your DTC campaigns, I'm wondering if there has been any increase in your show-up rates and if that's helping or improving the revenue per device as well.
Speaker #5: And then can you just remind me, how many clinics are part of your, or clinic groups are part of your Elevate 360 program currently?
Speaker #3: Well, that's a very complex question, so I'll break it into parts. We have as of the end of Q3, we had 838 partner clinics that are part of our usage agreement relationship.
Speaker #3: These are of these, we have managed to perform Elevate 360 with 99, and I covered that in our prepared remarks. And we're actively pursuing others as you can see in our investor presentation.
Speaker #3: We have approximately 25 territories covered by 25 territory managers. So it's approximately four accounts per territory managers that were covered from the beginning of this year.
Speaker #3: We hope to accelerate the pace and get to a much bigger number than that. Obviously, we're going after those that we see the potential, those that either had past higher performance or we have the reason to believe that they can grow, whether it's because of their patient population or because of the history that we had with them.
Speaker #3: So these are the more lower-hanging fruits. We are going after these, and as you can see, our not only are gross and net return revenue grew, and I'll spend a minute talking about this in a second, but not only the gross and net recurring revenue grew, but also the average revenue per device grew, which means the utilization per device.
Speaker #3: As I mentioned in our prepared remarks, approximately 2,000 devices were comebacks as a result of the litigation. We were able to bring them back.
Speaker #3: These were accounts that were very productive in the past and were approached by another company with false pretense and giving them false claims. We lost them in either in 2023 or 2024.
Speaker #3: We're able to bring them back. A big chunk of that, almost half of these two dozen devices, is coming back towards the back half of this year.
Speaker #3: And they're going to be just these 10 accounts are going to be accountable for an increase of just about half a million dollars a year in revenue.
Speaker #3: So we're doing this one piece at a time, making sure that our installed base and presence in the market is ready towards the end of 2026 for the expansion of the codes and being able to handle more patients coming in because of the expanded indications, but also being able to handle the existing patients more effectively.
Speaker #3: Now, going back to your the beginning of your question, which is DTC, our DTC covers nationwide. But we cover we go in geographies. We go after the accounts that could see the benefits from having DTC patients.
Speaker #3: And these accounts would be the accounts that are already very good at converting their own patients and see the benefits of an increased agent flow and utilization.
Speaker #3: So what we do see in DTC, and that's not geography-specific, is that in the second half of 2025, because of a variety of reasons, we have better much lower cost per acquisition of DTC patients, which is driven both by better cost per lead.
Speaker #3: So our cost of media better conversion means the efficiency of our call center and being able to place them into appointments. And then down the funnel, better show rates and better conversion rates.
Speaker #3: And that is mostly because of the focus we have with these accounts. We stop sending patients to accounts that are not converting, and we're using these patients with accounts that do convert.
Speaker #3: We redirect patients from accounts that are not very good at converting and use them better. So these numbers are basically across the funnel of DTC.
Speaker #3: And this is why we can see with more or less the same sales and marketing expense we're getting better results in recurring revenue, which is converting into better contribution margins from the business.
Speaker #3: And may I point out that our gross margin stayed flat even though we lost international business. So we're actually doing better as a core recurring revenue business in the US.
Speaker #3: Again, I hope I answered the question in full.
Speaker #5: that makes perfect sense. Thank you. And Yes, then one last one for me, on STRATA Clear, excuse me, can you remind us what the installed base on that might look like by the end of '25?
Speaker #5: And I think you previously mentioned 2026, but I'm also curious to understand how the moving into Mexico and having commercial placements there may tie into the overall strategy.
Speaker #5: Thank you for taking the
Speaker #5: questions. Sure.
Speaker #3: So let me start with Mexico. And Mexico, interestingly enough, is a country that lies just south of the US. So we don't need to we don't need to travel far to support them, whether it's marketing-wise, clinically-wise, or even technical support.
Speaker #3: We are actively pursuing, and we were actively pursuing throughout 2024 and 2025, the registrations with cost of price, which is the registering body in Mexico.
Speaker #3: And just a few weeks ago, we were happy to announce that we got the STRATA Clear registered with cost of price and are able to report the first commercial placement.
Speaker #3: Our approach in Mexico is very much like the one in the US. Instead of trying to sell capital equipment and run into issues of us having to get paid a very meaningful sums of money.
Speaker #3: And as you probably know, because I know that you are also covering other capital equipment companies, the capital equipment markets are suffering from high interest rates, from tariffs, and so on.
Speaker #3: Our approach with Mexico from the beginning was if we can get the registrations, we can expand by placing into Mexico. We were hoping to get the extract registered in Mexico first, but that did not happen.
Speaker #3: It's still in the STRATA Clear registered progress. We got in Mexico. And we've already announced the first commercial placement, and we're we hope to be able to announce by the end of 2025 a significant number of placements in Mexico, which are going to be following the same commercial relationship we have in the US, in which we take the risk of the equipment.
Speaker #3: We take the risk of training the accounts and supporting the accounts. The account shares the revenue with us. The average rate of payment that a patient pays in Mexico for an acne visit is about $100, the equivalent of about $140.
Speaker #3: And we don't see a reason why we cannot collect the same levels we collect in the US, which is approximately 40% of that, 50 to 60 dollars of our money.
Speaker #3: And our technical support teams and our clinical support teams are able to support in Mexico. We've spent multiple visits in Mexico in the last three months getting the local sales team of the distribution partner we have in Mexico, a company by the name of Minolabs, ready to do the sales.
Speaker #3: We've participated with them in the some of the initial meetings with customers. They have access to there's over 3,000 dermatologists in Mexico, and they have access to many, many of them.
Speaker #3: And we believe that the belief in the trust in the technology and the need in the market are going to show up as early as in Q4 this year.
Speaker #3: We are participating with them in a national dermatology conference next week, and I think that's going to be the trigger for these placements. Now, going back to the first part of your question, our U.S. installed base is about 161 devices.
Speaker #3: We are even though we don't parse we do not parse in our financials the portion of what STRATA Clear means inside the recurring revenue that John discussed.
Speaker #3: As I mentioned in my prepared remarks, it's still a small portion. But it's a growing portion. And more importantly, it gives us a second touchpoint within the same account.
Speaker #3: So all of these 161 accounts are within these 838 extract accounts. So our territory managers, when they visit an account, they cover both the extract and the STRATA Clear.
Speaker #3: We have been at the process of expanding usage of STRATA Clear in the US now for about a year. We are happy to report that the use of the dedicated CPT code 10040 is expanding.
Speaker #3: About two-thirds of our 161 accounts are using that code for insurance reimbursement. The other one-third is our charging patients cash for the treatment. And we anticipate to wrap up my answer to your question, we were still hoping to get much closer to 200 devices deployed whether in the US or elsewhere under the usage agreement by the end of 2025.
Speaker #2: Okay. Thank you for those updates. I appreciate it.
Speaker #3: Absolutely. Thank
Speaker #3: you. Our next question comes
Speaker #1: from Jeremy Perlman of Maxim Group. Please go ahead.
Speaker #4: Thank you for taking the question. Good afternoon. First one, maybe you could help us understand a little bit the delta, if I heard correctly.
Speaker #4: So you said that there was 7% year-over-year growth from those businesses that were part of the Elevate 360 program, but then you said overall average gross billings were up 8.5%.
Speaker #4: So maybe help us understand where that delta is coming from.
Speaker #3: Yes. So, first of all, I owe a portion of the answer to the question that was asked before by Destiny. Just as a reminder, we report two numbers on the recurring revenue.
Speaker #3: We report a gross number and a net number. The difference between the gross and the net is even though it's itemized in our financial reports and in our releases, it's it includes two components.
Speaker #3: One, we are netting out some of our support to the market. So for example, the our coupons given to patients for reimbursing their co-pays are netted out.
Speaker #3: But the bigger portion of changes happens because we need to defer out revenue that came in during the last part of the quarter. And we defer in that we defer that into the following quarter.
Speaker #3: So there's always going to be a difference between our gross numbers and our net numbers. Then in addition to that, we reported two gross numbers.
Speaker #3: One has to do with these specifically these 99 accounts that are that were handled through Elevate 360. And with these accounts, we have seen a growth of 7% in revenue.
Speaker #3: These accounts, as I mentioned before, are we break our accounts into five tiers: Tier 1 to Tier 5. Tier 1 being the highest producing tiers and Tier 5 being the lowest producing tiers.
Speaker #3: And we are focused on with our Elevate 360, we're focused on tiers 2, 3, and 4, being able to move accounts from Tier 4 to Tier 3 or Tier 3 to Tier 2.
Speaker #3: And with Tier 5, we're either removing them or they have to move up on their own because they're too small for us to focus on.
Speaker #3: We're not really focused on Tier 1 with Elevate 360. These are the accounts that got it and know how to make it work. The 7% number is a 7% growth over these 99 accounts.
Speaker #3: The 8.5% growth in average recurring revenue per device is across the 838 devices. So it's two different populations. The 7%, if you wish, is what we were able to get in growth for these 99 accounts that are mostly Tier 2, 3, and 4, where the 8.5% board, to be also from Tier 1s and is across the board.
Speaker #3: Tier 5s. I hope that helps answer the question. And again, And across the So it gets netted out the 8.5% is a gross number.
Speaker #3: when we grow, it actually you can actually see these in the net numbers going up slower. That's why when John went through his numbers, you saw a number that's about 4% in overall numbers.
Speaker #3: Because I understood.
Speaker #3: we average numbers are per device. I hope that the math makes sense.
Speaker #4: Yeah. No, I understand. So it's how the what tiered clinics are within are in the program versus the overall. Okay. Got it. Is that that 4%, is that a net revenue growth number?
Speaker #4: Is that something we could provide, or are you not offering that number this quarter?
Speaker #3: John, do you mind jumping in on gross to net?
Speaker #2: is the 4% is the net number. And just in Yeah. So that anything can happen later in the general terms, because quarter, but in general terms, if you see the gross number growing a bit faster than the net number, that's usually a positive leading
Speaker #4: Okay. Understood.
Speaker #4: and just what's roughly how many more devices you think you can get from that?
Speaker #3: damage caused Yeah. by the false claims is in the range
Speaker #3: damage caused Yeah. by the false claims is in the range So I'm not going to accounts. go into specific account numbers And we are actively back.
Speaker #3: So again, if you take a perspective over the last year and a half, our top-line pursuing bringing all of them 2024, you saw our top-line removals, you should look at what happens of 75 to 100 between 2023 and 2024.
Speaker #3: And this is when we lost these accounts. More importantly, these accounts were very productive accounts. And they were lost based on false claims. And the false number slightly decrease because of claims had to do with two major areas.
Speaker #3: One was the technical and clinical equivalence or superiority, which the defendants in this case cannot support because they do not have not even one clinical study to their name that shows clinical efficacy on treating psoriasis.
Speaker #3: And they have one 16-patient case done in Korea for vitiligo, and that's it. That's what they have in clinical studies. The technical claims that have to do with speed, ease of use, and performance are far from being substantiated. They claimed that their, but more importantly, device can be used for treatment for reimbursement.
Speaker #3: And the CPT codes are very specific. They say eczema laser treatment for psoriasis. And so there's no two ways to understand that. It says eczema laser.
Speaker #3: If you have something that's not eczema laser, then it's not eczema laser. And these very productive accounts do not want to face both the first part, which is not getting clinical efficacy for their patients and being straddled with something that works slower, maybe does not work, but also most importantly, they do not want to face the potential of being pursued for non-ethical billing of something that cannot be billed.
Speaker #3: So this is why they tend to us come back and work with and in addition to the fact that we give them a full envelope of services that includes helping them with pre-authorization of patients and driving DTC patients to them and so on and so forth.
Speaker #3: So there's a meaningful additional upside of comebacks to come from them. Just as a reminder, in the past, we had a similar situation with a competitor, a company called RA Medical, which we ended up eventually acquiring the business in 2021.
Speaker #3: But before that, they had a few hundred devices, and we were actively pursuing them, and we were able to convert a few hundred devices of the RA Medical Service device into the extra
Speaker #3: users. Okay.
Speaker #4: Understood. That's good information. And then just two questions. I think I might have missed the time to call. Did you say how many patients the DTC marketing campaign drove through this quarter into clinics, or I might have missed it?
Speaker #4: that? Good catch.
Speaker #3: No, we did not. We will probably have to follow up with a press release that outlines
Speaker #3: that. Okay.
Speaker #4: And then just last question from me. You mentioned, I think, last quarter that I know you got the CBT codes, so hopefully going to SAF, the expanded codes in 2027.
Speaker #4: And you did say there was a possibility of getting temporary codes. Is that something that's still on the table for 2026 and when would that when might that be if that's a
Speaker #4: possibility? So
Speaker #3: So the CMS physician fee schedule that came out about 10 days ago, the final rule for 2026, CMS specifically related to our request and said that they do not want to create confusion in the market considering that there's the existing codes for psoriasis only.
Speaker #3: There is the change of expanded codes coming in in January 1st, 2027. And then there is the ongoing examination of the value of the codes, which is right now in the hands of the RUC committee which are between these three things, the CMS thought it would not be a good or wise thing to create temporary codes for the 2026
Speaker #3: cycle. Okay.
Speaker #4: Understood. Thank you for all the information. I'll hop back in with you.
Speaker #4: you. Absolutely.
Speaker #3: Thank
Speaker #3: you. Once again,
Speaker #1: if you have a question, please press star, then one. This concludes the question and answer session. I would like to turn the conference back over to Dolev Rafaeli for any closing
Speaker #1: remarks. Thank you, everyone, for showing up for
Speaker #3: this call. I appreciate your interest in the company. We will be presenting again in the middle of March, presenting our fourth quarter results. Thank you very
Speaker #3: much. Thank