Revenue growth momentum continues with further improvement in gross margins and positive operating cash flow for the quarter
Conference call and webcast, today at 8:30 am Eastern Time
HORSHAM, Penn., Nov. 13, 2018 (GLOBE NEWSWIRE) — STRATA Skin Sciences, Inc. (NASDAQ: SSKN) (“STRATA”), a medical technology company in Dermatology and Plastic Surgery dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions, today reported financial results for the period ended September 30, 2018.
Financial highlights of the third quarter of 2018 include the following (all comparisons are with the third quarter of 2017 and all figures are cited in GAAP, unless stated otherwise):
- Revenues were $7.9 million, an increase of 8%
- Recurring XTRAC® revenues were $5.6 million, or 70% of total revenues. Average revenue per device was $7,448, an increase of 4.6%
- Gross margins were 61.4%, an increase of 6.4%
- Dermatology Recurring Procedures Revenue margin was 68.4%, an increase of 6%
- Cash and cash equivalents as of September 30, 2018 of $15.9 million, an increase of $1.5 million over June 30, 2018
“Just a few months into the turnaround, we are pleased to report on another quarter of solid sequential improvement and operational strength,” stated Dr. Dolev Rafaeli, President and Chief Executive Officer of STRATA. “The investments in our direct-to-consumer (DTC) advertising program and focus on our core recurring business and unique go-to-market platform contributed significantly to our improved results, highlighted by our delivering positive cash flow, which sets the foundation for further growth.”
Dr. Rafaeli continued. “We expect revenue growth to accelerate to double digits in 2019. We will also continue to seek accretive growth opportunities to augment our growing platform.”
Reported Financial Results
Revenues for the third quarter of 2018 were $7.9 million compared with revenues for the third quarter of 2017 of $7.3 million.
Net loss for the third quarter of 2018 was $0.3 million or ($0.01) per basic and diluted common share, which included $0.2 million in interest expense and $1.3 million in depreciation and amortization expenses. This compares with net loss for the third quarter of 2017 of $13.7 million or ($3.32) per basic and diluted common share, which included an $11.8 million loss on the extinguishment of debentures, $1.3 million in interest expense and $1.6 million in depreciation and amortization.
Revenues for the nine months of 2018 were $21.9 million compared with revenues for the nine months of 2017 of $22.9 million. Net loss for the nine months of 2018 was $3.9 million or ($0.15) per basic and diluted share, which included $0.9 million in interest expense and $4.0 million in depreciation and amortization expenses. This compares with net loss for the nine months of 2017 of $17.1 million or ($5.94) per basic and diluted common share, which included an $11.8 million loss on the extinguishment of debentures, $4.3 million in interest expense and $4.8 million in depreciation and amortization expenses.
In the second quarter of 2018, the Company terminated its agreement to license the Nordlys product line. The comparability of sales and margins in the periods presented are impacted by this termination. Our overall sales for the three months ended September 30, 2018 and 2017, excluding Nordlys, were $7.8 million and $7.2 million, respectively. The sales for the nine months ended September 30, 2018 and 2017, excluding Nordlys, were $21.6 million and $22.3 million, respectively.
As of September 30, 2018, the Company had cash and cash equivalents of $15.9 million, compared with $4.1 million as of December 31, 2017.
Reconciliation of Non-GAAP Measures
To supplement the Company’s consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company provides certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP adjusted EBITDA.
The Company’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to, GAAP results. These non-GAAP measures are provided to enhance investors’ overall understanding of our current financial performance and to provide further information for comparative purposes.
Specifically, the Company believes the non-GAAP measures provide useful information to both management and investors by isolating certain expenses, gains and losses that may not be indicative of the Company’s core operating results and business outlook. In addition, the Company believes non-GAAP measures enhance the comparability of results against prior periods. Reconciliation of the GAAP measure of net loss to non-GAAP measures included in this press release is as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||
| Net Loss | $ (290 | ) | $ (13,671 | ) | $ (3,868 | ) | $ (17,111 | ) | |||
| Adjustments: | |||||||||||
| Depreciation/amortization | 1,253 | 1,602 | 3,993 | 4,811 | |||||||
| Income taxes | (80 | ) | 38 | – | 181 | ||||||
| Interest expense | 239 | 1,343 | 930 | 4,264 | |||||||
| Non-GAAP EBITDA | 1,122 | (10,688 | ) | 1,055 | (7,855 | ) | |||||
| Stock compensation | 366 | 63 | 570 | 136 | |||||||
| Change in fair value of warrants | 79 | (81 | ) | 101 | (77 | ) | |||||
| Write-off of Nordlys inventory & assets | – | – | 280 | – | |||||||
| Loss on extinguishment of debt | – | 11,799 | – | 11,799 | |||||||
| Impairment of distributors rights agreement | – | – | (11 | ) | – | ||||||
| Non-GAAP adjusted EBITDA | $ 1,567 | $ 1,093 | $ 1,995 | $ 4,003 | |||||||
STRATA Financial Metrics
| (in thousands except for Average Recurring Revenue per Consigned Systems and Systems Placed under Recurring Revenue Model) | |||||||||||||||||||||
| Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | Q1 2018 | Q2 2018 | Q3 2018 | |||||||||||||||
| Dermatology recurring procedures revenue | $ | 5,556 | $ | 5,971 | $ | 5,525 | $ | 5,588 | $ | 4,498 | $ | 5,167 | $ | 5,556 | |||||||
| Dermatology procedures equipment revenue | $ | 1,537 | $ | 2,500 | $ | 1,751 | $ | 3,008 | $ | 1,968 | $ | 2,366 | $ | 2,336 | |||||||
| Systems placed under dermatology procedure recurring revenue model (installed base) | 791 | 795 | 776 | 753 | 746 | 746 | 746 | ||||||||||||||
| Average recurring revenue per consigned system per quarter | $ | 7,024 | $ | 7,511 | $ | 7,120 | $ | 7,421 | $ | 6,029 | $ | 6,926 | $ | 7,448 | |||||||
| Dermatoloty recurring procedures segment margin percent | 63.2 | % | 69.1 | % | 62.3 | % | 56.7 | % | 56.7 | % | 63.6 | % | 68.4 | % | |||||||
| Total Company gross margin percent, including Nordlys inventory and fixed asset write off | 61.5 | % | 62.5 | % | 55.0 | % | 49.8 | % | 49.0 | % | 53.6 | % | 61.4 | % | |||||||
| The Dermatology procedures equipment revenue includes $0, $391, $118, $684, $218, $59, $57 for the quarters represented above, respectively, in the cancelled Nordlys product line. | |||||||||||||||||||||
STRATA previously announced the scheduling of a conference call with investors to review the results of the third quarter. Following is the pertinent information for accessing that call.
Conference Call Detail:
| Date: | Tuesday, November 13 |
| Time: | 8:30 am Eastern Time |
| Toll Free: | 888-204-4368 |
| International: | 323-994-2082 |
| Israel-local | 1809-212-909 |
| Passcode: | 3967099 |
| Webcast: | www.strataskinsciences.com |
About STRATA Skin Sciences, Inc.
STRATA Skin Sciences is a medical technology company in Dermatology and Plastic Surgery dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC® excimer laser and VTRAC® lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions; and the STRATAPEN® MicroSystem, marketed specifically for the intended use of micropigmentation.
The Company’s proprietary XTRAC® excimer laser delivers a highly targeted therapeutic beam of UVB light to treat psoriasis, vitiligo, eczema, atopic dermatitis and leukoderma, diseases, which impact over 35 million patients in the United States alone. The technology is covered by multiple patents, including exclusive rights for patents for the delivery of treatments to vitiligo patients.
STRATA’s unique business model leverages targeted Direct to Consumer (DTC) advertising to generate awareness and utilizes its in-house call center and insurance advocacy teams to increase volume for the Company’s partner dermatology clinics.
The XTRAC® business has used this proven DTC model to grow its domestic dermatology partner network to over 740 clinics, with a worldwide installed base of over 2,000 devices. The Company is able to offer 90% of DTC patients an introduction to physicians prescribing a reimbursable solution, using XTRAC®, within a 10-mile radius of their house. The Company is a leader in dermatology in-clinic business generation for its partners.
Safe Harbor
This press release includes “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995. These statements include but are not limited to the Company’s plans, objectives, expectations and intentions and may contain words such as “will,” “may,” “seeks,” and “expects,” that suggest future events or trends. These statements, the Company’s ability to generate the growth in its core business, the Company’s ability to develop social media marketing campaigns, and the Company’s ability to build a leading franchise in dermatology and aesthetics, are based on the Company’s current expectations and are inherently subject to significant uncertainties and changes in circumstances. Actual results may differ materially from the Company’s expectations due to financial, economic, business, competitive, market, regulatory and political factors or conditions affecting the Company and the medical device industry in general, as well as more specific risks and uncertainties set forth in the Company’s SEC reports on Forms 10-Q and 10-K. Given such uncertainties, any or all these forward-looking statements may prove to be incorrect or unreliable. The statements in this press release are made as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company does not undertake any obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release. The Company urges investors to carefully review its SEC disclosures available at www.sec.gov and www.strataskinsciences.com.
Investor Contacts:
| Matthew Hill, Chief Financial Officer | Jeremy Feffer, Managing Director |
| STRATA Skin Sciences, Inc. | LifeSci Advisors, LLC |
| 215-619-3200 | 212-915-2568 |
| ir@strataskin.com | jeremy@lifesciadvisors.com |
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| September 30, 2018 | December 31, 2017 | ||
| (unaudited) | |||
| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | $ 15.888 | $ 4,069 | |
| Accounts receivable, net | 2,728 | 3,141 | |
| Inventories | 2,488 | 3,009 | |
| Other current assets | 670 | 533 | |
| Property and equipment, net | 5,698 | 7,703 | |
| Goodwill and intangible assets, net | 18,670 | 20,128 | |
| Other non-current assets, net | 48 | 48 | |
| Total assets | $ 46,190 | $ 38,631 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
| Current liabilities: | |||
| Long-term debt and other notes payable | $ 7,362 | $ 10,597 | |
| Accounts payable and accrued current liabilities | 4,464 | 4,637 | |
| Current portion of deferred revenues | 327 | 291 | |
| Deferred tax liability | 392 | 414 | |
| Other long-term liabilities | 268 | 447 | |
| Stockholders’ equity | 33,377 | 22,245 | |
| Total liabilities and stockholders’ equity | $ 46,190 | $ 38,631 | |
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
| For the Three Months Ended September 30, |
||||||
| 2018 | 2017 | |||||
| Revenues | $ 7,892 | $ 7,285 | ||||
| Cost of revenues | 3,049 | 3,276 | ||||
| Gross profit | 4,843 | 4,009 | ||||
| Operating expenses: | ||||||
| Engineering and product development | 224 | 411 | ||||
| Selling and marketing | 2,487 | 2,492 | ||||
| General and administrative | 2,184 | 1,678 | ||||
| 4,895 | 4,581 | |||||
| Operating loss before other income (expense), net | (52 | ) | (572 | ) | ||
| Other income (expense), net: | ||||||
| Interest expense, net | (239 | ) | (1,343 | ) | ||
| Change in fair value of warranty liability | (79 | ) | 81 | |||
| Loss on extinguishment of debt | – | (11,799 | ) | |||
| (318 | ) | (13,061 | ) | |||
| Loss before income taxes | (370 | ) | (13,633 | ) | ||
| Income tax benefit (expense) | 80 | (38 | ) | |||
| Net loss | $ (290 | ) | $ (13,671 | ) | ||
| Net loss per common share – basic and diluted | $ (0.01 | ) | $ (3.32 | ) | ||
| Shares used in computing net loss per basic and diluted common share | 29,912,827 | 2,477,743 | ||||
| Net loss per Preferred C share – basic and diluted | $ (3.23 | ) | $ (1,235.43 | ) | ||
| Shares used in computing net loss per basic and diluted Preferred C share | 10,049 | 4,400 | ||||
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
| For the Nine Months Ended September 30, |
||||||
| 2018 | 2017 | |||||
| Revenues | $ 21,982 | $ 22,852 | ||||
| Cost of revenues | 9,842 | 9,182 | ||||
| Gross profit | 12,050 | 13,670 | ||||
| Operating expenses: | ||||||
| Engineering and product development | 831 | 1,309 | ||||
| Selling and marketing | 7,737 | 8,312 | ||||
| General and administrative | 6,319 | 4,999 | ||||
| 14,887 | 14,620 | |||||
| Operating loss before other income (expense), net | (2,837 | ) | (950 | ) | ||
| Other income (expense), net: | ||||||
| Interest expense, net | (930 | ) | (4,264 | ) | ||
| Change in fair value of warrant liability | (101 | ) | 77 | |||
| Loss on extinguishment of debt | – | (11,799 | ) | |||
| Other income, net | – | 6 | ||||
| (1,031 | ) | (15,980 | ) | |||
| Loss before income taxes | (3,868 | ) | (16,930 | ) | ||
| Income tax expense | – | (181 | ) | |||
| Net loss | $ (3,868 | ) | $ (17,111 | ) | ||
| Net loss per common share – basic and diluted: | $ (0.15 | ) | $ (5.94 | ) | ||
| Shares used in computing net loss per basic and diluted share: | 16,099,752 | 2,328,274 | ||||
| Net loss per Preferred C share – basic and diluted: | $ (57.58 | ) | $ (2,208.96 | ) | ||
| Shares used in computing net loss per basic and diluted Preferred C share | 23,872 | 1,483 | ||||
STRATA SKIN SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| For the Nine Months Ended September 30, |
|||||
| 2018 | 2017 | ||||
| Cash Flows From Operating Activities: | |||||
| Net loss | ($3,868 | ) | ($17,111 | ) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||
| Depreciation and amortization | 3,993 | 4,811 | |||
| Provision for doubtful accounts | 53 | 58 | |||
| Loss on disposal of property and equipment | 503 | – | |||
| Gain on cancellation of distributor rights agreement | – | (40 | ) | ||
| Impairment of intangible asset and liability | (11 | ) | 23 | ||
| Stock-based compensation | 570 | 136 | |||
| Deferred tax provision | (22 | ) | 180 | ||
| Amortization of debt discount | 44 | 2,344 | |||
| Amortization of deferred financing costs | 79 | 171 | |||
| Loss on extinguishment of debt | – | 11,799 | |||
| Change in fair value of warrant liability | 101 | (77 | ) | ||
| Changes in operating assets and liabilities: | |||||
| Accounts receivable | 361 | 130 | |||
| Inventories | 521 | (716 | ) | ||
| Prepaid expenses and other assets | (137 | ) | 406 | ||
| Accounts payable | (614 | ) | 71 | ||
| Other accrued liabilities | 423 | (162 | ) | ||
| Other liabilities | (3 | ) | 108 | ||
| Deferred revenues | (198 | ) | 115 | ||
| Net cash provided by operating activities | 1,795 | 2,246 | |||
| Cash Flows From Investing Activities: | |||||
| Lasers placed-in-service, net | (1,254 | ) | (1,450 | ) | |
| Purchases of property and equipment, net | (6 | ) | (321 | ) | |
| Payments on distributor rights liability | (23 | ) | (115 | ) | |
| Net cash used in investing activities | (1,283 | ) | (1,886 | ) | |
| Cash Flows From Financing Activities: | |||||
| Proceeds from issuance of common stock | 14,664 | – | |||
| Repayments of long-term debt | (3,000 | ) | (857 | ) | |
| Payments on notes payable | (357 | ) | (304 | ) | |
| Net cash provided by (used in) financing activities | 11,307 | (1,161 | ) | ||
| Net increase (decrease) in cash and cash equivalents | 11,819 | (801 | ) | ||
| Cash and cash equivalents, beginning of period | 4,069 | 3,928 | |||
| Cash and cash equivalents, end of period | $ 15,888 | $ 3,127 | |||