STRATA Skin Sciences Reports Fourth Quarter and Full-Year 2023 Earnings
- Revenue in Q4 2023 was $8.7 million, with global recurring revenue at $5.6 million.
- Full-year 2023 revenue reached $33.4 million, with global recurring revenue at $21.5 million.
- The company increased its domestic installed base to 923 devices by the end of 2023.
- STRATA launched the TheraClear®X Acne Therapy System and implemented a recurring revenue model targeting clinical dermatology insurance reimbursed procedures.
- Leadership transition occurred in October 2023, appointing Dr. Dolev Rafaeli as Vice-Chairman, President, and CEO.
- The company re-implemented a strategic revenue model emphasizing recurring revenue through a Direct-to-Consumer approach.
- Sales and marketing department optimization led to reduced expenditures in 2023.
- An amended credit facility with MidCap Financial Trust was obtained to refinance existing debt.
- Initiated an outreach initiative to broaden Current Procedural Terminology code coverage.
- Showcased products at Maui Derm 2024, demonstrating efficacy in reducing acne lesions.
- Net loss for Q4 2023 was $3.8 million, including a goodwill impairment expense of $2.3 million.
- Full-year 2023 net loss was $10.8 million, including a goodwill impairment expense of $2.3 million.
- Cash, cash equivalents, and restricted cash at December 31, 2023, totaled $8.1 million.
- Net loss increased from $5.6 million in 2022 to $10.8 million in 2023.
- Gross profit decreased from 65% of revenues in Q4 2022 to 55% in Q4 2023.
- Impairment expense of $2.3 million in Q4 2023 related to goodwill impairment.
- Selling and marketing costs remained high, at $2.8 million for Q4 2023.
- General and administrative costs increased from $2.5 million in Q4 2022 to $2.8 million in Q4 2023.
Insights
The financial results reported by STRATA Skin Sciences indicate a decline in both quarterly and annual revenues, with fourth quarter revenues dropping from $10.6 million to $8.7 million year-over-year and full-year revenues decreasing from $36.2 million to $33.4 million. A key factor contributing to this downturn is the reduction in global recurring revenue, which is a vital measure of predictability and stability in a company's revenue streams. The decrease in equipment revenues also signifies a potential slowdown in new device placements or market saturation.
Moreover, the impairment expense of $2.3 million, related to goodwill impairment in the dermatology recurring procedures segment, suggests a reassessment of the segment's future profitability. This non-cash charge has significantly impacted net losses, which have nearly doubled from the previous year. The company's shift towards a Direct-to-Consumer model and cost optimization in sales and marketing, which led to reduced expenditures, indicates a strategic pivot that may improve margins in the future. However, the increased net loss and lower gross profit margins raise concerns about the company's near-term profitability and cash flow management.
From a market perspective, the launch of the new TheraClear®X Acne Therapy System and the expansion of the XTRAC® device installed base are strategic moves to capture more of the dermatology market. The adoption of a recurring revenue model for TheraClear®X, targeting insurance-reimbursed clinical dermatology procedures, could enhance customer loyalty and create a steady income stream. However, the actual impact of these initiatives on revenue growth will depend on the rate of market penetration and the effectiveness of the company's patient-focused marketing strategies.
The company's efforts to broaden CPT code coverage aim to increase patient access and provider reimbursement rates, which could potentially improve service adoption and profitability. The showcasing of products at industry events like Maui Derm 2024 is an important marketing strategy, but the real-world efficacy and adoption rates post such events will be critical to evaluate the success of these efforts. The company's amended credit facility with MidCap Financial Trust suggests confidence from creditors but also underscores the necessity for external financing to support operations.
STRATA's emphasis on non-GAAP financial measures, such as non-GAAP adjusted EBITDA, highlights an attempt to provide a more favorable view of financial performance by excluding certain expenses. While these measures can offer insights into the company's operational efficiency, investors should approach them with caution, as they do not replace the importance of GAAP measures. The reported non-GAAP adjusted EBITDA of $957 thousand, compared to $2.557 million in the previous year, still reflects a decline in operational profitability.
The reconciliation of non-GAAP XTRAC gross domestic billings to domestic recorded revenue reveals the company's accounting for deferred revenue and adjustments for discounts. Understanding these reconciliations is important for investors, as they provide a clearer picture of actual revenue recognition practices. The decline in recognized GAAP domestic revenue from $21.537 million to $19.715 million year-over-year suggests that despite billing practices, revenue realization is facing challenges.
Company to host conference call and webcast today, March 27, 2024, at 4:30 PM ET
HORSHAM, Pa., March 27, 2024 (GLOBE NEWSWIRE) -- STRATA Skin Sciences, Inc. (NASDAQ: SSKN) (“STRATA” or “the Company”), a medical technology company dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions, today announced financial results for the fourth quarter and full-year ended December 31, 2023.
Fourth Quarter and Full-Year 2023 and Recent Business Highlights:
- Revenue in the fourth quarter of 2023 was
$8.7 million - Global recurring revenue was
$5.6 million - Gross domestic recurring billings were
$5.3 million
- Global recurring revenue was
- Revenue for the full-year 2023 was
$33.4 million - Global recurring revenue was
$21.5 million - Gross domestic recurring billings were
$20.2 million
- Global recurring revenue was
- Increased domestic installed base to 923 XTRAC® devices at December 31, 2023
- Launched new TheraClear®X Acne Therapy System in January 2023 and implemented the recurring revenue model in December 2023, which targets clinical dermatology insurance reimbursed procedures - currently 92 devices in operation by year end
- Announced leadership transition, in October 2023, with Dr. Dolev Rafaeli appointed as Vice-Chairman, President and Chief Executive Officer
- Reimplemented strategic revenue model emphasizing recurring revenue through a Direct-to-Consumer (DTC) approach, providing value add services to its partner clinics
- Completed sales and marketing department optimization in July 2023 which directly lead to a reduction of sales and marketing expenditures for the year, with full benefits expected to be realized in 2024
- Amended credit facility with MidCap Financial Trust to refinance existing debt and ensure alignment with the Company’s current and future business projections by supporting operational and capital needs
- Initiated outreach initiative focused on broadening Current Procedural Terminology (“CPT”) code coverage to increase patient access to advanced treatments and enable higher provider reimbursement rates
- Showcased TheraClear®X and XTRAC® products at Maui Derm 2024, demonstrating the TheraClear®X safety and efficacy in significantly reducing cystic and papular acne lesions by over
50% within 1-2 weeks
“2023 was a pivotal year for STRATA, marked by strategic growth, product innovation, and market expansion,” stated Dr. Dolev Rafaeli, Vice-Chairman, President and CEO of STRATA. He continued, “We entered the large acne treatment market with the successful launch of our TheraClear®X device, expanded our terms with our credit facility to further influence growth, and re-invigorated the DTC recurring revenue model that was in place during my previous tenure as CEO, making it more robust than before. As we continue to ramp up this model, we are focused on executing our strategic priorities - driving utilization and placements of our XTRAC® and TheraClear®X systems, pursuing opportunities in new geographies, and leveraging our patient-focused marketing to increase awareness and adoption of our treatments. I am excited to lead STRATA in this next chapter as we work to improve operating results and deliver value to our shareholders.”
Fourth Quarter 2023 Financial Results
Revenues for the fourth quarter of 2023 were
Gross profit for the fourth quarter of 2023 was
Selling and marketing costs for the fourth quarter of 2023 were
Impairment expense for the fourth quarter of 2023 was
Other expenses for the fourth quarter of 2023 were
Net loss for the fourth quarter of 2023 was
Full Year 2023 Financial Results
Revenues for the full year 2023 were
Gross profit for the full year 2023 was
Selling and marketing costs for the full year 2023 were
Impairment expense for the full year 2023 was
Other expenses for the full year 2023 were
Net loss for the full year 2023 was
Cash, cash equivalents and restricted cash at December 31, 2023, were
Webcast and Conference Call Information
STRATA management will host a conference call today, beginning at 4:30 PM ET. The conference call will be concurrently webcast. The link to the webcast is available here: 4Q23 & Full Year Earnings Webcast and will be archived for future reference. To listen to the conference call, please dial 877-269-7756 (US/Canada), 201-689-7817 (International), and use the conference ID number 13744189.
Non-GAAP Financial Measures
We have determined to supplement our consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), presented elsewhere within this report, with certain non-GAAP measures of financial performance. These non-GAAP measures include non-GAAP gross profit, which excludes the non-cash expense of amortization of acquired intangible assets classified as cost of revenues, and non-GAAP adjusted EBITDA, “Earnings Before Interest, Taxes, Depreciation, and Amortization.”
These non-GAAP disclosures have limitations as an analytical tool, should not be viewed as a substitute for Gross Profit or Net Earnings (Loss) determined in accordance with U.S. GAAP, should not be considered in isolation or as a substitute for analysis of our results as reported under U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. We consider these non-GAAP measures in addition to our results prepared under current accounting standards, but they are not a substitute for, nor superior to, U.S. GAAP measures. These non-GAAP measures are provided to enhance readers’ overall understanding of our current financial performance and to provide further information for comparative purposes. This supplemental presentation should not be construed as an inference that the Company's future results will be unaffected by similar adjustments to Gross Profit or Net Earnings (Loss) determined in accordance with U.S. GAAP. Specifically, we believe the non-GAAP measures provide useful information to management and investors by isolating certain expenses, gains and losses that may not be indicative of our core operating results and business outlook. In addition, we believe non-GAAP measures enhance the comparability of results against prior periods.
Reconciliation to the most directly comparable U.S. GAAP measure of all non-GAAP measures included in this Annual Report is as follows:
| Year Ended December 31, | |||||||
| (in thousands) | 2023 | 2022 | |||||
| Net loss | $ | (10,830 | ) | $ | (5,549 | ) | |
| Adjustments: | |||||||
| Depreciation and amortization | 5,553 | 5,293 | |||||
| Amortization of operating lease right-of-use asset | 349 | 395 | |||||
| Loss on disposal of property and equipment | 72 | 52 | |||||
| (Benefit from) / provision for income taxes | (92 | ) | 63 | ||||
| Interest income | (231 | ) | (89 | ) | |||
| Interest expense | 1,640 | 926 | |||||
| Non-GAAP EBITDA | (3,539 | ) | 1,091 | ||||
| Impairment of goodwill | 2,284 | — | |||||
| Stock-based compensation | 1,303 | 1,466 | |||||
| Loss on debt extinguishment | 909 | — | |||||
| Non-GAAP adjusted EBITDA | $ | 957 | $ | 2,557 | |||
XTRAC Gross Domestic Recurring Billings
XTRAC gross domestic recurring billings represent the amount invoiced to partner clinics when treatment codes are sold to the physician. It does not include normal GAAP adjustments, which are deferred revenue from prior quarters recorded as revenue in the current quarter, the deferral of revenue from the current quarter recorded as revenue in future quarters, adjustments for co-pay and other discounts. This excludes international recurring revenues.
The following is a reconciliation of non-GAAP XTRAC gross domestic billings to domestic recorded revenue for the third quarter of 2023 and 2022 (in thousands):
| Three Months Ended December 31, | YTD | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | |||||||||||
| Gross domestic recurring billings | $ | 4,947 | $ | 5,768 | $ | 19,622 | $ | 22,271 | |||||||
| Co-Pay adjustments | (87 | ) | 294 | (343 | ) | (268 | ) | ||||||||
| Other discounts | (22 | ) | (40 | ) | (110 | ) | (163 | ) | |||||||
| Deferred revenue from prior quarters | 1,913 | 2,309 | 2,170 | 1,867 | |||||||||||
| Deferral of revenue to future quarters | (1,624 | ) | (2,170 | ) | (1,624 | ) | (2,170 | ) | |||||||
| GAAP Recorded domestic revenue | $ | 5,127 | $ | 6,161 | $ | 19,715 | $ | 21,537 | |||||||
About STRATA Skin Sciences, Inc.
STRATA Skin Sciences is a medical technology company dedicated to developing, commercializing and marketing innovative products for the in-office treatment of various dermatologic conditions such as psoriasis, vitiligo, and acne. Its products include the XTRAC® excimer laser, VTRAC® lamp systems, and the TheraClear®X Acne Therapy System.
STRATA is proud to offer these exciting technologies in the U.S. through its unique Partnership Program. STRATA’s popular partnership approach includes a fee per treatment cost structure versus an equipment purchase, installation and use of the device, on-site training for practice personnel, service and maintenance of the equipment, dedicated account and customer service associates, and co-op advertising support to help raise awareness and promote the program within the practice.
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 launch and sell an acne treatment device and to integrate that device into its product offerings, the Company’s ability to develop, launch and sell products recently acquired or to be developed in the future, the Company’s ability to develop social media marketing campaigns, direct to dermatologist 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, adverse market conditions or supply chain interruptions resulting from the coronavirus 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 Contact:
Rich Cockrell
CG Capital
Phone: +1 (404) 736-3838
sskn@cg.capital
| STRATA Skin Sciences, Inc. and Subsidiary | |||||||
| Consolidated Balance Sheets | |||||||
| (in thousands, except share and per share data) | |||||||
| December 31, | |||||||
| 2023 | 2022 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 6,784 | $ | 5,434 | |||
| Restricted cash | 1,334 | 1,361 | |||||
| Accounts receivable, net of allowance for credit losses of | 4,440 | 4,471 | |||||
| Inventories | 2,673 | 3,095 | |||||
| Prepaid expenses and other current assets | 312 | 691 | |||||
| Total current assets | 15,543 | 15,052 | |||||
| Property and equipment, net | 11,778 | 9,950 | |||||
| Operating lease right-of-use assets | 626 | 975 | |||||
| Intangible assets, net | 7,319 | 17,394 | |||||
| Goodwill | 6,519 | 8,803 | |||||
| Other assets | 231 | 98 | |||||
| Total assets | $ | 42,016 | $ | 52,272 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 3,343 | $ | 3,425 | |||
| Accrued expenses and other current liabilities | 6,306 | 6,555 | |||||
| Deferred revenues | 2,120 | 2,778 | |||||
| Current portion of operating lease liabilities | 352 | 355 | |||||
| Current portion of contingent consideration | 53 | 313 | |||||
| Total current liabilities | 12,174 | 13,426 | |||||
| Long-term debt, net | 15,044 | 7,476 | |||||
| Deferred revenues and other liabilities | 552 | 314 | |||||
| Deferred tax liability | 186 | 306 | |||||
| Operating lease liabilities, net of current portion | 237 | 610 | |||||
| Contingent consideration, net of current portion | 1,135 | 8,309 | |||||
| Total liabilities | 29,328 | 30,441 | |||||
| Commitments and contingencies (Note 11) | |||||||
| Stockholders’ equity: | |||||||
| Series C convertible preferred stock, | — | — | |||||
| Common stock, 35,060,920 and 34,723,046 shares issued and outstanding at December 31,2023 and 2022, respectively | 35 | 35 | |||||
| Additional paid-in capital | 250,711 | 249,024 | |||||
| Accumulated deficit | (238,195 | ) | (227,228 | ) | |||
| Total stockholders’ equity | 12,688 | 21,831 | |||||
| Total liabilities and stockholders’ equity | $ | 42,016 | $ | 52,272 | |||
| STRATA Skin Sciences, Inc. and Subsidiary | |||||||
| Consolidated Statements of Operations | |||||||
| (in thousands, except share and per share data) | |||||||
| Year Ended December 31, | |||||||
| 2023 | 2022 | ||||||
| Revenues, net | $ | 33,358 | $ | 36,161 | |||
| Cost of revenues | 14,897 | 14,393 | |||||
| Gross profit | 18,461 | 21,768 | |||||
| Operating expenses: | |||||||
| Engineering and product development | 1,317 | 1,029 | |||||
| Selling and marketing | 12,956 | 15,301 | |||||
| General and administrative | 10,508 | 10,087 | |||||
| Impairment of goodwill | 2,284 | — | |||||
| 27,065 | 26,417 | ||||||
| Loss from operations | (8,604 | ) | (4,649 | ) | |||
| Other (expense) income: | |||||||
| Interest expense | (1,640 | ) | (926 | ) | |||
| Interest income | 231 | 89 | |||||
| Loss on debt extinguishment | (909 | ) | — | ||||
| (2,318 | ) | (837 | ) | ||||
| Loss before benefit from / (provision for) income taxes | (10,922 | ) | (5,486 | ) | |||
| Benefit from / (provision for) income taxes | 92 | (63 | ) | ||||
| Net loss | $ | (10,830 | ) | $ | (5,549 | ) | |
| Net loss per share of common stock, basic and diluted | $ | (0.31 | ) | $ | (0.16 | ) | |
| Weighted average shares of common stock outstanding, basic and diluted | 34,920,291 | 34,712,246 | |||||
| STRATA Skin Sciences, Inc. and Subsidiary | |||||||
| Consolidated Statements of Cash Flows | |||||||
| (in thousands) | |||||||
| Year Ended December 31, | |||||||
| 2023 | 2022 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (10,830 | ) | $ | (5,549 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Depreciation and amortization | 5,553 | 5,293 | |||||
| Impairment expense | 2,284 | — | |||||
| Amortization of operating lease right-of-use assets | 349 | 395 | |||||
| Amortization of deferred financing costs and debt discount | 140 | 157 | |||||
| Change in allowance for credit losses | (110 | ) | 107 | ||||
| Stock-based compensation expense | 1,303 | 1,466 | |||||
| Loss on debt extinguishment | 909 | — | |||||
| Loss on disposal of property and equipment | 72 | 52 | |||||
| Deferred income taxes | (120 | ) | 40 | ||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | 141 | (1,145 | ) | ||||
| Inventories | 689 | (1,340 | ) | ||||
| Prepaid expenses and other assets | 246 | (111 | ) | ||||
| Accounts payable | (100 | ) | 603 | ||||
| Accrued expenses and other liabilities | (197 | ) | 229 | ||||
| Deferred revenues | (472 | ) | (644 | ) | |||
| Operating lease liabilities | (376 | ) | (477 | ) | |||
| Net cash used in operating activities | (519 | ) | (924 | ) | |||
| Cash flows from investing activities: | |||||||
| Purchase of property and equipment | (5,019 | ) | (3,736 | ) | |||
| Cash paid in connection with TheraClear asset acquisition | — | (631 | ) | ||||
| Net cash used in investing activities | (5,019 | ) | (4,367 | ) | |||
| Cash flows from financing activities: | |||||||
| Proceeds from long-term debt | 7,000 | — | |||||
| Payment of deferred financing costs | (97 | ) | — | ||||
| Payment of contingent consideration | (42 | ) | (500 | ) | |||
| Net cash provided by (used in) financing activities | 6,861 | (500 | ) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 1,323 | (5,791 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of year | 6,795 | 12,586 | |||||
| Cash, cash equivalents and restricted cash at end of year | $ | 8,118 | $ | 6,795 | |||
| Supplemental disclosure of cash flow information: | |||||||
| Cash paid during the year for interest | $ | 1,415 | $ | 744 | |||
| Cash paid during the year for income taxes | $ | 22 | $ | 19 | |||
| Supplemental schedule of non-cash operating, investing and financing activities: | |||||||
| Modification of common stock warrants | $ | 384 | $ | — | |||
| Transfer of property and equipment to inventories | $ | 267 | $ | 463 | |||
| Change in intangible assets and fair value of contingent consideration | $ | 7,374 | $ | — | |||
| Accrued exit fee recorded as debt discount | $ | 450 | $ | — | |||
| Accrued payment of contingent consideration | $ | 18 | $ | — | |||
| Inventories acquired in connection with TheraClear asset acquisition | $ | — | $ | 71 | |||
| Intangible assets acquired in connection with TheraClear asset acquisition | $ | — | $ | 10,182 | |||
| Contingent consideration issued in connection with TheraClear asset | $ | — | $ | 9,122 | |||
| Common stock issued in connection with TheraClear asset acquisition | $ | — | $ | 500 | |||
| Change in operating lease right-of-use assets and liabilities due to new and amended leases | $ | — | $ | 732 | |||
FAQ
What was STRATA Skin Sciences' revenue in Q4 2023?
How many XTRAC devices were installed by December 31, 2023?
Who was appointed as Vice-Chairman, President, and CEO in October 2023?
What was the net loss for Q4 2023?
What was the cash, cash equivalents, and restricted cash balance at December 31, 2023?
