STRATA Skin Sciences Reports Third Quarter 2020 Financial Results

11/10/2020, 2:00 PM (Source: GlobeNewswire)

HORSHAM, Pa., Nov. 10, 2020 (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 announced financial results for the quarter ended September 30, 2020.

Recent Highlights

  • Total revenue for the third quarter of 2020 was $5.6 million, a decrease of 25.0% over the third quarter of 2019
    –  Recurring revenue for the third quarter of 2020 was $3.8 million, a 35.9% decrease over the third quarter of 2019 and a 37.2% increase over the second quarter of 2020
    –  Gross domestic recurring billings were $4.7 million, a 155% increase over the second quarter 2020 (See Reconciliation of Non-GAAP measures below)
  • Total gross margins in the third quarter of 2020 were 57.5%, a 4.3% decrease over third quarter 2019
  • Cash, cash equivalents and restricted cash at September 30, 2020 were $18.5 million
  • Concluded the quarter with a global recurring revenue installed base of 837 XTRAC devices, an increase of 31 from June 30, 2020
  • Results of our sponsored, peer-reviewed study entitled, “Therapies for Psoriasis: Clinical and Economic Comparisons,” published in the Journal of Drugs in Dermatology. XTRAC® was found to be most effective and economical treatment for plaque psoriasis compared to other therapies
  • Cigna, a global health company insuring over 20 million people in the United States, issued a new medical coverage policy insuring the previously uncovered condition of vitiligo

“We are pleased by our performance in the third quarter, underscored by strong growth in both recurring revenue and gross domestic recurring billings over the second quarter of 2020, commensurate with broader trends in regional recovery. We are confident that these results demonstrate the measures we implemented in 2018 – to strategically focus on driving recurring revenue – are resonating once again, picking up from the meaningful momentum that we built in 2019,” said Dr. Dolev Rafaeli, Chief Executive Officer of STRATA Skin Sciences. 

Dr. Rafaeli continued, “While we are encouraged by these positive trends, we remain cautiously optimistic with variability expected from COVID-19 resurgences and rising cases across the U.S. and the world. Despite this continued level of uncertainty, we remain confident in the core strength of our business and the resiliency of our team and partner clinics. We believe that we are strategically poised to deliver durable growth over the long term, as we continue to lead the way for improved patient care with XTRAC.”

Third Quarter 2020 Financial Results
Revenues for the third quarter of 2020 were $5.6 million, as compared to revenues of $7.5 million for the third quarter of 2019. Recurring revenues for the third quarter of 2020 were $3.8 million, as compared to recurring revenues of $6.0 million for the third quarter of 2019. Equipment revenues were $1.8 million for the third quarter of 2020, as compared to $1.5 million for the third quarter of 2019.

Gross profit for the third quarter of 2020 was $3.2 million, or 57.5% of revenues, as compared to $4.6 million, or 61.8% of revenues, for the third quarter of 2019. Gross profit on recurring revenues for the third quarter of 2020 was $2.5 million, or 64.3% of revenues, as compared to $4.0 million, or 67.2% of revenues, for the third quarter of 2019. The decrease in gross profit is the result of lower sales due to the COVID-19 pandemic, fixed costs in manufacturing and the impact of the change in deferred revenues.

Selling and marketing costs for the third quarter of 2020 were $2.1 million, as compared to $2.9 million for the third quarter of 2019, primarily as a result of lower tradeshow costs, travel costs, compensation costs and direct to consumer advertising costs. General and administrative costs for the third quarter of 2020 were $1.9 million, as compared to $2.2 million for the third quarter of 2019, as a result of lower legal, accounting and consulting costs partially offset by higher insurance and stock compensation costs. Other expense for the third quarter of 2020 was $21,000, compared to $153,000 for the third quarter of 2019, as a result of lower interest expense due to refinancing of the Company’s long-term debt in December 2019.

Net loss for third quarter 2020 was $1.3 million, or a loss of $0.04 per basic and diluted common share, as compared to the net loss for the third quarter of 2019 of $0.9 million, or a net loss of $0.03 per basic and diluted common share.

Webcast and Conference Call Information
STRATA management will host a conference call today, beginning at 8:30 a.m. Eastern. The conference call will be concurrently webcast. The link to the webcast is available on the company website (www.strataskinsciences.com) under the investor relations section and will be archived for future reference. To listen to the conference call, please dial 1-800-786-6705 (US/Canada), 1-212-271-4651 (International), or 1-809-468-011 (Israel) and use the conference ID number 21971988.

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, including non-GAAP adjusted EBITDA and Gross Domestic Recurring Gross Billings.

The Company’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but is 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 measures of net loss to non-GAAP measures included in this press release is as follows (in thousands):


Adjusted EBITDA

   For the Three Months Ended September 30, For the Nine Months Ended
September 30,
    2020   2019   2020   2019 
          
Net Loss $(1,254) $(860) $(3,969) $(3,275)
          
Adjustments:        
 Depreciation/amortization*  890   1,183   3,035   3,677 
 Income taxes  72   (22)  207   (111)
 Interest expense, net  21   153   38   433 
          
Non-GAAP EBITDA  (271)  454   (689)  724 
 Stock compensation  403   257   1,243   883 
Non-GAAP adjusted EBITDA $132  $711  $554  $1,607 


Gross Domestic Recurring Billings
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.

Gross domestic recurring billings for July, August and September 2020 were $1.4 million, $1.6 million, and $1.7 million, respectively. The total gross domestic recurring billings for the third quarter of 2020 was $4.7 million, compared to $1.8 million for the second quarter of 2020.

The following is a reconciliation of non-GAAP gross domestic billings to recorded revenue for the third quarter of 2020 (in thousands):

Gross domestic recurring billings$4,700  
Co-Pay adjustments (160) 
Other discounts (6) 
Deferred revenue from prior quarters 546  
Deferral of revenue to future quarters (1,390) 
GAAP Recorded revenue$3,690  

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.

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 813 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, 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, future responses to and effects of COVID-19 pandemic, 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

Leigh Salvo  
(415) 937-5404  
ir@strataskin.com   



STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

 September 30, 2020 December 31, 2019
ASSETS(unaudited)  
Current assets:   
Cash and cash equivalents$11,063  $8,129 
Restricted cash 7,397   7,500 
Accounts receivable, net of allowance for doubtful accounts of $249 and $184, respectively 2,510   4,386 
Inventories 3,502   3,027 
Prepaid expenses and other current assets 464   513 
Total current assets 24,936   23,555 
    
Property and equipment, net 5,258   5,369 
Operating lease right-of-use assets, net 1,072   1,314 
Intangible assets, net 6,697   7,955 
Goodwill 8,803   8,803 
Other assets 298   347 
Total assets$47,064  $47,343 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Note payable$7,275  $7,275 
Current portion of long-term debt 1,134   - 
Accounts payable 3,488   1,880 
Other accrued liabilities 4,558   5,134 
Current portion of operating lease liabilities 361   313 
Deferred revenues 1,864   2,832 
Total current liabilities 18,680   17,434 
    
Long-term liabilities:   
Long-term debt, net 1,394   - 
Deferred tax liability 207   - 
Long-term operating lease liabilities, net 804   1,078 
Other liabilities 52   178 
Total liabilities 21,137   18,690 
    
Commitments and contingencies   
    
Stockholders’ equity:   
Series C Convertible Preferred Stock, $.10 par value, 10,000,000 shares authorized; 0 and 2,103 shares issued and outstanding at September 30, 2020 and, December 31, 2019, respectively -   1 
Common Stock, $.001 par value, 150,000,000 shares authorized; 33,754,909 and 32,932,273 shares issued and outstanding at September 30, 2020 and, December 31, 2019, respectively 34   33 
Additional paid-in capital 244,423   243,180 
Accumulated deficit (218,530)  (214,561)
Total stockholders’ equity 25,927   28,653 
Total liabilities and stockholders’ equity$47,064  $47,343 



STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)

  For the Three Months Ended
September 30,
   2020   2019 
Revenues, net $5,613  $7,480 
Cost of revenues  2,383   2,855 
Gross profit  3,230   4,625 
     
Operating expenses:    
Engineering and product development  411   249 
Selling and marketing  2,051   2,887 
General and administrative  1,929   2,218 
   4,391   5,354 
     
Loss from operations  (1,161)  (729)
     
Other expense, net:    
Interest expense, net  (21)  (153)
   (21)  (153)
     
Loss before income taxes  (1,182)  (882)
Income tax (expense) benefit  (72)  22 
Net loss $(1,254) $(860)
     
Loss attributable to common shares $(1,254) $(840)
Loss attributable to Series C Convertible Preferred shares $-  $(20)
Loss per common share:    
Basic $(0.04) $(0.03)
Diluted $(0.04) $(0.03)
Shares used in computing loss per common share:    
Basic  33,754,909   32,903,287 
Diluted  33,754,909   32,903,287 


Loss per Series C Convertible Preferred share basic and diluted
 $-  $(9.58)
Shares used in computing loss per basic and diluted Series C Convertible Preferred shares  -   2,103 



STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)

  For the Nine Months Ended
September 30,
   2020   2019 
Revenues, net $16,373  $22,688 
Cost of revenues  6,780   8,544 
         
Gross profit  9,593   14,144 
     
Operating expenses:    
Engineering and product development  950   788 
Selling and marketing  6,446   8,911 
General and administrative  5,921   7,398 
   13,317   17,097 
     
Loss from operations  (3,724)  (2,953)
     
Other expense, net:    
Interest expense, net  (38)  (433)
   (38)  (433)
Loss before income taxes  (3,762)  (3,386)
Income tax (expense) benefit  (207)  111 
Net loss $(3,969) $(3,275)
     
Loss attributable to common shares $(3,947) $(3,079)
Loss attributable to Series C Convertible Preferred shares $(22) $(196)
Loss per common share:    
Basic $(0.12) $(0.10)
Diluted $(0.12) $(0.10)
     
Shares used in computing loss per common share:    
Basic  33,551,070   31,663,355 
Diluted  33,551,070   31,663,355 


Loss per Series C Convertible Preferred share basic and diluted
 $(43.73) $(36.14)
     
Shares used in computing loss per basic and diluted Series C Convertible Preferred shares  491   5,412 



STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

 For the Nine Months Ended
September 30,
  2020   2019 
Cash Flows From Operating Activities:   
Net loss$(3,969) $(3,275)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Depreciation and amortization 2,793   3,437 
Amortization of right-of-use asset 242   240 
Provision for doubtful accounts 65   9 
Loss on disposal of property and equipment and lasers placed in service 23   29 
Stock-based compensation 1,243   883 
Deferred taxes 207   (111)
Amortization of debt discount -   43 
Amortization of deferred financing costs -   64 
Changes in operating assets and liabilities:   
Accounts receivable 1,811   (261)
Inventories (475)  (792)
Prepaid expenses and other assets 98   76 
Accounts payable 1,608   233 
Other accrued liabilities (576)  437 
Other liabilities (126)  (61)
Operating lease liabilities (226)  (219)
Deferred revenues (968)  384 
Net cash provided by operating activities 1,750   1,116 
    
Cash Flows From Investing Activities:   
Lasers placed-in-service (1,430)  (1,370)
Purchases of property and equipment (17)  (5)
Net cash used in investing activities (1,447)  (1,375)
    
Cash Flows From Financing Activities:   
Proceeds from note payable and long-term debt 2,528   - 
Net cash provided by financing activities 2,528   - 
    
Net increase (decrease) in cash and cash equivalents and restricted cash 2,831   (259)
Cash, cash equivalents and restricted cash, beginning of period 15,629   16,487 
Cash, cash equivalents and restricted cash, end of period$18,460  $16,228 
    
    
Cash and cash equivalents$11,063  $16,228 
Restricted cash 7,397   - 
 $18,460  $16,228 

 

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