Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strata Skin Sciences Inc (SSKN, Financial) has successfully expanded its DTC marketing, leading to over 500 patient appointments at a cost-effective rate, demonstrating effective patient acquisition strategies.
- The company has strategically optimized its device placements, removing underperforming devices and reallocating them to higher potential clinics, which is expected to enhance device utilization and revenue.
- Strata Skin Sciences Inc (SSKN) reported a smaller decline in gross domestic recurring billings compared to previous quarters, indicating potential stabilization and improvement in domestic revenue streams.
- The company has continued to grow its installed base of therapy Rx devices, with an increase from 92 devices at the end of 2023 to 104 devices by March 31, 2024, showing progress in market penetration.
- Strata Skin Sciences Inc (SSKN) has extended its exclusive distribution agreements in key international markets such as Korea, China, and Japan, which is expected to support sustained revenue contributions from these regions.
Negative Points
- Total revenue for the first quarter of 2024 decreased to $6.8 million from $7.6 million in the same quarter the previous year, indicating a drop in overall earnings.
- Gross profit margin declined to 45.6% in the first quarter of 2024 from 58% in the corresponding period in 2023, primarily due to higher depreciation costs and material costs.
- The company experienced a decrease in equipment revenue in the first quarter of 2024 compared to the same period in 2023, reflecting challenges in equipment sales.
- Strata Skin Sciences Inc (SSKN) reported a write-off of obsolete inventory assets, which could indicate issues with inventory management or product demand.
- Despite strategic initiatives, the company still faces challenges in achieving profitability and positive cash flow, as indicated by the ongoing need to optimize device placements and control costs.
Q & A Highlights
Q: Could you talk about or identify the region of the country you're referencing in DTC, and then maybe give us a sense of the number of regions that you'll have in place by the end of '24?
A: (Dolev Rafaeli - President & CEO) We anticipate covering all regions by the end of the year, aiming for full deployment by the middle of the third quarter. Our DTC spend will increase based on efficiencies, maintaining cost per lead and appointment within target ranges. The investor deck online shows outcomes for the first quarter in the New York City area, one of the four areas we advertised. By the end of this year, we plan to be advertising in all regions.
Q: Could you provide an estimate of where XTRAC placements could be through Q2 and the end of the year, and the same with TheraClear?
A: (Dolev Rafaeli - President & CEO) We have an inventory of about 200 devices and aim to deploy all by the end of this year or early next year. This deployment is mostly with accounts that will use reimbursement. We are now seeing 65 new patients a week from 47 of the 104 accounts. The rest are still based on cash-paying patients. We focus on accounts that can utilize the devices effectively to ensure profitability for both parties.
Q: Can you discuss the trends in utilization for XTRAC and TheraClear, particularly how the funnel for new placements looks and the expected trends in utilization?
A: (Dolev Rafaeli - President & CEO) The biggest upside is in utilization. Placing more devices is feasible as we charge per use with no minimum charge. However, higher depreciation has been a challenge. We focus on repositioning assets before expanding the number of devices. We aim to improve utilization from $5,000 per device per quarter to about $7,500, which was the rate in 2019. This involves optimizing account performance and potentially removing devices from underperforming accounts.
Q: Could you elaborate on the strategies for new accounts and how they integrate into your funnel, especially concerning utilization trends?
A: (Dolev Rafaeli - President & CEO) Our strategy involves targeting existing XTRAC accounts and those owned by private equity groups, which typically have a clear utilization plan. We focus on accounts that previously had an excimer laser business, as they do not require building from scratch. We provide technology, training, and reimbursement support to these accounts, which helps in quickly ramping up their operations.
Q: What are your expectations for the financial performance and operational adjustments through the next quarters?
A: (Dolev Rafaeli - President & CEO) We are focused on improving financial performance by increasing device utilization and optimizing our account base. This includes removing devices from underperforming accounts and placing them in more promising ones. We also aim to fully utilize our inventory of devices without additional expenditure, ensuring efficient use of resources and improving profitability.
Q: How do you plan to manage the challenges associated with higher depreciation costs and the impact on profitability?
A: (Dolev Rafaeli - President & CEO) Managing depreciation costs is crucial for our profitability. We are addressing this by repositioning our assets to ensure higher utilization rates before considering expanding our device inventory. This strategy is intended to maximize revenue per device and reduce the financial impact of depreciation, aligning our operational efforts with financial health.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
