STRATA Skin Sciences Reports Third Quarter 2020 Financial Results
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.
Third Quarter 2020 Financial Results
Revenues for the third quarter of 2020 were
Gross profit for the third quarter of 2020 was
Selling and marketing costs for the third quarter of 2020 were
Net loss for third quarter 2020 was
Webcast and Conference Call Information
STRATA management will host a conference call today, beginning at
Reconciliation of Non-GAAP Measures
To supplement the Company’s consolidated financial statements, prepared in accordance with accounting principles generally accepted in
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 |
For the Nine Months Ended |
||||||||||||||||
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 |
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
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 | ||||
Co-Pay adjustments | (160 | ) | ||
Other discounts | (6 | ) | ||
Deferred revenue from prior quarters | 546 | |||
Deferral of revenue to future quarters | (1,390 | ) | ||
GAAP Recorded revenue |
About
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
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
Investor Contact
(415) 937-5404 | ||
ir@strataskin.com |
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
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 |
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 | |||||
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, |
- | 1 | |||||
Common Stock, |
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 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)
For the Three Months Ended |
||||||||
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 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)
For the Nine Months Ended |
||||||||
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 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
For the Nine Months Ended |
|||||||
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 |
Source: STRATA Skin Sciences, Inc.