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 quarter and full year ended December 31, 2020.

Recent Highlights

  • Total revenue for the fourth quarter of 2020 was $6.7 million, a decrease of 24.5% over the fourth quarter of 2019
    • Global recurring revenue for the fourth quarter of 2020 was $5.1 million, a 22.7% decrease over the fourth quarter of 2019 and a 32.4% increase over the third quarter of 2020
    • Gross domestic recurring billings were $5.4 million, a 13.7% increase over the third quarter 2020 (See Reconciliation of Non-GAAP measures below)
  • Total gross margins in the fourth quarter of 2020 were 67.6%, a 1.2% decrease over the fourth quarter of 2019
  • Cash, cash equivalents and restricted cash at December 31, 2020 were $18.1 million
  • Concluded the quarter with a global recurring revenue installed base of 860 XTRAC devices, an increase of 30 over the fourth quarter of 2019
  • Results of 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, added medical coverage policy statements, effective September 2020, insuring the previously uncovered condition of vitiligo

“I am excited to join the STRATA Skin Sciences team. There is a large unmet need to treat the estimated 31 million people in the U.S. alone that are affected by psoriasis, vitiligo and atopic dermatitis. I believe that our XTRAC excimer laser is a clear solution for both patients and providers to safely and effectively treat these conditions,” said Bob Moccia, Chief Executive Officer of STRATA Skin Sciences. “While this past year has been unquestionably challenging, we plan to continue to focus on driving awareness and improved utilization with recurring revenue, which we believe will lead to durable growth over the long term.”

Fourth Quarter 2020 Financial ResultsRevenues for the fourth quarter of 2020 were $6.7 million, as compared to revenues of $8.9 million for the fourth quarter of 2019. Global recurring revenues for the fourth quarter of 2020 were $5.1 million, as compared to global recurring revenues of $6.6 million for the fourth quarter of 2019. Equipment revenues were $1.6 million for the fourth quarter of 2020, as compared to $2.3 million for the fourth quarter of 2019. Revenues were negatively impacted by the COVID-19 pandemic.

Gross profit for the fourth quarter of 2020 was $4.5 million, or 67.6% of revenues, as compared to $6.1 million, or 68.8% of revenues, for the fourth quarter of 2019. Gross profit on recurring revenues for the fourth quarter of 2020 was $3.8 million, or 74.4% of revenues, as compared to $5.0 million, or 76.5% of revenues, for the fourth quarter of 2019. The decrease in gross profit is the result of lower sales due to the effects of the COVID-19 pandemic and unapplied costs partially offset by lower depreciation on laser placements.

Selling and marketing costs for the fourth quarter of 2020 were $2.6 million, as compared to $3.1 million for the fourth quarter of 2019, primarily as a result of cost management due to lower revenue, lower tradeshow costs, travel, direct to consumer advertising and compensation. General and administrative costs for the fourth quarter of 2020 were $2.0 million, as compared to $2.9 million for the fourth quarter of 2019, as a result of lower legal, consulting and accounting fees.

Other expense for the fourth quarter of 2020 was $0.02 million, compared to $0.5 million for the fourth quarter of 2019, as a result of lower interest expense and additional cost in 2019 for the extinguishment of long-term debt.

Net loss for fourth quarter 2020 was $0.4 million, or a loss of $0.01 per basic and diluted common share, as compared to the net loss for the fourth quarter of 2019 of $0.5 million, or a net loss of $0.02 per basic and diluted common share.

Full Year 2020 Financial ResultsRevenues for the full year 2020 were $23.1 million, as compared to revenues of $31.6 million for the full year 2019. Global recurring revenues for the full year 2020 were $17.4 million, as compared to global recurring revenues of $23.7 million for the full year 2019. Equipment revenues were $5.7 million for the full year 2020, as compared to $7.9 million for the full year 2019.

Gross profit for the full year 2020 was $14.1 million, or 61.2% of revenues, as compared to $20.3 million, or 64.2% of revenues, for the full year 2019. Gross profit on recurring revenues for the full year 2020 was $11.6 million, or 66.5% of revenues, as compared to $16.7 million, or 70.3% of revenues, for the full year 2019. The decrease in gross profit is the result of lower sales due to the effects of the COVID-19 pandemic and unapplied costs partially offset by lower depreciation on laser placements.

Selling and marketing costs for the full year 2020 were $9.0 million, as compared to $12.0 million for the full year 2019, primarily as a result of cost management due to lower revenue, lower tradeshow costs, travel, direct to consumer advertising and compensation. General and administrative costs for the full year 2020 were $7.9 million, as compared to $10.3 million for the full year 2019, as a result of lower legal, consulting and accounting fees.

Other expense for the full year 2020 was $0.06, compared to $0.9 for the full year 2019, as a result of higher interest income, lower interest expense and additional cost in 2019 for the extinguishment of long-term debt.

Net loss for full year 2020 was $4.4 million, or a loss of $0.13 per basic and diluted common share, as compared to the net loss for the full year 2019 of $3.8 million, or a net loss of $0.11 per basic and diluted common share.

Webcast and Conference Call Information STRATA management will host a conference call today, beginning at 4:30 p.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 1-877-451-6152 (US/Canada), 1-201-389-0879 (International), or 1 809 406 247 (Israel) and use the conference ID number 13717061.

Reconciliation of Non-GAAP MeasuresTo 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 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) (unaudited):

    For the Three Months EndedDecember 31,   For the Year EndedDecember 31,
      2020       2019       2020       2019  
Net loss   $ (443 )   $ (515 )   $ (4,412 )   $ (3,790 )
                         
Adjustments:                        
Income taxes     68       (38 )     275       (149 )
Depreciation and amortization     876       1,144       3,911       4,821  
Interest expense, net     23       82       61       515  
Non-GAAP EBITDA     524       673       (165 )     1,397  
                         
Stock-based compensation expense     390       312       1,633       1,195  
Impairment of lasers placed-in-service     24       30       24       30  
Loss on extinguishment of debt     -       414       -       414  
Non-GAAP adjusted EBITDA   $ 938     $ 1,429     $ 1,492     $ 3,036  

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 October, November and December 2020 were $1.6 million, $1.5 million, and $2.3 million, respectively. The total gross domestic recurring billings for the fourth quarter of 2020 was $5.4 million, compared to $6.9 million for the fourth quarter of 2019.

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

Gross domestic recurring billings $ 5,400    
Co-Pay adjustments   (70 )  
Other discounts   (20 )  
Deferred revenue from prior quarters   1,390    
Deferral of revenue to future quarters   (1,800 )  
GAAP Recorded domestic revenue $ 4,900    

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 31 million patients in the United States alone. The technology is covered by multiple patents.

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 832 clinics, with a worldwide installed base of over 2,300 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.

The Company has now introduced its Home by XTRAC™ business, leveraging in-house resources; including DTC advertising, in-house call center and its insurance reimbursement team to provide an at-home, insurance-reimbursed treatment option for patients with certain skin diseases that do not qualify for in-office treatments.

Safe HarborThis 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, the Company’s ability to build a leading franchise in dermatology and aesthetics, and the Company’s ability to develop a home-based treatment of skin disease 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 SUBSIDIARYCONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)(unaudited)

    December 31, 2020     December 31, 2019
ASSETS              
Current assets:              
Cash and cash equivalents   $ 10,604       $ 8,129  
Restricted cash     7,508         7,500  
Accounts receivable, net     2,944         4,386  
Inventories     3,444         3,027  
Prepaid expenses and other current assets     331         513  
Total current assets     24,831         23,555  
               
Property and equipment, net     5,529         5,369  
Operating lease right-of-use assets     988         1,314  
Intangible assets, net     6,345         7,955  
Goodwill     8,803         8,803  
Other assets     282         347  
Total assets   $ 46,778       $ 47,343  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Note payable   $ 7,275       $ 7,275  
Current portion of long-term debt     1,478         -  
Accounts payable     2,764         1,880  
Other accrued liabilities     4,690         5,134  
Deferred revenues     2,262         2,832  
Current portion of operating lease liabilities     369         313  
Total current liabilities     18,838         17,434  
               
Long-term liabilities:              
Long-term debt, net     1,050         -  
Long-term operating lease liabilities; net     710         1,078  
Deferred tax liability     254         -  
Other liabilities     34         178  
Total liabilities     20,886         18,690  
               
Commitments and contingencies (see Note 11)              
               
Stockholders’ equity:              
Series C Convertible Preferred Stock, $.10 par value, 10,000,000 shares authorized; 0 and 2,103 shares issued and outstanding as of December 31, 2020 and 2019, respectively     -         1  
Common Stock, $.001 par value, 150,000,000 shares authorized; 33,801,045 and 32,932,273 shares issued and outstanding as of December 31, 2020 and 2019, respectively     34         33  
Additional paid-in capital     244,831         243,180  
Accumulated deficit     (218,973 )       (214,561 )
Total stockholders’ equity     25,892         28,653  
Total liabilities and stockholders’ equity   $ 46,778       $ 47,343  

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

  For the Three Months Ended December 31,
    2020         2019  
Revenues, net $ 6,717       $ 8,898  
Cost of revenues   2,176         2,772  
Gross profit   4,541         6,126  
Operating expenses:            
Engineering and product development   324         214  
Selling and marketing   2,592         3,092  
General and administrative   1,977         2,877  
    4,893         6,183  
Loss from operations   (352 )       (57 )
Other (expense) income, net:            
Interest expense, net   (23 )       (82 )
Loss on extinguishment of debt   -         (414 )
    (23 )       (496 )
Loss before income taxes   (375 )       (553 )
Income tax (expense) benefit   (68 )       38  
Net loss $ (443 )     $ (515 )
Loss attributable to common shares $ (443 )       (503 )
Loss attributable to Preferred Series C shares $ -         (12 )
Loss Earnings per common share:            
Basic $ (0.01 )     $ (0.02 )
Diluted $ (0.01 )     $ (0.02 )
             
Loss per Preferred Series C share - basic and diluted $ -       $ (5.75 )

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

  For the Year Ended December 31,
    2020         2019  
Revenues, net $ 23,090       $ 31,586  
Cost of revenues   8,956         11,316  
Gross profit   14,134         20,270  
Operating expenses:            
Engineering and product development   1,274         1,002  
Selling and marketing   9,038         12,003  
General and administrative   7,898         10,275  
    18,210         23,280  
Loss from operations   (4,076 )       (3,010 )
Other (expense) income, net:            
Interest expense, net   (61 )       (515 )
Loss on extinguishment of debt   -         (414 )
    (61 )       (929 )
Loss before income taxes   (4,137 )       (3,939 )
Income tax (expense) benefit   (275 )       149  
Net loss $ (4,412 )     $ (3,790 )
Loss attributable to common shares $ (4,394 )     $ (3,597 )
Loss attributable to Preferred Series C shares $ (18 )     $ (193 )
Loss per common share:            
Basic $ (0.13 )     $ (0.11 )
Diluted $ (0.13 )     $ (0.11 )
Shares used in computing loss per common share:            
Basic   33,609,922         31,978,665  
Diluted   33,609,922         31,978,665  
             
Loss per Preferred Series C share - basic and diluted $ (48.59 )     $ (42.24 )
Shares used in computing loss per basic and diluted Preferred Series C shares   368         4,577  

STRATA SKIN SCIENCES, INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019(In thousands, except share amounts)(unaudited)

  Convertible Preferred Stock – Series C Common Stock Additional Paid- Accumulated  
  Shares Amount Shares Amount In Capital Deficit Total
BALANCE, JANUARY 1, 2019 9,968   $ 1   29,943,086 $ 30 $ 241,988   $ (210,771 ) $ 31,248  
Stock-based compensation -     -   -   -   1,195     -     1,195  
Conversion of convertible preferred stock into common stock (7,865 )   -   2,923,791   3   (3 )   -     -  
Exercise of stock options -     -   36,410   -   -     -     -  
Issuance of restricted stock -     -   28,986   -   -     -     -  
Net loss -     -   -   -   -     (3,790 )   (3,790 )
BALANCE, DECEMBER 31, 2019 2,103   $ 1   32,932,273 $ 33 $ 243,180   $ (214,561 ) $ 28,653  
Stock-based compensation -     -   -   -   1,633     -     1,633  
Conversion of grantable preferred stock into common stock (2,103 )   (1 ) 782,089   1   -     -     -  
Exercise of stock options -     -   15,000   -   18     -     18  
Issuance of restricted stock -     -   71,683   -   -     -     -  
Net loss -     -   -   -   -     (4,412 )   (4,412 )
BALANCE, DECEMBER 31, 2020 -   $ -   33,801,045 $ 34 $ 244,831   $ (218,973 ) $ 25,892  

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

    For the Year Ended December 31,
      2020       2019  
Cash Flows From Operating Activities:            
Net loss   $ (4,412 )   $ (3,790 )
Adjustments to reconcile net loss to net cash provided by operating activities:            
Depreciation and amortization     3,585       4,503  
Amortization of right-of-use assets     326       318  
Provision for doubtful accounts     90       43  
Impairment of lasers placed-in-service     24       30  
Stock-based compensation     1,633       1,195  
Deferred taxes     254       (111 )
Amortization of deferred financing costs and debt discount     -       174  
Changes in operating assets and liabilities:            
Accounts receivable     1,352       (1,036 )
Inventories     (417 )     (233 )
Prepaid expenses and other assets     247       104  
Accounts payable     884       116  
Other accrued liabilities     (444 )     634  
Other liabilities     (144 )     (210 )
Operating lease liabilities     (312 )     (241 )
Deferred revenues     (570 )     733  
Net cash provided by operating activities     2,096       2,229  
             
Cash Flows From Investing Activities:            
Lasers placed-in-service     (2,133 )     (2,676 )
Purchases of property and equipment     (26 )     (115 )
Net cash used in investing activities     (2,159 )     (2,791 )

STRATA SKIN SCIENCES, INC. AND SUBSIDIARYCONSOLIDATED STATEMENTS OF CASH FLOWS(continued)(In thousands)(unaudited)

    For the Year Ended December 31,
         
Cash Flows From Financing Activities:   2020   2019
Proceeds from exercise of stock options   $ 18   $ -  
Repayments of long-term debt     -     (7,571 )
Proceeds on notes payable     2,528     7,275  
Net cash provided by (used in) financing activities     2,546     (296 )
             
Net increase (decrease) in cash and cash equivalents and restricted cash     2,483     (858 )
Cash and cash equivalents and restricted cash, beginning of period     15,629     16,487  
Cash and cash equivalents and restricted cash, end of period   $ 18,112   $ 15,629  
Cash and cash equivalents   $ 10,604   $ 8,129  
Restricted cash     7,508     7,500  
    $ 18,112   $ 15,629  

 

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