GlobeNewswire Inc | Nov 10, 2020 08:00AM EST

November 10, 2020

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

Gross Domestic Recurring BillingsGross 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 Companys 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.

STRATAs 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 Companys 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 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 Companys 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 Companys ability to generate the growth in its core business, the Companys ability to develop social media marketing campaigns, and the Companys ability to build a leading franchise in dermatology and aesthetics, are based on the Companys current expectations and are inherently subject to significant uncertainties and changes in circumstances. Actual results may differ materially from the Companys 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 Companys 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 SUBSIDIARYCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share and per share amounts)

September December 31, 30, 2020 2019ASSETS (unaudited) Current assets: Cash and cash equivalents $ 11,063 $ 8,129 Restricted cash 7,397 7,500 Accounts receivable, net of allowance for doubtful 2,510 4,386 accounts of $249 and $184, respectivelyInventories 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 parvalue, 10,000,000 shares authorized; 0 and 2,103 - 1 shares issued and outstanding at September 30, 2020and, December 31, 2019, respectivelyCommon Stock, $.001 par value, 150,000,000 sharesauthorized; 33,754,909 and 32,932,273 shares issued 34 33 and outstanding at September 30, 2020 and, December31, 2019, respectivelyAdditional 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 SUBSIDIARYCONDENSED 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 $ - $ (20 )Convertible Preferred sharesLoss 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

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

STRATA SKIN SCIENCES, INC. AND SUBSIDIARYCONDENSED 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 $ (22 ) $ (196 )Convertible Preferred sharesLoss 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

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

STRATA SKIN SCIENCES, INC. AND SUBSIDIARYCONDENSED 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 23 29 lasers placed in serviceStock-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 2,831 (259 )equivalents and restricted cashCash, cash equivalents and restricted cash, 15,629 16,487 beginning of periodCash, cash equivalents and restricted cash, end of $ 18,460 $ 16,228 period Cash and cash equivalents $ 11,063 $ 16,228 Restricted cash 7,397 - $ 18,460 $ 16,228