GlobeNewswire Inc | Aug 11, 2020 08:00AM EDT

August 11, 2020

Recurring revenue for the second quarter of 2020 was $2.8 million, a 52.1% decrease over second quarter 2019Total gross margins in the second quarter of 2020 was 48.7%, a 14.9% decrease over second quarter 2019Global recurring revenue installed base totaled 806 systems at June 30, 2020Conference call and webcast, today at 8:30 am Eastern Time

HORSHAM, Pa., Aug. 11, 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 reported financial results for the quarter ended June 30, 2020.

While our overall second quarter revenue performance reflects the impact of the COVID-19 global pandemic, we are encouraged by the monthly improvement in our recurring revenue business, which follows the gradual reopening of clinical practices, domestically and internationally, said Dr. Dolev Rafaeli, Chief Executive Officer of Strata Skin Sciences.

Second Quarter Revenue and Business Highlights

-- Total revenue for the second quarter of 2020 was $4.0 million, a decrease of 47.8% over total revenues for the second quarter of 2019 as our revenue was impacted by the COVID-19 global pandemic. -- Total global XTRAC recurring revenue in the second quarter of 2020 was $2.8 million, a decrease of 52.1% over second quarter 2019 total global XTRAC recurring revenues. -- Total gross margins and recurring gross margins were 48.7% and 51.2%, respectively, a decrease of 14.9% and 19.1%, respectively, as compared to second quarter 2019. -- Net loss was $1.7 million, an increase of 55.3% from a net loss of $1.1 million in the second quarter 2019. -- Domestic and International recurring installed base of 789 and 17 XTRAC devices, respectively, a decrease of 33 and an increase of 1, respectively. -- Cash and cash equivalents and restricted cash at June 30, 2020 was $18.6 million. -- During the second quarter the Company received a $2.0 million forgivable loan under the SBA Payroll Protection Plan (the PPP loan) and estimates approximately 80% will be forgiven based on current guidelines. -- During the second quarter the Company also received $500 thousand in loan proceeds from the SBA under the Economic Injury Disaster Loan program (the EIDL loan). -- Saw the publication of a physician-sponsored, peer reviewed study entitled: 308-nm Excimer Laser Plus Platelet-Rich Plasma for Treatment of Stable Vitiligo: A Prospective, Randomized CaseControl Study in the journal Clinical, Cosmetic and Investigational Dermatology. The randomized study, conducted at the Xian Vitiligo Specialist Hospital in China, evaluated the XTRAC Velocity 400i-308 nm excimer laser therapeutic system plus PRP in the treatment of vitiligo patients. Results of the 60 patient trial reaffirmed that the effect of PRP combined with XTRAC on stable vitiligo is significantly better than that of PRP or 308 nm excimer laser alone. -- The Company entered into a Settlement Agreement and Release with Ra Medical Systems, Inc. (Ra Medical), under which the Company and Ra Medical agreed to dismiss all pending lawsuits between the parties with prejudice, each party releases the opposing parties from any and all claims, demands, and causes of action.

While COVID-19 has impacted our revenue, our business has shown its resiliency and our fundamental trends are moving in the right direction as patients return to clinics. We are seeing month to month growth in our gross domestic recurring billings from April through July of $466 thousand, $633 thousand, $749 thousand and $1.4 million, respectively, with the Midwest and Southeast at or in excess of July 2019 gross billings. Our Patient Outreach Program has been instrumental in driving patients into our partner clinics but we do anticipate some unevenness on our path to full utilization as COVID hotspots will impact our localized partner clinics and their ability to return to normal operations, stated Dr. Rafaeli. We increased our overall cash position by $3 million in the second quarter compared to the first quarter and have $11.2 million in unrestricted cash. Internationally, we are observing similar trends and anticipate international placements and equipment sales to increase as markets open up further.

Dr. Rafaeli concluded, We firmly believe in our strategy and in the long-term prospects of the business. Being a solution to both patients and physicians in their search for a safe and effective treatment option for psoriasis and vitiligo resonates in the feedback we are receiving from our physician partners, and ensures XTRAC will be an important part of the recovery of our partner practices.

* Gross Domestic Recurring Gross Billings is a non-GAAP financial measure. For more information, see Reconciliation of Non-GAAP Measures below.

Reported Financial Results

Revenues for the second quarter of 2020 were $4.0 million, as compared to revenues of $7.7 million for the second quarter of 2019. Recurring revenues for the second quarter of 2020 were $2.8 million, as compared to revenues of $5.8 million for the second quarter of 2019. Equipment revenues were $1.2 million for the second quarter of 2020, as compared to $1.9 million for the second quarter of 2019. The COVID-19 pandemic has had a negative impact on the Companys results for the first and second quarter of 2020, and the Company expects it will have a negative impact on its revenue for as long as the pandemic continues.

Revenues for the six months ended June 30, 2020 were $10.8 million, as compared to revenues of $15.2 million for the six months ended June 30, 2019.

Gross profit for the second quarter of 2020 was $2.0 million, or 48.7% of revenues, as compared to $4.9 million, or 63.6% of revenues, for the second quarter of 2019. Gross profit on recurring revenues for the second quarter of 2020 was $1.4 million, or 51.2% of revenues, as compared to $4.1 million, or 70.3% of revenues, for the second 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 lower production.

Gross profit for the six months ended June 30, 2020 was $6.4 million, or 59.1% of revenues, as compared to $9.5 million, or 62.6% of revenues.

Selling and marketing costs for the second quarter of 2020 were $1.4 million, as compared to $3.0 million for the second quarter of 2019, primarily as a result of lower tradeshow costs, compensation costs, and direct to consumer advertising costs. General and administrative costs for the second quarter of 2020 were $1.9 million, as compared to $2.7 million for the second quarter of 2019, as a result of lower legal, accounting and consulting costs. Other expense for the second quarter of 2020 was $18 thousand, compared to $145 thousand for the second quarter of 2019 as a result of lower interest expense due to refinancing of our long-term debt in December 2019.

Sales and marketing costs for the six months ended June 30, 2020 were $4.4 million, as compared to $6.0 million for the six months ended June 30, 2019. General and administrative costs for the six months ended June 30, 2020 were $4.0 million, as compared to $5.2 million for the six months ended June 30, 2019. Other expense for the six months ended June 30, 2020 was $17 thousand, as compared to $280 thousand for the six months ended June 30, 2019.

Net (loss) for second quarter 2020 was $(1.7) million, or $(0.05) per basic and diluted common share, as compared to the net (loss) for the second quarter of 2019 of $(1.1) million, or $(0.03) per basic and diluted common share.

Net (loss) for the six months ended June 30, 2020 was $(2.7) million, or $(0.08) per basic and diluted share, as compared to the net loss for the six months ended June 30, 2019 of $(2.4) million, or $(0.07) per basic and diluted common share.

Reconciliation of Non-GAAP Measures

To 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 Six Months Ended June 30, June 30 2020 2019 2020 2019 Net Loss $ (1,680 ) $ (1,082 ) $ (2,715 ) $ (2,415 ) Adjustments: Depreciation/ 1,028 1,197 2,145 2,494 amortization*Income taxes 47 (46 ) 135 (89 )Interest 18 145 17 280 expense, net Non-GAAP EBITDA (587 ) 214 (418 ) 270 Stock 410 303 840 626 compensationNon-GAAP $ (177 ) $ 517 $ 422 $ 896 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 April, May, June and July 2020 were $466 thousand, $633 thousand, $749 thousand and $1.4 million, respectively. The total gross domestic recurring billings for the second quarter of 2020 was $1,848,000.

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

Gross domestic recurring billings $ 1,848 Co-Pay adjustments (86 )Other discounts (4 )Deferred revenue from prior quarters 1,458 Deferral of revenue to future quarters (546 )Recorded revenue $ 2,670

STRATA management will host a conference call with investors today, Tuesday, August 11, 2020 beginning at 8:30 am ET to review these results and answer questions. Shareholders and other interested parties may participate in the conference call using the dial-in and webcast information as follows:

Conference Call Details:

Date: Tuesday, August 11Time: 8:30 am Eastern TimeToll Free: 877-451-6152International: 201-389-0879Israel: 1 809 406 247Passcode: 13707396Webcast: www.strataskinsciences.com

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 789 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 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 corona virus and political factors or conditions affecting the Company and the medical device industry in general, 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.govand www.strataskinsciences.com.

Investor Contacts:

Matthew Hill, Chief Financial Officer Chuck Padala, Managing DirectorSTRATA Skin Sciences, Inc. LifeSci Advisors, LLC215-619-3200 646-627-8390ir@strataskin.com chuck@lifesciadvisors.com

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

June 30, December 31, 2020 2019ASSETS (unaudited) Current assets: Cash and cash equivalents $ 11,231 $ 8,129 Restricted cash 7,397 7,500 Accounts receivable, net of allowance for doubtful 1,361 4,386 accounts of $256 and $184, respectivelyInventories 3,470 3,027 Prepaid expenses and other current assets 430 513 Total current assets 23,889 23,555 Property and equipment, net 4,999 5,369 Operating lease right-of-use assets, net 1,155 1,314 Intangible assets, net 7,050 7,955 Goodwill 8,803 8,803 Other assets 314 347 Total assets $ 46,210 $ 47,343 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable $ 7,275 $ 7,275 Current portion of long-term debt 799 - Accounts payable 2,451 1,880 Other accrued liabilities 4,703 5,134 Current portion of operating lease liabilities 353 313 Deferred revenues 1,020 2,832 Total current liabilities 16,601 17,434 Long-term liabilities: Long-term debt, net 1,729 - Deferred tax liability 135 - Long-term operating lease liabilities, net 896 1,078 Other liabilities 71 178 Total liabilities 19,432 18,690 Commitments and contingencies Stockholders' equity: Series C Convertible Preferred Stock, $.10 parvalue, 10,000,000 shares authorized; - and 2,103 - 1 shares issued and outstanding at June 30, 2020 and,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 June 30, 2020 and, December 31,2019, respectivelyAdditional paid-in capital 244,020 243,180 Accumulated deficit (217,276 ) (214,561 )Total stockholders' equity 26,778 28,653 Total liabilities and stockholders? equity $ 46,210 $ 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 June 30, 2020 2019 Revenues, net $ 4,030 $ 7,725 Cost of revenues 2,066 2,815 Gross profit 1,964 4,910 Operating expenses: Engineering and product development 247 235 Selling and marketing 1,442 2,958 General and administrative 1,890 2,700 3,579 5,893 Loss from operations (1,615 ) (983 ) Other expense, net: Interest expense, net (18 ) (145 ) (18 ) (145 ) Loss before income taxes (1,633 ) (1,128 )Income tax (expense) benefit (47 ) 46 Net loss $ (1,680 ) $ (1,082 ) Loss attributable to common shares $ (1,680 ) $ (1,007 )Loss attributable to Series C - $ (75 )Convertible Preferred sharesLoss per common share: Basic $ (0.05 ) $ (0.03 )Diluted $ (0.05 ) $ (0.03 )Shares used in computing loss per common share:Basic 33,731,739 31,359,104 Diluted 33,731,739 31,359,104

- $ (11.94 )Loss per Series C Convertible Preferredshare basic and dilutedShares used in computing loss per basicand diluted Series C Convertible - 6,250 Preferred shares

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

For the Six Months Ended June 30, 2020 2019 Revenues, net $ 10,760 $ 15,208 Cost of revenues 4,397 5,689 Gross profit 6,363 9,519 Operating expenses: Engineering and product development 539 539 Selling and marketing 4,395 6,024 General and administrative 3,992 5,180 8,926 11,743 Loss from operations (2,563 ) (2,224 ) Other expense, net: Interest expense, net (17 ) (280 ) (17 ) (280 )Loss before income taxes (2,580 ) (2,504 )Income tax (expense) benefit (135 ) 89 Net loss $ (2,715 ) $ (2,415 ) Loss attributable to common shares $ (2,693 ) $ (2,226 )Loss attributable to Series C $ (22 ) $ (189 )Convertible Preferred sharesLoss per common share: Basic $ (0.08 ) $ (0.07 )Diluted $ (0.08 ) $ (0.07 ) Shares used in computing loss per common share:Basic 33,448,030 31,033,114 Diluted 33,448,030 31,033,114

$ (29.93 ) $ (26.66 )Loss per Series C Convertible Preferredshare basic and diluted Shares used in computing loss per basicand diluted Series C Convertible 740 7,093 Preferred shares

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

For the Six Months Ended June 30, 2020 2019 Cash Flows From Operating Activities: Net loss $ (2,715 ) $ (2,415 )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization 1,986 2,347 Amortization of right-of-use asset 159 147 Provision for doubtful accounts 72 2 Loss on disposal of property and equipment and 19 22 lasers placed in serviceStock-based compensation 840 626 Deferred taxes 135 (89 )Amortization of debt discount - 12 Amortization of deferred financing costs - 57 Changes in operating assets and liabilities: Accounts receivable 2,953 (85 )Inventories (443 ) (813 )Prepaid expenses and other assets 116 (42 )Accounts payable 571 327 Other accrued liabilities (431 ) 248 Other liabilities (107 ) (5 )Operating lease liabilities (142 ) (126 )Deferred revenues (1,812 ) 193 Net cash provided by operating activities 1,201 406 Cash Flows From Investing Activities: Lasers placed-in-service (730 ) (947 )Purchases of property and equipment - (5 )Net cash used in investing activities (730 ) (952 ) 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 2,999 (546 )equivalents and restricted cashCash, cash equivalents and restricted cash, 15,629 16,487 beginning of period Cash, cash equivalents and restricted cash, end of $ 18,628 $ 15,941 period Cash and cash equivalents $ 11,231 $ 15,941 Restricted cash 7,397 - $ 18,628 $ 15,941