GlobeNewswire Inc | Mar 24, 2021 04:00PM EDT

March 24, 2021

HORSHAM, Pa., March 24, 2021 (GLOBE NEWSWIRE) -- 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 2020Gross 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 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 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) (unaudited):

For the Three Months For the Year Ended Ended December 31, December 31, 2020 2019 2020 2019 Net loss $ (443 ) $ (515 ) $ (4,412 ) $ (3,790 ) Adjustments: Income taxes 68 (38 ) 275 (149 )Depreciation and 876 1,144 3,911 4,821 amortizationInterest expense, 23 82 61 515 netNon-GAAP EBITDA 524 673 (165 ) 1,397 Stock-basedcompensation 390 312 1,633 1,195 expenseImpairment oflasers 24 30 24 30 placed-in-serviceLoss onextinguishment of - 414 - 414 debtNon-GAAP adjusted $ 938 $ 1,429 $ 1,492 $ 3,036 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 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

AboutSTRATA Skin Sciences, Inc.

STRATA Skin Sciencesis 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 XTRACexcimer laser and VTRAClamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions.

The Companys proprietary XTRACexcimer 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 inthe United Statesalone. The technology is covered by multiple patents.

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

December 31, December 31, 2020 2019ASSETS 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 parvalue, 10,000,000 shares authorized; 0 and - 1 2,103 shares issued and outstanding as ofDecember 31, 2020 and 2019, respectivelyCommon Stock, $.001 par value, 150,000,000shares authorized; 33,801,045 and 32,932,273 34 33 shares issued and outstanding as of December31, 2020 and 2019, respectivelyAdditional 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 $ - (12 )sharesLoss Earnings per common share: Basic $ (0.01 ) $ (0.02 )Diluted $ (0.01 ) $ (0.02 ) Loss per Preferred Series C share - basic and $ - $ (5.75 )diluted

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 $ (18 ) $ (193 )sharesLoss 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 - $ (48.59 ) $ (42.24 )basic and dilutedShares used in computing loss per basic 368 4,577 and diluted Preferred Series C shares

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 Additional Preferred Stock Common Stock Paid- Accumulated ? Series C Shares Amount Shares Amount In Capital Deficit TotalBALANCE,JANUARY 1, 9,968 $ 1 29,943,086 $ 30 $ 241,988 $ (210,771 ) $ 31,248 2019Stock-based - - - - 1,195 - 1,195 compensationConversionofconvertible (7,865 ) - 2,923,791 3 (3 ) - - preferredstock intocommon stockExercise ofstock - - 36,410 - - - - optionsIssuance ofrestricted - - 28,986 - - - - stockNet loss - - - - - (3,790 ) (3,790 )BALANCE,DECEMBER 31, 2,103 $ 1 32,932,273 $ 33 $ 243,180 $ (214,561 ) $ 28,653 2019Stock-based - - - - 1,633 - 1,633 compensationConversionof grantablepreferred (2,103 ) (1 ) 782,089 1 - - - stock intocommon stockExercise ofstock - - 15,000 - 18 - 18 optionsIssuance ofrestricted - - 71,683 - - - - stockNet loss - - - - - (4,412 ) (4,412 )BALANCE,DECEMBER 31, - $ - 33,801,045 $ 34 $ 244,831 $ (218,973 ) $ 25,892 2020

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 - 174 debt discountChanges 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 2019Proceeds 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 2,546 (296 )activities Net increase (decrease) in cash and cash 2,483 (858 )equivalents and restricted cashCash and cash equivalents and restricted cash, 15,629 16,487 beginning of periodCash and cash equivalents and restricted cash, $ 18,112 $ 15,629 end of periodCash and cash equivalents $ 10,604 $ 8,129 Restricted cash 7,508 7,500 $ 18,112 $ 15,629