GlobeNewswire Inc | Aug 16, 2021 04:03PM EDT

August 16, 2021

HORSHAM, Pa., Aug. 16, 2021 (GLOBE NEWSWIRE) -- STRATA Skin Sciences, Inc. (NASDAQ: SSKN), 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 ended June 30, 2021.

Recent Highlights

-- Total revenue for the second quarter of 2021 was $7.4 million, an increase of 83.1% as compared to the second quarter of 2020 Recurring revenue for the second quarter of 2021 was $5.5 million, a 95.0% increase over the second quarter of 2020Gross domestic recurring billings were $5.5 million, a 196.6% increase over the second quarter 2020 (See Reconciliation of Non-GAAP measures below) -- Total gross margins in the second quarter of 2021 were 64.5%, a 15.8% increase over second quarter 2020 -- Cash, cash equivalents and restricted cash at June 31, 2021 were $17.0 million down from $17.5 million at March 31, 2021 -- Concluded the quarter with a global recurring revenue installed base of 889 XTRAC devices, an increase of 18 devices from March 31, 2021 -- Acquired U.S. dermatology business of Ra Medical Systems, significantly expanding opportunity to generate additional recurring revenue and expand customer base -- Hired New VP of Marketing, Brent Cowgill -- Received notification of Paycheck Protection Program forgiveness

We were encouraged by our second quarter results, which showed significant growth over the second quarter of 2020, but more importantly, reflect total revenues at 95% of the comparable quarter of 2019 levels, said Robert J. Moccia, Chief Executive Officer of STRATA Skin Sciences.

Additionally, weve seen significant progress on our new strategic plan approved by our Board in May, including the positive impact of our improved direct to consumer and direct to dermatologist marketing efforts, as well as the successful execution of our sales initiatives. We were also pleased to announce the acquisition of the Pharos 308nm excimer laser business from Ra Medical. This transaction further demonstrates our commitment to commercial execution to drive both organic and inorganic growth, continued Mr. Moccia. In addition, Brent Cowgill recently joined the STRATA team, heading up our marketing efforts. We are confident that his extensive experience in sales and marketing will further enable us to reach new customers and expand the XTRAC excimer lasers patient and physician base.

Second Quarter 2021 Financial ResultsRevenues were $7.4 million, as compared to revenues of $4.0 million for the second quarter of 2020. Recurring revenues were $5.5 million, as compared to recurring revenues of $2.8 million for the second quarter of 2020. Equipment revenues were $1.9 million, as compared to $1.2 million for the second quarter of 2020.

Gross profit was $4.8 million, or 64.5% of revenues, as compared to $2.0 million, or 48.7% of revenues, for the second quarter of 2020. Gross profit on recurring revenues was $3.8 million, or 70.0% of recurring revenues, as compared to $1.4 million, or 51.2% of revenues, for the second quarter of 2020. The increase in gross profit is the result of higher sales, partially offset by higher depreciation expense.

Engineering and product development costs were $0.4 million, as compared to $0.2 million for the second quarter of 2020 as a result of certain engineering projects. Selling and marketing were $3.2 million, as compared to $1.4 million for the second quarter of 2020, primarily as a result of investments in sales and marketing and direct to consumer advertising, while in 2020 the Company managed its costs as a result of the downturn in business attributable to the COVID-19 pandemic. General and administrative costs were $2.1 million, as compared to $1.9 million for the second quarter of 2020, as a result of higher compensation, severance and stock option costs. Other income was $2.0 million, as compared to an expense of $0.0 million as a result of a gain on the extinguishment of debt, derived from the forgiveness of $2.0 million from our Paycheck Protection Plan loan.

Net income was $1.1 million, or earnings of $0.03 per basic and diluted common share, as compared to the net loss for the second quarter of 2020 of $1.7 million, or a net loss of $0.05 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 (877) 300-8521 (US/Canada) or (412) 317-6026 (International) and use the conference ID number 10159329.

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 STRATAs 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 2021 2020 2021 2020 Net income (loss) $ 1,082 $ (1,680 ) $ (1,336 ) $ (2,715 ) Adjustments: Depreciation/ 961 1,028 1,880 2,145 amortization Income taxes 4 47 8 135 Loss on lasers placed in 63 19 63 19 service Gain on extinguishment (2,028 ) - (2,028 ) - of debt Interest 19 18 41 17 expense, netNon-GAAP EBITDA 101 (568 ) (1,372 ) (399 ) Stock 581 410 1,243 840 compensationNon-GAAP adjusted $ 682 $ (158 ) $ (129 ) $ 441 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.

The total gross domestic recurring billings for the second quarter of 2021 was $5.5 million, compared to $1.9 million for the second quarter of 2020.

The following is a reconciliation of non-GAAP gross domestic billings to recorded revenue for the second quarter of 2021 and 2020 (in thousands):

2021 2020 Gross domestic recurring billings $ 5,482 $ 1,848 Co-Pay adjustments (186 ) (86 )Other discounts (41 ) (4 )Deferred revenue from prior quarters 1,769 1,458 Deferral of revenue to future quarters (1,897 ) (546 )GAAP Recorded revenue $ 5,127 $ 2,670

About STRATA Skin Sciences, Inc.STRATA Skin Sciences is a medical technology company in dermatology dedicated to developing, commercializing and marketing innovative products for the treatment of dermatologic conditions. Its products include the XTRAC and Pharos excimer lasers and VTRAC lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions.

The Companys proprietary XTRAC and recently acquired Pharos excimer lasers deliver 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.

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.

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 migrate customers from the Pharos system to XTRAC and to execute new service agreements to at least portions of the Pharos user base, to generate the growth in its core business, including transitioning capital equipment purchasers into recurring revenue users, to integrate the Pharos service business into the Companys field service offering, 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 and its variants including the distribution and effectiveness of the COVID-19 vaccines, 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)

June 30, December 31, 2021 2020ASSETS (unaudited) Current assets: Cash and cash equivalents $ 9,576 $ 10,604 Restricted cash 7,457 7,508 Accounts receivable, net of allowance for doubtful 2,854 2,944 accounts of $206 and $274, respectivelyInventories 3,049 3,444 Prepaid expenses and other current assets 526 331 Total current assets 23,462 24,831 Property and equipment, net 5,931 5,529 Operating lease right-of-use assets, net 814 988 Intangible assets, net 5,640 6,345 Goodwill 8,803 8,803 Other assets 249 282 Total assets $ 44,899 $ 46,778 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable $ 7,275 $ 7,275 Current portion of long-term debt 3 1,478 Accounts payable 2,642 2,764 Other accrued liabilities 5,101 4,690 Current portion of operating lease liabilities 383 369 Deferred revenues 2,375 2,262 Total current liabilities 17,779 18,838 Long-term liabilities: Long-term debt, net 497 1,050 Deferred tax liability 262 254 Long-term operating lease liabilities, net 513 710 Other liabilities 49 34 Total liabilities 19,100 20,886 Commitments and contingencies Stockholders' equity: Series C Convertible Preferred Stock, $.10 parvalue, 10,000,000 shares authorized; 0 shares - - issued and outstanding at June 30, 2021 and,December 31, 2020Common Stock, $.001 par value, 150,000,000 sharesauthorized; 33,889,239, and 33,801,045 shares 34 34 issued and outstanding at June 30, 2021 and,December 31, 2020, respectivelyAdditional paid-in capital 246,074 244,831 Accumulated deficit (220,309 ) (218,973 )Total stockholders' equity 25,799 25,892 Total liabilities and stockholders? equity $ 44,899 $ 46,778

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, 2021 2020 Revenues, net $ 7,382 $ 4,030 Cost of revenues 2,621 2,066 Gross profit 4,761 1,964 Operating expenses: Engineering and product development 403 247 Selling and marketing 3,160 1,442 General and administrative 2,121 1,890 5,684 3,579 Loss from operations (923 ) (1,615 ) Other income (expense), net: Gain on extinguishment of debt 2,028 - Interest expense net (19 ) (18 ) 2,009 (18 ) Income (loss) before income taxes 1,086 (1,633 )Income tax expense (4 ) (47 )Net income (loss) $ 1,082 $ (1,680 ) Earnings (loss) attributable to common $ 1,082 $ (1,680 )sharesEarnings (loss) attributable to - - Preferred Series C sharesEarnings (loss) per common share: Basic $ 0.03 $ (0.05 )Diluted $ 0.03 $ (0.05 )Shares used in computing earnings (loss) per common share:Basic 33,876,568 33,731,739 Diluted 34,318,495 33,731,739

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, 2021 2020 Revenues, net $ 13,209 $ 10,760 Cost of revenues 4,735 4,397 Gross profit 8,474 6,363 Operating expenses: Engineering and product development 787 539 Selling and marketing 6,092 4,395 General and administrative 4,910 3,992 11,789 8,926 Loss from operations (3,315 ) (2,563 ) Other income (expense), net: Gain on extinguishment of debt 2,028 - Interest expense, net (41 ) (17 ) 1,987 (17 ) Loss before income taxes (1,328 ) (2,580 )Income tax expense (8 ) (135 )Net loss $ (1,336 ) $ (2,715 ) Loss attributable to common shares $ (1,336 ) $ (2,693 )Loss attributable to Preferred Series C - $ (22 )sharesLoss per common share: Basic $ (0.04 ) $ (0.08 )Diluted $ (0.04 ) $ (0.08 )Shares used in computing loss per common share:Basic 33,839,554 33,448,030 Diluted 33,839,554 33,448,030

- $ (29.93 )Loss per Preferred Series C share -basic and dilutedShares used in computing loss per basic - 740 and diluted Preferred Series C Shares

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

For the Six Months Ended June 30, 2021 2020 Cash Flows From Operating Activities: Net loss $ (1,336 ) $ (2,715 )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization 1,706 1,986 Amortization of right-of-use asset 174 159 Provision for doubtful accounts (68 ) 72 Stock-based compensation 1,243 840 Loss on lasers placed in-service 63 19 Gain on extinguishment of debt (2,028 ) - Deferred taxes 8 135 Changes in operating assets and liabilities: Accounts receivable 158 2,953 Inventories 395 (443 )Prepaid expenses and other assets (162 ) 116 Accounts payable (122 ) 571 Other accrued liabilities 411 (431 )Other liabilities 15 (107 )Operating lease liabilities (183 ) (142 )Deferred revenues 113 (1,812 )Net cash provided by operating activities 387 1,201 Cash Flows From Financing Activities Proceeds from note payables and long-term debt - 2,528 Net cash proceeds by financing activities - 2,528 Cash Flows From Investing Activities: Lasers placed-in-service (1,369 ) (730 )Purchases of property and equipment (97 ) - Net cash used in investing activities (1,466 ) (730 ) Net (decrease) increase in cash and cash (1,079 ) 2,999 equivalents and restricted cashCash, cash equivalents and restricted cash, 18,112 15,629 beginning of period Cash, cash equivalents and restricted cash, end of $ 17,033 $ 18,628 period