Attached files
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| 8-K - FOR STRATA'S EARNINGS CALL PRESS RELEASE - STRATA Skin Sciences, Inc. | form-8k.htm |
EXHIBIT 99.1
STRATA Skin Sciences Reports Third Quarter 2017 Financial Results
Conference call and webcast, today at 4:30 pm Eastern Time
Horsham, PA, November 9, 2017 — (NASDAQ: SSKN) STRATA Skin Sciences, Inc. ("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 September 30, 2017.
Third Quarter and Recent Corporate Highlights
|
·
|
Third quarter total revenues were $7.5 million, a decrease of 3.7% year-over-year; year to date revenues of $23.5 million, an increase of $328 thousand over the same period for 2016.
|
|
·
|
Recurring XTRAC® revenues were $5.7 million, or 76.5% of total revenues. Recurring XTRAC revenues decreased 7.8% year-over-year.
|
|
·
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Installed base of XTRAC systems in the U.S. expands to 776 systems placed, up 2.1% from 760 at the end of the third quarter 2016.
|
|
·
|
Recurring revenues were negatively impacted by hurricanes in Florida, Georgia, and Texas.
|
Frank McCaney, President and Chief Executive Officer of STRATA, stated, "A key strategic goal for the Company is to improve our current business and, in order to set the stage for a stronger 2018, we enacted a number of initiatives to improve the long term health of the company and to enhance our ability to grow. These decisions had an impact on the third quarter and will continue though this year. Among the initiatives was a restructuring of our sales organization, including the hiring of new regional sales directors as well as reps with proven track records in aesthetic capital sales. We also shifted our advertising focus from radio and TV to web and social media. The Company stopped radio and TV advertising early in the second quarter and very recently completed our first social media initiative in a limited rollout in one market"
"STRATA made the proactive decision to remove XTRAC systems from underperforming practices in the third quarter," added Mr. McCaney. "These systems will be redeployed in practices which we believe have better revenue potential using an improved qualification program. Our goal is to boost the revenue per system and the profitability of dermatologists' business over time. We are continuing to focus on increasing the treatment volume of our existing systems by having our salesforce work with dermatologists to improve their understanding of the value of XTRAC to their practices, including dermatological conditions that we have not promoted previously."
One of our newer products is Nordlys. "We believe that Nordlys is a best-in-class aesthetic platform laser system," continued Mr. McCaney. "The arena for this type of product is growing but is competitive. We have recently hired seasoned capital sales professionals to focus on selling the Nordlys system, complementing STRATA's traditional salesforce, which focuses primarily on XTRAC recurring revenue. We expect to close a number of Nordlys sales in the fourth quarter and build out our pipeline for 2018 with our new sales structure. We are also seeing early acceptance of the benefits of the STRATAPEN product and later in the fourth
- 1 -
quarter, we will begin a promotion with our new partner MedResults Network (MRN). These Nordlys and STRATAPEN efforts are consistent with our goal to become The Dermatological and Aesthetic Practice Partner, leveraging our existing infrastructure, including our current sales presence, strong field service group, reimbursement capabilities and call center."
"STRATA's balance sheet and financial flexibility have been enhanced by the recent exchange of our convertible debt obligations for new shares of convertible preferred stock. The exchange underscores the Company's efforts to improve the long term health of the business and will have the benefit of reducing our interest expense by over $4 million over the next four years, enhancing our ability to grow the business," concluded Mr. McCaney.
Revenues for the third quarter of 2017 were $7.5 million compared with revenues for the third quarter of 2016 of $7.8 million.
Net loss for the third quarter of 2017 was $13.7 million or ($3.32) per diluted common share, which included other income of $0.1 million for the change in fair value of warrant liability, $1.3 million in interest expense and $1.6 million in depreciation and amortization expenses. The net loss also included an $11.8 million loss on the extinguishment of the convertible debentures, which were exchanged in during the quarter for convertible preferred stock. This compares with a net loss for the third quarter of 2016 of $1.5 million or ($0.71) per diluted share, which included other income of $0.1 million for the change in fair value of warrant liability, $1.2 million in interest expense and $1.5 million in depreciation and amortization expenses and $0.1 million for income tax expense.
Revenues for the nine months of 2017 were $23.5 million compared with revenues for the nine months of 2016 of $23.1 million.
Net loss for the nine months of 2017 was $17.1 million or ($5.94) per diluted common share, which included other income of $0.1 million for the change in fair value of warrant liability, $4.3 million in interest expense, $4.8 million in depreciation and amortization expenses, $0.1 million for income tax expense, and $11.8 million loss on the extinguishment of the convertible debentures. This compares with net loss for the nine months of 2016 of $2.4 million or ($3.55) per diluted share, which included other income of $5.3 million for the change in fair value of warrant liability, $3.6 million in interest expense and $4.8 million in depreciation and amortization expenses and $0.2 million for income tax expense.
As of September 30, 2017, the Company had cash and cash equivalents of $3.1 million, compared with $3.9 million as of December 31, 2016.
Non-GAAP Measures
To 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. These non-GAAP measures include non-GAAP adjusted EBITDA.
The Company's reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, nor superior to,
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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 to the most directly comparable GAAP measure of all non-GAAP measures included in this press release is as follows:
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Three Months Ended
September 30,
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Nine Months Ended
September 30,
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|||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
|||||||||||||
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(in thousands)
(Unaudited)
|
(in thousands)
(Unaudited)
|
|||||||||||||||
|
Net income loss as reported
|
$
|
(13,671
|
)
|
$
|
(1,509
|
)
|
$
|
(17,111
|
)
|
$
|
(2,448
|
)
|
||||
|
Adjustments:
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||||||||||||||||
|
Depreciation and amortization expense*
|
1,602
|
1,521
|
4,811
|
4,844
|
||||||||||||
|
Interest expense, net
|
564
|
537
|
1,752
|
1,604
|
||||||||||||
|
Non-cash interest expense
|
779
|
638
|
2,512
|
1,967
|
||||||||||||
|
Income taxes
|
38
|
64
|
181
|
191
|
||||||||||||
|
EBITDA
|
(10,688
|
)
|
1,251
|
(7,855
|
)
|
6,158
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||||||||||
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Stock-based compensation expense
|
63
|
116
|
136
|
401
|
||||||||||||
|
Change in fair value of warrants
|
(81
|
)
|
(132
|
)
|
(77
|
)
|
(5,316
|
)
|
||||||||
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Loss on extinguishment of debentures
|
11,799
|
-
|
11,799
|
-
|
||||||||||||
|
Non-GAAP adjusted EBITDA
|
$
|
1,093
|
$
|
1,235
|
$
|
4,003
|
$
|
1,243
|
||||||||
* Includes depreciation on lasers placed-in-service of $1,078 and $1,040 for the three months ended September 30, 2017 and 2016, respectively and $3,229 and $3,329 for the nine months ended September 30, 2017 and 2016, respectively.
STRATA previously announced the scheduling of a conference call with investors to review the results of the first quarter. Following is the pertinent information for accessing that call.
Conference Call Detail:
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Date:
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Thursday, November 9
|
|
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Time:
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4:30 pm Eastern Time
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|
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Toll Free:
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877-874-1571
|
|
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International:
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719-325-2281
|
|
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Passcode:
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2299656
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Webcast:
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www.strataskinsciences.com
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- 3 -
Replays available through November 23, 2017:
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Toll Free:
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844-512-2921
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|
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International:
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412-317-6671
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|
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Passcode:
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2299656
|
|
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Webcast:
|
www.strataskinsciences.com
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About STRATA Skin Sciences, Inc.
(www.strataskinsciences.com)
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 STRATAPEN™ MicroSystem, marketed specifically for the intended use of micropigmentation; and Nordlys, a multi-technology aesthetic laser device.
Trademarks
Ellipse and Nordlys are trademarks of Ellipse S/A, Horsholm, Denmark.
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 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, including the Company's ability to generate the anticipated revenue stream, the Company's ability to generate sufficient cash flow to fund the Company's ongoing operations and research and development activities beginning at any time in the future, the public's reaction to the Company's new advertisements and marketing campaigns under development, and the Company's ability to build a leading franchise in dermatology and aesthetics, 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 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 Company's SEC reports on Forms 10-Q and 10-K. Given such uncertainties, any or all of these forward-looking statements may prove to be incorrect or unreliable. The Company assumes no duty to update its forward-looking statements and urges investors to carefully review its SEC disclosures available at www.sec.gov and www.strataskinsciences.com.
Investor Contacts:
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Christina L. Allgeier, Chief Financial Officer
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Bob Yedid, Managing Director
|
|
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STRATA Skin Sciences, Inc.
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LifeSci Advisors, LLC
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|
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215-619-3267
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646-597-6989
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callgeier@strataskin.com
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Bob@LifeSciAdvisors.com
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- 4 -
STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
September 30, 2017
|
December 31, 2016
|
|||||||
|
(unaudited)
|
||||||||
|
ASSETS
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$
|
3,127
|
$
|
3,928
|
||||
|
Accounts receivable, net
|
3,184
|
3,390
|
||||||
|
Inventories
|
3,533
|
2,817
|
||||||
|
Other current assets
|
209
|
617
|
||||||
|
Property and equipment, net
|
8,658
|
10,180
|
||||||
|
Goodwill and intangible assets, net
|
21,105
|
22,215
|
||||||
|
Other non-current assets, net
|
48
|
46
|
||||||
|
Total assets
|
$
|
39,864
|
$
|
43,193
|
||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Current liabilities:
|
||||||||
|
Long-term debt and other notes payable
|
$
|
10,812
|
$
|
11,805
|
||||
|
Accounts payable and accrued current liabilities
|
3,806
|
3,845
|
||||||
|
Current portion of deferred revenues
|
350
|
235
|
||||||
|
Senior secured convertible debentures, net
|
-
|
12,028
|
||||||
|
Warrant liability
|
28
|
105
|
||||||
|
Other long-term liabilities
|
951
|
456
|
||||||
|
Stockholders' equity
|
23,917
|
14,719
|
||||||
|
Total liabilities and stockholders' equity
|
$
|
39,864
|
$
|
43,193
|
||||
- 5 -
STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
|
For the Three Months Ended September 30,
|
For the Nine Months Ended September 30,
|
|||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
|||||||||||||
|
Revenues
|
$
|
7,480
|
$
|
7,767
|
$
|
23,454
|
$
|
23,126
|
||||||||
|
Cost of revenues
|
3,276
|
3,070
|
9,182
|
9,631
|
||||||||||||
|
Gross profit
|
4,204
|
4,697
|
14,272
|
13,495
|
||||||||||||
|
|
||||||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Engineering and product development
|
411
|
382
|
1,309
|
1,541
|
||||||||||||
|
Selling and marketing
|
2,687
|
2,840
|
8,914
|
10,073
|
||||||||||||
|
General and administrative
|
1,678
|
1,880
|
4,999
|
5,882
|
||||||||||||
|
|
4,776
|
5,102
|
15,222
|
17,496
|
||||||||||||
|
Operating loss before other income (expense), net
|
(572
|
)
|
(405
|
)
|
(950
|
)
|
(4,001
|
)
|
||||||||
|
|
||||||||||||||||
|
Other income (expense), net:
|
||||||||||||||||
|
Interest expense, net
|
(1,343
|
)
|
(1,175
|
)
|
(4,264
|
)
|
(3,571
|
)
|
||||||||
|
Change in fair value of warrant liability
|
81
|
132
|
77
|
5,316
|
||||||||||||
|
Loss on extinguishment of debentures
|
(11,799
|
)
|
-
|
(11,799
|
)
|
-
|
||||||||||
|
Other (expense) income, net
|
-
|
3
|
6
|
(1
|
)
|
|||||||||||
|
(13,061
|
)
|
(1,040
|
)
|
(15,980
|
)
|
1,744
|
||||||||||
|
Net loss before income taxes
|
(13,633
|
)
|
(1,445
|
)
|
(16,930
|
)
|
(2,257
|
)
|
||||||||
|
Income tax expense
|
(38
|
)
|
(64
|
)
|
(181
|
)
|
(191
|
)
|
||||||||
|
Net loss
|
$
|
(13,671
|
)
|
$
|
(1,509
|
)
|
$
|
(17,111
|
)
|
$
|
(2,448
|
)
|
||||
|
Net loss per common share:
|
||||||||||||||||
|
Basic
|
$
|
(3.32
|
)
|
$
|
(0.71
|
)
|
$
|
(5.94
|
)
|
$
|
(1.16
|
)
|
||||
|
Diluted
|
$
|
(3.32
|
)
|
$
|
(0.71
|
)
|
$
|
(5.94
|
)
|
$
|
(3.55
|
)
|
||||
|
Shares used in computing net loss per common share:
|
||||||||||||||||
|
Basic
|
2,477,743
|
2,135,952
|
2,328,274
|
2,107,365
|
||||||||||||
|
Diluted
|
2,477,743
|
2,135,952
|
2,328,274
|
2,189,543
|
||||||||||||
|
Net loss per basic and diluted preferred share
|
$
|
(1,235.43
|
)
|
$
|
-
|
$
|
(2,208.96
|
)
|
$
|
-
|
||||||
|
Shares used in computing net loss per basic and diluted preferred share
|
4,400
|
-
|
1,483
|
-
|
||||||||||||
- 6 -
STRATA SKIN SCIENCES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
|
For the Nine Months Ended
September 30,
|
||||||||
|
2017
|
2016
|
|||||||
|
Cash Flows From Operating Activities:
|
||||||||
|
Net loss
|
$
|
(17,111
|
)
|
$
|
(2,448
|
)
|
||
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||
|
Depreciation and amortization
|
4,811
|
4,844
|
||||||
|
Stock-based compensation
|
136
|
401
|
||||||
|
Amortization of debt discount
|
2,344
|
1,821
|
||||||
|
Amortization of deferred financing costs
|
171
|
145
|
||||||
|
Loss on extinguishment of debentures
|
11,799
|
-
|
||||||
|
Change in fair value of warrant liability
|
(77
|
)
|
(5,316
|
)
|
||||
|
Other
|
221
|
395
|
||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Current assets
|
(390
|
)
|
2,142
|
|||||
|
Current liabilities
|
342
|
(3,068
|
)
|
|||||
|
Net cash provided by (used in) operating activities
|
2,246
|
(1,084
|
)
|
|||||
|
Cash Flows From Investing Activities:
|
||||||||
|
Lasers placed-in-service, net
|
(1,450
|
)
|
(607
|
)
|
||||
|
Other
|
(436
|
)
|
140
|
|||||
|
Net cash used in investing activities
|
(1,886
|
)
|
(467
|
)
|
||||
|
Cash Flows From Financing Activities:
|
||||||||
|
Proceeds from term debt
|
-
|
1,500
|
||||||
|
Repayment of term debt
|
(857
|
)
|
-
|
|||||
|
Other financing activities
|
(304
|
)
|
(299
|
)
|
||||
|
Net cash provided by (used in) financing activities
|
(1,161
|
)
|
1,201
|
|||||
|
Effect of exchange rate changes on cash
|
-
|
4
|
||||||
|
Net decrease in cash and cash equivalents
|
(801
|
)
|
(346
|
)
|
||||
|
Cash and cash equivalents, beginning of period
|
3,928
|
3,303
|
||||||
|
Cash and cash equivalents, end of period
|
$
|
3,127
|
$
|
2,957
|
||||
|
Supplemental information:
|
||||||||
|
Cash paid for interest
|
$
|
1,934
|
$
|
1,517
|
||||
|
Supplemental information of non-cash investing and financing activities:
|
||||||||
|
Conversion of senior secured convertible debentures into common stock
|
$
|
262
|
$
|
248
|
||||
|
Conversion of convertible preferred stock into common stock
|
$
|
-
|
$
|
309
|
||||
|
Recognition of warrants issued as debt discount
|
$
|
-
|
$
|
47
|
||||
|
Reclassification of warrant liabilities to equity
|
$
|
-
|
$
|
1,541
|
||||
|
Acquisition of distributor rights asset and license liability
|
$
|
286
|
$
|
-
|
||||
|
Issuance of convertible preferred stock in exchange for convertible debentures
|
$
|
25,910
|
$
|
-
|
||||
- 7 -