Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue grew 2% year-over-year to $8.4 million.
- Operating expenses declined by approximately $850,000 or 14% year-over-year.
- Loss from operations decreased significantly by $1.5 million to roughly $500,000.
- Gross profit increased to $4.9 million from $4.3 million year-over-year, with gross profit margin improving to 58.5%.
- Successful expansion of DTC marketing efforts from 4 to 28 active marketing areas, leading to lower cost per lead and appointment metrics.
Negative Points
- Global net recurring revenue declined to $5.3 million from $5.5 million year-over-year.
- XTRAC gross domestic recurring billings were down 6% year-over-year.
- The installed base of XTRAC devices declined from 907 units to 881 units, indicating a reduction in active devices.
- Gross domestic recurring billing saw a decline for two consecutive quarters, with a 6% drop in Q2 2024.
- Despite improvements, the gross margin of 58.5% is still below the pre-COVID levels of nearly 70%.
Q & A Highlights
Q: Can you provide more details on the agreements and approvals in Japan, including the minimum number of units that must be purchased per the agreement? Also, how do international equipment sales impact margins, and should we expect any changes as you expand in Japan?
A: Internationally, we are active in multiple markets, with Japan being one of the largest. We have about 450 VTRAC devices in Japan and have started converting these to XTRAC devices. We anticipate stable volumes of around 40 devices per year, mostly placements. Regarding margins, the gross margin for Q2 2024 was higher than in 2023, but still below pre-COVID levels. The gap is due to depreciation and amortization costs, which we are addressing by redeploying underperforming devices and reducing the installed base.
Q: How much more shrinkage in the installed base do you expect, and how many new placements did you have in the quarter? Are there any changes to the parameters for determining if an account is unproductive?
A: The parameters for determining unproductive accounts remain the same. We removed more devices than we placed in Q2, with 7 new placements. We anticipate that net removals will stop by the end of the year, and we will start seeing net placements. The goal is to increase the average revenue per device before expanding the installed base.
Q: Your marketing in 2024 is performing better than in 2021. What changes have contributed to this improvement? Are you using new channels or different messaging?
A: The improvement is due to a combination of factors, including more experience, better data, and the fact that we haven't advertised for approximately two years. This has made it easier to place appointments and reduce costs per lead and per appointment.
Q: Can you discuss the financial impact of the recent $2.1 million financing and the participation of insiders and institutional shareholders?
A: The $2.1 million raised will support our turnaround and growth efforts. The participation of insiders and long-standing institutional shareholders demonstrates their confidence in our strategy and corporate direction.
Q: What are the future projections for the TheraClearX device, and how is it performing in the market?
A: The domestic installed base of TheraClearX devices grew to 117 units by the end of Q2. More patients were preapproved for photopneumatic acne treatment, and recent studies support its effectiveness and safety. We aim to increase awareness and grow our presence in high acne volume accounts and National Dermatology Clinic Groups.
Q: How are you addressing the decline in gross domestic recurring billings, and what are your expectations for future performance?
A: We believe we are near trough levels and expect to turn positive with increased DTC efforts. The decline in gross domestic recurring billings has slowed, and we are optimistic about future performance with our expanded DTC marketing efforts.
Q: Can you provide more details on the strategic redeployment of underperforming XTRAC devices and its impact on revenue?
A: We are committed to redeploying underperforming XTRAC devices to clinics that can drive higher utilization or selling them. This strategy helped increase equipment revenue by 11% in Q2 2024. If successful, we could increase annual revenue by approximately $8 million at higher margins without increasing the installed base.
Q: What are the key financial highlights from Q2 2024, and how do they compare to the previous year?
A: Total revenue for Q2 2024 was $8.4 million, up from $8.3 million in Q2 2023. Gross profit increased to $4.9 million, with a gross margin of 58.5%. Operating expenses declined by 14%, and our cash position supports our growth initiatives. We raised $2.1 million in gross proceeds through a recent financing.
Q: What are the future plans for the company's marketing efforts, and how do you plan to sustain the current momentum?
A: We plan to continue ramping up our DTC marketing spend to create additional patient awareness about XTRAC. Our success thus far has led us to expand from 4 marketing areas to 28 with a national focus. We aim to sustain this momentum by leveraging our experience and data from previous DTC marketing efforts.
Q: Can you provide an update on the leadership changes within the company?
A: Chris Lesovitz will be leaving his role as CFO to pursue other interests. We thank him for his service and welcome John Gillings, who brings extensive private equity investment management and equity research experience, as the new CFO.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
