Company is cash flow positive for the third quarter
Conference call and webcast, today at 4:30 pm Eastern Time
HORSHAM, Pa., Nov. 10, 2016 (GLOBE NEWSWIRE) -- (NASDAQ:SSKN) STRATA Skin Sciences, Inc. (“STRATA”) a medical technology company dedicated to developing and commercializing innovative products for the treatment and diagnosis of serious dermatological disorders, today reported financial results for the quarter ended September 30, 2016.
Third Quarter and Recent Corporate Highlights
- Third quarter revenues were $7.7 million
- Recurring XTRAC revenues were $6.2 million, down 11.8% year-over-year and up 1.8% sequentially
- Installed base of XTRAC systems in the U.S. expanded to 760 systems placed, up 8.9% from 698 at the end of the third quarter 2015
- Company generated positive operating cash flow for the third quarter and expects to be cash flow positive in the fourth quarter 2016
- Podium presentation of new XTRAC data at Fall Clinical Dermatology Conference
- On October 31, appointed Frank McCaney as President and CEO
“The STRATA business has been in its current form for about a year. We now have a good sense of what has been working well with the XTRAC business, where the challenges lie, and what actions we need to take to address them,” stated Frank McCaney, President and Chief Executive Officer. “I believe that gives us the opportunity to focus on growing the core business through technology enhancements, improved treatment protocols for patients and new marketing initiatives. Importantly, we believe that dermatology office practices are undergoing significant changes, and we plan to take an approach that helps dermatologists and their practices be more efficient, more successful and to better manage the business aspects of their offices.”
“Going forward, one of the priorities of our strategic plan for STRATA will be to expand our product offerings,” continued Mr. McCaney. “The Company already has significant resources in a dedicated dermatology sales organization, a Field Service force, and Field Clinical Specialists as well as a Call Center for Patient Recruitment and a Reimbursement Hotline. I will be working with our senior management to evaluate these resources and to determine if any further improvements need to be made. Together, I believe our current capabilities are important assets in the dermatology space that can and should be leveraged. Overall, I believe we have the talent, innovation and the infrastructure to enhance our value proposition to our customers and ultimately the value to our shareholders.”
Reported Financial Results
Revenues for the third quarter of 2016 were $7.7 million compared with revenues for the third quarter of 2015 of $8.3 million, a decrease of 6.7%.
Net loss for the third quarter of 2016 was $1.5 million or ($0.14) 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, $1.5 million in depreciation and amortization expenses and $0.1 million for income tax expense. This compares with a net loss for the third quarter of 2015 of $12.2 million or ($1.29) per diluted share, which included a deemed dividend of $3.0 million, other expense of $1.3 million for the change in fair value of warrant liability, $5.6 million in interest expense and $1.7 million in depreciation and amortization expenses.
Revenues for the nine months of 2016 were $23.1 million compared with revenues for the nine months of 2015 of $9.0 million. Reported revenues for the nine months ended September 30, 2016 are not comparable to the prior year period since the Company acquired certain assets of PhotoMedex as of June 22, 2015.
Net loss for the nine months of 2016 was $2.4 million or ($0.71) 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, $4.8 million in depreciation and amortization expenses and $0.2 million for income tax expense. This compares with a net loss for the nine months of 2015 of $27.3 million or ($3.42) per diluted share, which included a deemed dividend of $3.0 million, other expense of $0.7 million for the change in fair value of warrant liability, $4.8 million in inventory obsolescence charges; $8.7 million in interest expense, $0.5 million in acquisition costs and $2.3 million in depreciation and amortization expenses.
As of September 30, 2016 the Company had cash, cash equivalents and short-term investments of $3.0 million, compared with $3.3 million as of December 31, 2015.
In order to provide information that is helpful to investors relating to the historical and current growth of the XTRAC recurring revenues, the Company is providing the following table, including information obtained from the predecessor company’s disclosures of previous period results.
| Q3 2016 Supplemental Proforma Financial Information | |||||||||||||||||||||||
| As of September 30, 2016, Q3 Earnings Report | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| 2015 | |||||||||||||||||||||||
| Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | YTD | |||||||||||||||||||
| XTRAC Recurring Revenue | $ | 5,376 | * | $ | 6,678 | ** | $ | 7,032 | $ | 7,479 | $ | 26,565 | *** | ||||||||||
| 2016 | |||||||||||||||||||||||
| Qtr. 1 | Qtr. 2 | Qtr. 3 | Qtr. 4 | YTD | |||||||||||||||||||
| XTRAC Recurring Revenue | $ | 5,528 | $ | 6,093 | $ | 6,205 | - | $ | 17,826 | ||||||||||||||
*As reported by PhotoMedex, Inc.
**$104 reported by the Company; balance reported by PhotoMedex, Inc.
***$14,615 reported by the Company; balance reported by PhotoMedex, Inc.
Non-GAAP Measures
To supplement the Company’s consolidated financial statements, prepared in accordance with 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, 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:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| (in thousands) (Unaudited) | (in thousands) (Unaudited) | ||||||||||||||||
| Net loss as reported | $ | (1,509 | ) | $ | (9,234 | ) | $ | (2,448 | ) | $ | (24,354 | ) | |||||
| Adjustments: | |||||||||||||||||
| Depreciation and amortization expense * | 1,521 | 1,710 | 4,844 | 2,348 | |||||||||||||
| Interest expense, net | 537 | 506 | 1,604 | 794 | |||||||||||||
| Non-cash interest expense | 638 | 5,071 | 1,967 | 7,944 | |||||||||||||
| Income taxes | 64 | - | 191 | - | |||||||||||||
| EBITDA | 1,251 | (1,947 | ) | 6,158 | (13,268 | ) | |||||||||||
| Stock-based compensation expense | 116 | 1,007 | 401 | 1,483 | |||||||||||||
| Change in fair value of warrants | (132 | ) | 1,329 | (5,316 | ) | 679 | |||||||||||
| Acquisition costs | - | - | - | 456 | |||||||||||||
| Impairment of property and equipment | - | - | - | 920 | |||||||||||||
| Inventory valuation reserves | - | - | - | 4,818 | |||||||||||||
| Non-GAAP adjusted EBITDA | $ | 1,235 | $ | 389 | $ | 1,243 | $ | (4,912 | ) | ||||||||
* Includes depreciation on lasers placed-in-service of $1,040 and $1,169 for the three months ended September 30, 2016 and 2015, respectively, and $3,329 and $1,169 for the nine months ended September 30, 2016 and 2015, respectively.
STRATA previously announced the scheduling of a conference call with investors to review the results of the second quarter. Following is the pertinent information for accessing that call.
Conference Call Detail:
| Date: | Thursday, November 10, 2016 | |
| Time: | 4:30 pm Eastern Time | |
| Toll Free: | 888-503-8175 | |
| International: | 719-457-2631 | |
| Passcode: | 5890827 | |
| Webcast: | www.strataskinsciences.com | |
Replays available through November 26, 2016:
| Toll Free: | 844-512-2921 | |
| International: | 412-317-6671 | |
| Passcode: | 5890827 | |
| Webcast: | www.strataskinsciences.com | |
About STRATA Skin Sciences, Inc.
(www.strataskinsciences.com)
STRATA Skin Sciences is a medical technology company focused on the therapeutic and diagnostic dermatology market. Its products include the XTRAC® laser and VTRAC® excimer lamp systems utilized in the treatment of psoriasis, vitiligo and various other skin conditions, and the MelaFind® system used to assist in the identification and management of melanoma skin cancer.
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 beginning at any time in the future, the Company’s ability to execute on on-going or new R&D or treatment protocol programs, the Company’s ability to expand its product offerings, the public’s reaction to the Company’s new advertisements and marketing campaign, and the Company’s ability to build a leading franchise in medical dermatology, 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.
| STRATA SKIN SCIENCES, INC. AND SUBSIDIARY | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| September 30, 2016 | December 31, 2015 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,957 | $ | 3,303 | ||||
| Restricted cash | - | 15 | ||||||
| Accounts receivable, net | 2,936 | 4,068 | ||||||
| Inventories, net | 3,229 | 4,128 | ||||||
| Other current assets | 266 | 465 | ||||||
| Property and equipment, net | 10,848 | 13,851 | ||||||
| Goodwill and other intangible assets | 22,668 | 24,155 | ||||||
| Other non-current assets, net | 46 | 94 | ||||||
| Total assets | $ | 42,950 | $ | 50,079 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Note payable | $ | - | $ | 299 | ||||
| Current portion of long-term debt | 857 | - | ||||||
| Accounts payable and accrued current liabilities | 3,437 | 6,607 | ||||||
| Current portion of deferred revenues | 327 | 173 | ||||||
| Senior secured convertible debentures, net | 11,398 | 9,839 | ||||||
| Long-term debt, net | 10,549 | 9,851 | ||||||
| Warrant liability | 185 | 7,042 | ||||||
| Other long-term liabilities | 320 | 181 | ||||||
| Stockholders' equity | 15,877 | 16,087 | ||||||
| Total liabilities and stockholders’ equity | $ | 42,950 | $ | 50,079 | ||||
| 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, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues | $ | 7,767 | $ | 8,323 | $ | 23,126 | $ | 9,015 | ||||||||
| Cost of revenues | 3,070 | 3,042 | 9,631 | 10,226 | ||||||||||||
| Gross profit (loss) | 4,697 | 5,281 | 13,495 | (1,211 | ) | |||||||||||
| Operating expenses: | ||||||||||||||||
| Engineering and product development | 382 | 560 | 1,541 | 1,289 | ||||||||||||
| Selling and marketing | 2,840 | 3,913 | 10,073 | 5,641 | ||||||||||||
| General and administrative | 1,880 | 3,131 | 5,882 | 6,819 | ||||||||||||
| 5,102 | 7,604 | 17,496 | 13,749 | |||||||||||||
| Operating loss before other income (expense), net | (405 | ) | (2,323 | ) | (4,001 | ) | (14,960 | ) | ||||||||
| Other income (expense), net: | ||||||||||||||||
| Interest expense, net | (1,175 | ) | (5,577 | ) | (3,571 | ) | (8,738 | ) | ||||||||
| Change in fair value of warrant liability | 132 | (1,329 | ) | 5,316 | (679 | ) | ||||||||||
| Other (expense) income, net | 3 | (5 | ) | (1 | ) | 23 | ||||||||||
| 1,040 | (6,911 | ) | 1,744 | (9,394 | ) | |||||||||||
| Net loss before income taxes | (1,445 | ) | (9,234 | ) | (2,257 | ) | (24,354 | ) | ||||||||
| Income tax expense | (64 | ) | - | (191 | ) | - | ||||||||||
| Net loss | (1,509 | ) | (9,234 | ) | (2,448 | ) | (24,354 | ) | ||||||||
| Deemed dividend related to warrant modification | - | (2,962 | ) | - | (2,962 | ) | ||||||||||
| Net loss attributable to common stockholders | $ | (1,509 | ) | $ | (12,196 | ) | $ | (2,448 | ) | $ | (27,316 | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic | $ | (0.14 | ) | $ | (1.29 | ) | $ | (0.23 | ) | $ | (3.42 | ) | ||||
| Diluted | $ | (0.14 | ) | $ | (1.29 | ) | $ | (0.71 | ) | $ | (3.42 | ) | ||||
| Shares used in computing net loss per share: | ||||||||||||||||
| Basic | 10,679,761 | 9,442,022 | 10,536,824 | 7,994,012 | ||||||||||||
| Diluted | 10,679,761 | 9,442,022 | 10,947,713 | 7,994,012 | ||||||||||||
| STRATA SKIN SCIENCES, INC. AND SUBSIDIARY | ||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (In thousands, unaudited) | ||||||||
| For the Nine Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | (2,448 | ) | $ | (24,354 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 4,844 | 2,348 | ||||||
| Stock-based compensation | 401 | 1,483 | ||||||
| Amortization of debt discount | 1,821 | 7,571 | ||||||
| Amortization of deferred financing costs | 145 | 373 | ||||||
| Change in fair value of warrant liability | (5,316 | ) | 679 | |||||
| Impairment of long-lived assets | - | 920 | ||||||
| Inventory write-offs | - | 4,818 | ||||||
| Other | 395 | 20 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Current assets | 2,142 | (916 | ) | |||||
| Current liabilities | (3,068 | ) | 113 | |||||
| Net cash used in operating activities | (1,084 | ) | (6,945 | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Lasers placed-in-service, net | (607 | ) | (1,066 | ) | ||||
| Other | 140 | (117 | ) | |||||
| Acquisition costs, net of cash received | - | (42,500 | ) | |||||
| Net cash used in investing activities | (467 | ) | (43,683 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from convertible debentures | - | 32,500 | ||||||
| Proceeds from senior notes | - | 10,000 | ||||||
| Proceeds from term debt | 1,500 | - | ||||||
| Other financing activities | (299 | ) | (154 | ) | ||||
| Net cash provided by financing activities | 1,201 | 42,346 | ||||||
| Effect of exchange rate changes on cash | 4 | 17 | ||||||
| Net decrease in cash and cash equivalents | (346 | ) | (8,265 | ) | ||||
| Cash and cash equivalents, beginning of period | 3,303 | 11,434 | ||||||
| Cash and cash equivalents, end of period | $ | 2,957 | $ | 3,169 | ||||
| Supplemental information: | ||||||||
| Cash paid for interest | $ | 1,517 | $ | 402 | ||||
| Supplemental information of non-cash investing and financing activities: | ||||||||
| Conversion of convertible preferred stock into common stock | $ | 309 | $ | 5,283 | ||||
| Conversion of senior secured convertible debentures into common stock | $ | 248 | $ | 4,593 | ||||
| Reclassification of property and equipment to inventory, net | $ | - | $ | 107 | ||||
| Reclassification of warrants to (from) stockholders’ equity | $ | 1,541 | $ | (5,399 | ) | |||
| Establishment of a warrant liability with a deemed dividend | $ | - | $ | 2,962 | ||||
| Recognition of debt discount and beneficial conversion feature on long-term debt | $ | - | $ | 27,300 | ||||
| Recognition of warrants issued as debt discount | $ | 47 | $ | - | ||||