STRATA Skin Sciences, Inc. Q2 FY2025 earnings call

• The AMA expanded CPT codes for STRATA's XTRAC 308-nanometer excimer laser in May 2025, expanding reimbursement to ~30 indications, effective 1/1/27; temporary G codes could pull forward revenue by 1 year.
• Elevate 360 consulting model and DTC campaigns to strengthen practice partners; placed 19 new XTRAC devices in the U.S. in Q2, the highest number of placements in 6 quarters.
• Generated ~1,100 DTC-driven patient appointments in Q2 with a 61% show rate; RDX system handled benefits for ~5,100 patients.
• TheraClearX installed base grew to 161 devices in the U.S. at end of Q2 2025.
• International business impacted by tariffs, with revenue down 15% in Q2; expecting stabilization once trade issues resolve.
• Litigation against LaserOptek ongoing, with court adding LaserOptek Korea and C. Dalton, LLC as defendants; potential for significant damages.
• Recent clinical studies support excimer laser therapy in new indications like vitiligo and atopic dermatitis.

Total revenue for the second quarter of 2025 was $7.7 million, down 9% compared to Q2 2024. Global recurring revenue was $5.1 million in the second quarter of 2025, down 4% versus the prior year period. U.S. XTRAC gross domestic recurring billings were $4.7 million in Q2 2025, a decline of 2% versus the prior year period. Equipment revenue was $2.5 million in Q2 2025, down 18% versus Q2 2024. TheraClearX reached an installed base of 161 devices in the U.S. at the end of the second quarter, up from 117 devices at the end of Q2 2024. International revenue was $2.6 million in the second quarter, declining 15% compared to the prior year period due to lingering trade disruptions in China and distributor challenges in Korea.

• Anticipate normal seasonality, gaining positive momentum heading into year-end, but tariffs remain a significant unknown.
• Look forward to potential positive impact of discussions with CMS for temporary codes to accelerate XTRAC reimbursement in 2026.
• Expect third quarter call in mid-November to provide more clarity on business performance.

• Tariffs impacting international business, causing revenue decline in Q2 and uncertainty.
• Litigation against LaserOptek with potential financial impact from lost accounts and fraudulent marketing claims.
• Uncertainty around CMS rule-making process for code expansion and reimbursement rate changes.

Q: Give a sense on the back half of the year expectation as far as the international business?

A: Our expectation of the second half of the year is to be not much different than last year, but we need to caution that these expectations are still up in the air as it comes to tariffs. We don't know what's going to happen in China. Other than that, we anticipate the business to be business as usual, and you can look at prior year progression from the first half to the second half in the international business.

Q: How about the lawsuit, sense of cost for the back half of the year and damages?

A: The entry of LaserOptek with false and misleading advertisement has caused litigation. The damages are in the 8-digit range. Our legal expenses are most of the way behind us, and we're towards the end of discovery. LaserOptek is a publicly traded company with significant assets, and we will be able to recoup damages awarded.

Q: How many units during this period that were placed out there in the marketplace by LaserOptek?

A: I cannot give you a number because that number as part of their legal practice was hidden away from us. We have our estimates, but the accounts we know about complicate things. Providers using LaserOptek devices risk being charged with fraudulent charges to CMS, resulting in heavy fines and reputation issues.

Q: Timeline for temporary G codes?

A: CMS issued their draft rule for 2026 approximately 3 weeks ago. Comments end the second week of September, followed by a hearing, and the final rule is anticipated in November. It involves review by the RUC Committee on time component and practice expense component of reimbursement codes.

Q: Impact of Elevate 360 on clinics?

A: All clinics undergoing the full process showed higher revenue in Q2 compared to previous year. For example, a Florida clinic that was declining saw increased productivity after the process, expanding from 1 to 9 clinics under the same owner. We will provide more metrics in future disclosures.

Q: TheraClearX installed base and focus?

A: TheraClearX installed base is growing but is a small portion of revenue compared to XTRAC. We anticipate reaching ~200 devices by end of 2025, but focus remains on XTRAC due to its larger upside with expanded reimbursement and clinical studies support.