Strata Skin Sciences Q2 2025 Earnings Report

Strata Skin Sciences EPS Results

• Actual EPS: -$0.60
• Consensus EPS: -$0.27
• Beat/Miss: Missed by -$0.33
• One Year Ago EPS: N/A

Strata Skin Sciences Revenue Results

• Actual Revenue: $7.70 million
• Expected Revenue: $8.56 million
• Beat/Miss: Missed by -$864.00 thousand
• YoY Revenue Growth: N/A

Strata Skin Sciences Announcement Details

• Quarter: Q2 2025
• Date: 8/13/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, August 13, 2025
• Conference Call Time: 4:30PM ET

Strata Skin Sciences (NASDAQ:SSKN), a medical technology company, develops, commercializes, and markets products for the treatment of dermatologic conditions in the United States, Europe, the Middle East, Asia, Australia, South Africa, and Central and South America. The company operates in two segments, Dermatology Recurring Procedures and Dermatology Procedures Equipment. The company products include XTRAC and Pharos excimer lasers, and VTRAC lamp systems for the treatment systems that are used for the treatment of psoriasis, vitiligo, and other skin conditions. It also offers TheraClear Acne Therapy System for the treatment of mild to moderate inflammatory, comedonal, and pustular acne. The company was formerly known as MELA Sciences, Inc and changed its name to STRATA Skin Sciences, Inc. in January 2016. STRATA Skin Sciences, Inc. was incorporated in 1989 and is based in Horsham, Pennsylvania.

Strata Skin Sciences Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strata achieved a historic expansion of CPT codes for its XTRAC 308 nm excimer laser to cover ~30 indications (vitiligo, atopic dermatitis, CTCL, etc.) effective 01/01/2027 and is pursuing temporary G codes to potentially pull forward new revenue opportunities, effectively tripling its addressable market to 30 million patients.
• Positive Sentiment: Through its Elevate360 consulting model and DTC campaigns, Strata generated ~1,100 patient appointments (61% show rate) in Q2 and placed 19 new XTRAC units—the highest quarterly placement in six quarters—while removing 21 suboptimal devices.
• Positive Sentiment: In its ongoing litigation against LaserOptik, Strata secured a court order adding LaserOptik’s parent entities as defendants for false and misleading marketing claims, positioning Strata to potentially recover significant eight-figure damages.
• Negative Sentiment: International revenue declined 15% to $2.6 million in Q2 2025 due to lingering China tariffs and distributor challenges in Korea, with continued uncertainty around trade disruptions.
• Negative Sentiment: Total Q2 revenue fell 9% year-over-year to $7.7 million, with an adjusted EBITDA loss of $0.76 million and higher operating expenses driven partly by legal costs.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the Strata Skin Sciences Inc. Second Quarter twenty twenty five Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen only mode. Participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes.

[Operator]

A webcast replay of the call will be available approximately one hour after the end of the call through 02/13/2026. I would like to turn the call over to Jules Abraham of CORE the company's Investor Relations firm. Please go ahead, sir.

[Jules Abraham, EVP, Head - Communications at Core IR]

Thank you, Steve. Good afternoon, and thank you all for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended 06/30/2025. A copy of that press release can be found on the company's website at www.strataskinsciences.com under the Investors tab. Joining me on today's earnings call from Strata Skin Sciences' management team are Doctor.

[Jules Abraham, EVP, Head - Communications at Core IR]

Dolev Raffaele, Chief Executive Officer and John Gillings, Vice President of Finance. During this call, management will be making forward looking statements, including statements that address Strata Skin Sciences' expectations for future performance or operational results. Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Strata Skin Sciences' most recently filed annual report on Form 10 ks and subsequent periodic reports filed with the SEC and Strata Skin Sciences' press release that accompanies this call, particularly the cautionary statements within. The contents of this call contains time sensitive information that is accurate only as of today, 08/13/2025.

[Jules Abraham, EVP, Head - Communications at Core IR]

And except as required by law, Stratus Skin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It's now my pleasure to turn the call over to CEO, Doctor. Doliv Raffaelli. Doliv?

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Thank you, Jules, and good afternoon to everyone on the call. The 2025 saw pivotal developments positioning our business for future growth and lasting shareholder value creation. We're especially heartened by the American Medical Association, the AMA, CPT Editorial Panel's historic expansion of CPT codes for Strata's XTRAC three zero eight nanometer excimer laser in May. The revision of these codes expands reimbursement eligibility for excimer laser treatments to include multiple inflammatory and autoimmune skin conditions beyond their original psoriasis indication, enabling coverage for conditions such as vitiligo, atopic dermatitis, mycosis fungoids, lichen planus, alopecia areata and cutaneous T cell lymphoma, better known as CTCL, among approximately 30 indications. The implications of these changes could not be more dramatic for us and our providers.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

While the revisions are set to go into effect on 01/01/2027, we have commenced the process to accelerate access to these revised codes through temporary G codes. Assuming successful implementation of the temporary G codes into the 2026 reimbursement period, we have the potential to pull forward revenue opportunities by one year as we expand into new indications. These developments open our addressable market to 30,000,000 patients, expanding our total available market, TAM, threefold. In addition, we have submitted economic data to support a potential increase in the reimbursement rates for each of our codes. Should rates increase, be approved, we could be headed into a period where both the number of patients eligible for the treatment and the revenue per patient procedure are increasing simultaneously.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

We've also continued to strengthen our practice partners through our Elevate360 consulting model and our innovative DTC campaigns. Elevate360 focuses on improving revenue for both clinics and strata by supporting the implementation of best practices to drive optimal use of the XTRAS lasers. By providing deeper analytics, we help physicians understand the financial opportunities associated with the patients they already see in their clinics and those they have prescribed but did not follow through with extra scheduling. Having these best practices in place lays the groundwork for effectively managing and benefiting from the dramatic increase in patients' eligibility for reimbursement under the expanded CPT codes I mentioned previously. Optimizing extract devices placement in physicians' practices facilitates more procedures and opportunity that utilizes the resources we provide.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Further, simultaneously expanding our direct to consumer marketing campaign increases extract device utilization and recurring revenue per device across our domestic installed base. We ended the second quarter with eight forty four units placed with partners clinics in The U. S, down from eight forty six at the end of the first quarter. While we continue to seek optimization of the installed base, the activity behind the numbers paints a more complete picture. During the second quarter, we removed 21 devices from suboptimal partners and placed 19 devices with new accounts that are interested in growing with us.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Importantly, these 19 placements represent the highest number of placements in The United States in the last six quarters, which we view as a positive leading indicator for the future revenue growth. Given these initiatives and these growth driving codes developments, we continue to believe that the opportunity to increase utilization for our extract devices is significant and we continue to see positive results from the refocus of our DTC strategy. We generated roughly 1,100 DTC driven patient appointments in the second quarter with a sixty one percent show rate. In addition, our proprietary RDX system handled benefits for approximately 5,100 patients in the second quarter. Of these patients, roughly one thousand were acne patients with our TheraCare X partner clinics and about two thousand five hundred were psoriasis patients.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

The balance of patients were other indications treated by XTRAC that would have generally involved extra effort and pre approvals illustrating the strong demand for excimer laser therapy among these patients who will soon be more easily covered under the updated CPT codes. Turning briefly to TheraClear X. We reached an installed base of 161 TheraClear X devices in The U. S. At the end of the second quarter, up from 117 devices at the 2024.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

TheraClear X continues to be a small but growing portion of our revenue. On the first quarter call in May, we highlighted the potential impact of the tariffs on our international business. While we were able to complete some sales in China during the ninety day tariff pause, the uncertainty about the future they have caused has created a temporary drag on our international business. We generated international revenue of $2,600,000 in the second quarter, which declined 15 compared to the prior year period. International equipment sales were significantly affected by lingering trade disruptions in China and distributor challenges in Korea.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

We continue to see strong underlying demand in these markets and expect these geographies to return to growth once once things stabilize. While we will continue navigating the seasonality of our business, specifically a slower first and second quarters as we turn to the 2025. We continue to anticipate normal seasonality gaining positive momentum heading into the year end with the caveat that tariffs still represent a significant unknown. In 2026, we look forward to the potential positive impact of our ongoing discussions with the Centers of Medicare and Medicaid Services or CMS to obtain temporary codes that would accelerate access to our recently expanded reimbursement for XTRAC. Notably, we have secured strong support from members of the legislature, patient advocacy groups and leading academic key opinion leaders.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

We are further encouraged by the growing body of peer reviewed available clinical study supporting excimer laser therapy, which points to the new and enhanced application adding to the hundreds of other studies published over the years. Last Thursday, we published a press release with reimbursement and clinical updates that we would point out to you if you have not already read it. In addition, this press release offered a brief update on our litigation against LaserOptik regarding its use of false and misleading statements in its marketing. We believe we are strongly positioned in this suit and have the potential to be awarded significant damages. We are pleased that the court agreed with our position that LaserOptics Korea, the parent of LaserOptics America, should be added as a defendant.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

In addition, C. Dalton LLC, the entity that represented LaserOptics Korea interests in The United States has been added as a defendant. These are important developments and help ensure that should damages be awarded, these responsible will not be able to shield themselves behind other legal entities. Before turning the call over to John for our financial discussion, let me, take a moment to discuss the three recent publications that support excimer laser and vitiligo and atopic dermatitis, expanding the potential use of XTRAP. In a peer reviewed study featured in the International Journal of Dermatology, a multicenter randomized controlled trial evaluated the efficacy and safety of three zero eight nanometer excimer laser therapy in combination with oral JAK inhibitors.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Oral JAK inhibitors is a novel class of immune modulating drugs. A total of two forty adults patients were enrolled and monitored over the fifty two week period. The study demonstrated superior re pigmentation in combination therapy with patients receiving three zero eight nanometer excimer laser combined with the JAK inhibitor reporting 100% overall response rate and 96% pigment stability indicating a durable response. Further, the study showed that treatment was well tolerated across all groups with no serious adverse events reported over the fifty two week trial. It is noteworthy to point out that there is no other technology that is enabling such results and that the addition of vitiligo as a covered indication will open the door for somewhere between three million and four million existing patients seeking not only temporary remission gained from the pharmaceuticals, but full repigmentation.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

A second study published in Human Vaccine and Immunotherapy highlights conjunctive use of excimer laser with JAK inhibitor on a patient that has developed segmental vitiligo one week after her third HPV vaccine, achieving approximately seventy percent repigmentation. Further, a third study published in dermatology therapy evaluated the safety and efficacy of three zero eight nanometer excimer laser therapy in conjunction with JAK inhibitors for treatment of refractory vitiligo in patients complicated by moderate to severe atopic dermatitis. The trial involved 19 patients who had not responded to conventional therapy. Patients showing a mean fifty five percent VASI improvement, with facial and neck areas responding best with greater than seventy percent improvement. Importantly, the fifty five percent mean VASI improvement in these challenging patients, compared to thirty nine percent improvement with the JAK inhibitor alone, suggesting a strong synergistic mechanism.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

The domestic market has approximately eighteen million atopic dermatitis patients. Importantly, Strata has been preparing for the potential expansion into combined therapy and owns patents that were granted recently for the methods of combining systemic biologic and JAK inhibitor medication with extubar laser dosimetry controlled treatments. This positions us well for the potential market expansion associated with combination treatment for more challenging patients. With that, I'd like to turn the call over to John, who will review our financial results in more detail. John?

[John Gillings, VP - Finance at STRATA Skin Sciences]

Thank you, Doliv. Our total revenue for the 2025 was $7,700,000 down 9% compared to 2024. This was driven primarily by the challenging international environment Doliv described. Global recurring revenue for the 2025 was $5,100,000 down 4% versus the prior year period. Turning to The U.

[John Gillings, VP - Finance at STRATA Skin Sciences]

S, excluding deferred billings and other GAAP adjustments, XTRAC gross domestic recurring billings were $4,700,000 in the 2025, a decline of 2% versus the prior year period. Moving to the equipment business, revenue was $2,500,000 in the 2025, down 18% versus the 2024. This was due primarily to challenges in specific international markets with lingering trade disputations in China and supplier challenges in Korea. Gross profit of $4,300,000 or 56 percent of revenue for the three months ended 06/30/2025 declined from $5,000,000 during the same period in 2024. The reduction in gross profit was driven primarily by lower sales with increases in manufacturing overhead contributing.

[John Gillings, VP - Finance at STRATA Skin Sciences]

Total operating expenses were 6,500,000 in the 2025, up roughly $1,000,000 versus $5,500,000 in the prior year period. Engineering and product development was down 57% year over year. Selling and marketing increased 16% versus the prior year due primarily to increases in headcount in the sales and call center and increase in DTC spending. G and A expense increased roughly $700,000 versus the prior year period. Of this, roughly $340,000 is due to litigation that we have chosen to pursue primarily against LaserOptech.

[John Gillings, VP - Finance at STRATA Skin Sciences]

In addition to this, G and A expense in the 2025 is compared to an abnormally low quarter in the prior year. The 2024 had the lowest G and A expense of the year coming in 500,000 below 2024, which was the next lowest quarter of the year. Adjusted EBITDA for the second quarter was a loss of 762,000 Turning to the cash flow statement. Cash used in operations was $1,900,000 in the second quarter. Of this, 1,300,000.0 represents a payment of restricted cash to the State of New York related to the sales tax accrual that we took in the 2024.

[John Gillings, VP - Finance at STRATA Skin Sciences]

Of the remaining $600,000 roughly $340,000 relates to the legal expenses I described previously. We exited Q2 twenty twenty five with cash and equivalents of $6,000,000 As of 06/30/2025, the company had 4,171,161 common shares outstanding. That concludes my prepared remarks, and I'd like to turn the call back over to Dolev for any remaining comments.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Thank you, John. In summary, our team is extremely passionate about our business and laser focused on driving growth. We are excited about what lies ahead, including a seasonality stronger 2025 as well as a potential tripling of our patient population with expanded indications for use of our eczema laser, given favorable reimbursement beginning in 2026 using temporary G codes. That said, we believe it is important to caution investors about the potential impact of tariffs on our international business. While it is no meaningful impact on our business in the first quarter, we saw some weakening in China in the second quarter.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

We hope to move past these issues and hope to be able to offer greater clarity on the third quarter call, which we expect to hold in mid November. Now I'd like to turn the call over to the operator so that we can begin the question and answer session. Operator?

[Operator]

Thank you. We will now begin the question and answer session. First question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead.

[Jeffrey Cohen, MD & Director - Equity Research at Ladenburg Thalmann & Co. Inc]

Hey, good afternoon, Jalal and John. Couple of questions from Aaron. So can you give us a sense on the what your back half of the year expectation is as far as the international business? Just recap with us what was in Q2 and perhaps what we should anticipate for the back half?

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Hi, Jeff, and happy to hear you on the call. John is going to give the specific numbers. Our expectation of the second half of the year is to be not much different than last year. But having said that, 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.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

As you know, the administration just extended the window and things are changing from day to day. 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. John, do you mind coming in on the specific numbers because I think you just reflected them in your portion?

[John Gillings, VP - Finance at STRATA Skin Sciences]

Yes.

[John Gillings, VP - Finance at STRATA Skin Sciences]

I was just going to say, we haven't given specific guidance versus the second half. But I think those gave you a good indication that our initial expectations were for it to be roughly similar to the prior year. But we do have to give that caution that depending on what happens with the tariffs, we could see any given quarter move fairly significantly. Had it not been for the ninety day pause in the second quarter, our international revenue could have been impacted considerably more. So until that calms down, it's hard to give anything really more concrete than that.

[Jeffrey Cohen, MD & Director - Equity Research at Ladenburg Thalmann & Co. Inc]

Okay. Thanks. That's helpful. And then could you jump over to the lawsuit as far as I can see the cost from Q2? Can you give us a sense of cost for the back half of the year and what you're after with the three entities as far as monetary damages and remind us of the state or the ICC or whoever is handling the case court system? Thank you.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

So good question. I'll start with the expected damages. The entry of an entity like LaserOptech that chose to use false and misleading advertisement, both in conjunction with the, reimbursability of their devices, which their devices are not reimbursable, codes are very specific. The guidelines from the American Medical Association and the American Academy of Dermatology as well as the specific code descriptors dating all the way back to 2012 are specific and say that the providers can only use excimer lasers, then they represented their devices as superior technologically when and I'm not going to go through the whole case now, but I'll just mention that even their FDA filings compared their devices to devices that Strata is no longer selling, no longer offering and that had their devices they compared to have not been in this market for over ten years. So the combination of them coming to the market with full statements on the reimbursability of the devices as well as claims about technical superiority and clinical availability for devices that frankly do not have any clinical studies for psoriasis, not even one.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

And not in their original country of origin, Korea nor in The U. S. And that compares to hundreds of peer reviewed published clinical studies for extract. When we approached them to stop what they do, they ignored us and that is what started the litigation. The, I'm not going go again into the details of the back and forth, but very fast, we filed the litigation in August and very fast by November, the court has issued an order that bars them from continuing to claim that their devices can be reimbursed and use the comparative advertisement claims.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Having said that, in the approximately four years that they were in the market, they were able to either get, accounts that had existing Eximer users or existing either extract or Steros devices, both are devices owned by Strata or they were able to convert previous accounts into users of their device. As a side note, since then, at least with most of these the bigger accounts, we were able to take them back. However, that has cost Strata not only the immediate revenue loss from these accounts that moved over to laser optic devices, but also potential future revenue because when conflicting and confusing and more accurately described by the judge as fraudulent information is disseminated in the market, that creates confusion with the customers. Now I'm not going go into the specific damages, but these damages are in the eight digit range when it comes to calculation. The damages experts have come up with the relevant theories and Strata is going to pursue this to the end if needed unless, as you know, in these cases companies meet and find a way to settle the dispute before the case goes all the way.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Maybe should be pointed out and I did mention this in my prepared remarks, one of the things that LaserOptik has done is they were hiding behind entities that didn't exist. So for some time since we started this suit, in August 2024, They claimed that all the relevant parties were present. However, we just recently found out that LaserOptics America was actually not an entity. It was doing business as BBA, but it was another company that they did not present and that it is the company I mentioned, which is C. Dalton International LLC.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

They also represented themselves as representatives of Korea, which they are not or at least they claim they are not. The judge in his recent remarks to the parties in the case, mentioned his dissatisfaction with the way they have conducted their business. However, to your specific question, we are our legal expenses are most of our legal expenses are behind us. Now we're in the towards the end of SEC discovery and what is going to extend the case somewhat is the inclusion of these two new defendants. However, these two new defendants are not going to come up with anything we don't know.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

LaserOptics in their legal practice have chosen to mark most of their documents attorney's eyes only, which made our work as a company harder to understand what the damages are. But I gave you a framework of where we think it is. It is important to understand that LaserOptik is a publicly traded company. They have assets, and we will be able to recoup our damages, awarded by the court or whatever we agreed to in a settlement discussion from the parties in the case, now that we know that we can get to every one of the parties relevant. And they're significant in size, considering the accounts we lost and the reasons for why these accounts were lost.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

I hope that answers the question. If not, please ask for more clarification.

[Jeffrey Cohen, MD & Director - Equity Research at Ladenburg Thalmann & Co. Inc]

Yes. Just one more. Could you give us a sense of how many units during this period that were placed out there in the marketplace?

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

How many units were placed by LaserOptik?

[Jeffrey Cohen, MD & Director - Equity Research at Ladenburg Thalmann & Co. Inc]

Yes.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

I cannot give you a number because that number, as part of their legal practice was hidden away from us. We have our estimates. We have the accounts we know about. It does complicate these accounts and we did, try to make this clear not only through us but directly from us but also indirectly from the American Academy of Dermatology because for a provider to use a device and build the codes, when the codes are specifically saying excimer laser, that puts the provider at risk of being charged with fraudulent charges to CMS. That, when it happens, results in very heavy fines and garnishing of all the revenue they made.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

It also puts them at a high risk of reputation and so on. So they know that and that's part of the reason why some of the accounts that they have taken have come back to us. Other reasons are that these devices actually do not technically work even close to what the extract does and had they had the, substantiation to say that these devices are same or superior, I would assume they would have done one clinical study at least. They haven't done even one. And in my prepared remarks, I went through three studies for XTRAC that were published in the last month.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

And one of them had two forty patients in less than fifty two weeks. So these are things that an honest and good market player would do. I would add one more thing. As part of the litigation, as part of the discovery in the litigation, we found that, LaserOptik had a practice of approaching individuals within the organization that drafted the changes to the CPT codes and they took part in making changes to these codes. That, when we found out, was a big surprise for both ourselves, of course, as well as the American Medical Association that is responsible for these things, that has a very strict policy of non intervention of outside parties.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

And I think it also painted their activities with the court the way it should have, which is they're bad players. And as bad players, they will end up paying and that's why we highlighted the things because we believe pursuing it to the end would be a good practice. Now Jeff, I believe you were covering other companies in the medical device dermatology space in the past and there have been things like that in the past. I don't think there have been things as, black and white as this one. The codes are very specific, excimer laser and the guidance have been in place since 2012.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

And then going around and representing themselves as strata employees, and then trying to flip accounts, is going to end up costing them a lot. But thank you for the question.

[Jeffrey Cohen, MD & Director - Equity Research at Ladenburg Thalmann & Co. Inc]

Super. Thanks for taking my questions, Aleth.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Sure.

[Operator]

The next question comes from Jeremy Perlman with Maxim Group. Please go ahead.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

First one related to these temporary G codes. Is there anything else on your end that has to be done? Or has the review process already begun? And then what time frame can we expect in our response?

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Thank you for the question. I'll expand a little bit. So when we found that, LaserOptik was actively manipulating things within the AMA and as a result impacting things that happened in the market. We approached CMS and this is before the 2025 lawmaking cycle for 2025, which is in effect now. And we asked CMS to make changes based on three things.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

One, the specific change of the code that happened that took effect on '1 onetwenty four narrowed the language of the code and made it very specific to psoriasis and that caused limitation to the applicability of the codes to other patients. Now as I covered in my prepared remarks, we still see about 30 to 40% of our codes being used for non psoriasis patients, but that takes a lot of effort on our side. Help our providers by taking every one of these patients through a pre authorization or pre determination or pre approval process to make sure that they can be treated. So can go back into my prepared remarks and you can see the ratio out of five thousand one hundred patients, two thousand five hundred were psoriasis, one thousand were acne, that's three thousand five hundred and about fifteen hundred were non psoriasis patients being treated extract. By expanding the codes, which is going to take effect, right now in 11/27, that is going to alleviate the need to take these patients one by one and take them through the pre approval process.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Having said that, so we started the discussion with CMS back in before the rule making process of 2025 and their response the response comes out in November when the final rule is presented. Their response was, one, we do not have sufficient data to make the decision on our own. We need the American Medical Association to opine on the extension of the codes. So we went ahead and petitioned with the AMA or made an application for a code change. It's called a Code Change Application, CCA, which resulted in the expansion of the code descriptor as it was, as it happened in May and was discussed by us in our previous call and in press releases.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

That code is going to go by design, a new code descriptor goes into effect not immediately, but has to go through a review by the RUC committee. The RUC committee is another part of that takes care of these codes and they look at the values associated. So they need to opine on whether there is more cost associated with this or less cost associated with treating other conditions, such as vitiligo, atopic dermatitis and so on. That process is right now happening and there was a survey sent out by the Rock Committee to providers. The company is not involved in this process, but the outcome of that is going to decide whether the time component in the code is going to change.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

We believe it should go up and we have very detailed backing to that. So that's one part. The bigger part had to do with the components of the reimbursement code that is called TD practice expense. And that component includes among other things, among the cost of gloves and if needed local anesthesia and so on. It includes the cost of the equipment.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

As it stands out, the American Academy of Dermatology came to the AMA in 2023 and requested a higher value for that practice expense. So for reference, our codes reimburse in the range of $160 per procedure, about $22 today are attributed to the cost of the device. What the American Academy of Dermatology in 2023 said and explained to the AMA was that that component should not be $22 it should be closer to $80 and they provided their reasoning. However, in 2023 CMS being very cautious about the budget said, thank you, the American Academy of Dermatology for asking for this, but you did not provide any data to support that. So our application to CMS now includes three components.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

One has to do with the time and I cover that. The second one has to do with the device or the utilization of the device. And we are showing CMS backed by data. And the data we show them is, over the span of 2018 until today, there were 13 providers using or 1,300 devices used or 1,300 clinics using the devices and that is a combination of our partner clinics, clinics that have purchased the device from us and clinics that have purchased the Ferrous device from RA Medical, which we acquired that business from them in 2021. So there are 1,300 individual clinics using the device.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Since we have insight into the utilization of every one of these devices, we are providing CMS with data covering 1,300 devices going all the way back to 2018, showing them that that component, the cost of the device in the code should be approximately 4.5 times. So, it should be about $95 If that happens, then, our is going to go our average reimbursement is going to go up from $160 up about $70 So it's going go up to $2.30 That's kind of the maximum and that's just based on the practice expense component. If the time component also expands, that's going to push the reimbursement even further up. The third request from CMS is to provide temporary G codes. Now their response back in November 2024 for the 2025 fiscal year was, we appreciate you asking for this, but there is no code we can provide G codes for because at that point in time, the code was saying only psoriasis.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

So they said, we can't give you G codes for the other indications, since the code only says psoriasis. So what we have now is we have an expanded code that they can attribute the G codes to. We have the data to rely on for the extended practice expense and time to expand the value of these codes. And we have the backing of and I mentioned this through my prepared remarks, we have the backing of everybody involved starting from key opinion leaders saying we already are treating patients and have been treating patients in these conditions since 02/2003, but most importantly in the last few years, from the patient advocacy groups, Global Vinyligo Foundation, the GBS and others that say we represent hundreds of thousands or millions of patients and this is a very important modality for them to be treated. We have comments that are being submitted to CMS from big provider groups, so private equity backed provider groups that are supporting this request.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

You asked about timeline. So CMS issued their draft rule for 2026 approximately three weeks ago and the period for comments ends the September and then there's going to be an open not open hearing about the topic. So there's going be a hearing, maybe they will include us, maybe not. And we anticipate the final rule to come out in November. I hope that helps explaining, the timeline.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

Yes, it does. Thank you very much. And then, on the last earnings call, you mentioned that roughly 100 clinics were currently undergoing that Elevate360 consulting services. Are there any metrics you could share how that has impacted those clinics?

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

I did not prepare for this in this cycle but we will share this in future disclosures from the company. However, I can say that all of the clinics that have went through the full process, and I will describe the process shortly, have shown higher revenue in Q2 as compared to Q2 previous year and in some cases, a very significant growth. So let outline the process. What we do is we go in and we provide the owner or the key person in the clinic, so it depends whether it's an individual clinic or it's a group of clinics, we provide them with insights to what's happening as it comes to these codes. I will use one specific example, a clinic, one individual clinic that is in Florida that in 2022 and 2023 was a very productive clinic for us.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

It was in the range of 40,000 to $50,000 a year for us, which means that they were doing approximately $100,000 for them and then it started declining. And in October 2024, we started the process with them. What we found is that they had in the prior twelve months, they had eight eighty six relevant patients or patients with the relevant indications. They have submitted into our RDX portal 160 patients. So they thought that there are 160, about 20% of their relevant patient population, that are relevant for their treatment.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

We have secured pre authorization or pre determination. So we have secured, approvals from the insurance company for 132 patients and they have only started treatment on six of them. So specifically for that clinic, the follow-up happens between the person that manages the reimbursement and the person that schedules patients. It's that person in probably the front desk that needs to pick up the phone and call the patient and say, we've contacted your insurance and your insurance is gonna cover this for these 132 patients. Now to put this in perspective, every one of these patients is worth about $3,000 for the clinic and it's worth about $1,000 for us.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

So had they done this process to the extent of 132 patients, then they would be generating about $400,000 and we would be generating about $100,000 from that clinic. We started the process in October 2024. By the 2025, not only we had that clinic clicking at, I would say about twenty five percent of the so about twenty five patients were in treatment. Not only that, but within the same owner of clinics, we expanded from one to nine clinics and all of them are now producing. So that became a center of excellence for the Northern Part Of Florida.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Now I can use examples on other clinics, but I think what you are looking for are, metrics that go across the 100 accounts and I will we will be sure to provide that through, either a press release or our next call.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

And just last question related to the TheraClear devices. It seems like the installed base was flat quarter over quarter. Are you going through the same review process as you are in the extract installed base on the Theraclear? Or are you just leaving what's out there? And hopefully, revenue will grow a little bit, but the main focus is still on the extract and especially with all these CPT code potential?

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Well, first of all, definitely, the main focus is on the actual devices. They represent the highest, upside that we have, approximately eight fifty devices in the market and, every $1,000 of increase in productivity per account is going to take us $860,000 up in the revenue. And there ample upside in terms of the patients already in the clinics that were prescribed and not being put into treatment. Now, just as an add on to the answer to the previous question, we do the same thing with groups. With groups, it's a little bit more complicated because everything is centralized, so their scheduling is centralized and their business is centralized and their regulatory oversight is centralized.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

But we see the same upside. And again, we will provide, more statistics, to allow you insight into that. Now in terms of Therapeutics, you are kind of right. The installed base is growing. It's not growing as fast as the extract could grow and we told you, in prior call that we anticipate to be closer to 200 devices by the 2025 and we still think we will be at that range.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

However, if you recall, when the therapy was launched back in, the 2023, the company's strategy at the time was to approach, clinics that treat patients, seeking cash pay. And we changed that in the 2024 realizing that the cash paying patient is harder to convert and the clinics are not very good at that. And now about one half of our clinics are billing codes and growing accordingly. So our revenue for therapy is growing, but as I said in our prepared remarks, is growing, but it is small. So providing metrics for that, I think is less important than showing success with XTRAP, which has a huge upside with the not only the extended reimbursement, but higher payment for the codes and more adaptation, based on real world clinical studies.

[Jeremy Pearlman, Equity Analyst at Maxim Group]

Okay, understood. Thank you for taking my questions. I'll hop back in the queue.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Absolutely. Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Dolev Raffili for closing remarks.

[Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences]

Thank you, everyone, for showing up for this call. I appreciate your interest in the company. We will be presenting again in the November presenting our third quarter results. Thank you very much.

[Operator]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.

Participants

Analysts

• Jules Abraham, EVP, Head - Communications at Core IR
• Dolev Rafaeli, President, CEO & Vice-Chairman at STRATA Skin Sciences
• John Gillings, VP - Finance at STRATA Skin Sciences
• Jeffrey Cohen, MD & Director - Equity Research at Ladenburg Thalmann & Co. Inc
• Jeremy Pearlman, Equity Analyst at Maxim Group