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Operator
Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the StrataSkin Sciences, Inc., third quarter 2024 financial results and corporate update conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. 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. A webcast replay of the call will be available approximately one hour after the end of the call through May 13, 2025. I would now like to turn the call over to Joey DeLaHusse of Core IR, the company's industrial relations firm. Please go ahead.
spk02
Thank you. Good afternoon, and thank you for participating in today's conference call. Earlier this afternoon, the company released its financial results for the quarter ended September 30th, 2024. 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 StrataSkin Sciences management team are Dr. Philip Raffialli, Chief Executive Officer, and John Gilling, Vice President of Finance. During this call, management will be making forward-looking statements, including statements that address StrataSkin 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-K and subsequent periodic reports filed with the SEC and Strata Skin Sciences' press release that accompanies this call, particularly the cautionary statements in it. The content of this call contains time-sensitive information that is accurate only as of today, November 13th, 2024. Except as required by law, Stratiskin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to CEO, Dr. Dola Papiali.
Dola Papiali
Thank you, Joey, and good afternoon for everyone on the call. Our results during the third quarter demonstrated continued and encouraging progress in our corporate turnaround as several metrics have stabilized and begun to show improvement. Revenue per extract device grew 2% year over year versus the flat revenue growth seen in the second quarter and versus the decline of 10% seen in fiscal 2023 over fiscal 2022. Our gross margin as a percentage of revenue improved for the third consecutive quarter and reached 60.3% in the third quarter versus 56% in the second quarter of 2023. Our operating expenses include a one-time accrual of 1.8 million related to a New York State sales tax audit for the years 2014 to 2017. Excluding the one-time item, non-GAAP operating expenses decreased to 5.2 million in Q3 of 2024, down from 5.6 million in Q3 of 2023, and down from 5.4 million in the second quarter of 2024. Collectively, and when combined with stable year-over-year revenue, these positive trends contributes to our first operating profit since 2018 when excluding the one-time accrual. Direct-to-consumer, or DTC, initiatives remain a central element of our turnaround strategy, and we continue to see promising results in this segment. Year-to-date, we have scheduled over 1,900 new patient appointments through our DTC efforts versus just eight in all of 2023. We've also surpassed the 1,643 appointments scheduled in all of fiscal 2019 before the COVID-19 pandemic disrupted healthcare visits across the industry. We continue to expand our geographic focus with DTC and have now launched DTC using Spanish language advertising. Our domestic installed base of extract devices decreased slightly from 882 units at the end of the second quarter of this year to 873 units at the end of Q3. This trend is consistent with our strategy to removing underperforming units from dermatology clinics as warranted. The third quarter average revenue per extract device was the highest quarter figure since the end of 2022. Gross domestic recurring billing in the third quarter were down 2% year over year, versus a decline of 6% year-over-year in the second quarter, and versus a decline of 3% year-over-year in the first quarter. These low single digit declines compare favorably to year-over-year declines of 12% and 14% in the second and third quarter of 2023, respectively. Obviously, the goal is to turn these metrics positive on a year-over-year basis, and we believe our strategic efforts are paving the way towards helping us reach that goal. We reached an install base of 135 TheraClear X devices at the end of the third quarter, up from 117 devices at the end of the second quarter. In 2024, we focused on assisting with the adoption of insurance-reimbursed non-cash billing for acne treatment with the TheraClear X device. I'm happy to report that year-to-date, we have secured preauthorizations for over 2,000 patients with acne at our partner clinics. Additionally, published study results, such as in the July 11, 2024 Journal of Cosmetic and Laser Therapy, continue to highlight improved outcomes for acne treatment with the TheraClear X device. Doctors and KOLs also report favorable results at dermatology conferences, such as the most recent 2024 full clinical dermatology conference in Las Vegas. So we are optimistic about continued growth from this acne treatment platform. In July 2024, we bolstered our cash position with $2.1 million of equity raised that had strong participation from both existing shareholders and insiders. Given our improved execution and stronger balance sheet, we see a path to profitability and sustainable cash flow generation, which are clear objectives of our corporate strategy and actions. In a press release published earlier this week, we've announced a positive but partial litigation outcome in a complaint we filed against a competitor. The basis of our claim was that the defendant was misrepresenting the technical merits of their laser device compared to our AXIMR device in their sales efforts to potential customers and misrepresenting the potential reimbursement with existing CPT codes used for AXIMR lasers, such as our AXIMR device. On November 8th, 2024, the United States District Court of the Eastern District of Pennsylvania entered a court order that prevents the competitor from making these material misrepresentations in their sales efforts. Additionally, Strata will continue to pursue monetary damages from the defendant for their past misrepresentations and sales efforts. It is important that we vigorously defend Strata our dermatology clinic partners, and patients from false technical efficacy and reimbursement claims and tactics that put providers at risk of an unethical use of CPT reimbursement codes. Now, I'd like to turn the call over to John, who will review our financial results in more detail. John?
John
Thanks, Doliz. Our total revenue for the third quarter of 2024 was 8.8 million versus 8.9 million in the third quarter of 2023, a decline of 1%. Global net recurring revenue for the third quarter of 2024 was 5.4 million versus 5.3 million in the third quarter of 2023. Excluding deferred billings and other gap adjustments, extract gross domestic recurring billings were 4.8 million in the third quarter of 2024, down 2% from 4.9 million in the third quarter of 2023. Equipment revenue was 3.4 million in the third quarter of 2024 versus 3.6 million in the third quarter of 2023. International sales of X-Track and V-Track devices comprised the majority of equipment revenue in both periods. Gross profit increased to 5.3 million for the three months ended September 30th, 2024, from $5 million during the same period in 2023. As a percent of revenue, the gross profit was 16.3% for the three months ended September 30th, 2024, as compared to 56% for the same period in 2023. Total operating expenses in the third quarter of 2024 were $7 million. Adjusting for the one-time accrual Doliv mentioned previously, operating expenses were $5.2 million versus $5.6 million In the third quarter of 2023, a 7% reduction. Before moving on, I want to offer a little more color on the accrual. The $1.8 million we accrued in the third quarter relates to a sales tax audit in the state of New York covering the 2014 to 2017 timeframe. We initially received a favorable ruling, which was then overturned by the state of New York's Appeal Tribunal, after which we requested that the New York State Court of Appeals hear the case. On October 22nd of this year, in an unsigned, one-line decision, the Court of Appeals denied our motion to appeal, bringing the matter to a close for that period under audit. Our cash, cash equivalents, and restricted cash position of $8.4 million at September 30, 2024, along with our credit facility with MidCap Financial, supports our growth initiative and leaner cost structure. The 8.4 million total cash balance includes 1.3 million of restricted cash related to the sales tax accrual. This will cover the majority of the cost of the unfavorable legal decision. We continue to believe that we can execute on our strategic goals for 2024 given our current financial position. As of September 30th, 2024, the company had 4,171,161 common shares outstanding. During the third quarter, we raised $2.1 million in gross proceeds through the sale of 665,136 shares, including insider participation in this financing that illustrates the conviction these insiders have in Strata's strategic plan, ability to execute, and path to profitability. That concludes my prepared remarks, and I'd like to turn the call back to Doliz for any remaining comments.
Dola Papiali
Thank you, John. Consistent with execution thus far in 2024 led to a solid third quarter that points to a stabilization in our financial performance and offers some early signs of growth. We remain committed to the strategies laid out at the beginning of 2024 that are helping drive our performance. Now, I'd like to turn the call over to the operator so that we can begin the question and answer session. Operator?
Operator
Ladies and gentlemen, if you wish to ask a question on today's call, you will need to press star then the number one on your telephone. If your question has been answered and you wish to withdraw your request, you may do so by pressing star then two. If you are using a speaker phone, please pick up your handset before entering your request and speaking on the call. One moment please for the first question. This concludes our question and answer session. I'd like to turn the conference back over to Dolev Raffaele for any closing remarks.
Dola Papiali
I want to thank all of you for participating in today's call and for your interest in Stratus Skin Sciences. We look forward to sharing our progress on our next quarterly conference call when we report our year-end 2024 financial results, likely in March of 2025. Thank you and have a good day.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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