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spk08: Hello, welcome to join the Cicero Medical Technology Annual Report in 2023 conference call. All attendees are muted now. Here we go with a disclaimer. This conference call is only open to CineLink's professional institutional investors or invited clients for the exchange of research views only. The content of conference doesn't stand for private investment opinions. Without the prior written permission of Simulink Securities, any institution or individual is strictly prohibited from disclosing the contents and relevant information of the conference in any form, share with others, download, spread, copy, edit, modify, interpret, and so on. We will resolve all the legal rights for those suspected of violating the above. Thank you for your understanding and support. There will be question and answer session after the guest finishes his speech. Now, let's welcome the host of CineLink to speak. Thank you. Good morning and welcome to CISREN Medical Earnings Call for the first half of year 2023. has a job in a pharmaceutical analyst from Sinalink Securities. Please note, this event is being recorded. I would now like to turn the call over to the RR team.
spk07: Mary, please go ahead.
spk00: Thank you, operator, and everyone for joining us today. Welcome to CISFIRM's earnings call. I would like to remind our listeners that certain information provided in this call may contain forward-looking statements. and changes in business, competitive, technological, regulatory, and other factors could cause actual results to differ materially from the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. As such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them except as required by law. This safe harbor statement applies to the call. If you have not received the copy of the release, please visit the investor relations section of the company's website. Now, I'd like to introduce the speakers on the call. With us on the line today are Mr. Liu Yi, CISRAM's chairman, Mr. Lior Dayan, CISRAM's chief executive officer, Mr. Doron Yanai, Alma's CFO, and Ms. Shanli Fang, CISRAM's Secretary of the Board. Management will start with an overview of the business developments in the first half of 2023. Following the prepared remarks, we will open the call for the question and answer session. With that, I'd like to turn the call over to Mr. Lior Dayan, CISRAM's Chief Executive Officer. Please go ahead.
spk01: Thank you very much, Miri. Good morning, you all. We are very thrilled to report the ongoing success of our wellness ecosystem in the first half of this year. CISRAM is centered around four core aesthetics and wellness business lines. The first would be the energy-based devices, the injectables, the digital dentistry, and the fourth one is the personal care. This first half of the year has marked significant milestones as we unveil technological advances and achieve market breakthroughs across all of our business lines. These initiatives have not only extended our wellness portfolio, but have also solidified our competitive advantage in the markets most notably through our newly established direct channels. As a result, gross profit of the group amounted to more than $105 million, which was an increase of almost 6% compared to the same period last year. And the gross profit margin increased by more than four points to 61.4% of the period versus last year of the first half of 22. This performance attributed to higher revenue drive from direct operation offices and more profitable product mix not only showcases our ability to adapt and thrive amidst microeconomic fluctuations, but also represents our market dominance in strategic countries. One of the highlights has been the establishment of the new offices in strategic locations just lately in China, the United Kingdom, and Dubai. This aligns with our direct operation strategy, enabling us to strengthen our direct sales efforts, provide localized support, and get closer to our valued partners. By understanding their needs, we tailor designated custom solutions and enhance our ability to serve our partners effectively. Globally, the direct operation officers recorded revenue of $124 million for the first half, representing an increase of 11% year over year for the same period. Overall, revenue drive from direct sales represented more than 72% of the total revenues, which is an increase of more than 7% versus the first half of 2022. The acquisition of the aesthetic device distributor, PhotonMed, in China this last June is a testament to our localization efforts. This move not only reinforces our commitment to the Chinese market, but also opens a direct sales channel. China remains a pivotal contributor to our profitable growth, and we are poised to leverage this strategic deal for greater success going forward. Also in June, we opened Cicero's first brick-and-mortar wellness center in Chicago, not only creating a trusted destination offering the consumer a wide range of wellness solutions, but also enabling us to interact daily with professionals in the strategic market and better understand their challenges. Our unique value proposition built on relevance, innovation, and differentiation across our four business lines continues to be driving force behind our success. We have formulated and commenced a two-year collaboration with a new global brand ambassador. She is a born performer who is well-known and immensely popular worldwide, enjoys using Cicerum's solutions, and will enhance Cicerum brand awareness globally. This high-profile public figure will be featured in a new multi-platform campaign that is anticipated to resonate with end consumers to generate bottom-up demand and to enable partners to effectively promote and sell the company's solutions. This campaign, in addition to the wellness aspect, communicates our brand values, amplifies brand awareness, and fosters trust among B2C audiences, reinforcing our position as a trusted partner in wellness solutions. In the first half of this year, our flagship Alma brand launched several new devices. The Soprano Titanium, a leading FDA-approved platform for the hair removal, was launched in North America. Following that, the Opus, a non-invasive radiofrequency platform for skin resurfacing and facial tightening, was launched internationally in the markets outside of the United States. Such devices powered by Alma unique technology combination have achieved never-before-seen results for patients who reported high satisfaction and improvements in their appearances and quality of life. In addition, we successfully obtained United States FDA regulatory clearance for two complementary accessories designed to enhance Alma's Beautifil system, catering to both laser-assisted liposuction and skin tightening procedures. Besides traditional domains, the company is extending its market influence into the field of sexual wellness and hair growth. This initiative involves pioneering concepts and holistic approach to address the evolving demands of consumers. During the first six months of 2023, we led a couple of successful Alma Academy events. Alma Academy event in Italy, and one in the United States. Both events united thousands of physicians, distinguished global key leaders, esteemed business partners from across the globe. Such events continue to be important in our strategic efforts to strengthen customer relationships and to ensure that our technology remains at the forefront of industry trends. In the personal care sector, we strategically launch elements in the Asia-Pacific market. Our ongoing efforts focus on boosting Elements brand recognition, positioning it as crucial for enhancing in-clinic treatment outcomes and exploring cross-selling with other Cicerone products. Revenue from the injectable business rose to almost 30% to $5 million, and the business is poised for future growth. The approval application for Daxify, a unique neurotoxin injectable already approved by the United States FDA, was accepted by the National Medical Products Administration, or NMPA, the Chinese equivalent for the U.S. FDA. With Ciceron exclusive rights to import and commercialize Daxify in mainland China, Hong Kong, and Macau, this acceptance represents further progress in building the injectables business and bringing innovative products to strategic markets. In the dental business, during the reporting period, we completed a commercial pilot for Coppola, a new innovative platform that provides a one-stop shopping services for dentists conduct in a collaboration with known KOLs in Israel. This achievement marks an important step forward, laying a solid foundation, paving the way to commercialize and scaling up of procedure volume. We acknowledge that certain markets have been under pressure recently, as seen by the adverse effects of macroeconomic fluctuations around the world. We have also noticed the end of pent-up demand in the post-COVID era in China. Additionally, there was a short-term impact on revenue growth attributed to our ongoing transition from distribution model to a direct sales approach and the establishment of the new direct operations. Looking to the second half of the year, we see great opportunity and expect that our shift to direct sales will be an impactful driver of revenue growth and profit margins. We have already seen the positive effects of a shorter supply chain, better pricing power, greater brand awareness, and better customer experience, and we're excited to see our strategy thrive. CISROM versatile business building blocks deliver the power of combined innovative technologies to strategic markets. Today, we are proud of being the first company in the United States to offer a comprehensive ecosystem, including flagship and clinic devices, high-quality skincare product lines, and innovative home-use devices, such as Element, together with innovative protocols to enhance patient results for treating skin indications. Our dedication to innovation persists, and its expanding system of unique wellness offerings. We equip partners with reliable solutions for diverse aesthetic needs. We will continue to invest in R&D and technology and look forward to new product launches such as Alma Vale in the United States in the coming months. With a focus on growth in the strategic markets of North America and China, we anticipate even greater advances in the near future. As always, I would like to thank all of our employees of the efforts to build CISRAM into a global leader in wellness and extend our appreciation to our shareholders as we continue our journey together.
spk06: Thank you, Miri. Operator?
spk07: Hello, the is not online. Please hold on a minute. please speak.
spk06: Hello, Miri. We're ready to take your questions. We can move to the Q&A, yeah.
spk07: Okay. Is there a conference assistant? Please work up the question form. If you would like to ask questions, please press star and then number one on your telephone keypad and wait for your turn. Thank you. Hello, ladies and gentlemen.
spk08: If you would like to ask questions, please press star and then number one on your telephone keypad and wait for your turn.
spk07: Thank you.
spk08: Hello, ladies and gentlemen. If you would like to ask questions, please press star and then number one on your telephone keypad and wait for your turn. Thank you. Okay, so at the time when we wait for investors' questions, I would like to ask some small questions. First, I want to ask how can the – could you tell your strategy about where you concentrate, for example, more in –
spk07: I'm listening to the call. Yes.
spk01: Yes, operator. Please, you can go ahead with the question about the strategy of the development markets. That's what you were saying.
spk08: Yeah, yeah, yeah. I'm Heather. So I just, I will continue my question. about the company's strategy, about your allocation of your concentration about China market or the North American market or the European market. How about your strategy on the worldwide market? Could you explain in more detail about your strategy and why?
spk01: Yes, absolutely. The company has different type of strengths which are combined into the results of our activity. Among them is our global coverage, and we are acting in more than 100 countries. And with the acquisition of the operation of the EBD in China, now we have also full diet control of the Chinese market. So the two major giants, of course, would be North America and China. And then, of course, we have additional eight more offices. So basically, we have a very unique balance between direct operation in strategic markets, but then also large coverage with distribution channels on all the active countries out there. So our goal is to implement our strategy of combined technologies through the ecosystem that we're speaking about, in each one of our direct operations. This is the strategy we're following. We're building it over the last few years, combining energy devices, injectables, skin care, home device as a home kit. This is Element, as you know. Altogether, we'll basically create a very unique solution that will be provided by the doctor to the patient.
spk08: Okay, thank you. I have another question about our product. We understand the company has four areas and collaborating each other. We are more curious about our Dexify because the Chinese domestic investors are more curious about that. So how do you anticipate the market, the growth in China market if the NMPA approves this product in China.
spk01: So, the Axify is definitely one of the cornerstones in our injectable division that will be launched in China. Besides Axify, we will also have Profilo, which is a bioremodeling product that we already sell in Hong Kong, and we're going to start coming this Q4 in Hainan as well, the bioremodeling beside that. And so, we expect to get approval sometime in the second half of 2024. basically for Daxify and also Profilo, and we, that will be a very important part of the growth plan for specifically mainland China.
spk08: Okay, it's clear. So, as we know, the company make a very important contribution important thing for Alma in China for the channel so how do you expect the future of the energy sources athletic products in China how how do you anticipate the profit margin in China market in this area because we know we are a leading company in this area in the world, but China still is growing. So could you draw some picture of future in this area?
spk01: Of course, of course. So, in each one of our direct operations, we plan to work in a pretty much similar way of how we combine our technologies into one offering for the patient by the doctor. So, I mean, when we want to treat maybe a rejuvenation of the face, we believe that if we should combine the energy device together with a skincare preparation, or in cases injectable, and maybe even a home device to take home after or before the procedure. This is the way we're already starting to implement this in the United States. This is the way we will implement in China. So that will be our unique value proposition. When we do this, it's not just product-wise. It's also a very special operation to support. in order to educate the doctor, in order to support the doctor in his clinic on how to speak to the patients, how to address the whole support of that. It's called the customer success operation. We have it running in our direct operations, and this will be our unique way of how we position ourselves because we are a premium provider. So when you're a premium provider, you expect high margins, high gross margins, so you'll be able to have those potential profit in order to build the expenses to support that operation and to give value to our doctors.
spk08: Okay. It's very clear. So the conference assistant, please pass the investor's call in.
spk07: Okay, let's welcome Fan Rong from JP Morgan to ask questions. Thank you.
spk02: Thanks, management, for your sharing, and I've got two questions here. The first one is regarding the four-year guidance. As we all understand that the first half result is partially under pressure, and I noted that the four-year guidance of 15 to 25% growth is missed in the interim report, or maybe I've overlooked, but could you please share more color on the four-year guidance in the outlook for the second half? And do we still got the confidence to reach the four-year guidance? And the second question is regarding the China market. Could you please give us more color on the future development plan in the China market, especially post the acquisition of . For example, the collaboration between your original team and the new acquired team, and how to develop other categories other than TBD, like the elements series, and the product line, product pipeline, something like that. Thank you.
spk01: Thank you very much, sir. So I would answer the first question regarding the expectation for the second half. We right now, because of, again, like I mentioned, macroeconomics fluctuation, as we can see, it has an impact on different markets. Not in the same way. On one hand, the United States is still reflecting. We're seeing growth. year over year, and we expect this to continue. Although the market is more challenging, meaning with high, still high interest rates, but there is positive sentiment out there that this would be better in the second half of the year. However, in Asia, situation is more with a challenge in that perspective, and so we We are more careful with giving high statements like maybe at the end of 2022 when we look forward in 2023. We would be overachieving the results of 2022, but we don't want right now to set very high expectation of how much more than 22. So the situation right now is such that because we acquired Phaeton Medical, like you mentioned, I'll speak about that in a second, we have more opportunities to push and be able to overcome any macroeconomical challenges. And you can see, by the way, that all of our direct operations in general are growing. So in a financial situation where there is maybe struggling in the market, an indirect channel would always be more sensitive and careful. Us being direct in a strategic market allows us to be more assertive and powerful and therefore presenting growth. And you can also see that we are keeping a solid net profit in our business. and which is very, very important, even though there might be a fluctuation in the top line, we know to adjust our operation and to be effective. So this is our situation right now in the middle of August, and we really look forward towards the second half of the year to be able to take advantages of any changes in the market conditions. About the second question about the integration phase, this is what we are at right now. We are, although we know our partner, Paytun, for more than 20 years, now what we're basically doing, we're coming into deep into the operation with the resources that we have globally and tapping on that and connecting whether it's putting more energy into more regulation of new products. Basically, the products we have in North America and Europe are not yet introduced in China, so we're initiating several projects on that level with the Chinese FDA. It's a long process. It's not going to show fruits within this year. But these are the steps that we're doing right now in order to build the infrastructure towards next year, which next year I mentioned the injectables would come in. Element is already playing in China. And so basically building our unique ecosystem, which is existing in North America, also now in China.
spk06: Thanks. It's clear. Thank you, sir.
spk07: Hello, ladies and gentlemen, if you would like to ask questions, please press star and then number one on your telephone keypad and wait for your turn. Thank you.
spk08: Okay, we are waiting for the investor's call. I have another question. So when we see our presentation of we see your digital copilot. So could you introduce more about this digital platform? Is it any AI implement or something like that because we use digital copilot?
spk01: Yes, of course. The Coppola division, which we established over the last two and a half years, It means co-pilot. And the idea is that we are aligning with the young dentist, the dentist that wants to grow within the aesthetic dentistry field and help him the ability to address aesthetic procedures in a way and fashion that operative-wise it will be easier for him to function. So with an app and a unique scanner that is connected to the web, a young physician could basically grow inside this business of aesthetic dentistry, have ability to connect to our manufacturing sites and laboratory sites that we have Coppola in China, and being able to have a delivery of whether it's aligners or later on also veneers, in a very seamless procedure. Everything is being managed through the app. Of course, there's embedded into this potential software AI capability down the road. And we're going to finalize the pilot that was done in Israel over the last few months within the next quarter. And that will be our point where we will decide on the next steps of launching this unique solution into larger markets.
spk08: Okay, thank you. So conference assistant, please access to investor's question now.
spk07: Okay, let's welcome Novaranda from CMS to ask questions. Thank you.
spk06: Hi.
spk03: Good evening and good morning, gentlemen and ladies and gentlemen. This is Owen Dai calling from China American Securities, Hong Kong. I've got two questions. One is more long-term regarding the European market. You know, the economy recession open takes a long time to recover from. I'm just curious, what were the performance in the European market in the first half of 2003, of 2020? to re-reflect the situation in coming years. Also, I got one more question regarding the growth new product launch in previous year. You know, just curious, do they contribute to the company's revenue? Yeah.
spk01: Yeah. Well, thank you very much. The first point about Europe, if I heard you correctly, the drop in the Europe business in the first half of the year is really because of two major reasons. There is a general delay in the process of closing deals, again, because of the war that we are aware of that is happening in Europe. And so you have kind of longer cycles. And this is mainly in the middle of Central Europe. Our business in the United Kingdom is really picking up very fast with the new office, and you will be able to show very nice results by the end of the year. Now, the other thing that has had an impact, again, it's just from the financial reports point of view, but just to put the history into perspective here, The first half of 2022 was relatively strong from revenue because at the end of 2021, we had a huge amount of backlog due to supply chain limitations of electronics. And therefore, things started really to ship out. at the end of 2021, at the beginning of 2022, and basically reflecting not really new orders that came in the first half of 2022. So we don't really see, sorry, forgive me, we don't see a decline from that perspective as much as there was a very high spike in the beginning of 2022. Now, coming back to your second question, sir, We launched a lot of new products over the last few years, whether it's the hybrid, which is a dual-wave unique technology to deal with scars and skin rejuvenation. We have the sexual wellness platform. We have hair growth. We have a lot of new products. We have the open new applicators. All of these are really playing a major role on the results of the company. At the end, if there is one of the things we learned in 2008 on the financial crisis that technology companies, they differ and they could distinguish themselves by introducing new technologies because for those people, those business people, physicians that can allow themselves to continue to grow and to invest into the business during financial fluctuations, they are looking for new technologies. They look for things that distinguish themselves from their peers. And that's exactly the spot we are at. And that's why we push strong to continue to introduce new technologies, new solutions every year.
spk05: Okay. That's very helpful. Thank you so much for answering the question.
spk06: Thank you, sir.
spk05: Thank you.
spk08: Okay. Thank you, Leo. Thank you for the investors, for everybody. So at this time, I'd like to ask the director, Mr. Liu Yi, to give a conclusion.
spk07: Hello. Hello, can you hear me?
spk06: Okay, thank you for the introduction.
spk04: Yeah, I want to tell you something also, and maybe we can continue if there have some investors wants to know more about the business. As our CEO of the introduction, I think with our in the medical aesthetic industry, now has become a global wireless group position. For sure, challenge also ahead. The unique ecosystem plants energy-based device, injectable, personal care, and dental pieces, and more. I think these offerings have been meticulously developed, drawing from our expertise in researching, developing, and many technologies. I think our achievements have not gone unnotified as our award-winning products and the service has a direct mission across the globe. Regarding for the first half-year performance, to be honest, I think they still have a big room, big space we tend to develop. Although there has different many challenges ahead, but I think the team will fully believe with our efforts, especially from the good collaboration from your side, advisors and partners, work together for system, we can try our best to achieve a brighter and brighter future business. in this area because I think for the beauty and health, it's a very important demand for the customer all over the world. So thank you, everyone. And if you have some further questions, I think we can continue to communicate.
spk08: Thank you. Thank you. Thank you for Chairman Liu's summarization. Just now the investors had asked questions and Leo had given answers. So now we thank you everybody who attended this meeting. And if you have more questions, you can connect to CISRAM or you can get in touch with me. I'm from Sinalink Securities. I'm Heather. So thank you everybody. Today's meeting is now the meeting is over.
spk05: Thank you. Thank you.
spk08: Thank you. Thank you for joining the conference call. The conference has been finished. Wish you all the best. Goodbye.
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