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spk01: Good afternoon and good evening. Thank you everyone for joining us today. Welcome to CISRAM Medical's H1 2024 earnings call. This is Xiaotong Li, the analyst from Guangfa Securities. As a reminder, this conference call is being recorded today. Now I'd like to introduce our speakers on the call. With us on the line today are Mr. Leo Dayen, CISRAM Chief Executive Officer, Mr. Duran Yanai, AirMask DFO, Ms. Qianli Fang, Secretary of the Board. Management will begin with an overview of the business development for the H1 2024. And following the prepared remarks, we will hold a Q&A session. With that, I'd like to turn the conference over to Leo Dayen, CISROM's CEO, to share updates for H1 2024. Please go ahead.
spk05: Thank you, Yeotong Li. Thank you very much, everybody, for joining us on the call today. I'm happy to provide an update on the ongoing success during the first half of 2024, which has been a period of momentum for CISROM. For over two decades, CISRM has been a global leader in the consumer wellness, built around four core businesses areas, which are energy-based devices, injectables, home-use devices, and also skincare. The medical aesthetic industry is evolving rapidly. Technological advancements and shifting consumer preferences are elevating beauty standards with increasingly sophisticated consumers seeking personalized and high-quality solutions. As the market expands with more practitioners entering the field, the demand for exceptional experiences and long-term patient care has never been higher. Within this dynamic landscape, I'm proud to update today that during the reporting period, CISRM achieved an all-time high new orders rate, demonstrating its unique value to growing audience of practitioners. This milestone, driven by rapid market adoption of Alma 3 recent launches, reflects strong confidence in Alma's platforms and demonstrates the strength of our brand equity in strategic markets. I'm practically excited to announce the successful launch of Alma Harmony and introduced in North America alongside the groundbreaking new diagnostic concept, Alma IQ. CISRM has made significant leap forward in the high demand skin analysis with AlmaIQ, an intelligent skin analysis and consultation solution. This innovation transforms the consultation process by offering visually engaging and automated interactive experience that effectively addresses patient skin health concerns. Simultaneously, AlmaHarmony Alma's new innovative multimodal platform designed to tackle a wide range of skin conditions across diverse demographics has also been introduced in North America and quickly embraced by the market. In addition, the group continues the leadership in the hair removal segment with global launch of the special edition of Alma Award-leading hair removal platform Soprano Titanium. This new addition has been warmly received worldwide and includes a breakthrough applicator that enhances treatment sessions by 20% while ensuring virtually painless experience. The new and improved edition of this Soprano Titanium is also recognized as the fastest in the market by the Sapir Research, an independent global research agency. This advancement not only sets a new standard in the industry, but also provides even greater value to our customers. Furthermore, we continue to lead the way in scar treatment with Alma Hybrid, our premier platform for top tier practitioners. This latest clinical standards are paving the way for Alma Hybrid to become the first line of treatment for scars. Central to our success in our commitment to expanding CISROM unique wellness ecosystem with combined energy-based devices, skin care, injectables, and now also diagnostic tool stands as the most comprehensive synergistic product line available today. Now, I would like to take a step forward with you into the future as we mark significant advancements in CISROM injectable segment. a strategic building block within the CISROM wellness ecosystem and crucial driver for the company's long-term sustainable growth. Supported by three strategic partnerships, CISROM has built a high-end product portfolio featuring world-leading injectable brands, such as IPSA, a high-end thermal biostimulator named Profilo, the first world long-lasting botulinum toxin named Daxify, and the renowned Revancé dermal filler collection. So the market value of the injectable segment has soared, reaching multi-billion dollar figures in the recent years. Ciceram is proud to be the only company in this space that operates in both fields and delivers unique combinations of injectable products, together with the gold standard of energy-based devices, enabling a new edge of more powerful and long-lasting aesthetic results. With our comprehensive injectable portfolio and dedicated seasoned sales force, we are ready to seize opportunities in this rapidly expanding market. The group's performance for the first half of 2024 includes revenues of $168.7 million with a gross profit of $105.3 million. The latter remained the same in the corresponding period of last year, 2023. The total revenues decreased by 1.7% compared to the corresponding period in 2023, downtake preliminary due to the high interest rate environment in North America, which was offset by double-digit growth in other territories. On a year-over-year basis, our gross profit margin rose by 1.2 to 62.4. Through the reporting periods, Cicerum has made significant strides in expanding its direct sales presence in key markets and enhancing its unique wellness ecosystem, two key contributors to the company's profitable future growth. During the reporting period, we present double-digit growth in Asia Pacific, Europe, and Middle East and Africa, which increased by 15.5%, 10%, and almost 11% respectively. Aligned with the company's strategy to strengthen Asia Pacific leadership, CISRAM has significantly advanced its new offices in Japan and China, which established in H2, 2023. With our current 11 direct sites, we are confident in maintaining leadership in these markets and bringing more value to our customers within their clinics with the aim of better serving them and streamlining operations. Together with our team of long-term veterans in the aesthetic industry, this approach enables us to address rapid adjustments and achieve efficiency in every aspect of our business, allowing us to align expenses with the top line and improve gross profitability. In the current reporting period, revenue from the direct sales comprised 86% of our total revenue, with sales through distributors making up for the remaining 14%. In addition to maintaining our leadership as a premium provider, enhancing brand visibility, and strengthening relationship with partners and clients, the setup of our direct operation offices allow CISRAM to navigate macroeconomic trends much more effectively. In parallel, we continue to see enhancement and strengthening of Alma Global Brand, which drives demand and growth for our customer clinics. Our ongoing strategic partnership with Hollywood icon Kate Hudson has played a key role in this effort. This collaboration has markedly boosted brand awareness and engagement, reaching over 300 million people worldwide and generating more than 350,000 social media interactions within less than a year of its launch. Looking into the second half of the year, CISRM will continue to execute our strategy by evaluating and implementing near-future technologies and extending the company's global footprint according to the direct sales approach. In particular, promoting a whole new skincare concept and advanced in-clinic platform. We will strategically focus on strengthening corporate leadership in Asia Pacific and North America, and continue to expand Cicero unique wellness ecosystem with a high value and synergistic offering. This will involve utilizing the building blocks of energy-based devices, injectables, home-use devices, and skin care. All of this will be governed by innovative protocols designed to enhance patient results, elevate clinical practice, and increase patient satisfaction. Lastly, CISROM is committed to building close relationships with end consumers through various channels and technologies, providing continuous support to clinics with strong dedication to ensuring our partners' ongoing success and operational excellence. As always, I want to express my gratitude to all of our employees for their dedication in helping CISROM become a global leader in wellness I also want to extend our thanks to our shareholders as we move forward together on our journey. Thank you very much.
spk01: Thank you, Leo. We are all set for the Q&A session. If you are on the phone, just press the start key first, followed by the number one key to ask your question. For those joining us via the webpage, please raise your hand or type your question in the Q&A box. And a friendly reminder to our listeners, please introduce yourself and your organization before you ask your question. Thank you. The first question comes from the name of Sealand Securities. Please go ahead.
spk00: Hi, thank you for offering this opportunity. This is Xuanxing Ma from Ceylon Securities. I have two questions for the management. The first one be, why did the revenue and profit decrease and what can we expect them for the second half year of 2024? Thank you.
spk05: So, yeah, thank you for the question. And as addressed, and you can see also in the report, the major drop that we faced in the first half of the 15.7%, as you can see, were mainly from North America. And again, we, of course, managed to... kind of offset this with a very strong double-digit growth from other sides of the world, one of the uniquenesses of this operation. The major reason for the drop is related, of course, to the microeconomics trends, which are specifically with high interest rates in North America, also in Europe, but significantly impacting North America, which limits the ability to get approval for leasing or to have a slowdown in the process. What really helped us to have just 15.7%, this is compared to maybe some of the peers in the EBD segment that maybe you are aware that they dropped even further, but one of the reasons we managed to control that in a way was the introduction of new technologies, as I mentioned, the new version of the ALMA system Harmony, the new generation of it, and together with Alma IQ, the diagnostic tool that comes together. So these are kind of the reasons for that. Regarding the net profit, the majority of, I mean, the major reasons for that would be the fact that, as you know, over the last... um, year and a half, we opened few direct operations, which are really at early stage and building their presence in the relevant markets, like in the United Kingdom, um, Emirates, um, um, Japan, uh, and so on. Uh, so we basically are really at the first, uh, uh, year or two, uh, which relatively the amount of expenses of building that operation, um, is, um, is basically at the early stage. We do believe that within usually the third year, every subsidiary, they are aligned with the group margin, net margin, the overall net group. So these are kind of the topics. I hope it answered the question.
spk00: Thank you, sir. That was helpful. And the second question is, do we have any plan for further expansion in direct channels? Do we have any targets of the rate of direct sales? Thank you.
spk05: So, at the moment, we do not give a specific forecast for the second half. In general, we're more optimistic because of a few reasons. In general, As I mentioned, we just introduced in North America a few new technologies and things are even just gaining more and more pace. The new Harmony version, the Harmony Next Gen, will be introduced in Europe later on this year. So that's another part. So that's in general. We don't know yet what's going to happen with the interest rate, as mentioned. If the signals would be optimistic as everybody hopes, uh, if that will start going down, definitely this is normally a signal for, uh, our business to grow strong. So this is, this is in general. Um, now regarding our offices, I can say, um, they're almost all of them actually with exception of the United States that we, we just spoke about North America. Uh, we, uh, we're basically on track regarding our expansion with them. So this is about our direct operation. And distribution channels, once again, financial markets are coming back into normality. They are reacting positively in a similar way.
spk00: Okay, that's clear. Thank you. Thank you, sir.
spk05: You're welcome.
spk01: Thank you Leo. Let's proceed with the question from CMS app.
spk06: Hi, good afternoon and good evening. Can you hear me? Yeah, definitely. Hi, thank you for taking my question. I got two quick question on the injectables regarding the Dexify. So my first question is regarding the Crown Laboratory and Revan's announcement for the entry into the merger agreement. I'm curious, how would that impact or affect our future collaboration with Revan? My second question is regarding DexDefy's approval timeline from the NIMPA in China and also any commercial plan you would share with us in China. One more follow-up regarding our collaboration with RevenS. I'm curious about the manufacturing, you know, whether that merger acquisition will help, you know, the optimization of the manufacturing process will eventually help, you know, to bring down the manufacturing cost of the product. Thank you.
spk05: Yeah. Thank you very much for the questions. I'll try to... uh, share, um, as much as information I, I know as a public, um, you know, uh, that, uh, Revance is a public company and we are actually stating, um, what they are, uh, announcing. And so we, yeah, we are, we are, uh, with tight, uh, relationship with, with the team over there. Um, and, uh, and basically, um, we, uh, we, we, uh, we were aware to the transaction and, uh, Our collaboration as a distributor of Daxify has been, at the moment, for Asia, for Great China, Hong Kong and Macau, is an important asset for the team, for Advance, also under the new coming owner. We... We see this relationship as a strategic relationship. And at the moment, rightfully, you are speaking about their supply chain. And right now, their supply chain is addressing demand, which is coming from North America. That's their major focus. And they're with clear steps of expanding demand. once we get our Chinese FDA, the NMPA approval, which is yet not clear exactly when, but as you know, we got the approval of submission last year, in 2023, mid-year, and we're positive with that one coming ahead. But then again, of course, the first step would be China, and other parts of the world will be really depending on supply level. Definitely the collaboration between Revance and us brings a win-win collaboration. As you already heard from my overview before, our ecosystem, our solutions from a clinical and business aspect to our clinics are combining injectables in our offering. So there is a great place for that journey to continue to grow.
spk06: Thank you, very clear. You're welcome.
spk01: Thank you, Will. Next question comes from the name of JP Morgan. Please go ahead.
spk07: Hi, management. This is Carson from JP Morgan. Thanks for the sharing and the resilient results in such challenging environments. I've got two questions here. The first one is regarding injectables. Could you share more colors on the decline in sales of injectables? I guess mainly profilo. Is this because the weak macros are increasing competition? And what's your view on its performance in the second half and beyond? And any further plans on injectable pipelines? The second question is regarding the shareholder returns. So could you share any thoughts on the cash flow and CapEx, including essential R&D investments, and any potentials in increasing the dividends or any share buyback scamming things?
spk05: Sure, sure, sure, sure. So I will answer the first question and also give the opportunity for... Alma CFO, Mr. Duroni, and I to address also the aspects of the exact situation of cash flow as it is positive, of course. So first of all, regarding the injectables, Cicero is pretty much one of the only companies in this industry that has a division for injectables in addition to skin care and, of course, the energy-based devices. That's where Alma grew from. And that capability now would be even expanded with the diagnostic tools that I mentioned and just launched in the United States named AlmaIQ. Now, within the injectable division, Carson, that you asked about, what we are creating In the territories that we have at the moment, the license to distribute injectables, we have collaboration with the leading companies such as Ipsa from Italy and Revant, as we spoke just before, Prolinium from the Canadian hyaluronic acid company, and we also have Coming up, a few more kind of startups such as Allura. We're not reporting this on this report yet, but it's going to be reported. Allura is an injectable new development, new technology of hyaluronic acid. This will be distributed first in Israel. Then, as you know, we also have in the incubation mode the collaboration that was happening through Fusun Pharma on Raziel, which is a lipolysis solution for addressing lysis in small fat areas. So this is our injectable division, and this is the plan to expand that further. This is kind of to answer your first question.
spk02: Yeah, about, you wanted to talk about OPEX and the dividend, right? Yeah. About, yeah, about the OPEX, sorry, it's the wrong, I'm sorry, finance of CISRAM. So with respect to the OPEX, OPEX, of course, is slightly higher than what it was last year, but it's a combination of As mentioned before, new sales offices, which of course, you know, required more resources. On the other hand, we are always looking on efficiency steps at the same time. So we are limiting, you know, our OPEX, keeping the money with us. You talked about cash flow. The company is generating cash all the time. We have sufficient cash, of course. And about the dividend, our formal policy is that we pay about 30%, not about, exactly 30% from our net income. Sorry, I don't think that at this stage we have any plans to update it. So as usual, we will pay. Usually it's going to be by the fourth quarter, third, fourth quarter, the dividend payment of the last year, previous year, sorry.
spk07: I think that's very helpful.
spk01: Thank you, Leo. I'm Ya Tongli, the analyst from Guangfa Securities. My first question is that how do you think the market for botulinum toxin products mainly as a product to attract consumers? If you reduce the frequency of visiting to doctors, will it reduce consumer sickness with doctors? so that it will lead to doctors are reluctant to recommend Dexify. Thank you very much.
spk05: Oh, that's a very good question. I'll try to address this from three angles. So we think the opposite, actually. And the reason is because when you only have one tool to play with, then maybe you are limited to what the technology can achieve. But when you combine technologies, you can come to much greater results. And that's where we're going to work together with our clinics to go after. And the work is not just with introduction of new technologies, but also training on them. Now, just give you an example of dealing with neurotoxins. Even in the U.S., when... at the moment we're not selling it, one of the things physicians want to do is to be able to have their patient move from one treatment to another because of, you know, maintenance and having better and better results. But it was very difficult to present such a move from someone which was maybe just used to do some injectables and maybe moved to do some treatments of using energy-based devices to treat skincare conditions of pigment or redness or wrinkles. Now that we introduced AlmaIQ, which is a diagnostic tool with a supportive software for the consultation between the doctor and the patient, it could reflect very, very well how the energy-based device together with what's in the clinic there, could have a much better result. And that's great value for the doctor when they consult the patient. They can really show you the value of adding some technologies to improve redness on the face. And so I hope I kind of explained to you why that aspect would give actually more value to the clinic and the patient.
spk01: Thank you, Leo. My next question is how do you think about company's share price?
spk04: The what? The stock price? Yes.
spk05: Well, we all hope it will be higher, wouldn't we? I don't think we can, from our side, from the operations side, I don't think we have much control on that one. Our job is to implement our strategy and make things happen. I think we have a very, very good operation. especially overachieving with what's happening in the financial markets, and every market has its own uniqueness. The stock exchange has its own life. I think it's very difficult for us to comment on that one.
spk01: Thank you, Leo. Thank you very much. You're welcome. Next question comes from the name of CITIC Security. Please go ahead.
spk03: Okay, thank you for taking my questions. I am Jingpeng He from City Securities. And so first, I want to ask maybe more about the original, our main, you know, market, like, for example, in China, for example, in China, we see, this is the first full year of our consolidation of Phaeton or Photomat. So how is the performance of this new team after our consolidation? And for the United States, I've heard in the early meeting that we said that the amount in North America was not affected, but maybe our sales of devices dropped more in the second quarter, and maybe that's more about the interest rate effect. And we said in our report that we will provide the financing support in North America, so Could we see maybe some recovery in the second half of this year? And third is about Europe. So we see steady recovery in the first half of the year. And how do we expect the performance of Europe in the full year? Yeah, thank you.
spk05: You're welcome. So indeed... First of all, I start with Mainland China. And in general, I can say that our team over there, AmaChina, which we hold 60% of this business, are achieving their targets as being planned, as being addressed in our contract. This is something which is going on track. And this is, again, taking in consideration the special conditions in the market that we all are aware in China at the moment. We are a leader in this business and it's going on track from that perspective. One of our strengths is the fact that we are building their readiness with the launches of the injectables, one. And two, the product that we have regulation at the moment are not the state of art that we have in North America and in Europe. So we're getting ready with this for the next couple of years. So the potential growth in mainland China would be really, really strong. In North America, like you said, the major impact that had an impact would be the high level of interest rate, much more expensive to pay a lease today than maybe a year ago. So this kind of slows down the sales process, and not only that, not every customer might get approval for a lease. So this kind of slows down. We have ability with, as you know, our cash position is strong. We have the ability to have special support on special payment terms for some accounts, and we're working with some of the agencies to be able to expand this. However, we do want to be able to be optimistic that, and this is kind of, there is a sense that hopefully in the very near future, the Fed would remove a little bit of this interest rate and will signal a positive future with that. We are more optimistic towards the second half of the year, As I already mentioned, it is also taking into consideration the fact that normally the second half of the year has the quarter four. Usually it's the end of the tax in North America, and that's by that definition one of the strong quarters in the year. And yet with that, we believe the momentum would be positive and slightly better than than maybe even the beginning of the year, also because of the fact of introduction of the new platforms and technologies that we spoke about them before. And so that's about North America. You also mentioned Europe. Europe, in a way, is still suffering a little bit from the fact of the war between Russia and Ukraine. And you can see the impact on mainly on Germany, for example, because the cost of living, the energy and so on is, still has an impact there. However, we are at the summer period, so it's not so significant. On the other hand, we established our operation in the United Kingdom, as you know, and that helped us to come and increase the momentum, continue the momentum on that side, and you can see the growth, that 10% growth we spoke about. in Europe.
spk03: Yeah, okay, thank you. That's very clear. And just a question about the profit margin. So we have seen that our net profit margin is below 10% for like two and a half years, the second half of last year and this second half this year. So what do we expect the profitability in the future?
spk05: So the change over there is really mainly because of a few factors. One, when we are not achieving the top line, like earlier mentioned in North America, we are immediately trying to downsize and control our expenses. And these are the efforts that are being done Immediately, it's been very, very effective in large operations. However, we also have, as you know, new operations that established over the last two years, and those operations are still in the stage of getting up and running. It is known that the first and second year are not profitable. But then on the third year, we plan and expect for these operations to be at the range of the profit of the group, that around that ballpark of 10% that we always were shooting for. And again, we were shooting for that percentage, taking in consideration, as you remember, of incubating a lot of business, whether it was the home device, whether it's new operations for injectables we are building, Anytime you're building an operation, it's an investment period. It's not an immediate reaction where you can immediately see revenue. But still, we are shooting to be able to have that ballpark of tempo.
spk03: Yeah, that's very clear. Thank you very much.
spk05: Thank you. You're welcome.
spk01: Okay. Thank you. Thank you all for joining today's earnings call. We appreciate your participation and insightful questions. If you have any further inquiries or need additional information, please feel free to reach out to our investor relations team. We look forward to our continued dialogue. Have a great day. Thank you.
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