STRATA Skin Sciences, Inc. (SSKN)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 revenue was $7.66M, down 9% YoY and below Wall Street consensus of $8.56M; EPS was -$0.60 vs. consensus -$0.29. Both revenue and EPS missed estimates, driven by international headwinds and higher OpEx. * Values retrieved from S&P Global
• Gross margin improved sequentially to 56% (from 53.5% in Q1), but gross profit declined YoY to $4.31M; net loss widened to $2.49M.
• Strategic catalyst: AMA CPT descriptor expansion for excimer laser treatments, potentially tripling the reimbursable patient pool; STRATA is working with CMS to secure temporary G-codes for 2026 and submitted economic data to increase reimbursement rates per procedure.
• Operational update: 19 device placements (highest in six quarters) and removal of 21 underperforming devices; DTC drove ~1,100 appointments with 61% show rate; domestic average gross billings/device rose 2.7% YoY.
• Key headwinds: International revenue declined 15% YoY amid tariff uncertainty and distributor issues; OpEx up ~$1.1M YoY, including ~$340K legal costs; equipment revenue down 18% YoY.

What Went Well and What Went Wrong

What Went Well

• CPT code expansion accepted for 96920–96922 to include inflammatory/autoimmune conditions (e.g., vitiligo, atopic dermatitis, alopecia areata), positioning a potential tripling of the addressable patient population. “These developments open our addressable market to 30,000,000 patients, expanding our total available market threefold.”
• Device placement activity improved: “We removed 21 XTRAC devices from underperforming accounts during the quarter and placed 19, the highest number of placements in six quarters.”
• DTC and practice support gaining traction: “We generated roughly 1,100 DTC driven patient appointments in the second quarter with a 61% show rate… our proprietary RDX system handled benefits for approximately 5,100 patients.”

What Went Wrong

• International headwinds: “We generated international revenue of $2,600,000 in the second quarter, which declined 15% compared to the prior year period… lingering trade disruptions in China and distributor challenges in Korea.”
• Profitability and costs: Adjusted EBITDA was -$0.76M; total OpEx rose to $6.53M (+$1.07M YoY), with litigation costs (~$340K) and higher sales/call center headcount/DTC spend.
• Equipment revenue softness: Equipment revenue fell to $2.5M (-18% YoY), reflecting international market issues and tariffs.

Financial Results

Segment breakdown

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “These revised reimbursement code descriptors, and the temporary codes we’ve applied for, have the potential to more than triple our available patient population by expanding into new indications.” — Dr. Dolev Rafaeli, President & CEO
• “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… These developments open our addressable market to 30,000,000 patients.” — CEO prepared remarks
• “We generated roughly 1,100 DTC driven patient appointments in the second quarter with a 61% show rate… our proprietary RDX system handled benefits for approximately 5,100 patients.” — CEO
• “Selling and marketing increased… due primarily to increases in headcount in the sales and call center and increase in DTC spending… roughly $340,000 relates to the legal expenses.” — VP Finance
• “The court has agreed… LaserOptek Co. Ltd… should be added as a defendant… we are further gratified by the significant potential damages that may be awarded.” — CEO

Q&A Highlights

• International trajectory: Management expects 2H 2025 international results to be roughly similar to prior year but cautioned tariff-driven volatility; the 90-day pause prevented deeper Q2 impact. No specific guidance given.
• Litigation details: Management described false advertising/reimbursement claims by LaserOptek and indicated potential damages in “eight digit range,” with most legal expenses “behind us” post-discovery; G&A included ~$340K legal costs in Q2.
• CMS G-code timeline: Draft rule for 2026 issued; comment period ends September; final rule anticipated November 2025; seeking higher practice expense and time components and temporary G-codes linked to expanded CPT descriptor.
• Elevate360 impact: ~100 accounts engaged; anecdotal case studies show significant revenue uplift and multi-clinic expansion following process implementation (analytics, scheduling, pre-authorization). More metrics to be shared in future.
• TheraClear strategy: Focus remains on XTRAC; TheraClear installed base targeted “closer to 200” by YE 2025; insurance-billed clinics prioritized; device breakeven ~$2,500/quarter revenue.

Estimates Context

*Values retrieved from S&P Global

Implications: Revenue and EPS missed consensus meaningfully; estimate revisions may drift lower near term given international uncertainty and higher OpEx, partially offset by regulatory tailwinds from CPT expansion and prospective CMS actions.

Key Takeaways for Investors

• Q2 print was weaker than expected with both revenue and EPS missing consensus; softness concentrated in international equipment sales and elevated OpEx. * Values retrieved from S&P Global
• Sequential margin improvement (56% vs. 53.5%) suggests operational efficiencies are taking hold despite lower volumes; watch if RDX/DTC and Elevate360 continue to lift device utilization in Q3/Q4.
• Regulatory catalysts are significant: CPT expansion (effective 1/1/2027) and potential CMS temporary G-codes for 2026 could drive both volume and reimbursement per procedure; final rule expected November 2025.
• International tariffs remain the primary swing factor; management flagged uncertainty in China/Korea and service/warranty import costs; monitor trade policy developments and November call.
• Litigation progress could deter competitive encroachment and potentially yield damages; near-term G&A may normalize as major legal work is “behind us.”
• Device footprint optimization continues: net installed base slightly down to 844, but 19 new placements (six-quarter high) and rising per-device activity support the domestic recurring model.
• Near-term trading catalyst stack: CMS rule comment period (Sep 2025) and final rule (Nov 2025), Q3 results mid-November, and any tariff updates—position sizing should reflect binary policy risk vs. multi-year reimbursement upside.