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STRATA Skin Sciences, Inc. (SSKN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue of $6.9M (-21% YoY) and gross margin of 60%; adjusted EBITDA turned slightly positive, while net loss narrowed to $(1.6)M (EPS $(0.36)) . Versus S&P Global consensus, revenue missed ($7.72M est.) but EPS beat (est. $(0.53)); coverage was thin (1 estimate each).*
  • Recurring revenue resilience (global recurring +3% YoY to $5.5M) offset sharp equipment softness (down 60% YoY), driven by international trade-policy instability; U.S. XTRAC utilization improved (avg gross billings per device up 8.5% YoY to $5,981) .
  • Strategic/regulatory update: CMS’ CY-2026 Final Rule recognized the upcoming expanded CPT descriptors (effective Jan 1, 2027) and increased 2026 payment ~3.5% for excimer codes; temporary codes for 2026 will not be issued, shifting the expansion benefit to 2027 .
  • Near-term catalysts: Seasonally stronger Q4 setup; continued clinic “same-store” growth via Elevate 360 consulting/DTC funnel efficiency; litigation progress recapturing high-value clinics; regulatory clarity supports the medium-term reimbursement tailwind .

What Went Well and What Went Wrong

  • What Went Well
    • Utilization improved: average gross billings per device hit $5,981 (+8.5% YoY), the highest since Q4 2022; management credits removing non-productive devices and Elevate 360/DTC optimization .
    • Mix/gross margin stable: gross margin ~60% was roughly flat YoY despite international revenue pressure; OpEx fell to $5.4M from $6.9M, aided by lower G&A and a ~$0.68M settlement gain, turning adjusted EBITDA slightly positive .
    • Regulatory tailwinds: CMS Final Rule affirmed excimer exclusivity and acknowledged expanded indications effective 2027; STRATA is engaging payers to align policies to expanded descriptors .
  • What Went Wrong
    • Top-line miss on equipment: total revenue fell ~21% YoY as equipment revenue declined ~60% YoY on international trade-policy instability (notably China/Korea) .
    • International uncertainty persists: management reiterated tariff/trade-policy headwinds and lack of temporary codes in 2026, deferring expanded indication benefits to 2027 .
    • Installed base drifted lower: U.S. XTRAC devices declined by 6 q/q to 838 as STRATA pruned underperforming sites, though management expects net adds as productivity improves .

Financial Results

Consolidated P&L snapshot (USD)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($M)$6.812 $7.663 $6.929
Revenue YoY %+1% -9% -21%
Gross Profit ($M)$3.647 $4.306 $4.184
Gross Margin %53.5% 56% 60%
Operating Expenses ($M)$5.662 $6.530 $5.357
Net Loss ($M)$(2.432) $(2.489) $(1.622)
Diluted EPS$(0.58) $(0.60) $(0.36)
Adjusted EBITDA ($M)$(0.547) $(0.762) $0.010

Revenue by type (USD)

MetricQ1 2025Q2 2025Q3 2025
Global Recurring Revenue ($M)$4.7 $5.1 $5.5
Equipment Revenue ($M)$2.1 $2.5 $1.4

KPIs and balance sheet items

KPIQ1 2025Q2 2025Q3 2025
Avg gross billings per device (U.S.)—$5,512 $5,981
U.S. XTRAC installed base (units)846 844 (U.S. partners) 838
TheraClearX installed base (units)160 161 161
XTRAC gross domestic recurring billings ($M, non-GAAP)$4.086 $4.652 $5.012
Cash & Cash Equivalents ($M)$7.846 incl. restricted $5.966 $7.076

Notes: Non-GAAP items per company definitions; see reconciliations in releases .

Actuals vs S&P Global Consensus (Q3 2025)

MetricConsensusActualSurprise
Revenue ($M)$7.717*$6.929 Miss ~$0.79M
Primary EPS$(0.53)*$(0.36) Beat ~$0.17

Values retrieved from S&P Global.*

Drivers: equipment weakness on international trade-policy instability; recurring revenue resilience; OpEx reduction aided margin/EBITDA improvement .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Formal financial guidanceFY/Q4 2025None providedNone provided; management noted “seasonally stronger Q4” commentaryMaintained qualitative only
CMS CPT reimbursement (codes 96920–96922)CY 2026N/ACMS Final Rule increased 2026 payment by ~3.5%Increase
Expanded CPT descriptors (indications beyond psoriasis)Effective 1/1/2027Announced by AMA CPT Panel (May 2025)CMS recognized and will incorporate into 2027 rulemaking; no temporary codes for 2026Timing clarified to 2027

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1/Q2 2025)Current Period (Q3 2025)Trend
Expanded reimbursement (CPT)Pursuing temporary G-codes to pull forward to 2026; expanded descriptors approved for 2027; 30M+ patient TAM CMS 2026 Final Rule recognizes 2027 expansion; no temporary 2026 codes; continued payer education Tailwind intact; timing shifted to 2027
International tariffs/tradeCautioned on China tariff uncertainty possibly reducing int’l revenue Cited “weakness” in China and ongoing pressure; primary driver of equipment decline Headwind persists
DTC funnel efficiencyQ1: >1,000 appts; benefits handled +33% YoY Better CPL/conversion, show rates; reallocated leads to high converters Improving efficiency
Elevate 360 consultingEarly rollout; strong clinic uplift examples 99 clinics enrolled; avg +7% revenue growth; focus on Tier 2–4 clinics Scaling; measured rollout
Litigation vs LaserOptekProgress; added entities as defendants Court added LaserOptek Korea and C. Dalton; >20 clinics returned; >$1M annual revenue impact Positive developments
TheraClearXInstalled base 160; insurance CPT usage rising 161 U.S.; Mexico approval and initial placements; aiming closer to 200 by YE25 Gradual growth; new market entry
Installed base strategyRedeploy/remove underperformers; target productivity U.S. XTRAC base 838 (down 6 q/q) as pruning continues; expect net adds as utilization rises Prune then grow

Management Commentary

  • “Average gross billings per device…$5,981…highest since 2022. We are in a growth trend…driven…by removing non-productive devices…and…increasing utilization through our Elevate 360 and our normal DTC operations.” — CEO D. Rafaeli .
  • “Global recurring revenue of $5.5 million increased 3%…equipment revenue of $1.4 million decreased 60%…Gross margin…~flat…Total operating expenses…$5.4 million…Adjusted EBITDA was slightly positive…” — VP Finance J. Gillings .
  • “CMS…recognized both the existing psoriasis-only codes and the expanded ones in its calendar year 2026…rule…[to] reflect into the 2027 reimbursement codes.” — CEO D. Rafaeli .
  • “Our DTC…saw better cost per leads…better conversion…better show rates…we stop sending patients to accounts that are not converting…” — CEO D. Rafaeli .

Q&A Highlights

  • Utilization per device: ARPD reached ~$5,981; strategy is pruning low producers and driving Elevate 360/DTC-led utilization; long-run potential cited back to ~$7,500/device .
  • DTC funnel: Improved cost per lead, conversion, and show rates by prioritizing clinics with superior conversion; similar spend delivering better recurring revenue .
  • Litigation recovery: >20 clinics returned; runway remains to recapture additional high-value accounts; damages sought remain significant (added defendants to enable collection) .
  • Temporary codes: CMS declined 2026 temporary G-codes to avoid market confusion, anchoring expansion to 2027 .
  • TheraClearX strategy: 161 U.S. devices; Cofepris approval with first placements in Mexico; targeting closer to 200 devices by YE25; aim for insurance billing penetration .

Estimates Context

  • Consensus (S&P Global) for Q3 2025: Revenue $7.717M (1 est.), EPS $(0.53) (1 est.). Actuals: Revenue $6.929M, EPS $(0.36). Result: Revenue miss ($0.79M) and EPS beat ($0.17). Coverage was limited (n=1 for both).*
  • Potential estimate revisions: Lower equipment and international contributions may drive modest top-line trims near-term; improved OpEx control and utilization trends support EPS trajectory into seasonally stronger Q4, with larger reimbursement uplift deferred to 2027 .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term: Expect seasonally stronger Q4; monitor recurring revenue momentum versus continued international equipment softness; adjusted EBITDA inflected positive on cost control .
  • Medium-term: CMS Final Rule solidifies reimbursement path; expanded descriptors effective 2027 with ~3.5% code payment increase in 2026, underpinning multi-year utilization tailwind .
  • Execution levers: Elevate 360 consulting and DTC efficiency are boosting “same-store” utilization, a key driver given large installed base and limited CapEx needs from redeployment .
  • Risk watch: International trade-policy/tariff volatility and lack of temporary codes in 2026 temper near-term international growth; management is reallocating focus to U.S. recurring revenue .
  • Litigation optionality: Added defendants increase probability of damage collection; clinic recapture already contributing >$1M annualized revenue .
  • KPI focus: Track ARPD, U.S. installed base, adjusted EBITDA, and recurring revenue mix to gauge underlying operating health .
  • Strategic adjacencies: TheraClearX expansion (U.S. and Mexico) adds a second touchpoint in the same accounts; insurance billing adoption rising .

Citations:

  • Q3 2025 8-K/press release and financials:
  • Q3 2025 earnings call transcript:
  • Q2 2025 8-K/press release/call:
  • Q1 2025 8-K/press release/call:
  • Relevant regulatory/strategy press releases (Q3 period context):

Estimates source: Values retrieved from S&P Global.*