STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q2 2025 Earnings Call Transcript

STRATA Skin Sciences, Inc. (NASDAQ:SSKN) Q2 2025 Earnings Call Transcript August 13, 2025

STRATA Skin Sciences, Inc. misses on earnings expectations. Reported EPS is $-0.6 EPS, expectations were $-0.24.

Operator: Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the STRATA Skin Sciences Inc. Second Quarter 2025 Financial Results and Corporate Update Conference Call. [Operator Instructions] 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 1 hour after the end of the call through February 13, 2026. I would like to turn the call over to Jules Abraham of Core IR, the company’s Investor Relations firm. Please go ahead, sir.

Jules Abraham: Thank you, Steve. Good afternoon, and thank you all for participating in today’s conference call. Earlier this afternoon, the company released its financial results for the quarter ended June 30, 2025. 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 STRATA Skin Sciences management team are Dr. Dolev Rafaeli, Chief Executive Officer; and John Gillings, Vice President of Finance. During this call, management will be making forward-looking statements, including statements that address STRATA Skin 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 within. The content of this call contains time-sensitive information that is accurate only as of today, August 13, 2025. And except as required by law, STRATA Skin Sciences disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It’s now my pleasure to turn the call over to CEO, Dr. Dolev Rafaeli. Dolev?

Dolev Rafaeli: Thank you, Jules, and good afternoon to everyone on the call. The second quarter of 2025 saw pivotal developments positioning our business for future growth and lasting shareholder value creation. We’re especially heartened by the American Medical Association, the AMA, CPT Editorial Panel’s historic expansion of CPT codes for STRATA’s XTRAC 308-nanometer excimer laser in May of this year. The revision of these codes expands reimbursement eligibility for excimer laser treatments to include multiple inflammatory and autoimmune skin conditions beyond their original psoriasis indication, enabling coverage for conditions such as vitiligo, atopic dermatitis, mycosis fungoides, lichen planus, alopecia areata and cutaneous T-cell lymphoma, better known as CTCL, among approximately 30 indications.

The implications of these changes could not be more dramatic for us and our providers. While the revisions are set to go into effect on January 1, 2027, we have commenced the process to accelerate access to these revised codes through temporary G codes. Assuming successful implementation of the temporary G codes into the 2026 reimbursement period, we have the potential to pull forward revenue opportunities by 1 year as we expand into new indications. These developments open our addressable market to 30 million patients, expanding our total available market TAM threefold. In addition, we have submitted economic data to support a potential increase in the reimbursement rates for each of our codes. Should rates increase be approved, we could be headed into a period where both the number of patients eligible for the treatment and the revenue per patient procedure are increasing simultaneously.

We’ve also continued to strengthen our practice partners through our Elevate 360 consulting model and our innovative DTC campaigns. Elevate 360 focuses on improving revenue for both clinics and STRATA by supporting the implementation of best practices to drive optimal use of the XTRAC lasers. By providing deeper analytics, we help physicians understand the financial opportunities associated with the patients they already see in their clinics and those they have prescribed but did not follow through with XTRAC scheduling. Having these best practices in place lays the groundwork for effectively managing and benefiting from the dramatic increase in patients’ eligibility for reimbursement under the expanded CPT codes I mentioned previously. Optimizing XTRAC devices placement in physicians’ practices facilitates more procedures and opportunity that utilizes the resources we provide.

Further, simultaneously expanding our direct-to-consumer marketing campaign increases XTRAC device utilization and recurring revenue per device across our domestic installed base. We ended the second quarter with 844 units placed with partners’ clinics in the U.S., down from 846 at the end of the first quarter. While we continue to seek optimized — optimization of the installed base, the activity behind the numbers paints a more complete picture. During the second quarter, we removed 21 devices from suboptimal partners and placed 19 devices with new accounts that are interested in growing with us. Importantly, these 19 placements represent the highest number of placements in the United States in the last 6 quarters, which we view as a positive leading indicator for the future revenue growth.

Given these initiatives and these growth driving codes developments, we continue to believe that the opportunity to increase utilization for our XTRAC devices is significant, and we continue to see positive results from the refocus of our DTC strategy. We generated roughly 1,100 DTC-driven patient appointments in the second quarter with a 61% show rate. In addition, our proprietary RDX system handled benefits for approximately 5,100 patients in the second quarter. Of these patients, roughly 1,000 were acne patients with our TheraClearX partner clinics and about 2,500 were psoriasis patients. The balance of patients were other indications treated by XTRAC that would have generally involved extra effort and pre-approvals, illustrating the strong demand for excimer laser therapy among these patients who will soon be more easily covered under the updated CPT codes.

Turning briefly to TheraClearX. We reached an installed base of 161 TheraClearX devices in the U.S. at the end of the second quarter, up from 117 devices at the end of Q2 2024. TheraClearX continues to be a small but growing portion of our revenue. On the first quarter call, in May, we highlighted the potential impact of the tariffs on our international business. While we were able to completely — to complete some sales in China during the 90-day tariff pause, the uncertainty about the future they have caused has created a temporary drag on our international business. We generated international revenue of $2.6 million in the second quarter, which declined 15% compared to the prior year period. International equipment sales were significantly affected by lingering trade disruptions in China and distributor challenges in Korea.

We continue to see strong underlying demand in these markets and expect these geographies to return to growth once things stabilize. While we will continue navigating the seasonality of our business, specifically a slower first and second quarters as we turn to the second half of 2025, we continue to anticipate normal seasonality, gaining positive momentum heading into the year-end with the caveat that tariffs still represent a significant unknown. In 2026, we look forward to the potential positive impact of our ongoing discussions with the Centers of Medicare and Medicaid Services, or CMS, to obtain temporary codes that would accelerate access to our recently expanded reimbursement for XTRAC. Notably, we have secured strong support from members of the legislature, patient advocacy groups and leading academic key opinion leaders.

We are further encouraged by the growing body of peer-reviewed publicly available clinical study supporting excimer laser therapy, which points to the new and enhanced application adding to the hundreds of other studies published over the years. Last Thursday, we published a press release with reimbursement and clinical updates that we would point out to you if you have not already read it. In addition, this press release offered a brief update on our litigation against LaserOptek regarding its use of false and misleading statements in its marketing. We believe we are strongly positioned in this suit and have the potential to be awarded significant damages. We are pleased that the court agreed with our position that LaserOptek Korea, the parent of LaserOptek America, should be added as a defendant.

In addition, C. Dalton, LLC, the entity that represented LaserOptek Korea interest in the United States has been added as a defendant. These are important developments and help ensure that should damages be awarded, these responsible will not be able to shield themselves behind other legal entities. Before turning the call over to John for our financial discussion, let me take a moment to discuss the three recent publications that support excimer laser in vitiligo and atopic dermatitis, expanding the potential use of XTRAC. In a peer-reviewed study featured in the International Journal of Dermatology, a multicenter randomized controlled trial evaluated the efficacy and safety of 308- nanometer excimer laser therapy in combination with oral JAK inhibitors.

Oral JAK inhibitors is a novel class of immune modulating drugs. A total of 240 adult patients were enrolled and monitored over the 52-week period. The study demonstrated superior repigmentation in combination therapy with patients receiving 308-nanometer excimer laser combined with the JAK inhibitor, reporting 100% overall response rate and 96% pigment stability, indicating a durable response. Further, the study showed that treatment was well tolerated across all groups with no serious adverse events reported over the 52-week trial. It is noteworthy to point out that there is no other technology that is enabling such results and that the additional — the addition of vitiligo as a covered indication will open the door for somewhere between 3 million and 4 million existing patients seeking not only temporary remission gained from the pharmaceuticals, but full repigmentation.

A second study published in Human Vaccines & Immunotherapeutics highlights conjunctive use of excimer laser with JAK inhibitor on a patient that has developed segmental vitiligo 1 week after her third HPV vaccine, achieving approximately 70% repigmentation. Further, a third study published in Dermatology Therapy evaluated the safety and efficacy of 308-nanometer excimer laser therapy in conjunction with JAK inhibitors for treatment of refractory vitiligo in patients complicated by moderate-to-severe atopic dermatitis. The trial involved 19 patients who had not responded to conventional therapy. Patients showing a mean 55% VASI improvement with facial and neck areas responding best with greater than 70% improvement. Importantly, the 55% mean VASI improvement in these challenging patients compared to 39% improvement with the JAK inhibitor alone, suggesting a strong synergy — synergistic mechanism.

The domestic market has approximately 18 million atopic dermatitis patients. Importantly, STRATA has been preparing for the potential expansion into combined therapy and owns patents that were granted recently for the methods of combining systemic biologic and JAK inhibitor medication with excimer laser dosimetry-controlled treatments. This positions us well for the potential market expansion associated with combination treatment for more challenging patients. With that, I’d like to turn the call over to John, who will review our financial results in more detail. John?

John Gillings: Thank you, Dolev. Our total revenue for the second quarter of 2025 was $7.7 million, down 9% compared to Q2 of 2024. This was driven primarily by the challenging international environment Dolev described. Global recurring revenue for the second quarter of 2025 was $5.1 million, down 4% versus the prior year period. Turning to the U.S. Excluding deferred billings and other GAAP adjustments, XTRAC gross domestic recurring billings were $4.7 million in the second quarter of 2025, a decline of 2% versus the prior year period. Moving to the equipment business. Revenue was $2.5 million in the second quarter of 2025, down 18% versus the second quarter of 2024. This was due primarily to challenges in specific international markets with lingering trade disputations in China and supplier challenges in Korea.

Gross profit of $4.3 million or 56% of revenue for the 3 months ended June 30, 2025, declined from $5 million during the same period in 2024. The reduction in gross profit was driven primarily by lower sales with increases in manufacturing overhead contributing. Total operating expenses were $6.5 million in the second quarter of 2025, up roughly $1 million versus $5.5 million in the prior year period. Engineering and product development was down 57% year-over-year. Selling and marketing increased 16% versus the prior year due primarily to increases in headcount in the sales and call center and increase in DTC spending. G&A expense increased roughly $700,000 versus the prior year period. Of this, roughly $340,000 is due to litigation that we have chosen to pursue primarily against LaserOptek.

In addition to this, G&A expense in the second quarter of 2025 is compared to an abnormally low quarter in the prior year. The second quarter of 2024 had the lowest G&A expense of the year, coming in $500,000 below Q1 of 2024, which was the next lowest quarter of the year. Adjusted EBITDA for the second quarter was a loss of $762,000. Turning to the cash flow statement. Cash used in operations was $1.9 million in the second quarter. Of this, $1.3 million represents a payment of restricted cash to the state of New York related to the sales tax accrual that we took in the third quarter of 2024. Of the remaining $600,000, roughly $340,000 relates to the legal expenses I described previously. We exited Q2 2025 with cash and equivalents of $6 million.

As of June 30, 2025, the company had 4,171,161 common shares outstanding. That concludes my prepared remarks, and I’d like to turn the call back over to Dolev for any remaining comments.

Dolev Rafaeli: Thank you, John. In summary, our team is extremely passionate about our business and laser-focused on driving growth. We are excited about the — what lies ahead, including a seasonality stronger second half of 2025 as well as a potential tripling of our patient population with expanded indications for use of our excimer laser, given favorable reimbursement beginning in 2026 using temporary G codes. That said, we believe it is important to caution investors about the potential impact of tariffs on our international business. While it is no meaningful impact on our business in the first quarter, we saw some weakening in China in the second quarter. We hope to move past these issues and hope to be able to offer greater clarity on the third quarter call, which we expect to hold in mid- November. Now I’d like to turn the call over to the operator so that we can begin the question-and-answer session. Operator?

Q&A Session

Operator: [Operator Instructions] First question comes from Jeffrey Cohen with Ladenburg Thalmann.

Jeffrey Scott Cohen: A couple of questions from our end. So can you give us a sense on the what your back half of the year expectation is as far as the international business? Just recap with us what was in Q2 and perhaps what we should anticipate for the back half?

Dolev Rafaeli: Jeff, happy to hear you on the call. John is going to give the specific numbers. Our expectation of the second half of the year is to be not much different than last year. But having said that, we need to caution that these expectations are still up in the air as it comes to tariffs. We don’t know what’s going to happen in China. As you know, the administration just extended the window and things are changing from day to day. Other than that, we anticipate the business to be business as usual, and you can look at prior year progression from the first half to the second half in the international business. John, do you want to — mind coming in on the specific numbers because I think you just recited them in your portion.

John Gillings: Yes. So I was just going to say, we haven’t given specific guidance versus the second half. But I think Dolev gave you a good indication that our initial expectations were for it to be roughly similar to the prior year, but we do have to give that caution that depending on what happens with the tariffs, we could see any given quarter move fairly significantly. Had it not been for the 90-day pause in the second quarter, our international revenue could have been impacted considerably more. So until that calms down, it’s hard to give anything really more concrete than that.

Jeffrey Scott Cohen: Okay. That’s helpful. And then could you jump over to the lawsuit. As far as I can see the cost from Q2, can you give us a sense of cost for the back half of the year and where you’re after with the three entities as far as monetary damages and remind us of the state or the ICC or whoever is handling the case — court system?

Dolev Rafaeli: So good question. I’ll start with the expected damages. The entry of an entity like LaserOptek that chose to use false and misleading advertisement, both in conjunction with the reimbursability of their devices, which their devices are not reimbursable. The codes are very specific, the guidelines from the American Medical Association and the American Academy of Dermatology as well as the specific code descriptors dating all the way back to 2012 are specific and say that the providers can only use excimer lasers. Then they represented their devices as superior technologically when — and I’m not going to go through the whole case now, but I’ll just mention that their — even their FDA filings compared their devices to devices that STRATA is no longer selling, no longer offering and that had their — the devices they compared to or — have not been in this market for over 10 years.

So the combination of them coming to the market with false statements on the reimbursability of the devices as well as claims about technical superiority and clinical availability for devices that frankly, do not have any clinical studies for psoriasis, not even one and not in their original country of origin, Korea, nor in the U.S., and that compares to hundreds of peer-reviewed published clinical studies for XTRAC. When we approached them to stop what they do, they ignored us, and that is what started the litigation. I’m not going to go again into the details of the back and forth, but very fast — we filed the litigation in August. And very fast by November, the court has issued an order that bars them from continuing to claim that their devices can be reimbursed and that — and use the comparative advertisement claims.

Having said that, in the approximately 4 years that they were in the market, they were able to either get accounts that had existing excimer users or existing either XTRAC or Pharos devices, both are devices owned by STRATA or they were able to convert previous accounts into users of their device. As a side note, since then, at least with most of these — the bigger accounts, we were able to take them back. However, that has caused STRATA not only the immediate revenue loss from these accounts that moved over to LaserOptek devices, but also potential future revenue because when conflicting and confusing and more accurately described by the judge as fraudulent information is disseminated in the market, that creates confusion with the customers.

Now I’m not going to go into the specific damages, but these damages are in the 8-digit range when it comes to calculation. The damages experts have come up with the relevant theories, and STRATA is going to pursue this to the end if needed unless, as you know, in these cases, companies meet and find a way to settle the dispute before the case goes all the way. As maybe should be pointed out, and I did mention this in my prepared remarks, one of the things that LaserOptek has done is they were hiding behind entities that didn’t exist. So for some time since we started this suit in August of 2024, they claimed that all the relevant parties were present. However, we just recently found out that the LaserOptek America was actually not an entity.

It was doing business as DBA, but it was another company that they did not present and that is the company I mentioned, which is C. Dalton International, LLC. They also represented themselves as representatives of Korea, which they’re not or at least they claim they’re not. The judge in his recent remarks to the parties in the case mentioned his dissatisfaction with the way they have conducted their business. However, to your specific question, we are — our legal expenses are — most of our legal expenses are behind us. Now we’re in the — towards the end of discovery. And what is going to extend the case somewhat is the inclusion of these two new defendants. However, these two new defendants are not going to come up with anything we don’t know.

The LaserOptek in their legal practice have chosen to mark most of their documents attorney’s eyes only, which made our work as a company harder to understand what the damages are. But I gave you a framework of where we think it is. It is important to understand that LaserOptek is a publicly traded company. They have assets, and we will be able to recoup our damages awarded by the court or whatever we agreed to in a settlement discussion from the parties in the case now that we know that we can get to every one of the parties relevant. And they are significant in size considering the accounts we lost and the reasons for why these accounts were lost. I hope that answers the question. If not, please ask for more clarification.

Jeffrey Scott Cohen: Yes. Just one more. Could you give us a sense of how many units during this period that were placed out there in the marketplace?

Dolev Rafaeli: How many units were placed by LaserOptek?

Jeffrey Scott Cohen: Yes.

Dolev Rafaeli: I cannot give you a number because that number as part of their legal practice was hidden away from us. We have our estimates. We have the accounts we know about. It does complicate these accounts, and we did try to make this clear not only through us but — directly from us, but also indirectly from the American Academy of Dermatology because for a provider to use a device and bill the codes when the codes are specifically saying excimer laser, that puts the provider at risk of being charged with fraudulent charges to CMS. That when it happens, results in very heavy fines and garnishing of all the revenue they made. It also puts them at a high risk of reputation and so on. So they know that. And that’s part of the reason why some of the accounts that were — that they have taken have come back to us.

Other reasons are that these devices actually do not technically work even close to what the XTRAC does. And had they had the substantiation to say that these devices are same or superior, I would assume they would have done one clinical study at least. They haven’t done even one. And I — in my prepared remarks, I went through three studies for XTRAC that were published in the last month. And one of them had 240 patients and lasted 52 weeks. So it’s — these are things that an honest and good market player would do. I would add one more thing. As part of the litigation, as part of the discovery in the litigation, we found that LaserOptek had a practice of approaching individuals within the organization that drafted the changes to the CPT codes, and they took part in making changes to these codes.

That, when we found that was a big surprise for both ourselves, of course, as well as the American Medical Association that is responsible for these things, that has a very strict policy of nonintervention of outside parties. And I think it also painted their activities with the court the way it should have, which is they’re bad players. And as bad players, they will end up paying. And that’s why we highlighted the things because we believe pursuing it to the end would be a good practice. Now Jeff, I believe you were covering other companies in the medical device dermatology space in the past, and there have been things like that in the past. I don’t think there have been things as black and white as this one. The codes are very specific, excimer laser and the guidance have been in place since 2012.

And then going around and representing themselves as STRATA employees and then trying to flip accounts is going to end up costing them a lot. But thank you for the question.

Operator: The next question comes from Jeremy Pearlman with Maxim Group.

Jeremy Pearlman: First one related to these temporary G codes. Is there anything else on your end that has to be done? Or has the review process already begun? And then what time frame could we expect a response?

Dolev Rafaeli: Thank you for the question. I’ll expand a little bit. So when we found that LaserOptek was actively manipulating things within the AMA and as a result, impacting things that happen in the market, we approached CMS, and this is before the 2025 — law-making cycle for 2025, which is in effect now. And we asked CMS to make changes based on three things. One, the specific change of the code that happened — that took effect on 1/1/24, narrowed the language of the code and made it very specific to psoriasis. And that caused limitation to the applicability of the codes to other patients. Now as I covered in my prepared remarks, we still see about 30% to 40% of our codes being used for non-psoriasis patients, but that takes a lot of effort on our side.

So we help our providers by taking every one of these patients through a pre-authorization or predetermination or pre-approval process to make sure that they can be treated. So you can go back into my prepared remarks, and you can see the ratio. Out of 5,100 patients, 2,500 were psoriasis, 1,000 were acne, that’s 3,500 and about 1,500 were non-psoriasis patients being treated by XTRAC. By expanding the codes, which is going to take effect right now on 1/1/27, that is going to alleviate the need to take these patients one by one and take them through the pre-approval process. Having said that, so we started the discussion with CMS back in — before the rule-making process of 2025. And their response — and the response comes out in November when the final rule is presented.

Their response was we — one, we do not have sufficient data to make the decision on our own. We need the American Medical Association to opine on the expansion of the codes. So we went ahead and petitioned with the AMA or made an application for a code change. It’s called a code change application, CCA, which resulted in the expansion of the code descriptor as it was — as it happened in May and was discussed by us in our previous call and in press releases. That code is going to go — by design, a new code descriptor goes into effect not immediately, but has to go through a review by the RUC Committee. The RUC Committee is another part of — that takes care of these codes, and they look at the values associated. So they need to opine on whether there is more cost associated with this or less cost associated with treating other conditions, such as vitiligo, atopic dermatitis and so on.

That process is right now happening, and there was a survey sent out by the RUC Committee to providers. We — the company is not involved in this process, but the outcome of that is going to decide whether the time component in the codes is going to change. We believe it should go up, and we have very detailed backing to that. So that’s one part. The bigger part had to do with the component of the reimbursement code that is called PE, practice expense. And that component includes, among other things, among the cost of gloves and if needed, local anesthesia and so on. It includes the cost of the equipment. As it stands out, the American Academy of Dermatology came to the AMA in 2023 and requested a higher value for that practice expense. So for reference, our codes reimburse in the range of $160 per procedure, about $22 today are attributed to the cost of the device.

What the American Academy of Dermatology in 2023 said and explained to the AMA was that, that component should not be $22, it should be closer to $80, and they provided their reasoning. However, in 2023, CMS being very cautious about the budget, said, thank you, the American Academy of Dermatology for asking for this, but you did not provide any data to support that. So our application to CMS now includes three components. One has to do with the time, and I covered that. The second one has to do with the device or the utilization of the device. And we are showing CMS backed by data. And the data we show them is over the span of 2018 until today, there were 1,300 providers using — or 1,300 devices used or 1,300 clinics using the devices. And that is a combination of our partner clinics, clinics that have purchased the device from us and clinics that have purchased the Pharos device from our — from Ra Medical, which — we acquired that business from them in 2021.

So there are 1,300 individual clinics using the device. Since we have insight into the utilization of every one of these devices, we are providing CMS with data covering 1,300 devices going all the way back to 2018, showing them that component, the cost of the device in the code should be approximately 4.5x. So it should be about $95. If that happens, then our reimbursement is going to go — our average reimbursement is going to go up from $160 up about $70, so it’s going to go up to $230. That’s kind of the maximum. And that’s just based on the practice expense component. If the time component also expands, that’s going to push the reimbursement even further up. The third request from CMS is to provide temporary G codes. Now their response back in November 2024 for the 2025 fiscal year was, we appreciate you asking for this, but there is no code we can provide G codes for because at that point in time, the code was saying only psoriasis.

So they said, we can’t give you G codes for the other indications since the code only says psoriasis. So what we have now is we have an expanded code that they can attribute the G codes to. We have the data to rely on for the expanded practice expense and time to expand the value of these codes. And we have the backing of — and I mentioned this through my prepared remarks, we have the backing of everybody involved starting from key opinion leaders, saying we already are treating patients and have been treating patients in these conditions since 2003, but most importantly, in the last few years from the patient advocacy groups, the Global Vitiligo Foundation, the GVF and others that say we represent hundreds of thousands or millions of patients.

And this is a very important modality for them to be treated. We have comments that are being submitted to CMS for — from big provider groups, so private — equity-backed provider groups that are supporting this request. You asked about time line. So CMS issued their draft rule for 2026, approximately 3 weeks ago. And the period for comments ends the second week of September. And then there’s going to be an open or not open hearing about the topic. So there’s going to be a hearing, maybe they will include us, maybe not. And we anticipate the final rule to come out in November. I hope that helps explaining the time line.

Jeremy Pearlman: Yes, it does. And then on the last earnings call, you mentioned that roughly 100 clinics were currently undergoing that Elevate 360 consulting services. Are there any metrics you could share how that has impacted those clinics?

Dolev Rafaeli: I did not prepare for this in this cycle, but we will share this in future disclosures from the company. However, I can say that all of the clinics that have went through the full process, and I will describe the process shortly, have shown higher revenue in Q2 as compared to Q2 previous year and in some cases, a very significant growth. So let me outline the process. What we do is we go in and we provide the owner or the key person in the clinic, so it depends whether it’s an individual clinic or it’s a group of clinics. We provide them with insight to what’s happening as it comes to these codes. And I will use one specific example, a clinic — one individual clinic that is in Florida that in 2022 and 2023 was a very productive clinic for us.

It was in the range of $40,000 to $50,000 a year for us, which means that they were doing approximately $100,000 for them. And then it started declining. And in October of 2024, we started the process with them. What we found is that they had — in the prior 12 months, they had 886 relevant patients, so patients with the relevant indications. They have submitted into our RDX portal 160 patients. So they thought that there are 160, about 20% of their relevant patient population that are relevant for their treatment. We have secured pre-authorization or predetermination. So we have secured approvals from the insurance company for 132 patients, and they have only started treatment on 6 of them. So specifically for that clinic, the falloff happened between the person that manages the reimbursement and the person that schedules patients.

It’s that person in probably the front desk that needs to pick up the phone and call the patient and say, we’ve contacted your insurance and your insurance is going to cover this, for these 132 patients. Now to put this in perspective, every one of these patients is worth about $3,000 for the clinic, and it’s worth about $1,000 for us. So had they done this process to the extent of 132 patients, then they would be generating about $400,000, and we would be generating about $100,000 in that clinic. We started the process in October of 2024. By the end of Q1 2025, not only we had that clinic clicking at, I would say, about 25% of them, so about 25 patients were in treatment. Not only that, but within the same owner of clinics, we expanded from one to nine clinics, and all of them are now producing.

So that became a center of excellence for the northern part of Florida. Now I can use examples on other clinics, but I think what you were looking for are metrics that go across the 100 accounts, and I will — we will be sure to provide that through either a press release or our next call.

Jeremy Pearlman: Okay. Great. And just last question related to the TheraClear devices. It seems like the installed base was flat quarter-over-quarter. Are you going through the same review process as you are in the XTRAC installed base on TheraClear? Or are you just leaving what’s out there and hopefully, recurring revenue will grow a little bit, but the main focus is still on the XTRAC and especially with all the CPT codes potential?

Dolev Rafaeli: Well, first of all, definitely, the main focus is on the XTRAC devices. They represent the highest upside. We have approximately 850 devices in the market and every $1,000 of increase in productivity per account is going to take us $850,000 up in the revenue. And there is ample upside in terms of the patients already in the clinics that were prescribed and not being put into treatment. Now just as an add-on to the answer to the previous question, we do the same thing with groups. With groups, it’s a little bit more complicated because everything is centralized. So their scheduling is centralized and their business is centralized and their regulatory oversight is centralized but we see the same upside. And again, we will provide more statistics to allow you insight into that.

Now in terms of TheraClearX, you are kind of right The installed base is growing. It’s not growing as fast as the XTRAC could grow. And we told you in prior call that we anticipate to be closer to 200 devices by the end of 2025. And we still think we will be at that range. However, if you recall, when the TheraClear was launched back in the second half of 2023, the company’s strategy at the time was to approach clinics that treat patients seeking cash pay. And we changed that in the beginning of 2024, realizing that the cash paying patient is harder to convert and the clinics are not very good at that. And now about 1/2 of our clinics are billing codes and growing accordingly. So our revenue for TheraClear is growing. But as I said in our prepared remarks, it is growing, but it is small.

So providing metrics for that, I think, is less important than showing success with XTRAC, which has a huge upside with the — not only the expanded reimbursement, but higher payment for the codes and more adaptation based on real-world clinical studies.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Dolev Rafaeli for closing remarks.

Dolev Rafaeli: Thank you, everyone, for showing up for this call. I appreciate your interest in the company. We will be presenting again in the middle of November, presenting our third quarter results. Thank you very much.

Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Thank you.