STRATA's Q3 2025 Earnings Call: Conflicting Guidance on Average Revenue per Device, Elevate 360 Growth, and Installed Base Numbers Raise Red Flags for Investors

Date of Call: November 13, 2025

Financials Results

• Revenue: $6.9M, down 20% YOY
• EPS: Net loss of $0.36 per basic and diluted share, compared to net loss of $0.51 in Q3 2024
• Gross Margin: 60% of revenue, roughly flat versus prior year

Guidance:

• Expect a seasonally stronger Q4 2025.
• Expanded CPT codes for XTRAC effective Jan 1, 2027, tripling addressable patient population to >30M and expanding indications beyond psoriasis.
• CMS recognized expanded codes in the CY2026 Final Rule; potential reimbursement rate increases submitted and under review.
• CMS decided not to create temporary codes for 2026; valuation review is with the RUC/CMS process.
• Continue international expansion (TheraClearX initial Mexico placement) and scaling Elevate 360 to drive utilization.

Business Commentary:

* Revenue Decline and International Challenges: - STRATA Skin Sciences reported $6.9 million in total revenue for Q3 2025, down 20% compared to Q3 2024. - The decline was primarily due to the challenging international environment, with trade policies impacting their business in China and Mexico.

• Utilization and Average Revenue Per Device:
• Average gross billings per device for all 838 U.S. partner clinics increased to $5,981, a 8.5% increase year-over-year for Q3 2025.

• This growth is attributed to increased device utilization and removal of nonproductive devices from the market.

• Elevate 360 Program Success:

• Among the 99 clinics participating in the Elevate 360 program, there was an average of 7% year-over-year growth in revenue.
• This success is due to improved utilization of XTRAC lasers and better financial analysis provided to partners.

• CPT Code Expansion and Future Growth:
• The expansion of CPT codes for excimer laser treatments is expected to triple the addressable patient population.

• This change, set to become effective in January 2027, will exponentially increase potential revenue from procedures, contributing to future growth.

• Cash Position and Financing Activities:

• STRATA raised $2.2 million net in a registered direct offering during Q3, with cash and cash equivalents at $7.1 million as of September 30, 2025.
• These financial activities are part of the company's strategy to maintain financial stability amid international challenges and potential growth opportunities.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized positioning for future growth and shareholder value, noting: 'historic expansion of CPT codes...expected to become effective January 1, 2027' and 'Adjusted EBITDA was slightly positive' with recurring revenue up (global recurring revenue $5.5M, +3% YOY). They also highlighted $5,981 average gross billings per device, the highest since Q4 2022.

Q&A:

• Question from Destiny Buch (Ladenburg Thalmann & Co. Inc., Research Division): Could you maybe talk to the average revenue per device in the third quarter? And any trends you're seeing going into the fourth quarter in terms of treatment volumes?
  Response: Average gross revenue per device was $5,981 (highest since 2022); utilization is rising driven by removing nonproductive devices and Elevate 360/DTC efforts, and management expects continued increases and installed-base growth late in the year.

• Question from Destiny Buch (Ladenburg Thalmann & Co. Inc., Research Division): Has there been any increase in your show-up rates, and is that helping revenue per device? How many clinics are part of your Elevate 360 program currently?
  Response: As of Q3 there are 838 partner clinics and 99 in Elevate 360; DTC improvements lowered cost-per-acquisition and increased show/conversion rates, boosting utilization and recurring revenue per device.

• Question from Destiny Buch (Ladenburg Thalmann & Co. Inc., Research Division): What does the TheraClear installed base look like by the end of '25 and how does the Mexico placement tie into strategy?
  Response: TheraClear U.S. installed base ~161 devices (aiming toward ~200 by end of 2025); first commercial placement in Mexico after COFEPRIS registration with a revenue-share model and expectations for additional placements by year-end.

• Question from Jeremy Pearlman (Maxim Group LLC, Research Division): You said 7% YOY growth from Elevate 360 businesses but overall average gross billings were up 8.5%—where does the delta come from?
  Response: 7% refers to the 99 Elevate 360 accounts (targeted tiers); 8.5% is the gross average-per-device growth across all 838 devices; net recurring revenue growth was ~4%—gross grows faster than net due to deferrals and market support netting.

• Question from Jeremy Pearlman (Maxim Group LLC, Research Division): You mentioned ~24 devices coming back via litigation; is there more in the field you can pull back and how many more might that be?
  Response: Management cited total damage impacting roughly 75–100 accounts and said they're actively pursuing bringing them all back, representing meaningful upside, but did not provide specific additional device counts.

• Question from Jeremy Pearlman (Maxim Group LLC, Research Division): Did you say how many patients the DTC campaign drove into clinics this quarter?
  Response: No specific DTC patient count was provided on the call; management indicated they will follow up with a press release outlining those details.

• Question from Jeremy Pearlman (Maxim Group LLC, Research Division): Is a temporary code for 2026 still on the table, and if so when might it occur?
  Response: CMS stated in the CY2026 Final Rule that it will not create temporary codes for 2026; expanded codes are set for Jan 1, 2027 and valuation review is with the RUC/CMS process.

Contradiction Point 1

Average Revenue Per Device

It reflects changes in the company's financial performance, particularly in terms of revenue generation per device, which is a key indicator for investors.

What was the average revenue per device in Q3 and what trends are you seeing in treatment volumes for Q4? - Destiny Buch(Ladenburg Thalmann & Co. Inc., Research Division)

2025Q3: The average revenue per device was $5,981, the highest since 2022. Revenue increased due to removing nonproductive devices and focusing on utilization through Elevate 360 and DTC operations. Average revenue per device is expected to reach $7,500, which would add $5 million annually to top-line revenue. - Dolev Rafaeli(CEO)

How many additional devices can you recover through litigation, and are there other recovery efforts being considered? - Jeremy Pearlman(Maxim Group LLC, Research Division)

2025Q2: The average revenue per device increased by 8% sequentially to $5,422 due to higher utilization in the second quarter. - Dolev Rafaeli(CEO)

Contradiction Point 2

Elevate 360 Program Growth

It involves the performance and growth targets of the Elevate 360 program, which is an important initiative for clinic productivity and strategic focus.

Have show-up rates increased from DTC campaigns, and are they improving revenue per device? How many clinics are in the Elevate 360 program? - Destiny Buch(Ladenburg Thalmann & Co. Inc., Research Division)

2025Q3: As of Q3, 99 clinics are part of the Elevate 360 program. More clinics are planned to be included to support growth opportunities in 2026. - Dolev Rafaeli(CEO)

Do you have metrics for the impact of the Elevate 360 consulting service on clinics? - Jeremy Pearlman(Maxim Group LLC, Research Division)

2025Q2: The Elevate 360 program is up 15% year-over-year. We've implemented the Elevate 360 program approximately a year ago in about 1/3 of our clinics. - Dolev Rafaeli(CEO)

Contradiction Point 3

Elevate 360 Program Growth and Strategy

It involves differing perspectives on the growth and strategic focus of the Elevate 360 program, which is crucial for improving productivity and revenue.

Can you explain the difference between the 7% growth in Elevate 360 program clinics and the 8.5% overall average gross billings growth? - Jeremy Pearlman(Maxim Group)

2025Q3: Elevate 360 includes 99 clinics that have shown improvement, with 7% year-over-year growth compared to 8.5% overall company growth. - Dolev Rafaeli(CEO)

How many accounts is Elevate 360 applied to, and what percentage of the installed base does it represent? - Jeremy Pearlman(Maxim Group)

2025Q1: Elevate 360 is applied to 100 accounts, which is approximately 10% of the installed base. It requires significant resources with four accounts per territory manager. - Dolev Rafaeli(CEO)

Contradiction Point 4

Accuracy of Device Installed Base Numbers

It highlights discrepancies in the reported device installed base numbers, which are important for understanding the company's growth and market penetration.

Can you provide an update on TheraClear's installed base by the end of 2025 and how Mexico's commercial placements tie into its overall strategy? - Destiny Buch(Ladenburg Thalmann)

2025Q3: By the end of 2025, the U.S. installed base is expected to reach 200 devices. - Dolev Rafaeli(CEO)

Could you discuss TheraClear placements and any market insights? - Jeffrey Cohen(Ladenburg Thalmann)

2025Q1: Our installed base continues to grow, currently at 160 devices. - Dolev Rafaeli(CEO)

Contradiction Point 5

Productivity and Revenue Growth Strategies

It involves changes in the company's approach to improving productivity and revenue growth, which are crucial for business performance and investor expectations.

What is the projected installed base for TheraClear by year-end 2025, and how do commercial placements in Mexico align with its overall strategy? - Destiny Buch(Ladenburg Thalmann & Co. Inc., Research Division)

2025Q3: By the end of 2025, the U.S. installed base is expected to reach 200 devices. Mexico is a new market with potential for significant growth, as registrations for TheraClear are complete and initial placements have begun. - Dolev Rafaeli(CEO)

You mentioned 144 in TheraClearX, but there was a prior number of 108. Can you clarify the difference? - Jeffrey Cohen(Ladenburg Thalmann)

2024Q4: Approximately 144 TheraClearX devices are in place, with 108 of those transitioned to noncash insurance reimbursement accounts in the past quarter, with 95% gross billings growth in Q4. - Dolev Rafaeli(CEO)