Strata Skin Sciences signals threefold TAM expansion as CPT code changes unlock 30M patient market

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

MANAGEMENT VIEW

* CEO Dolev Rafaeli highlighted the "historic expansion of CPT codes for STRATA's XTRAC 308-nanometer excimer laser," stating this revision "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." Rafaeli emphasized that "these developments open our addressable market to 30 million patients, expanding our total available market TAM threefold." He also said, "we have commenced the process to accelerate access to these revised codes through temporary G codes."
* Rafaeli explained that "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."
* The company ended Q2 with 844 XTRAC units placed in U.S. partner clinics, down from 846 in Q1, but Rafaeli noted that "the activity behind the numbers paints a more complete picture... these 19 placements represent the highest number of placements in the United States in the last 6 quarters."
* Rafaeli announced, "we generated roughly 1,100 DTC-driven patient appointments in the second quarter with a 61% show rate."
* Rafaeli also detailed ongoing litigation against LaserOptek, stating, "we believe we are strongly positioned in this suit and have the potential to be awarded significant damages."
* Principal Financial Officer John Gillings reported, "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."
* Gillings added, "global recurring revenue for the second quarter of 2025 was $5.1 million, down 4% versus the prior year period."

OUTLOOK

* Rafaeli indicated, "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."
* Management expects "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."
* Rafaeli cautioned, "tariffs still represent a significant unknown" and said, "we continue to anticipate normal seasonality, gaining positive momentum heading into the year-end."

FINANCIAL RESULTS

* Gillings reported, "XTRAC gross domestic recurring billings were $4.7 million in the second quarter of 2025, a decline of 2% versus the prior year period."
* Equipment revenue for the period was $2.5 million, down 18% year-over-year, mainly due to "lingering trade disruptions in China and distributor challenges in Korea."
* Gross profit was $4.3 million or 56% of revenue for Q2 2025, compared to $5 million in Q2 2024.
* Total operating expenses were $6.5 million in Q2 2025, up $1 million from the prior year, with a notable $340,000 spent on litigation. Adjusted EBITDA was a loss of $762,000.
* The company exited Q2 with $6 million in cash and equivalents.

Q&A

* Jeffrey Scott Cohen, Ladenburg Thalmann, asked about international business expectations for H2. Rafaeli responded, "our expectation of the second half of the year is to be not much different than last year... we need to caution that these expectations are still up in the air as it comes to tariffs."
* Cohen questioned litigation costs and damages. Rafaeli explained, "these damages are in the 8-digit range when it comes to calculation... most of our legal expenses are behind us."
* Cohen inquired about units placed by LaserOptek. Rafaeli said, "I cannot give you a number because that number as part of their legal practice was hidden away from us."
* Jeremy Pearlman, Maxim Group, asked about the temporary G codes process and timing. Rafaeli described ongoing engagement with CMS and the AMA, noting, "we anticipate the final rule to come out in November."
* Pearlman asked about Elevate 360 consulting metrics. Rafaeli stated, "all of the clinics that have went through the full process... have shown higher revenue in Q2 as compared to Q2 previous year and in some cases, a very significant growth."
* Pearlman queried TheraClearX strategy. Rafaeli confirmed, "the main focus is on the XTRAC devices. They represent the highest upside."

SENTIMENT ANALYSIS

* Analysts expressed a mix of cautious optimism and concern, particularly around international revenue volatility and legal expenses, while seeking clarity on litigation outcomes and the pace of regulatory change.
* Management maintained a confident tone in prepared remarks, repeatedly referencing "significant opportunity" and "positive momentum," but grew more cautious in Q&A, especially regarding tariffs and unpredictable regulatory timelines, as reflected in Rafaeli's statement, "we need to caution that these expectations are still up in the air as it comes to tariffs."
* Compared to the previous quarter, management's tone shifted from steady optimism to a blend of confidence in market expansion and caution surrounding external risks. Analysts were more probing about legal and regulatory uncertainties than in Q1.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter featured a major development with the expanded CPT code coverage, tripling the total addressable market and introducing a potential reimbursement rate increase, neither of which were present in Q1.
* International revenue declined in Q2 after growth in Q1, with management now attributing this to "lingering trade disruptions in China and distributor challenges in Korea," a concern that was only prospective in the previous quarter.
* Operating expenses increased in Q2, notably due to legal costs, while Q1 saw a reduction in expenses.
* Q2 saw renewed focus on maximizing device utilization through consulting and marketing, with management citing increased DTC appointments and a high show rate.
* Analyst questions in Q2 concentrated more on legal and regulatory matters, while Q1 focused more on deployment and utilization trends.

RISKS AND CONCERNS

* Management repeatedly identified tariffs and international trade disruptions as ongoing risks, stating, "tariffs still represent a significant unknown."
* Litigation with LaserOptek remains a material risk, although management believes "most of our legal expenses are behind us."
* Uncertainty over the timing and implementation of expanded CPT code reimbursement creates risk for the pace of revenue growth.
* Analyst questions reflect ongoing concern about legal costs, international volatility, and the ultimate impact of expanded CPT codes.

FINAL TAKEAWAY

STRATA Skin Sciences’ Q2 2025 call highlighted a transformative expansion in its addressable market through new CPT code eligibility, potentially tripling patient reach and enabling both higher patient volume and increased reimbursement. Management remains focused on driving device utilization and revenue growth with strategic consulting and marketing initiatives, but cautioned that international tariffs and ongoing litigation introduce continued uncertainty for the back half of the year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/sskn/earnings/transcripts]

MORE ON STRATA SKIN SCIENCES

* STRATA Skin Sciences, Inc. (SSKN) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813396-strata-skin-sciences-inc-sskn-q2-2025-earnings-call-transcript]
* Seeking Alpha’s Quant Rating on STRATA Skin Sciences [https://seekingalpha.com/symbol/SSKN/ratings/quant-ratings]
* Historical earnings data for STRATA Skin Sciences [https://seekingalpha.com/symbol/SSKN/earnings]
* Financial information for STRATA Skin Sciences [https://seekingalpha.com/symbol/SSKN/income-statement]