Sisram Medical Ltd (1696) Earnings Call Transcript & Summary

Good afternoon, investors and analysts. Welcome to Sisram Medical's H1 2026 Interim Results Earnings Call. Today, we'll share with you the operating results of our company, key business progress and future development strategy for H1 this year. We have the management, including Mr. Lior Moshe Dayan, our Chairman; Mr. Eyal Ben David, CEO; Mr. Jiahong Li, Co-CEO and CFO. I'm your moderator, Fan Hui, Director of IR, IRD. This event is equipped with simultaneous interpretation. Participants may listen on either English or Chinese channel. At first, the senior executives will share their remarks, followed by Q&A. We welcome your questions. Now let's welcome Mr. Lior, our Chairman, to begin. Please go ahead, Lior.

Good day, everyone. Thank you very much for joining. As we open today's call, I'd like to share the Board's perspective on the industry's direction and Sisram's place within it. The fundamentals of medical aesthetics remain strong. Patient awareness is rising, treatment adoption is broadening, more medical professionals are entering the field and innovation remains vibrant across technologies, injectables and digital solutions. As the industry matures, the source of competitive advantage is changing with it. It is no longer about any single product. It's increasingly about the ability to deliver integrated solutions, execute consistency and create long-term value across categories, technologies and markets. That is why Sisram has spent the past several years building and why we believe we are well positioned for the industry's next phase. Our international performance outside North America was a clear highlight in the first half with strong demand across Asia Pacific, Europe and the Middle East. Asia Pacific is now our largest and fastest-growing region and is increasingly central to the company's future. It is where some of the most significant long-term growth opportunities in our industry are developing, and we continue to strengthen our position across the region. At the same time, we recognize that performance in North America and the pressure on profitability require focused attention. The Board and management are aligned on the need to improve execution, increase efficiency and ensure that our cost structure and investments are appropriately aligned with the market conditions. Underneath these results is a business of real and enduring strength, a diversified global footprint that gives us both resilience and reach, a strong core business and unwavering commitment to innovation. The first half also demonstrated something important about the evolution of Sisram. We're no longer defined by a single category. Our injectables business is developing into a meaningful second growth engine, while core energy-based device business continues to provide the foundation of the group. At the same time, we continue to develop the diagnostic, digital and personalized skin care capabilities that support our broader integrated ecosystem strategy. What is encouraging to the Board is not only where we see growth, but the quality and the durability of the business we are building. We are making deliberate choices today that strengthen the company for the long term, balancing current performance with investments needed to expand our relevance, deepen our customer relationships and build a more resilient and diversified business. That balance between ambition and discipline is central to how we think about Sisram's next chapter. At the Board level, we remain closely engaged in shaping long-term strategy, overseeing execution and ensuring disciplined capital allocation. We also have full confidence in the executive team and will continue to support management as it addresses the areas requiring improvement while advancing the company's strategic priorities. Looking ahead, we will continue to strengthen our presence in the markets that matter most, develop our next growth engines and pursue the opportunities created by rapidly evolving industry. We believe Sisram is well positioned to capture the long-term opportunities ahead, provided we continue to combine ambition with disciplined execution. On behalf of the Board, my thanks to the management, employees -- and the employees for their dedication and our shareholders and partners for their continuous trust. With that, I will hand the call over to our CEO, Mr. Eyal Ben David.

Thank you, Lior, and thank you all for joining us today. The first half of '26 was an important period for Sisram. Energy-based innovation has entered a phase of real advancements, and we intend to lead it by building treatments that are more precise, personalized and more closely aligned with the body's own mechanisms. That positioning shows up where it matters the most in demand. For the first 6 months, we delivered revenue of $171.4 million, reflecting 3.6% year-over-year, supported by better sales productivity, disciplined operations and stronger production. Let me be direct about profitability, which came in below our expectations this period. This was a largely strategic reflecting investment needed for us to build our injectable business in China and launch Sisram's first pharmaceutical product, including meaningful investments in our organization, commercial team and go-to-market execution. We see it as an investment in a second growth engine that will serve us for years to come. Turning to the regions. Our international markets outside North America grew 16.7% to $127 million, led by Mainland China, Thailand, Japan and Hong Kong, while Europe grew by 12% to $26.7 million. North America declined overall, reflecting continued softness in the U.S. However, we're addressing these improving our sales productivity, disciplined execution and stronger operational support. While our Canada operation grew 20% year-over-year, provides an early indication of our potential for the regional recovery. Looking at our energy-based platforms, they continue to lead. They remain the foundation on which the rest of our model is built. The products, Hybrid and Soprano families and specifically, Alma Harmony continued to generate strong global demand, supported by improved sales productivity and focused commercial execution across key markets. During the period, we launched Soprano Titanium in Thailand, and Harmony XL in Mainland China, strengthening our premium energy-based platform and offering and reinforcing our position with leading practitioners worldwide. Every platform we place is a multiyear customer relationship rather than a onetime sale. It generates recurring revenue through consumables and protocols, and it opens the account for injectables and for our AI tools later on. We manage the portfolio to protect that. A steady launch cadence, firm premium positioning and protocols that keep practitioners on our platforms rather than switching to the competitor. Injectables are accelerating as our second growth engine. This is where much of the first half investment is going. The segment keep building momentum, led by DAXXIFY, commercial milestones in Mainland China and Profhilo's continued strength in Thailand. In China, DAXXIFY sustained strong commercial momentum during the period with cumulative shipments surpassing 30,000 vials as of June 30. In '26, the coverage reaching more than 500 premium medical aesthetic clinics across 28 different provinces. This gave us a strong commercial base from which we deepen our penetration among high-quality clinics, drive repeat ordering and build benchmark sites that support broader adoption. Injectables present one of the largest, most attractive revenue opportunities in medical aesthetics and expanding in this category gives Sisram an important additional channel alongside our EBD platforms. Together with EBD platforms, this broadens the way we serve clinics and customers, strengthens our integration offering and positions us to capture greater share of the demand over time. We are scaling in sequence, establishing DAXXIFY in our largest market first, then extending the model market by market as our commercial and regulatory footing is in place. Our AI-enabled ecosystem is gaining traction. Alma IQ and Alma Universkin by Alma has shown strong retention and repeat orders in pilot markets, reinforcing our conviction that personalization and AI will play a defining role in the future of aesthetics. Recognition of Alma IQ and AI-powered diagnostics capabilities, together with continued momentum of Universkin by Alma in the U.S. market reflects the growing demand for solutions that connect diagnosis, treatment and skin care into a seamless patient experience. Because we believe the future of aesthetics will be defined by AI, we are building for it now. A broader international rollout is coming in the second half, extending this personalized ecosystem across the full patient journey. Behind all of this is an organization we have worked hard to sharpen and establish. During the period, we ran comprehensive manufacturing ramp-up, expanding our capacity, improving our planning and shortening the lead time for our high-volume platforms while keeping inventory disciplined. In June, we reached a defining moment in our globalization strategy when our Beijing facility produced the first locally made Alma Rejuve. Building in a market is how a global company creates local impact. It puts our technology closer to practitioners, reflects local clinical and regulatory needs and anchors our APAC ambitions with supply chain built for the growth we see. At the same time, we continue to strengthen our foundations of our future innovation. We've invested $8.5 million in R&D. We welcomed Eran Shor as our EVP of R&D and further optimized development organization to accelerate strategically important programs. Our teams advance a broad clinical and innovation agenda with 24 clinical and preclinical studies conducted to date, including 4 new studies initiated during the period. We also continue to expand and protect our IP portfolio through new patent filings, granted patents and trademark registrations, reinforcing the long-term competitiveness of our technology platform. Looking ahead, we enter the next phase with momentum and demand holds. Our platforms land, injectables scale and the ecosystem we have described for years begins to show up in real customer behavior. Our priorities follow that momentum to strengthen the energy-based device portfolio and expand across high-growth markets, particularly in APAC, to accelerate DAXXIFY in Mainland China and to scale Alma IQ and Universkin internationally, to grow in the fast-moving hair growth segment and to deepen our localization in China, while pursuing targeted ecosystem-aligned acquisitions that strengthen our pipeline. My thanks go out to our shareholders, partners, customers and employees, whose dedication drove our progress in the first half and leaves Sisram well positioned to deliver long-term growth and shareholder value. To walk you through the operations and financials in more detail, I will now hand over the call to our Co-CEO and CFO, Jiahong Li. Thank you, Jiahong.

Thank you, Ben David. Good afternoon, everyone, and thank you for joining Sisram's 2026 Interim Results Call. I will cover our first half results and plans from 3 angles. First, our production operation and strategic execution. Second, key financial performance. And third, our priorities going forward. Let me begin with global production operations and strategic execution. Our Israeli manufacturing base ran smoothly throughout the first half. As global market accelerate their shift toward multi-energy, multi-application platforms, we expanded capacity and upgraded the production lines. At the same time, we refined production scheduling, supply chain management and end-to-end quality control, shortening delivery lead times through our flagship devices. Our global fulfillment and supply capability have improved significantly, positioning well to meet rising demand over mid to long term. Concerning Middle East geopolitical risk, the actual impact on our first half operation were minimal and limited almost entirely to logistics. Our Israeli team has rolled out comprehensive contingency measures that give us the ability to adjust the production, shipping and staffing in real time. This proactive approach has protected our employees, sustained supply chain stability and kept external disruption to a bare minimum. Today, our Israeli manufacturing facility and all global subsidiaries are operating without interruption. This outcome clearly demonstrate our operational resilience and the strength of our risk management framework. On aftersales service, we continue to optimize our global service network with particular focus on shortening repair turnaround times, improving maintenance efficiency and enhancing delivery reliability. Service business profitability also improved. Taken together, this operation enhanced across production capacity. Delivery and aftersales have formed a virtuous closed-loop improvement cycle, providing a solid foundation for revenue growth. The first half marked a major milestone in our localization road map. In June 2026, our Miyun manufacturing facility in Beijing officially commenced production and the first locally assembled Alma Rejuve rolled off the line. Backed by strong clinical results in anti-aging and skin rejuvenation, the product has gained widespread recognition across China, spanning both the medical aesthetics and life aesthetic segments. The Miyun facility strictly follows the production standards and quality control system of our Israeli bases. Drawing on decades of manufacturing expertise, we're upgrading local capacity and processes. Its commissioning signaled the transition of our China localization business into scale operation. Going forward, we will build end-to-end coordination across the manufacturing supply chain sales and aftersales. This ensure stable supply in China, lay a foundation for expanding local production pipeline for the strengthening Sisram-differentiated competitive edge across APAC. That covers operating performance. Let me turn to financial results. In the first half 2026, despite continued pressure in North America, overall revenue grew 3.6% year-on-year, supported by solid performance from our international operations and injectable business. Second quarter revenue accelerated both year-on-year and sequentially, and the quarterly trends continue to improve. This once again demonstrated the resilience inherent in our diversified geographic and product category mix. International markets outside North America performed particularly well, with revenue up by 16.7%. APAC's share increased to 45%, up by 19.1%, making it our most important regional market. Europe and Middle East also show strong momentum. By business segment, EBD revenue was USD 134 million, down by 2.5% year-on-year, mainly due to North America headwind. Excluding NA, international EBD revenue increased by 7.2% year-on-year, showing the underlying global demand for our core EBD platform remains solid. Injectable revenue reached USD 22.2 million, up by 54.2% year-on-year with the share of global revenue rising from 8.7% in 2025 to 12.9%. Growth was also driven primarily by DAXXIFY's commercial rollout in Mainland China and Profhilo's strong performance in Thailand. We now established a solid dual-engine growth model, EBD and injectables. Going forward, we'll keep EBD at the core of the rollout of more localized EBD products while accelerating injectable business expansion through deeper DAXXIFY channel penetration in Mainland China, advancing registration approval of Profhilo and other pipeline products. This effort will enrich our wellness solution, optimize the revenue mix and further enhance overall resilience against market risk. On cost control, we continue a disciplined and prudent approach. Operating expenses grew 8.5% year-on-year in the first half, mainly due to strategic upfront investment in our China injectable business. Excluding this investment, our operating expenses ratio declined year-on-year, reflecting the benefit of disciplined cost control and efficiency initiatives across core operations. In the second half, we will maintain a prudent financial approach, managing costs carefully, while continuing to invest for strategic growth. On profitability, results were temporarily affected by North America lower revenue and strategic investment in our China-based injectable operation. In the first half, gross profit was $97.2 million with gross margin of 56.7%, down from the 60% a year earlier. Adjusted net profit was $5.04 million compared with $12 million in the prior year period. And adjusted net profit margin was 2.9%, down 4.3 percentage points year-on-year. We have already rolled out target improvement measures. And in the second half, we'll focus on lifting operating quality, strengthening profitability and improving cash conversion efficiency. From a financial stability perspective, as of June 30, 2026, we held cash and cash equivalents of USD 77.3 million, and our overall financial position remains solid. Looking ahead, we'll continue to balance reinvestment for long-term growth with shareholder returns, delivering sustainable value to both fronts. With the overview, let me close with a brief summary and outlook. In the first half, the global market environment remained challenging. Against that backdrop, we maintained solid performance, once again demonstrating the resilience of our business. With industrial leading EBD as our foundation, rapidly expanding injectables as a new growth driver and our AI-driven ecosystem strategy, we have built differentiated competitive advantages. Looking ahead in the second half, we will strengthen our product portfolio in key markets, enhance commercial execution in North America and accelerate the penetration of DAXXIFY's channel, the rollout of next-generation EBD platforms and the integration of our EBD and injectables business in Mainland China, while steadily ramping up capacity at our Miyun localized manufacturing base. Further ahead, underpinned by the solid balance sheet and a clear strategic road map, we are confident in delivering higher-quality growth through organic expansion and external opportunities alike and increasing sustainable long-term value for our shareholders. That concludes my remarks. We'll now move on to Q&A. Back to the operator.

Thank you, management. [Operator Instructions] Now over to the assistant to give us the instruction.

[Operator Instructions]

[Operator Instructions] Now the first question is from Jinpeng He from CITIC Securities.

I'm Jinpeng He from CITIC Securities. I have two questions. First of all, now in terms of the global and China conditions, I mean, has your adjustments of the global and China mix has been completed? And what is the management architecture that is in place now? And the second question is about the strategic development goal for your overseas business. Do you have a targeted strategic objective, including key markets in North America, China and their strategy, respectively?

Regarding the management adjustment, I will leave it to our Chairman, Lior. The second question about the future development of North America and China, that will be from Eyal, from our CEO.

Yes. Thank you very much for the question. About the structure -- the restructure. So definitely, we have started several important management adjustments in both of the major markets, those markets which we have focus, which is China, of course, and North America. The changes we have done are still rolling. It is supposed to basically strengthen execution, coordinate and create accountability for the growing of the business. For example, Jiahong Li, which is on the call here is, in addition to his Co-CEO position, is leading the activity as the President of Sisram China and the CEO of Alma China, the EBD part, which will allow us to have a closer coordination across the business. As you know, in China, we are accelerating the integration of our EBD large business together with the injectable business, which today is, at this stage, DAXXIFY. And in the second half, we will see more progress on this operational efficiency and execution, which is on the go. So as the business will continue to evolve, we expect to continue to optimize and strength our organization where we find it appropriate in order to support long-term strong business growth strategy.

Thank you, Lior. Are we fine to the second question?

Yes.

So it's very important to say that strategy is not something that you shift year after year. It's a compass that you believe in and you follow. Nevertheless, we always look at reality and we learn and we adapt. Our strategy remains to have a full cycle integrated ecosystems where the EBD is the core, and we strengthen it with injectables, diagnosis and AI-powered skin care. But the EBD core is where we win the markets, when we earn the trust. And our core objective is to evolve from a single brand into a comprehensive medical aesthetic solution provider. Looking at the markets, obviously, our focus is on China and North America. In China, as we all know, we've launched a mega project that we've been investing and working on for many years, launching DAXXIFY. This is defining us as a leader. We are defining unique protocols for China, and we're driving increased utilization and repeat purchase. We also accelerate for the EBD, the next-generation devices. We want to deepen the interaction and integration between the commercial, the customer and the medical education. We also improve our supply chain across the company and make sure that we are ready for the next phase of integration between the EBD and injectables in China. As mentioned in the statements, we have an important milestone. We have the capacity in a Beijing facility to localize a product. It's one product today, but it's only the beginning, and it will enable us to capture the potential of growth in APAC. As for North America, we realign our commercial framework and our operating model positioning. We maximize the value of North America's strength. We understand that what really matters is our brands and what most matters is our customers and install base. Our focus is to come back to our customers that show trust and to make sure that they make the best out of their systems and they deliver amazing results for their patients. This is our first priority. We want to make also sure that we work and prioritize our performance stabilization and profitability recovery through the region. We proactively look for cost realignments and a clear focus on margin improvement. We're establishing our foundation to have a sustainable long-term growth. Thank you.

Now we're going to invite next speaker from Founder Securities, Hanting Gu.

Dear management, I'm from Founder Securities. I have two quick questions for the management. The first question about DAXXIFY. So in first half of this year, what is the confirmed sales revenue? What's the volume? And compared to our annual objective, will there be any adjustment? My second question is about product sales movement and repurchase on DAXXIFY. What is the repurchase including the sales activation or movement? In terms of the clinics or institutes we have covered, what about our future plan on expanding into different institutions, for example?

Yes. When it comes to revenue on DAXXIFY and the future sales goal on DAXXIFY and the repurchase performance on DAXXIFY and the coverage of institutes, we are going to invite Jiahong.

Thank you very much. We haven't disclosed a specific number on DAXXIFY yet. But overall speaking, the commercialization on DAXXIFY is well aligned with our expectation. Our annual operational goal is RMB 100 million. We are on the pace or cadence, and it will be adjusted according to the updates on commercialization in Chinese market. We will share with you if there's any updated information. Yes, at present, we follow a scheduled cadence to proceed DAXXIFY's business at our largest market, Mainland China. We will secure our leadership. And then if the maturity on both commercialization and regulation is available, well, we promote and reproduce it region by region. That's your first question. The next question is about sales movement and repurchase. As of end of first half of this year, our shipment has exceeded like 30 vials (sic) [30,000 vials], exceeding 28 provinces and nearly 500 premium medical aesthetic clinics. The driven forces is the penetration at the end market as well as standardized training on the practitioners has been executed very well. So at English level, we call it a benchmark, the medical aesthetic clinics. We will carry out following 3 works. The first, standardized clinical training, very refined. They are training and also service at the end as well as localized customized injection protocol, which will increase both the frequency of the clinical application and a stronger intention of repurchase. We are interested in this topic. We keep the repurchase at a very healthy level. We realized quarter-by-quarter growth, which has really built our strong leadership at premium. The BTA market penetration is increasing. So from second half of this year, commercialization will shift from just the coverage into more deeper penetration. Our priority is to build the benchmark sites in China to optimize the local injection protocol, increase the repurchase level as well.

We are looking forward to further updates on the sales as well. Our next question is from Northern East Securities (sic) [Northeast Securities], Senman Li, Northeast Securities.

I really appreciate this great opportunity during the Q&A. I want to follow up DAXXIFY. Yes, still a follow-up question on DAXXIFY. So we have also heard that we are also witnessing a certain ratio on profit sharing may decrease that. What is the update on the ongoing negotiation? What's our percentage? More specifically, how much percentage point will be declined? So when will we have an explicit answer or result? So this is the negotiation on DAXXIFY as well as Revance. And the next question is still about the pricing at the end market of DAXXIFY. It is deemed as a premium product. So this is my question about the overall pricing on DAXXIFY, including the expenditures for single treatment. And also compared to BOTOX, what is the premium of our products? How much higher? And what about the profitability in this field compared to the competitors? What are our advantages? These are the two questions.

The first question about Revance negotiation, we're going to invite our CEO about updates on Revance negotiation. The second question about the pricing of DAXXIFY at the end market, we're going to invite Jiahong to answer -- take the second question.

So indeed a very important question. And with Revance, it's a commercial agreement, but it's also building a relationship between 2 companies that are establishing -- established as premium companies. So the contract was signed a while back. And as we launch, we have an obligation to negotiate to have our best transfer price. We're exploring this opportunity. I will not disclose here, obviously, the specific terms, but we're exploring it on a wider aspect. We're seeking to broaden the scope of collaboration, expanding outside of not only being in Mainland China, which is crucial, Hong Kong and Macau. We are negotiating and speaking about launching and representing DAXXIFY in other strategic markets. And that will affect -- this agreement could affect the total terms of our agreement and our cooperation. I understand it's important for all of you to understand and to know. Hopefully, we can update soon with news about more specific terms and territories that will enable us to increase our opportunities with this product. Thank you.

I'll try to take the second question. So for DAXXIFY, as we said, it is positioned as a long-acting BTA. The price is RMB 6,800 at the end market. So we don't want to exchange the volume with a low price. We want to leave more margin for the clinics. So we find, overall speaking, the price is quite stable. Some premium clinics realize sales with good premium. Commercialization of DAXXIFY in China is direct to clinics. It's a quite flattened model without intermediates in the middle. We leave the sufficient profit and margin to the clinics. So when it comes to single treatment price difference compared to our competitors, we are not convenient to disclose the details. But for DAXXIFY, first of all, it is long-acting, quick action and very natural and safer. So for our competitors, if it can be maintained for 3 to 4 months, right, patients need to get 3 to 4 injections. But for DAXXIFY from efficacy, the medium time of maintenance duration is 6 months. Some patients can last as long as 9 months from annualized consumption. So the overall expenditure between the patients are very close. But for DAXXIFY, we have less time of injection to obtain equivalent, even longer maintenance duration, which will be more convenient for the patients and it's a differentiated treatment experience. Overall speaking, we offer clinics with competitive margin of profit. And when DAXXIFY has a quick action and long acting as differentiators, it will help clinics to improve both satisfaction, stickiness and operational efficiency or productivity. Thank you.