SofWave Medical Ltd. (SOFW) Earnings Call Transcript & Summary

[Foreign Language] Good to have you on this call. The floor is yours, please.

Thank you so much, Shimon. Good afternoon, everyone. In these challenging times, I have some very positive news to report on SofWave results for Q3 2023. In Q3, we had our revenues increased by 49% year-over-year to $12.2 million. On the year, Q1 through Q3, year-over-year, our revenues of $35 million, which is a 60% year-over-year growth. This has been a very strong year for us, including our recurring revenues, which expanded to $3.1 million for the quarter, which represents a 99% year-over-year growth. Our balance sheet is strong with $24.3 million in cash as of September 30, 2023. Our margins were at 73.2% on a non-GAAP basis, and we performed, again, attribute to our expanding adoption of our product over 185,000 treatments to date. If we look at this year in context, it's been a very successful year of both growth of the top line and utilization of the product. We're clearly emerging as the market leader in the very, very important market of skin lifting and tightening. And our product technology has been adopted by the who's who across medical disciplines in the space of aesthetics. We have global strength. We have channel to market capability in over 35 markets, and our partners are amongst the very best distributors in each of the respective countries. Our brand awareness, both business-to-business as well as business-to-consumer is accelerating. And in these trying times, we will speak about this sometime during the course of the call, I can assure everyone that our infrastructure and processes are solid in place, and we're very, very agile. We're able to do things very fast in this market. Our execution has been solid. And again, I attribute this to our team in Israel, our team globally dispatched, which are much engaged, very much engaged, talented and committed to SofWave. If we look at the market conditions, we feel -- I know you might have heard something differently on other companies reporting, we feel that the market conditions are very favorable despite some economic challenges and political concerns, we feel this all favor SofWave. The market demand, particularly in the noninvasive skin tightening segment continues to expand. This is a result of the invasive plastic surgery procedures appear to be slowing, with plastic surgeons adopting noninvasive procedures to fill out their practice as well as with some of the new weight loss drugs that are out on the market. As we look at one of the other advantages we have, which is unique to us is the fast ROI. When anyone makes an investment today, they think about it, whether it's a car, a house, a device or whatever. And we have -- so many of our customers have been successful in getting ROIs in 4 to 6 months. This is a major competitive advantage that we feel has helped us along with our price point, which is above $100,000, which many doctors simply just take cash for. And as we look further to some of the trends in the marketplace, we see now -- I mentioned the GLP agonist or inhibitors as the known. This is the Ozempic, this is the Wegovy, the very, very strong percentages of adults currently on this drug losing massive amounts of weight, creating an increased demand for tightening, lifting and actually toning because there is some muscle loss. All of this favors SofWave and our product pipeline and our future direction. Regenerative aesthetics is also another hot topic. That's very much one of the buzzwords we're hearing more and more. As we look at the brand awareness and the activities around it, patients are educated. They go into a practice, they go whether it's a MediSpa physician's office, and they have awareness around certain brands. So our activities in this area are very, very critical in our go-to-market strategy. And at the end of the day, people are looking for natural-looking results when seeking treatments. Just a quick reminder on our go-to-market strategy. This has been approving the science, doing the clinical studies, expanding the FDA indication, working with the top thought leaders, the people who influence their peers, the people who influence the agenda of the societies to get airtime and awareness around the SofWave brand, our reliability around our performance and the like, as well as our digital efforts to expand both the B2B and B2C activities, which I'll talk about today, as well as our direct distribution in the U.S. and the U.K. and the strength of our partners. Let's talk a little bit about our activities to grow brand awareness. So if we look at our business model first, it all feeds into each other. We have what we consider to be a superior and advanced business model that is frictionless in that the customer pays us, acquires a device from SofWave. Every time they use device, they pay for a pulse to deliver energy, and we deliver this to them without the need to stock inventory, making any advanced investment around inventory of a disposable, which could go out of date. We do it in a manner which is state-of-the-art. We do it all digitally from our eStore and we download treatment pulses on the demand, and this has significant advantage over other competitors where you physically have to stock this. Now as we look at the brand awareness, if we look on the right-hand side of this graph, if we create brand awareness, this focus helps drive adoption and procedure growth. The profit we receive from the high-margin consumables all feed into how we go ahead, invest in digital media, which increases further demand. Our partners, whether it be a provider, meaning a physician, a mediSpa and the like or even a distributor, also invest, also go ahead and post similar media that we're doing, and it creates a reverberation effect to amplify the engagement and, as well as expand the number of people that we reach all over there. All of this is synergistic, starting with the business model, starting with how we go out and reach people across the social channels and across the web. And we feel we have a winning business model, which is beginning to accelerate even further. If we look here at the recent campaign that we did, this Got Lift campaign, I'm speaking really to an Israeli audience, but in North America, probably the most successful campaign in the 20th century was Got Milk, where people walked around with the milk mustache, they had celebrities. It was good fun. It was wholesome. It had great consumer awareness. It was for promoting the use of milk products. And we took this, which was in the public domain, and we did Got Lift, which plays upon our indications for lifting the eyes, lifting the submental areas. And we're getting even stronger engagement that we had before. And we're doing this on a global basis. Since we introduced this, we reached over 2 million accounts with this campaign, featuring just our doctors at this point in time on Instagram and Facebook. Just for this campaign alone, we reached that far. And in terms of engagement, the industry averages for engagement across the social channels is approximately 1.5%. We're now at 4.6% just with this campaign alone, and it's increased our overall engagement, which is very, very important as you invest these dollars is how many people are liking, sharing and commenting on the post. Is it good content? It's increased close to 16% year-over-year just with this campaign alone. And across Instagram, we've also recruited more followers. And our numbers, again, these are all validated followers. These are not paid followers. These are not robots. It's about 0.75 million people following us. We plan on adding, as we look at the next slide here. Currently, we have, again, the who's who, some of the top plastic surgeons, such as the top most familiar faces in dermatology here. We plan on adding an iconic celebrity sometime in the foreseeable future to tie this whole campaign together. Again, doing digester around that lift of the eyes, which where uniquely, we have the indication for that, lifting the submental, another unique indication for SofWave. And we plan on expanding this. This will drive consumer demand, allowing the phone to ring in our practice office and also feeding into on the next slide, please, feeding into the media campaign where we look at such celebrities such as Sarah Jessica Parker, a global celebrity who was treated. We did not pay for this treatment. She liked it so much. It's in one of the major magazines. We also recently have been in magazine. We won the new Beauty Award. We featured in Baar. And as we mentioned in the last call, we're also featured in good Housekeeping magazine as the top ultrasound product in our space. All this feeds into one another. It's a tribute to our business model. The testimony to that is the increase in the number of procedures as well as increase in demand for the number of our consoles. I'll turn it over now to Dr. Shimon Eckhouse, who will talk about another unique opportunity for SofWave. Shimon?

Thank you, Louis. [Foreign Language]

[Foreign Language] I will now turn it back to Louis to summarize the presentation. Back to you, Louis.

We continue to execute on our business model of expanding the availability and delivering to our customers' next-generation patented strong intellectual property position, energy-based noninvasive solutions that are far advanced from anything currently on the market. We have significant recurring revenue with over 25% of our total revenue coming on a recurring basis with an ever-increasing number of treatments performed, topping right now over 180,000 treatments since inception. The industry is adopting our product as evidenced by our revenue numbers with a 60% growth year-over-year in the first 9 months of 2023. Our brand awareness continues to expand to well over 0.5 million followers at this point in time. Our FDA indications are expansive. They now include lifting both of the submental as well as the eyebrows, laxity, wrinkle treatments for the face and neck, our first indication for the body cellulite, we have that as well, as well as an indication in clearance for acne scars, our first FDA indication in clearance for skin texture improvements. Our regulatory clearances, again, expand to some of the major markets, including Brazil, Taiwan and Mexico. And we also have widespread acceptance across the globe by the key thought leaders, helping us in our peer-to-peer selling, helping our credibility and helping us fuel our expansion across all segments of the market. I'd like to turn it right now, open it to questions, and we'll start with the first question, please.

[Foreign Language] the first question, I'm actually going to refer to you, Louis, there is a question about the status of the company in terms of inventory, manufacturing and operations in light of the geopolitical situation in Israel right now?

The situation is challenging, but we rose to the challenge starting on October 8, we put a business continuation plan in place. We've deployed our finished goods inventories to locations in Europe as well as the U.S. We're able to ship new product to our customer. We also invested in inventories for our build, for our products, taking us well into 2024 in terms of product necessary to meet the growing demand for our product. And we also made sure that we have a global call center. So if a customer calls with a question on our product for a technical issue or a user issue, we have people in place around the globe to support that. Again, it gets back to that last point when I summarized the year. We have great people in Israel, great people around the globe. They're ready, willing and meeting the challenge of today's very difficult situation.

Thank you, Louis. [Foreign Language]