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

[Foreign Language]

[Foreign Language] Lou, the floor is yours.

Thank you, Shimon. Good afternoon, everyone. We're very pleased to report our Q2 2024 numbers. In Q2 of 2024, our revenues were $14.6 million in growth, which represents an 18% growth year-over-year. Of the $14.6 million, importantly, $6 million were recurring revenue occurred on a recurring basis, which represents an 83% year-over-year growth. For the first half of 2024, our revenues were $27.8 million, which represents a 22% year-over-year growth. We ended the quarter on June 30 with $21.1 million in cash, our margins were 76.3% based on a non-GAAP basis, and we have completed over 320,000 treatments since we launched the product. In terms of an overview, it was a solid quarter of growth for SofWave. Our products and ROI are superior and offer competitive advantage to the company. Our value proposition is emerging as best-in-class. Our focus is on the core physicians. It's had traction, plus many of our customers of this class paid cash for self-finance. Our pulse sales were exceptional, and they're driven by expanding brand awareness, superior treatment outcomes, patient satisfaction, all of which is increasing our procedure demand. We expanded our global launch of our arm lift clearance and SofWave + Pure Impact to select major KOLs due to demand that's created by the GLP-1 weight loss drugs. Our execution has been solid. Our infrastructure is lean. It's scalable, it's in place and it's here ready to support high growth and profitability. What's going on in the market? In the marketplace, globally, the core market remains solid. Core doctors being defined as dermatologists and plastic surgeons, demonstrate continued strong interest in new breakthrough technology. Our 8 FDA clearances are most meaningful with this segment. Lower procedure point and nonsurgical alternatives are driving noninvasive procedure growth, particularly in the plastic surgery segment. Again, the weight loss drug, the GLP agonist are everywhere, particularly in the U.S. And in North America, it's driving a demand for tightening, lifting, and laxity improvements as well as muscle toning. The geopolitical uncertainty in the U.S. presidential election weighs on multiple aspects of the economies, and we have to state this that the market slowdown in the noncore, meaning the general practitioner, the spas and new providers is real. It's due to the impact of inflation, high interest rates, the global economy in general and their limited access to capital. Since our inception, we've had a go-to-market strategy, which has been durable and has delivered results for the company. We made a foundational investment in clinical studies, which have led to broad expansion of our FDA clearances, which now sit at 8 for the SofWave device. We targeted the market influencers, the KOLs to be the early adopters, we're very well respected to be the ones who are the key thought leaders that influence other physicians from the podium through their word of mouth and through their overall influence to go ahead and allow us to create a situation where the peer-to-peer influence and the fear of missing out is strong and is growing. This is all fueled by the efforts of our in-house digital team where we continue to expand our digital presence and brand awareness, which is, again, driving our procedure growth and market adoption. Further, our channel-to-market capability continues to expand and grow and deliver results. We've increased market coverage on a direct basis in the U.S. to add practice development specialists, which go into the customers, make sure they're utilizing best practice on how to get results from our device, help them market to their current patients as well as help them go out and apply less digital techniques to attract new patients, and we further opportunistically, based upon regulatory approval, continue to expand our channel to market capabilities in EMEA, APAC and in Latin America. Now at the customer level, what's happening? First off, only disruptive product standout. The doctors or providers, if you will, compete for patients. Patients are always looking for the latest most effective treatments even in tough economies. New aesthetic devices are important for clinics that want to maintain their competitive edge. As the market becomes increasingly crowded, clinics that offer the latest technology are the most likely to stand out. The new weight-loss drugs again, are adding to this story. The ban for noninvasive procedures is up, such as skin tightening and muscle toning, particularly the ones that offer superior results and benefits such as SofWave. The undercapitalized new providers and medi spas are likely to compete with me-too products, and they're most likely to drop their prices. Treatments that are safe, delegatable, that have consistent outcome plus provide higher profit margins are favored. Competitive technologies such as RF microneedling, RF in general and HIFU are generic these days. They're experiencing both treatment, treatment price, erosion as well as a margin erosion for the provider. Providers are demanding brand awareness to offset their cost of patient acquisition and retention. This is real. The cost of attracting new patients, whether it's across the digital channels or any form of advertising is growing as is the cost to retain patients. What providers are looking for is they want the phone to ring. They want to demand on the B2C end. So that makes it much easier, much less -- with much less friction to sell a provider and the growing brand awareness of software is driving patient demand for the software treatment as well as for the consoles across the major markets where we're focused. So what are the benefits? I mean, there's a lot of high points, but getting into what the device really offers, featurely were very rich, but in terms of the business opportunity, it's very real in terms of its reward. We have a faster ROI than any other competitive device in the space. Our device, our treatments are delegatable. It's a fast treatment taking only to 30, 45 minutes. And as we look at our most recent survey from late 2023, over 90% of our providers would buy again and recommend our device to their colleagues. The treatment is effective. Our results are long lasting. We give natural-looking results. They're volumetric in nature. It has little to no downtime. This is an ideal treatment. It's such that the results were so dramatic. Many people are coming back in between the annual interval and asking providers for additional treatments. This is very good. This is part of the component of our acceleration in our pulse sales, and it's a very important sort of our story as well as the ROI for physicians. Our treatments are versatile. We have 8 very broad FDA clearances across the face and the body and is safe for all skin types even in the summer. In terms of its comprehensive nature, we're not only generating new collagen, we have the scientific evidence and histologies to demonstrate that we're also generating elastin and hyaluronic acid. We're regenerating the skin in a very, very natural manner as well as the fact -- besides the fact that our treatments are delegatable, they're extremely safe. Our second profile sets a new industry standard. And in terms of patient confidence, our treatments are very well tolerated, they're fast. And as I mentioned previously, that -- again, it's driving patients wanting to come back seeking additional treatments. Getting now to the numbers, we have an extremely fast ROI. We have a lower cost of ownership than any other device. Basically, if we place a device with a physician and they do 2 treatments a week, their ROI is between 4 to 6 months. They have a wide array of different treatment options to them. So they fit a wide range of patient demand. We offer premium procedure pricing. Procedure charge on average is approximately $3,000 for 1 treatment. Now I would say competitive technologies, I mentioned before that this price erosion, some of the more well-known competitive technology. Some of the ones and some of the names you may know, are now charging packages of 3 treatments for $1,000 right? 3 treatments for $1,000 versus 1 treatment of SofWave for $3,000, much higher margin as well as the fact that we implemented last year a minimum advertised pricing policy to our customers, which offsets the risk of price erosion in their advertising, another important feature. We have lower operating costs than other competitive technologies in the sense that it's delegatable. It's fast. Our consumable provides the provider with a very high gross margin, and in terms of -- the actual numbers, in terms of the ROI, they're very, very real. We have hundreds of testimonials from our physicians stating it's the fastest ROI they've ever received between 4 to 6 months versus well over a year for most of our competitors. So when we sum it all up and we added all these value adds with the best value proposition in the industry. Our job is to make our customers successful. We're different than other companies in that we're not just selling the capital equipment. We're in there with the customer side-by-side in a win-win partnership to make sure that they're using best methods to make sure the treatments are safe, effective, patient satisfaction is high, that their marketing efforts are synergistic with ours, where IoT, where Internet enabled, we continue to view along with our partners, our brand awareness, it's expanding, and I'll show you some of the numbers shortly. And other practice enhancement programs besides some of the general ones we do, we also have individualized ones for physicians to make sure they get the very best out of our device, including the loyalty program, it sets a new industry standard as well as the fact that our cost of ownership, the cost of acquisition. Cost of ownership is a win-win formula for our partners. In terms of social media growth, last quarter, we reached over 932,000 organic followers across the major channels. We're building in Asia our channels in such avenues as WeChat and Red Book and the like. And I'll give you a case study on the next slide, where we'll talk about 1 campaign that we just ran in June of last year called Got Lift. And on this 1 day, the awareness skyrocketed across the globe. This was a global campaign where our reach was over 1.3 million people we've reached. We had over 45,000 social media interactions. Now what does that mean? That's a like, comment or a share. In Asia alone, our engagement was over 79%, and we saw similar results not only in the U.S., but we saw similar results in Europe as well. 515 of our users also posted and got on the bad wagon with this. And as a result of it, compared to campaigns, we have one specific campaign of another competitors, our results far reached 100-fold to their results to one. What's importantly is the engagement. Are people clicking through? Are they doing the next thing? And this particular day, our click-through rate was 3.4% versus an industry average of 1.5%. And I can tell you this as well, I personally was contacted by at least 3 physicians wanting to buy the device. They reached the CEO. They were that enthusiastic. I had a previous relationship. They wanted to be part of this because the buzz, the treatment results, what they're hearing about the technology is all very real. On another front, with media coverage, our brand awareness is also expanding where in the quarter, we had over 100,000 global line placements and prints in some of the major industry beauty magazines, all of which leads to the awareness on a B2C basis with software, all of this, which we're doing in-house without the assistance of a major agency at this point in time. So what does all this mean? You need the brand awareness, you need the right people out there advocating for the brand, and you need to make sure that these people are successful. To that extent, you need to form a partnership with these customers. It's win-win. I reviewed the value proposition. And it's very much resonating throughout the core physician group. As we go ahead and generate successful results and have more and more case studies, we're reinvesting part of our revenue stream from our pulse sales, from our recurring revenues into creating more additional brand awareness, which again drives increased utilization and also attracts new providers. Back to the fundamental point as to how providers think, they need competitive advantage, particularly in competitive environments with tough economic times, they want to stand out and having this awareness, again, generates a fear of missing out which basically, again, helps console sales as well as helps them retain patients, attract new patients as well as speed to our entire business model. I'll now turn it over to Shimon for a discussion on unique opportunity we have in front of us. Shimon?

Thank you very much, Lou. [Foreign Language]

[Foreign Language] It's very difficult to improve. We have tried so many modalities, lasers, microneedling, of course, every cream on the market. And we haven't really seen much of an improvement until now. We are using SofWave, and we have had a handful of patients so far and we just got the machinery couple of months ago [Technical Difficulty] is virtually impossible. It's I mean, I've never seen anything like this before.

[Foreign Language]

[Foreign Language] Lou, back to you.

In summary, SofWave's technology is breakthrough and disruptive. It sets a new paradigm for noninvasive aesthetic treatments which really is an industry which has high demand for efficacious superior treatments because the present technologies that we compete against are all updated. Our revenue is significant from the standpoint that our recurring revenue has increased to 30% of our total revenue, representing over 325,000 treatments to date. We have rapid industry adoption, which is demonstrated in our 22% year-over-year growth for the first half of the year. Our infrastructure is scalable and lean. It's going to continue to support high sales revenue growth as well as profitability, fueled by our brand awareness, where we're close to 1 million followers at this present point in time and our broad range of FDA clearances, the fundamental investment that we made to have the 8 clearances across the face and body are paying us success and dividends in today's market. We'll now open it up to Q&A.

Thank you, Lou. [Foreign Language] Lou, there is a question here that I will refer to you about the Pure Impact, the launch and the acceptance of the Pure Impact technology.

Well, we're very excited about the initial rollout of Pure Impact. We have targeted several of the high-end, highly influential plastic surgeons and dermatologists, and the responses that we're getting back in terms of patient results are extraordinary. Again, we're in the early days of the rollout. We plan on having additional before and afters and more things as we expand our efforts beyond the U.S. into key markets where we have approval in Asia as well as in Europe. But again, early days are very promising, and we're just getting started here.

Thank you, Lou. [Foreign Language]

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Thank you.