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

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[Foreign Language] Good morning, Lou. Good morning, Assaf. Welcome to the call. Lou, please go ahead.

Thank you, Shimon. I'm very happy to report our Q3 2024 numbers. In the quarter, we achieved $13.5 million in revenue, which again represents double-digit growth year-over-year at 10.5%. Of these revenues, it occurred on a recurring basis, which represents a 72% year-over-year growth. On the year, year-to-date, we have achieved $41.3 million in revenue, which represents an 18% year-over-year growth. Our cash position is at $21.2 million as of September 30, 2024. Our gross margins are at 75.3% on a non-GAAP basis. And we have conducted over 385,000 treatments since we launched the product. As we look at the quarter, it's another solid quarter of growth and utilization. Our products are demonstrating in the field superiority in terms of efficacy, in terms of the return on investment, as well as the value proposition for not only the patient as well as the providers. It's truly the SofWave device being classified as best-in-class. Our focus on the core physicians is having traction. Many of our customers pay cash or are self-financed. If we look at the global launch of the Arm clearance of SofWave plus Pure Impact to major KOLs, we have excellent traction. This is due to the demand created by the weight loss drugs, the GLP-1 agonist. And if we stand back a little bit and look at the company at large, I would say that our execution has been solid. It's scalable. We have a very lean infrastructure in place to continue to support high double-digit revenue growth as well as profitability. This is not an easy market, however, the geopolitical uncertainty and through the end of the quarter, we had the U.S. presidential election, which is now behind us. I would emphatically state that we -- that the election is behind us, and we see opportunities in front of us. It's weighed upon the economy, however. The market slowed down, particularly in our core segment. This is the general practitioner of the spa and new entrants, new medi spas, new providers trying to get in the market, has slowed down quite a bit due to the high interest rates as well as access to capital. The core market, however, remains solid. These are the dermatologists, the plastic surgeons. They continue to show a strong interest in new technology, and this is where our 9 FDA clearances are very, very meaningful. The lower procedure price point and nonsurgical alternatives are particularly attractive in the field of plastic surgery because there is a great demand for noninvasive procedure growth in this segment. And again, the usage of the GLP-1 agonist is driving patient demand for noninvasive tightening, Lifting Laxity and toning treatments. Just a quick reminder, our foundational go-to-market strategy continues to remain the same with this 4 legs. The first is making the investment in the clinical trials, understanding the mechanism of action, expanding the FDA clearance, so our products can be used across a broad array of treatment categories. Selling to the top KOLs, selling to the core marketplace where we have, I would say, probably 1 of our greatest resources as well as greatest assets, which is our KOLs and our physicians are very, very happy with the product. They recommended to their peers, and they also influence the market acceptance. We drive this all with our in-house digital team growing our brand awareness, which in turn is leading to exceptional procedure growth. And lastly, having a direct sales team in key markets and key partners in some of the major markets and expanding the utilization of our device continues to drive our double-digit growth. As I mentioned, again, the foundation of our strategy, which is, again, having a technology which truly works, which has superior efficacy that could be used a broad category of both facial and body treatments and the like, having the trust that comes with doing this hard work is very, very essential, particularly to sell them to the segment where we're selling into right now. As we stand back and look at our business model a little bit and look at how someone who's acquiring technology looks at devices in general, I mean, we put ourselves in their shoes and they're competing for patients. They're competing from the standpoint that they need to have the best technology, which has the most efficacy where the most value is delivered to the patient. Now these devices are important to the core providers, in particular, as they compete for patients. They need to have their competitive edge. And if we look at having how crowded this field is, the question always comes up, why is SofWave different? Well, simply because the technology delivers the best results. And simply because we have the best ROI. And behind the scenes, we have the weight loss drugs, demanding -- which is driving the demand, increasing demand for noninvasive skin tightening as well as muscle toning and we have the best-of-breed solution there. Now this separates us further because what's happening with some of the older technologies, such as RF and RF microneedling, there is actually a price erosion going on in this particular category because they're seen as generic. Our product, the SofWave product, the SofWave wave treatment is differentiated by its brand awareness, by its. And in effect, we're helping the doctors. We're putting in a better competitive advantage position in terms of patient acquisition and patient retention. So the business model itself is designed to create value and to drive customer ROI. We create partnerships with our customers. We address a certain significant portion of our sales and marketing expense into the brand awareness. This generates pulse sales activity. This increases utilization. And at the end of the day, coupled with superior outcomes with the patients coming back and asking for another treatment, has led us to grow in the segment of dermatology alone in North America, in the U.S. rather, an increased 43% in our pulse sales just in the year alone. So the digital presence, of course, is part of our overall strategy, our go-to-market strategy. We continue to have traction there, both on a web basis, where we're now doing over 1 million visits -- organic visits a year, as well as what we're doing in terms of media placements and social activity as well. The brand equity that we're establishing and investing in is very, very important. This map -- this is the first time we're showing it. These numbers are the real numbers in terms of what a provider across the United States can achieve in their first year of acquiring SofWave. Let's use an example in the State of California, which is 1 of the major markets for aesthetic procedures, our providers on average, are achieving a 215% increase. Similarly, in a major market, such as New York, where it's close to 200% as well, similarly in Chicago. Similarly, in Florida. What this means quite simply is if someone invests in a SofWave device, they're likely to get twice their investment back in 1 year. This is unheard of in the industry. This type of payback, another significant competitive advantage of partnering with software. If we break this down a little bit further here, if we look as an example in the Pacific Northwest, a market like Seattle, it's as easy as doing 8 treatments a month across a broad category of facial treatment for fine lines and wrinkles per -- submental laxity for eye lifting, for cellulite and the like, a very, very low hurdle rate 1 can achieve almost a 220% increase. And if we look at cash flow from a provider basis, the cost of the pulses on average, again, these are average numbers, this is not median. This is not standard deviation. These are the true numbers. If they invest as little as $70,785 in their pulses, they're generating on the average treatment price that we've established in that region, over $0.25 million of revenue. That's impressive. So at the end of the day, the value proposition is supplemented by various marketing programs, including the practice development managers, which we've vetted on a global basis, which focus on the success of the practice businesses. They make sure that the practitioner is using the very best methods and techniques both digitally as well as from a clinical perspective as well, to generate maximum ROI, maximum patient satisfaction with SofWave. Our devices are smart, their IoT-enabled. We continue to invest in the direct-to-consumer campaign. As were our most successful customers, this helps us attract more patients and, again, help fuel the frictionless business model that we have. And the loyalty programs, which were recently added, helped them, again, attract patients and retain patients. That's the name of the game. You need to have the phone ringing in the practitioner's office to grow a brand and to grow device placements as well as to grow overall utilization and we protect our customers in the U.S. and in select markets by having a minimum advertised price for the particular treatments. This allows our customers to achieve premium pricing. It's a premium brand. A premium value delivered to the patient. And all this reflects a very low cost of acquisition and ownership program, which results in the high level of customer satisfaction we continually report on and build our business on. Lastly, as we look at the human capital and as we're growing our business, the last leg of our go-to-market strategy was to have the best of the best people in our sales team representing us. We announced earlier in the quarter Larry Laber, joining us as the Executive Vice President of North American Sales. Larry's track record of building sales teams in this market, in the aesthetic marketplace, in general, is unparalleled. He's off to a great start. He started in September. We're looking forward to building even more momentum in this marketplace. And today, we're announcing the addition of Miguel Pardos as our Chief Commercial Officer. Miguel has over 2 decades of leadership across the global markets from Asia to EMEA to Latin America onward to North America in terms of building successful sales and marketing teams and implementing on cutting-edge go-to-market strategies, and he's a great asset to have on our team. We worked with Miguel historically in the past at 1 of our other companies, and we're really looking forward to immediate traction by having such leadership on our team. I'll turn it over now to our Chairman, Shimon Eckhouse.

Thank you very much, Lou. [Foreign Language].

[Foreign Language] Lou, back to you for summary.

So in summary, we're offering best-in-class, best-of-breed, next-generation with a very strong patented intellectual property position in form of SofWave and SofWave plus Pure Impact. We have significant competitive advantage with some updated solutions. Our business model is novel and unique with our recurring revenue over 30% with over 385,000 treatments completed. Our industry adoption with some of the most influential providers in the industry continues to grow. We're up 18% year-over-year. Year-to-date, we have a leading infrastructure in place, which is scalable. Our brand awareness continues to expand, as do our FDA clearances, which we really cover both lifting, laxity and wrinkle treatments across the face and neck, including well cellulite, acne scars, arm laxity and muscle toning. We believe we have the best value proposition in the industry right now. And we'll now close and open it up for questions.

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[Foreign Language] Thank you very much.