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

[Foreign Language]

[Foreign Language]. Lou, please go ahead.

Thank you, Shimon. Good morning, everyone. We are very excited and pleased to report our Q2 2025 results. For the quarter, we achieved $21 million in revenue, which represents a 43% year-over-year growth. Of these revenues, $9.2 million came on a recurring revenue basis, which represents a 53% year-over-year growth. Our margins were 75.5% and we reported as well our first ever net income of $1.5 million. For the first half of the year, our revenues were $37.7 million, which represents a 35% year-over-year growth. And we're also reporting a profit of $0.4 million for the first half. We ended the first half of the year with $24 million in cash, and we have performed over 600,000 treatments with SofWave since we began commercialization. So what's going on in the market because I'm sure all of our investors are hearing very different things. We all are very aware of the geopolitical and economic uncertainties that are out there. There are headwinds with consumer confidence and with capital purchases in general as well as we have the fact that tariffs are impacting certain of our competitors, particularly in the U.S. We have certain Korean and Chinese entrants there that are struggling right now to get a toehold in the marketplace. So this is improving our competitiveness. And if we look at the market in general, we see the core market of the plastics and derms remaining quite healthy. However, the Medspa market with access to capital and high interest rate is being challenged. Now besides the headwinds, there are crosswinds and tailwinds. So we look at the glass as being more than half full from the standpoint that even in the second half of the year, with continued geopolitical concerns, high interest rates and tariffs, we see the tailwind for the rising demand for energy-based volumization treatments [indiscernible] very, very strong. People wanting that for appearance. We see the use of fillers -- filler usage declining and GLP-1 usage increasing. We have the ideal product at the right place and at the right time. So as we look at the quarter, we had exceptional results. There were many more high points and low points. We tend to be self-critical. We, of course, see opportunity to do even more. I can say the performance was balanced around the regions. There wasn't any one specific quarter that made the quarter. We executed very strong across all levels despite the geopolitical considerations that happened in the region. We had a very, very strong finish in June. Our brand awareness and total sales remained at record levels. We also, in terms of our product and the ROI positioning, it's emerging as superior in terms of the value proposition, why patients get the procedure and why patients buy. We're demonstrating time in and time out that we have a superior product and the best offering for support to the customer. And we see, despite whatever other companies may report, we see a growing demand in the marketplace for tightening, toning and lifting, particularly within the core segment. A few interesting things I want to point out as well. If we look -- on the next slide, please. If we look at the most recent study performed by McKinsey that was just published in May, they talked about the GLP phenomenon and how it's driving aesthetic procedures. 63% of their group of patients that were surveyed are now seeking facial aesthetic procedures that were absolutely new. These new patients coming in and seeking aesthetic treatment for the first time. And if you look as well, just about 2/3 of these patients lost between 11% to 30% of their body weight, leading to all sorts of concerns about loose skin, laxity, sagging, facial volume loss as well as muscle mass loss. Now other statistics just published by ISAPS support this. Now the marketplace is -- the marketplace for aesthetic procedures is still very strong, but you need to be in the right segment. If you look here at this graph on the bottom of this chart, we see, of course, the exponential rise in the GLP-1 use, particularly in the last 2 years. Now these other -- one treatment category in particular, has completely fallen off the radar, which is the desire to have energy-based devices reduce fat, fat disruption devices. According to ISAPS and their global survey, this is off by 40% from '23 to '24 and the downward trend continues. On the opposite side of this, the demand for skin tightening grew by 39% in '23 to '24, and we expect this trend to continue. We see fillers, I mentioned just previously, people want natural look as well. Filler volume is down. And I think this speaks to that. This was thousands of physicians that are core providers that build out a structural survey and the numbers are the numbers of the numbers. It's a very strong market for what SofWave is offering, the best-in-class of this demand with no downtime, lifting and toning devices that have consistent best-of-breed results that are delegable, that the doctors and providers can make money on and have a proven predictable ROI. So the challenge is as well, consumer spending. So what are we selling in essence, we sell a device and we sell pulses, but everything we do has to provide competitive advantage to our providers. They simply have to have a better offering that are competing for patients. Patients want the best results. They want the latest and greatest. They want the best technology that has the best outcome. Doctors want the competitive edge. They need to offer SofWave. What's also in their benefit is something that's delegable where they can use anyone in the office and have a high throughput throughout their treatment room. They have overhead just like we have overhead business and like and they have a various view when they make an investment in today's marketplace. And the other thing they want is they want national branding. They want the companies to do the lifting in terms of the awareness before that patient ever gets to their office and ever gets in their chair. Now SofWave is the rising star and the proof is in the numbers. The proof is in our growth that we have the best solution for noninvasive lifting and tightening. We're ideally positioned today and tomorrow from the standpoint that we have a holistic approach to the customer. We see these customers as our partner. We're their partners with patient acquisition and patient retention, and we're providing the vehicle for them, not only with the technology, but in the support services and in the brand awareness, again, that drives the demand for the procedure. Patients are coming back. The phone is ringing for them to get to the practice and they're coming back for more and more treatments, and we see this in our pulse numbers. The brand awareness is critical. The other thing that's also important is once a provider makes investment into a given product, they want to make sure their margins are protected. They look at gross margins as the way we do from a corporate perspective. And we have a feature in our offering, which allows for minimum advertised pricing protection, which we routinely police and make sure that we manage to make sure that our providers and the SofWave treatment is viewed as premium so that the provider can continue to make a high gross margin. So when he thinks about offering a patient that presents themselves of all the multiple choices that he may have -- he or she may have in the practice, SofWave is going to make the highest margin on. So SofWave becomes the treatment of choice. So the strategy to take market share, again, this is a slide from the last presentation, where we continue to go into new markets based upon regulatory approvals. Just recently, we announced the approval in the Japanese market. Hopefully, China somewhere in the future, we have access to markets such as that. We have other markets on our radar from Russia, Brazil, where we see the opportunity. Again, to add some of these top 10 markets in terms of our go-to-market strategy to expand our coverage, making sure the provider, the customer is successful, making sure the product works within their practice that they get consistent outcomes, that their patients are satisfied, continue to work with them on delivering a significant ROI, making sure that it's scalable, that they continue to be able to treat more and more patients and integrate into any practice. Our device fits into any practice. It's becoming a stable amongst -- we have certain providers where the first device they're buying now is SofWave. They may have just been doing injectables or in certain cases, just surgical procedures. The first device that they are considering now because of the growing demand and tightening, now with SofWave. And again, this is driven by patient awareness across the various channels that are available to us. So the brand awareness, some interesting things are coming out of these numbers. First off, we need to do this in both B2C and B2B. We need to drive -- we need to sell devices, we need to drive demand for procedure and we need to be very, very careful how we spend this money. And as we look at our financials, you'll see actually our sales and marketing expense is significantly dropping despite the fact that the awareness is going up. Recently, we talked about last quarter, the Kardashian effect, but we have many more influencers coming on board organically as a result of that. Our website visits have doubled despite the fact a lot of people are going to AI engines now for searches. Our website visits are up 100% year-over-year. And I'm going to introduce a new term that I think we should start looking at in the future, which is called "Share of Voice." Now what Share of Voice means, it means that how often using key search words such as GLP-1, weight loss, skin laxity, muscle tone, very competent, highly competitive keywords across 10 competitive companies. SofWave's Share of Voice was recently measured at 34% in Q2. We're going to increase this as well. And this means as consumers look for any of these major keywords as they tie together solutions for the lax skin, for muscle toning and the like, that SofWave appears either in the #0 or #1 position in the Google search results. We had recently, I think it was 10 days ago, we had another post organically by Khloé Kardashian. You can see the spike in the numbers. You can see how it cascades, how it amplifies here. The mentions when something happens, goes across the whole their entire network, we picked up 16,000 followers as a result of Khloé Kardashian's last post. And again, this is all organic at this point in time. If we look at the numbers in general overall, across all the social metrics, they're all flashing great across every potential social channel. The significant number of TikTok views, significant number of views on YouTube, the percentage increase. The organic reach has increased close to 600%. What's really interesting and really defines the quality of this content is the engagement rate. Engagement rate means like, share or comment. The industry average for beauty and aesthetics is 1.5%. We were above that last year in Q2, we were 2.3% and now we're at 8.3%, 73% year-over-year, outperforming the industry by 400%. We built a significant platform. We made the investments since day 1 and having best-in-class digital expertise. It's appearing in the numbers as are our national campaigns which we see on the next slide, which illustrates we have a community. It's very, very important that you have social proof and you have a community of people that go out because you don't want to do it all on your own. You want all your users, you want all your friends to make sure that they're engaged and involved when you do something. So the Got Lift campaign was highly successful. We ran this on June 6. The click-through rate, meaning the number of people who clicked on a link was 8%. The average click-through rate on most posts is 0.6%. And on the most successful -- most successful campaigns of all sorts, 5% is phenomenal rate, and we achieved an 8% rate as well as if you look at our PR campaigns, we won additional awards in highly influential magazines such as Elle, Women's Health and the like. So to summarize all those numbers and before I turn it over to Shimon, just a few closing words. First off, we made the investments in brand visibility and influencer partnerships and national campaigns. They are paying off. They're paying off not only in the numbers, but the demand generation that's happening out there. We're creating buzz. We're filling appointment books. A happy customer is one that's treating with the device. They're making money, the patients are coming back. That's the power of what we're doing and how we're approaching the market. And this demand we see as something like a perpetual motion machine and our viewpoint and how customers are trusting us, we're viewed as a partner, a very, very different approach to most other aesthetic device companies. And at the end of the day, since our business model depends upon selling pulses and when you look at the number of pulses greater than 40% that we're selling in every growing number. This is significant and will continue to generate what we believe to be high double-digit growth and exceptional profitability. I'd like to now turn it over to Shimon.

Thank you very much, Lou. [Foreign Language]

[Foreign Language] I will turn it back to Lou for a quick summary.

So just call this out the presentation, just a few of the highlights. We are truly delivering next-generation technology. We have a very strong intellectual property portfolio across both SofWave and Pure Impact technology. We're disrupting the industry that has outdated solutions. We're achieving rapid industry adoption. Last quarter, 43% revenue year-over-year is illustrative of what SofWave is capable of doing. We have created a company with scalable and lean infrastructure, and we believe that we can continue to support high growth and profitability. We also have done all the homework and all the preliminary work. We have a very broad range, 9 FDA clearances around lifting, laxity, toning and wrinkle reduction on the face and neck as well as other areas such as cellulite and body. The arm laxity and muscle toning represents another major, major opportunity for us. We have significant recurring revenue. We're not in the box business. We are selling holistically a device. Our value proposition is unique, wherein our pulses now represent 40% of our total revenue with the continually expanding volume of treatments being adopted. We have significant brand awareness and social media following with over 1 million followers. I'd like to close this portion of the presentation. Now I'll open it up for questions and answers.

Thank you very much, Lou. [Foreign Language] Q&A is going to be combination of Hebrew and English. [Foreign Language] The second question I would like to refer to you, Lou is what are the reasons for the [indiscernible] in Europe?

Channel to market capability is critical. So in years gone by in other major aesthetic companies, we had as many as 110 countries. SofWave now presently has in the low 40s in a number of countries. And so we're building it not only with the train rule with the larger countries contributing. We've also added on distributors in Eastern Europe as well, as well as our efforts in the U.K. where selling direct is beginning to yield benefits for us.

[Foreign Language] I want to thank Lou and Assaf for being here with us and building this wonderful company. And thank you very much, everyone. And Assaf, Lou and myself are, of course, available to any questions, comments or complaints. Thank you very much. [Foreign Language]