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

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[Foreign Language] Good morning, Lou and Assaf in New York. [Foreign Language] Lou, please go ahead.

Thank you, Shimon. Good afternoon, everyone. We are very pleased to report our Q3 2025 results and share our momentum with everyone on the call. For Q3 2025, we achieved $21.1 million in revenue, which represents a 56% year-over-year growth. As well as in Q3, $8.3 million of this revenue came on a recurring basis, which represents a 55% year-over-year growth. Our gross margins were 73.7% and we achieved an IFRS net income of $1 million. On the year, from Q1 to Q3, we've achieved $58.7 million in revenue, representing a 42% year-over-year growth as well as an IFRS net income of $1.4 million. We ended the quarter on September 30 with $26.5 million in cash, and we have performed over 667,000 treatments since commercialization. Well, I don't have to tell anyone on the call about how challenging the marketplace is. I mean there are many, many headwinds, both economically as well as geopolitically. And if we look specifically at the U.S. market, the high-growth medspa markets have been impacted most by access to capital and high interest rates. However, the core physicians, the dermatologists and plastic surgeons, that segment of the market remains resilient. We have this growing tailwind, the growing adoption of GLP-1 agonist, which were driving the demand exactly for what SofWave makes, which is lifting, laxity and superior toning treatments. As we look ahead, we're assuming with the interest rates being lowered, consumer spending could improve. High interest rates, again, are being lowered presently at the moment, which could provide additional access to capital and affordability. However, we do see increased competition coming into the tightening segment, the segment that we're off to tremendous momentum. If we look as well as besides the GLP-1 is driving to tighten and lift the skin. We also see the demand for energy-based volumization treatments, which offer natural appearance. Further, most recently at the beginning of this quarter, at the end of last quarter, we had the FDA issue a warning letter on RF microneedling as well as creating an opportunity for SofWave in this market where we truly have the safest and the best solution. As far as the company's execution goes, we had exceptional results in Q3. We had a solid execution across regions. We had momentum accelerated globally across major markets. Our brand awareness continues to extend. Our reach has reached at the highest levels yet. This does drive procedure demand. Our product, the SofWave SUPERB system as well as the Pure Impact EMS system, we believe we're offering a superior competitive offering. Our value proposition to both the patient as well as to the provider is emerging as best in class. We see a rocket rising market demand. We see the glass as half filled despite the overall macro conditions. We see the GLP-1s allowing us an opportunity to have traction across every segment of the market. And at the end of the day, we have a mindset and an execution platform that's allowed us to achieve exceptional growth as well as expanding profitability. As we look at brand awareness, this is a very important aspect of the business. B2C marketing as we all know could be very, very expensive. However, as we do a deeper dive into the number, we see as our top line grows, our active sales and marketing expense is being reduced as a percentage of the overall total. We have, again, in this GLP-1 segment and lifting conversations a 41% share of voice. This is up from the previous quarter while I spoke about this parameter, this parameter is basically a measurement of how many times you appear in the Google 0 or #1 slot, using keywords, long tail and short tail searches putting together various word combinations related to how a consumer with search for a solution for lifting and laxity related to the major generic as well as the trade names of GLP-1s. We're up from 34% versus 10 other companies in the segment to 41% of that share. So I'm going to pause on that and repeat back again. 41% of the time we're appearing in the Google 0 or #1 slot versus 10 other companies. This is a commanding achievement. This is attributable to 2 years of hard work and SEO planning to achieve this. And if we look across the board and look at how this is affecting not only our web traffic, it's also as well influencing very much our social media numbers as well. There's another new channel developing, which is Reddit. If we look at how the AI engines are searching now, beyond going -- beyond the Internet and whatever native intelligence they develop, they are also looking at newer sources such as Reddit. So we're working very hard as well in this channel for patient education discussing our scientific efforts as well as the other featural benefits across this channel as well. Lastly, on this particular slide, I'd like to mention that the PR reach is extended significantly, and we continue to win multiple industry awards, identifying SofWave as best-of-breed technology. On this one slide here, everything is pointing upwards. Everything is great. Now keep in mind, in Q1 and Q2, we had the Kardashian effect in the numbers. This effect is sustainable. If we look at the engagement rate, this is the number of times someone likes, shares or comments on a post. It actually expanded to 8.6% in Q3 from the previous record high of 8.3%. Our content is simply getting better, there's more of it. Our providers are on board, and it's really sustaining and creating a phenomenon where as we continue to try to expand the brand of SofWave across every channel, we have significant traction. What's in the numbers, it's very important. Of course, the top line and the bottom line. I mean, that's really how we're judged by, but a very important engagement to us as we look forward in the business, is the results of our 2025 customer satisfaction survey. We recently sent a survey out to all of our users in the U.S., and we had 500 verified responses. What came out of this report is an eye-opener, and I think it's a tremendous testimony to the efforts of our employees and the significant superiority of our support services as well as also the technology itself. 94% of the responders stated that they would recommend SofWave to its peers. This is an outstanding number. Now to further validate this number we reflected as well. We took the same numbers and we employed Bain Net Promoter Score. Now what the Net Promoter Score has been developed by Bain & Company as a global standard to measure customer advocacy. Brands such as Tesla, brands such as Amazon and Apple employ this score, and we scored which is incredible, a score of 86%. Now what this measurement represents is the number of people who would recommend your product minus the number of detractors. Now coming out at 86% puts us well above the aesthetic industry average of 46%. The drivers of this are the clinical results the ease of use and the responsiveness of our customer service. We believe this gives us the platform to continue to sustain our growth and expand our profitability. One last comment, which is the timing list. As I mentioned before, the fact that SofWave and its technology has no needles, no fat loss and no compromise. It's truly a noninvasive, no downtime procedure with superior outcomes, superior results and extraordinary safety that further is delegatable, right? This means that the plastic surgeon, the dermatologists, the nurse provider can safely delegate the treatment to anyone in the clinic who is trained and perform a procedure, not only that lives as well as decreases laxity, but it does not damage subcutaneous fat. Now why is this important? When people are losing weight, we've heard the phenomenon of Ozempic phase. The last thing they need is an energy-based treatment that damages the fat further. SofWave targets the mid dermis for precise collagen and elastin, and hyaluronic acid remodeling, it's truly regenerative. We preserve the fat layers for essential useful contours. This mechanism of action ensures optimal lifting without further hollowing of volume loss seen with a more aggressive modality such as our microneedling and fractional lasers. I'll turn it now over to Shimon for further comments on the technology.

Thank you very much, Lou. [Foreign Language]

[Foreign Language] Back to you, Lou, for a quick summary.

SofWave truly has disruptive technology. Our product delivers superior noninvasive skin treatments, and it's truly disruptive in the industry that has outdated solutions. We're achieving rapid industry adoption, 56% year-over-year growth in Q3. We had mentioned this earlier, Q3 typically due to seasonality is the weakest of all the 4 quarters, but yet we achieved 56%. And we also have the momentum around our selling activity, and we have built an infrastructure which is lean and agile, which will continue to support high growth and profitability. Our broad range of FDA clearances for lifting, lax and wrinkle treatments, the investment we have made is now paying us dividends. We also have clearances across the body, and we have a great future as we extend our product line beyond the face into total body treatments. We have significant recurring revenue. We have a novel, unique business model where we're partners with our customers. This represents over 40% of our total revenue, and we've achieved 667,000 treatments. Our brand awareness is expanding through our digital efforts, and we now have over 1 million followers. I'd like to thank everyone for participating in the call, and I'd like to now open it up for questions and answers.

All right. Thank you, Lou. The first question that we got here is regarding the FDA letter and how do we think this is going to affect the demand of our product.

Well, people want solutions. People want solutions and they go to a provider and the provider recommends not only the technology that they feel is most appropriate. They recommend what they believe is going to be safe and efficacious. And clearly, consumers are going to come in now that it's hit all the major news channels and social media with questions about any RF microneedling. If one were to go to an Instagram feed right now, you'll see in any given day, dozens of providers trying to explain themselves as qualified providers -- and I would say at this point in time, we are ambitious in terms and aggressive in terms of our go-to-marketing strategy, and we see this as ample opportunity, not only for new placements where people -- the providers are looking for a different solution than what they have as well as head-to-head opportunities where formerly we would have to face the entrenched competitor of our microneedling. So again, we see the -- we see the glass as more than half full and potentially overflowing with this most recent announcement.

Another question, represented an accelerated growth over the last 4 quarters. And the question is what's changed? What is different in terms of the growth and the demand of the product this year comparing to last year or the last 2 weeks?

Well, I think let's step back a second, and let's look at what's happened in the macro. We've seen tremendous challenges for every aesthetic company in the space. And somehow, we've been able to be true to our go-to-market strategy, getting the thought leaders, the influencers. And now as we've achieved credibility there, it's now cascading into other segments of the market. On top of that, we've increased our channel to market capability by expanding our distribution footprint, both direct and indirect. Our FDA clearances -- excuse me, our regulatory clearances in certain of these markets have given us access and the ability to sell with major partners and the brand awareness. The strategy we invested in, in going digital from day 1 is certainly paying off. So I would say we would have gotten here faster had we not been faced with some major challenges. But I would say what we've done is we've been able to navigate better than most of our competitors.

And another question, I'll take in Hebrew. [Foreign Language] All right. I don't see any further questions. And again, we are all available for additional questions through Eisenberg or on the phone. [Foreign Language]

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