STRATA Skin Sciences(SSKN) - 2021 Q2 - Quarterly Report

Part I. Financial Information Financial Statements The company's Q2 2021 financials show significant revenue growth and a return to profitability aided by a one-time gain Condensed Consolidated Balance Sheets Total assets were $44.9 million and stockholders' equity was $25.8 million as of June 30, 2021 Balance Sheet Summary (unaudited) | (In thousands) | June 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total current assets | $23,462 | $24,831 | | Total assets | $44,899 | $46,778 | | Total current liabilities | $17,779 | $18,838 | | Total liabilities | $19,100 | $20,886 | | Total stockholders' equity | $25,799 | $25,892 | Condensed Consolidated Statements of Operations (Three Months) Q2 2021 revenue grew 83.2% to $7.4 million, resulting in a net income of $1.1 million due to a debt extinguishment gain Q2 2021 vs Q2 2020 Operations | (In thousands, except per share amounts) | For the Three Months Ended June 30, 2021 | For the Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Revenues, net | $7,382 | $4,030 | | Gross profit | $4,761 | $1,964 | | Loss from operations | $(923) | $(1,615) | | Gain on extinguishment of debt | $2,028 | - | | Net income (loss) | $1,082 | $(1,680) | | Diluted earnings (loss) per common share | $0.03 | $(0.05) | Condensed Consolidated Statements of Operations (Six Months) For the first six months of 2021, revenue grew 22.8% to $13.2 million, significantly narrowing the net loss to $1.3 million H1 2021 vs H1 2020 Operations | (In thousands, except per share amounts) | For the Six Months Ended June 30, 2021 | For the Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Revenues, net | $13,209 | $10,760 | | Gross profit | $8,474 | $6,363 | | Loss from operations | $(3,315) | $(2,563) | | Gain on extinguishment of debt | $2,028 | - | | Net loss | $(1,336) | $(2,715) | | Diluted loss per common share | $(0.04) | $(0.08) | Condensed Consolidated Statements of Cash Flows Net cash from operations was $0.4 million for H1 2021, with total cash decreasing to $17.0 million by period end H1 2021 vs H1 2020 Cash Flows | (In thousands) | For the Six Months Ended June 30, 2021 | For the Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $387 | $1,201 | | Net cash used in investing activities | $(1,466) | $(730) | | Net cash provided by financing activities | - | $2,528 | | Net (decrease) increase in cash | $(1,079) | $2,999 | | Cash, cash equivalents and restricted cash, end of period | $17,033 | $18,628 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the impact of COVID-19, the forgiveness of a $2.0 million PPP loan, and a subsequent $3.7 million acquisition - The company is a medical technology firm specializing in products like the XTRAC® excimer laser for treating dermatologic conditions, with 848 systems placed in the U.S. under a recurring revenue model as of June 30, 2021[22][23] - The COVID-19 pandemic negatively impacted the business by disrupting supply chains and causing temporary closures of physician practices[26][27] - In Q2 2021, the company's $2.028 million Paycheck Protection Program (PPP) loan was forgiven, resulting in a gain on extinguishment of debt[72] - On August 16, 2021, the company acquired the U.S. dermatology Pharos business from Ra Medical Systems, Inc. for a cash payment of $3.7 million[101] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the strong Q2 2021 recovery, improved margins, increased operating expenses, and sufficient liquidity Results of Operations Q2 2021 revenue rose 83.2% driven by post-pandemic recovery, with higher operating expenses due to renewed investments Revenue by Segment | (In thousands) | For the Three Months Ended June 30, 2021 | For the Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Dermatology Recurring Procedures Revenue | $5,452 | $2,796 | | Dermatology Procedures Equipment Revenue | $1,930 | $1,234 | | Total Revenues | $7,382 | $4,030 | - The increase in gross profit to $4.8 million (64.5% margin) for Q2 2021 from $2.0 million (48.7% margin) in Q2 2020 was primarily due to higher sales as the impact of the COVID-19 pandemic lessened[132] - Selling and marketing expenses increased to $3.2 million in Q2 2021 from $1.4 million in Q2 2020, as the company increased investments in direct-to-consumer advertising[138] - Other income for Q2 2021 was $2.0 million, primarily due to the forgiveness of the $2.028 million PPP loan[140] Non-GAAP adjusted EBITDA Non-GAAP adjusted EBITDA turned positive at $682,000 for Q2 2021, a significant improvement from the prior-year quarter Non-GAAP Adjusted EBITDA Reconciliation | (In thousands) | For the Three Months Ended June 30, 2021 | For the Three Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net income (loss) | $1,082 | $(1,680) | | Gain on extinguishment of debt | $(2,028) | - | | Depreciation/amortization | $961 | $1,028 | | Stock compensation | $581 | $410 | | Non-GAAP adjusted EBITDA | $682 | $(158) | Liquidity and Capital Resources The company holds $17.0 million in cash and believes its liquidity is sufficient for the next 12 months - As of June 30, 2021, the company had $17.0 million in cash, cash equivalents, and restricted cash, compared to $18.1 million at December 31, 2020[143] - The company received a $2.0 million PPP loan in April 2020, which was fully forgiven in the second quarter of 2021[144][145] - The company holds a $500,000 EIDL loan with a 3.75% interest rate, with payments deferred for an additional 12 months from March 2021[146] - Management believes that current cash and anticipated revenues will be sufficient to satisfy liquidity requirements for the next 12 months[147] Quantitative and Qualitative Disclosure about Market Risk The company states that this item is not applicable - Not applicable[153] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - Based on an evaluation as of June 30, 2021, management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[154] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[156] Part II. Other Information Legal Proceedings The company may be party to legal proceedings incidental to its normal course of business - The company may be involved in legal proceedings in the ordinary course of business, including contract claims and employment matters[158] Risk Factors This section refers to the risk factors detailed in the company's 2020 Annual Report on Form 10-K - A description of risks is set forth in Item 1A of the Annual Report on Form 10-K for the fiscal year ended December 31, 2020[159] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None[160] Exhibits This section lists filed exhibits, including corporate governance documents and required CEO/CFO certifications - The report includes standard corporate governance documents and required certifications as exhibits, including CEO and CFO certifications under Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act[164]