Good afternoon and good evening. Thank you everyone for joining us today. Welcome to Sisram Medical's H1 2024 Earnings Call. This is Yatong Li, the analyst from Guangfa Securities. As a reminder, this conference call is being recorded today. Now, I'd like to introduce our speakers on the call. With us on the line today are Mr. Lior Dayan, Sisram, Sisram's Chief Executive Officer, Mr. Doron Yannai, Alma's CFO, Ms. Qianli Fang, Secretary of the Board. Management will begin with an overview of the business developments for the H1 2024, and following the prepared remarks, we will hold a Q&A session. With that, I'd like to turn the conference over to Lior Dayan, Sisram's CEO, to share updates for H1 2024. Please go ahead.
Thank you, Yatong Li. Thank you very much, everybody, for joining us on the call today. I'm happy to provide an update on the ongoing success during the first half of 2024, which has been a period of momentum for Sisram. For over two decades, Sisram has been a global leader in the consumer wellness, built around four core businesses areas, which are energy-based devices, injectables, home use devices, and also skincare. The medical aesthetic industry is evolving rapidly. Technological advancements and shifting consumer preferences are elevating beauty standards with increasingly sophisticated consumers seeking personalized and high-quality solutions. As the market expands with more practitioners entering the field, the demand for exceptional experiences and long-term patient care has never been higher.
Within this dynamic landscape, I'm proud to update today that during the reporting period, Alma Lasers achieved an all-time high new orders rate, demonstrating its unique value to growing audience of practitioners. This milestone, driven by rapid market adoption of Alma's three recent launches, reflects strong confidence in Alma's platforms and demonstrates the strength of our brand equity in strategic markets. I'm particularly excited to announce the successful launch of Alma Harmony and introduced in North America alongside the groundbreaking new diagnostic concept, Alma IQ. Sisram has made significant leap forward in the high-demand skin analysis with Alma IQ, an intelligent skin analysis and consultation solution. This innovation transforms the consultation process by offering visually engaging and automated interactive experience that effectively addresses patients' skin health concerns.
Simultaneously, Alma Harmony, a new innovative multimodal platform, it designed to tackle a wide range of skin conditions across diverse demographics, has also been introduced in North America and quickly embraced by the market. In addition, the group continues the leadership in the Hair Removal segment with global launch of the special edition of Alma world-leading hair removal platform, Soprano Titanium. This new addition has been warmly received worldwide and includes a breakthrough applicator that enhances treatment sessions by 20% while ensuring virtually painless experience. The new and improved edition of this Soprano Titanium is also recognized as the fastest in the market by the Sapio Research, an independent global research agency. This advancement not only sets a new standard in the industry, but also provides even greater value to our customers.
Furthermore, we continue to lead the way in scar treatment with Alma Hybrid, our premier platform for top-tier practitioners. These latest clinical standards are paving the way for Alma Hybrid to become the first line of treatment for scars. Central to our success is our commitment to expanding Sisram's unique wellness ecosystem, which combines energy-based devices, skincare, injectables, and now also diagnostic too, stands as the most comprehensive synergistic product line available today. Now, I would like to take a step forward with you into the future as we mark significant advancements in Sisram's injectable segment, a strategic building block within the Sisram wellness ecosystem and crucial driver for the company's long-term sustainable growth.
Supported by three strategic partners, partnerships, Sisram has built a high-end product portfolio featuring world-leading injectable brands, such as IBSA, a high-end thermal biostimulator named Profhilo, the first world long-lasting botulinum toxin named DAXXIFY, and the renowned Revanesse dermal filler collection, so the market value of the injectable segment has soared, reaching multibillion-dollar figures in the recent years. Sisram Medical is proud to be the only company in this space that operates in both fields and delivers unique combinations of injectable products together with the gold standard of energy-based devices, enabling a new edge of more powerful and long-lasting aesthetic results. With our comprehensive injectable portfolio and dedicated seasoned sales force, we are ready to seize opportunities in this rapidly expanding market.
The group's performance for the first half of 2024 includes revenues of $168.7 million, with a gross profit of $105.3 million. The latter remained the same in the corresponding period of last year, 2023. The total revenues decreased by 1.7%, compared to the corresponding period in 2023. Downtick preliminary due to the high interest rate environment in North America, which was offset by double-digit growth in other territories. On a year-over-year basis, our gross profit margin rose by 1 point to 62.4%. Through the reporting periods, Sisram has made significant strides in expanding its direct sales presence in key markets and enhancing its unique wellness ecosystem, two key contributors to the company's profitable future growth.
During the reporting period, we present double-digit growth in Asia Pacific, Europe, and Middle East and Africa, which increased by 15.5%, 10%, and almost 11%, respectively. Aligned with the company's strategy to strengthen Asia Pacific leadership, Sisram has significantly advanced its new offices in Japan and China, which established in H2 2023. With our current eleven direct sites, we are confident in maintaining leadership in these markets and bringing more value to our customers within their clinics, with the aim of better serving them and streamlining operations. Together with our team of long-term veterans in the aesthetic industry, this approach enables us to address rapid adjustments and achieve efficiency in every aspect of our business, allowing us to align expenses with the top line and improve gross profitability.
In the current reporting period, revenue from the direct sales comprised 86% of our total revenue, with sales through distributors making up for the remaining 14%. In addition to maintaining our leadership in a premium, as a premium provider, enhancing brand visibility, and strengthening relationship with partners and clients, the setup of our direct operation offices allows Alma Lasers to navigate macroeconomic trends much more effectively. In parallel, we continue to see enhancement and strengthening of Alma Global brand, which drives demand and growth for our customer clinics. Our ongoing strategic partnership with Hollywood icon, Kate Hudson, has played a key role in this effort. This collaboration has markedly boosted brand awareness and engagement, reaching over 300 million people worldwide and generating more than 350,000 social media interactions within less than a year of its launch.
Looking into the second half of the year, Sisram will continue to execute our strategy by evaluating and implementing near future technologies and extending the company's global footprint according to the direct sales approach. In particular, promoting a whole new skincare concept and advanced in-clinic platform. We will strategically focus on strengthening corporate leadership in Asia Pacific and North America, and continue to expand Sisram unique wellness ecosystem with a high value and synergistic offering. This will involve utilizing the building blocks of energy-based devices, injectables, home use devices, and skincare. All of this will be governed by innovative protocols designed to enhance patient results, elevate clinical practice, and increase patient satisfaction. Lastly, Sisram is committed to building close relationship with end consumers through various channels and technologies, providing continuous support to clinics with strong dedication to ensuring our partners' ongoing success and operational excellence.
As always, I want to express my gratitude to all of our employees for their dedication in helping Sisram become a global leader in wellness. I also want to extend our thanks to our shareholders as we move forward together on our journey. Thank you very much.
Thank you, Lior, so we are all set for the Q&A session. If you are on the phone, just press the star key first, followed by the number one key to ask your question. For those joining us via the webpage, please raise your hand or type your question in the Q&A box, and a friendly reminder to our listeners, please introduce yourself and your organization before you ask your question. Thank you. The first question comes from Sealand Securities. Please go ahead.
Hi, thank you for offering this opprtunity. This is Shansh Ma from Sealand Securities. I have two questions for the management. The first one, why did the revenue and profit decrease? And what can we expect them for the second half year of 2024 ? Thank you.
So, yeah, thank you for the question, and as addressed, and you can see also in the report, the major drop that we faced in the first half of the 15.7%, as you can see, were mainly from North America. And again, we of course managed to some kind of offset this with a very strong double-digit growth from other sides of the world, one of the uniquenesses of this operation. The major reason for the drop is related, of course, to the you know the macroeconomic trends, which are specifically with high interest rates in North America, also in Europe, but significantly impacting North America, which limits the ability to you know to get approval for leasing or to have a slowdown in the process.
What really helped us to have just 15.7%, this is not, I mean, this is compared to maybe some of the peers in the EBD segment, that maybe you are aware that they dropped even further. But one of the reasons we managed to control that in a way was the introduction of new technologies, as I mentioned, the new version of the Alma Harmony, the new generation of it, and together with the Alma IQ, the diagnostic tool that comes together. So these are kind of the reasons for that. Regarding the net profit, the majority of...
I mean, the major reasons for that would be the fact that, as you know, over the last year and a half, we opened few direct operations, which are really at early stage in building their presence in the relevant markets, like in the United Kingdom, Emirates, Japan, and so on. So we basically are really at the first year or two, which relatively the amount of expenses of building that operation is basically at an early stage. We do believe that, within usually the third year, every subsidiary they are aligned with the group margin, net margin, the overall net group. These are kind of the topics. I hope it's answered the question.
Thank you, sir. That was helpful. The second question is: do we have any plan for the expansion in direct channels? Do we have any target of the rate of direct sales? Thank you.
So, at the moment, we do not give a specific forecast for the second half. In general, we're more optimistic because a few reasons. In general, as I mentioned, we just introduced in North America few new technologies, and things are even just gaining more and more pace. The new Harmony version, the Harmony Next Gen, will be introduced in Europe later on this year. So that's another part. That's in general. We don't know yet what's gonna happen with the interest rate, as mentioned. If the signals would be optimistic, as everybody hopes, if that will start going down, definitely this is normally a signal for our business to grow strong. So this is in general.
Now, regarding our offices, I can say that almost all of them, actually, with exception of the United States that we just spoke about North America, we're basically on track regarding our expansion with them. So this is about our direct operation. And distribution channels, once again, market financial markets are coming back into normality, they are reacting positively in a similar way.
Okay, that's clear. Thank you. Thank you, sir.
You're welcome.
Thank you, Leo. Let's proceed with the question from CMSI.
Hi, good afternoon and good evening. Can you hear me?
Yeah, definitely.
Hi, hi, thank you for taking my question. I got two quick question on the injectables regarding the DAXXIFY. So my first question is regarding, you know, the Crown Laboratories and Revance announcement for the entry into the merger agreement. I'm curious, how would that impact or affect our, you know, future collaboration with Revance, Revance? And my second question is regarding DAXXIFY's, you know, time approval timeline from the NMPA in China, and also any other you know commercial plan you would share with us in China? I so one more follow-up regarding our collaboration with Revance.
I'm curious about the manufacturing, you know, whether the merger acquisition will help, you know, the optimization of the manufacturing process or will eventually help, you know, to bring down the manufacturing cost of the product. Thank you.
Yeah. Thank you very much for the questions. I'll try to share as much as information I know as a public, you know, that Revance is a public company, and we are actually stating what they are announcing. And so we, yeah, we are with tight relationship with the team over there. And basically, we were aware to the transaction and our collaboration as a distributor of DAXXIFY has been at the moment for Asia, for Great China, Hong Kong and Macau is an important asset for the team for Revance, even also under the new coming owner.
We see this relationship as a strategic relationship, and at the moment, rightfully, you were speaking about their supply chain, and right now their supply chain is addressing demand, which is coming from North America. That's their major focus, and they're with clear steps of expanding. Once we get our Chinese FDA, the NMPA approval, which is yet not clear exactly when, but as you know, we got the approval of submission last year in 2023, mid-year, and so, and we're positive with that one coming ahead, but then again, of course, the first step would be China, and other parts of the world will be really depending on supply level.
Definitely the collaboration between Revance and us brings a win-win collaboration. As you already heard from my overview before, our ecosystem, our solutions from a clinical and business aspect to our clinics, are combining injectables in our offerings. So, there is a great place for that journey to continue to grow.
Thank you. Very clear.
You're welcome.
Thank you, Lior. Next question comes from the name of JP Morgan. Please go ahead.
Hi, management. This is Carson from JP Morgan. Thanks for the sharing and the resilient results under such challenging environments. I've got two questions here. The first one is regarding injectables. Could you share more colors on the decline in sales of injectables? I guess mainly Profhilo. Is this because of weak macros or increasing competition? And what's your view on its performance in the second half and beyond? And any further plans on injectable pipelines? The second question is regarding the shareholder return. So could you share any thoughts on the cash flow and CapEx, including essential R&D investments, and any potentials in increasing the dividends or any share buyback schemes? Thanks.
Sure. I will answer the first question and also give the opportunity for Alma CFO, Mr. Doron Yanai, and I to address also the aspects of the exact situation of cash flow as it is positive, of course, so first of all, regarding the injectables, Sisram is pretty much one of the only companies in this industry that has a division for injectables in addition to skincare and of course, the energy-based devices, that's where Alma grew from, and that capability now would be even expanded with the diagnostic tools that I mentioned and just launched in the United States, named Alma IQ.
Now within the injectable division, Carson, that you asked about, what we are creating in the territories that we have at the moment, the license to distribute injectables. We have collaboration with the leading companies such as IBSA from Italy and Revance, as we got, as we spoke just before, Prollenium from the Canadian hyaluronic acid company. And we also have coming up a few more kind of a startups such as Allura. We're not reporting this on this report yet, but it's gonna be reported, Allura as a injectable, new development, new technology of hyaluronic acid. This would be distributed first in Israel.
Then, as you know, we also have, in the incubation mode, the collaboration that was happening through Fosun Pharma, on Raziel, which is a lipolysis solution for addressing lysis in fat area, in small fat areas. So this is our injectable division, and this is the plan to expand that further. This is kind of to answer your first question.
Yeah. You wanted to talk about the OpEx and the dividend, right?
Yeah.
About the OpEx. Sorry, it's Doron, the CFO of, I'm sorry, VP Finance of Sisram . So with respect to the OpEx, so OpEx, of course, is slightly higher than what it was last year, but it's combination of, as mentioned before, new sales offices, which of course, you know, required more resources. On the other hand, we are always looking on efficiencies, efficiency steps at the same time, so we are limiting, you know, our OpEx, keeping the money with us. You talked about cash flow. The company is generating cash all the time. We have sufficient cash, of course.
And about the dividend, our formal policy is that we pay about 30%, not about, exactly 30% from our net income. Sorry. I don't think that at this stage, we have any plans to update it. So, as usual, we will pay. Usually it's going to be by the third-fourth quarter, the dividend payment of the last year. Previous year, sorry.
Thank you. That's very helpful.
Okay.
Hey, thank you, Lior. I'm Yatong Li, the analyst from Guangfa Securities. My first question is that, how do you think the market for botulinum toxin products, mainly as a product to attract the consumers? If you reduce the frequency of visiting to doctors, will it reduce consumer stickiness with doctors, so that it will lead to doctors are reluctant to recommend DAXXIFY? Thank you very much.
Oh, that's a very good question. I'll try to address this from few angles. So we think the opposite, actually, and the reason is because, when you only have one tool to play with, then maybe you are limited to what the technology can achieve. But when you combine technologies, you can come to much greater results, and that's where we're gonna work together with our clinics to go after, and the work is not just with introduction of new technologies, but also training on them. Now, just give you an example of dealing with neurotoxins, even in the U.S., well, at the moment, we're not selling it. One of the things physicians need to do.
Want to do is to be able to have their patient move from one treatment to another, because of, you know, maintenance and having better and better results. But it was very difficult to present such a move from someone which was maybe just used to do some injectables, and maybe move to do some treatments of using energy-based devices to treat skincare conditions of pigment, or redness, or wrinkles. Now that we introduced Alma IQ, which is a diagnostic tool, with a supportive software for the consultation between the doctor and the patient, it could reflect very, very well how the energy-based device, together with what's in the clinic there, could have a much better result. And that's great value for the doctor when they consult the patient.
They can really show you the value of adding some technologies to improve redness on the face. And so I hope I kind of explained to you why that aspect would give actually more value to the clinic and the patient.
Thank you, Lior. My next question is: How do you think about company's share price?
Could you, what the what? The share, the stock exchange, the stock price?
Uh, yes.
We
How to think
We all
About company's share price?
We all hope it will be higher, wouldn't we? I don't think we can from our side, from the operations side. I don't think we have much control on that one. Our job is to implement our strategy and make things happen. I think we have a very, very good operation, especially over-achieving with what's happening in the financially different markets, and every market has its own uniqueness. The stock exchange has its own life. I think it's very difficult for us to comment on that one.
Thank you, Lior. Thank you very much. Next question comes.
You're welcome.
Next question comes from of CITIC Securities. Please go ahead.
Okay, thank you for taking my questions. I am Lingjie Kong from CITIC Securities. And so, first, I want to ask, maybe more about, the original, our main regional, market, like, for example, in China. For example, in China, we see, this is the full and first full year of our consolidation of. So, how is the performance of this, new team after, our consolidation? Yeah. And, for, the United States, we, I've heard in the early meeting that we said, that amount in United- in the North America was not, affected, but, maybe our sales of device was, dropped more in the second quarter, and maybe that's more about the interest rate effect.
So, and we said in our report that we will provide the financing support in North America. So, could we maybe see some recovery in the second half of this year? And, thirdly, about Europe, so, we see a steady recovery in the first half of the year, and to how do we expect the performance of Europe in the full year? Yeah. Thank you.
You're welcome. So, indeed, first of all, let's start with mainland China, and in general, I can say that our team over there, Alma China, which we hold 60% of this business, are achieving their targets as being planned, as being addressed, in our contract. This is something which is going on track, and this is again, taking into consideration the special conditions in the market that we all are aware in China at the moment. We are a leader in this business, and it's going on track from that perspective.
One of our strengths is the fact that we are building their readiness with the launches of the injectables, one, and two, the product that we have regulation at the moment are not the state-of-the-art that we have in North America and in Europe, so we're getting ready with this for the next couple of years, so the potential growth in mainland China would be really strong. In North America, like you said, the major impact would be the high level of interest rates. Much more expensive to pay a lease today than maybe a year ago. So this kind of slows down the sales process, and not only that, not every customer might get approval for a lease. So this kind of slowed down.
We have ability with, a s you know, our cash position is strong. We have the ability to have special support on special payment terms for some accounts, and we're working with some of the agencies to be able to expand this. However, we do wanna be able to be optimistic that, and this is kind of, there is a sense that hopefully in the very near future, the Fed would remove a little bit of this interest rate, and will signal a positive future with that. We are more optimistic towards the second half of the year, as I already mentioned. It is also taking into consideration the fact that normally the second half of the year has the quarter four.
Usually, it's the end of the year in North America, and that's by that definition, one of the strong quarters in the year. Yet with that, we believe the momentum will be positive and slightly better than maybe even the beginning of the year. Also, because of the fact of introduction of the new platforms and technologies that we spoke about them before. So that's about North America. You also mentioned Europe. Europe, in a way, is still suffering a little bit from the fact of the war between Russia and Ukraine, and you can see the impact, mainly on Germany, for example, because the cost of living, the energy and so on, still has an impact there.
However, we are at the summer period, so it's not so significant. On the other hand, we established our operation in the United Kingdom, as you know, and that helped us to continue the momentum on that side, and you can see the growth, that 10% growth we spoke about in Europe.
Yeah. Okay. Thank you. That's very clear. And just another question about profit margin. So we have seen that our net profit margin is below 10% for like two half years, the second half of last year and this second half this year. So what do we expect the profit, the profitability in the future?
The change over there is really mainly because of a few factors. One, when we are not achieving the top line, like earlier mentioned in North America, we are immediately trying to downsize and control our expenses. And these are the efforts that are being done immediately. It's been very, very effective in large operations. However, we also have, as you know, new operations that established over the last two years, and those operations are still in the stage of getting up and running.
It is known that the first and second year are not profitable, but then on the third year, we plan and expect for these operations to be at the range of the profit of the group, that around that ballpark of 10% that we always we're shooting for. And again, we're shooting for that percentage, taking in consideration, as you remember, of incubating a lot of business, whether it was the home device, whether it's new operations for injectables we are building. Anytime you're building an operation, it's an investment period. It's not an immediate reaction where you can immediately see revenue. But still, we are shooting to be able to have that ballpark of 10%.
Yeah. Yeah, that's very clear. Thank you very much.
Thank you. You're welcome.
Okay. Thank you. Thank you all for joining today's earnings call. We appreciate your participation and insightful questions. If you have any further inquiries or need additional information, please feel free to reach out to our investor relations team. We look forward to our continued dialogue. Have a great day. Thank you.
Thank you.