Good morning, everyone. Thanks for joining us again at the 24th Annual Needham Healthcare Conference. I'm Mike Matson, and I lead the MedTech and Diagnostics Equity Research Team at Needham & Company. I'm pleased to introduce Sofwave. Presenting from Sofwave, we have Louis Scafuri, CEO, and Assaf Korner, CFO. They're going to give a presentation on Sofwave, and then we will open it for questions at the end. If you do have questions you'd like to ask, you can submit them electronically through the Needham Conference website, or feel free to email them to me at mmatson@needhamco.com, and I'll do my best to fit them in. With that, I'll pass it to Louis and Assaf.
Good morning, everyone. This presentation is covered by Safe Harbors. I'd like to introduce Sofwave. Sofwave offers non-invasive technology in a very broad category for the purpose of lifting, tightening, and toning the skin. We're the emerging market leader. The company is public on the Tel Aviv Stock Exchange, and what we're offering is a next-generation disruptive technology that has very broad FDA clearances for treatment across the face and the body. It's unique from the standpoint in its mechanism of action and its consistency in the treatment. We've been able to accomplish, since launch of the product, significant traction, both from a revenue perspective as well as a strategic perspective, with many of the global KOLs adopting our technology, using it successfully in their clinical practice, as well as talking about it from a scientific as well as from a competitive advantage basis.
We see the glass being more than half full. We see the GLP-1s helping stimulate our business. Right now, there is a tremendous need for a lifting, laxity, and toning device. We see this segment as growing, and we think this market will continue to accelerate as the GLP-1s are introduced country by country. We have a global distribution footprint. Our channel to market capabilities include direct sales in the U.S. and in the U.K., and we're also marketing in over 40 different countries. This is supported by a very strong digital effort, where our B2C and B2B campaigns have been growing tremendously in terms of increasing the brand awareness. What differentiates us is, as I briefly mentioned, the consistency of our outcome, the superior clinical results, the patients are coming back asking for more. We have tremendous procedure growth volume.
In the eyes of the provider, whether it be a plastic surgeon, dermatologist, or a med spa, our ROI stands out second to none in terms of its ability for the device to become profitable in a very short period of time, as well as the fact that the device is delegatable and the patients—there is simply no downtime with it. One of the other features of Sofwave is the experience of our management team and our ability to execute. If we look at the team briefly, we were co-founded by Dr. Shimon Eckhouse, a well-known leader in the field of aesthetics. He formed such companies such as Lumenis, as well as Syneron Candela. He's also the inventor of Intense Pulsed Light. This is my third time working with Shimon, both at Lumenis as well as Syneron Candela.
We're also joined on the call here by our CFO, Assaf Korner, who worked with us at Syneron Candela. He has experience in both the private and public markets. We have a leadership team, again, with close cohesion, a team that has deep experience, best-of-breed performance in the field of aesthetics, and I think this is one of our hallmarks in terms of our rapid growth as well. The problem we're addressing is the fact that people across all demographics and all age groups are seeking aesthetic treatments. Right now, the currently minimally invasive techniques, as we see on this patient here illustrated here, that's had a fractional CO2, are showing significant epidermal damage. This is even in the case of microneedling, even in the case of CO2, other fractional methodologies where these treatments do come with risk of hyperpigmentation and other complications.
They require multiple sessions in order to achieve efficacy. The devices themselves need to be operated by a skilled operator. They're not often delegatable, and there are treatment areas that simply you cannot reach with this. At the end of the day, you're not going to get on a Zoom call or go back to work immediately after these treatments. They involve downtime. If we look at what we're trying to do with all these energy devices, we're really trying to stimulate the collagen and the elastin. Most of the fibroblasts, as well as collagen activity, is recognized to be situated in the mid dermis, which is 1.5 mm-1.8 mm deep. What the challenge is, is to reach the epidermis, produce enough heat and energy to stimulate it by causing a fractional injury, as well as not disrupt the dermis.
The patient we just saw clearly had holes in their skin, had bleeding and other associated wound healing necessary. However, the challenge is to do all this non-invasively, just target this area, stay away from the muscles, the nerves, and the bones, and to have this done at a temperature 60 degrees-70 degrees. This takes a unique approach, unique technology, therein lies Sofwave. Sofwave, our technology is known as SUPERB. It involves high-intensity, high-frequency ultrasound in the form of seven beams, which penetrate the mid dermis at a 1.5 mm-1.8 mm depth. We have integrated cooling. We have a unique proprietary technology wherein our transducers are cooled, which protects the epidermis, provides for patient comfort, and delivers a highly volumetric injury on a parallel basis to the mid dermis. Our technology has an exceptional safety profile. There is no special aftercare post the treatment.
There is very, very limited, even signs that the treatment was even done. Perhaps the patient will feel a tingling sensation from the warming of the skin, maybe perhaps a slight redness, but they're ready, their Zoom camera ready, they can go back to work. Oftentimes, with our FDA clearances, as indicated, the treatment's adorable. It's one treatment a year, but in many cases, because of the satisfaction with the results, the patients simply come back and ask for more treatments. Our go-to-market strategy is framed in the following manner. Again, we see the GLP-1 agonists accelerating a faster growth of the skin tightening, skin lifting, and muscle toning segment.
We've made the investment over time with our clinical studies, with some of the top thought leaders, leading us to have nine FDA clearances, seven on the Sofwave device, very broad clearances to allow a wide selection of different patients that's applicable to, as well as the fact we have two clearances on our new technology, the Pure Impact Body Toning Device. We've targeted probably the most discerning, the most, I would say, credible KOLs in our fundamental rollout of the product, where these individuals have helped us publish clinical studies, have significant presence at trade shows and in scientific journals, wherein also their experience speaks to how fast the ROI comes, how satisfied their patients are.
As a result of that, I would say one of our core competencies is some of the key thought leaders on a global basis recommending Sofwave for integration in the practice to their peers. We have right now, as well, all of these efforts supported by an in-house digital team, where our growing brand awareness, as well as our procedure growth, is becoming widespread throughout the industry. The phones are ringing in our physician's office. People are asking for Sofwave. We supplement all that with our channel to market capabilities by selling direct in the U.S., wherein, in addition to the direct sales team, we added practice development specialists, which would go back into the practices after we sell a device, help institute best practice both from a marketing perspective and use of the device, the right clinical application to drive procedure growth.
We're also dependent upon regulatory clearance and selection of the proper partner, expanding into EMEA, APAC, and Latin America. In today's environment, I mean, I'm sure that's the question for every company that's on the call today. What's exactly going on with all the uncertainty right now? In today's market, only disruptive products stand out. There is no longer a replacement product for such treatments such as hair removal, vascular lesions, and the like. Providers are reserving whatever capital they're spending right now on a disruptive technology, something that offers better treatments, something that offers them a competitive advantage within their practice so that they can attract patients on the basis of the B2C buzz, as well as on the basis of the satisfaction and the results of the outcome. The new weight loss drugs, people are spending money. They feel better about themselves. They're buying new clothes.
They're also looking for non-invasive solutions to lift and tighten their skin. The same with the muscle loss phenomena that goes there. In the case of plastic surgeons and dermatologists, this remains very robust. In the case of certain providers, in one segment in particular, the med spa, they're facing very high interest rates, and they're likely to compete now in this segment with the Me-Too product. They're likely to have in some of the technologies that have been out there that have less differentiation, they're really Me-Too. Those treatments are less desirable to the provider because they simply, they're much more price competitive than Sofwave, which is viewed to be a premium product, a premium procedure. Outcome is important.
Outcome and ROI, you need to talk the talk and walk the walk there because devices, if they're going to invest the time, invest the money, they expect to pay back much faster than they've ever had before. Competitive technologies such as microneedling and RF, they seem to be generic at this point in time. There are 15 companies-20 companies selling undifferentiated products into that segment. You have price erosion. You have all sorts of negative dynamics going on in that segment of the market. The other thing besides the outcome, besides the uniqueness of the technology, is the brand awareness.
You need to help the practitioner today in terms of their patient acquisition, which is quite costly, as well as retention, meaning that once they get in the door, they need to have a satisfactory experience with the technology, and they need to come back and ask for the procedure again. The whole phenomena keeps repeating itself. As I stated previously, we have very broad FDA clearances. We have done significant research. We have clearances for fine lines and wrinkles, which is known in the U.S. as tightening. We have the ability, again, to make claims against treating the jawline, lifting the eyes, treating the submental region, improving the overall appearance. We have a unique claim as well as arm lifting, which is another area with the GLP-1s, as well as weight loss in general, as well as aging, which is a very, very important segment for non-invasive devices.
The surgical alternatives are quite expensive and involving scars. We also have the clearance for acne scar reduction, as well as for the treatment of cellulite. With the adoption of our device and a product, the provider has multiple choices, multiple different types of patients to use it on, and the treatments are delegatable. One of our hallmarks as well is our frictionless business model. We place a device and then we sell a virtual consumable. It works very similar to the way a cell phone model business model works, where you buy the cell phone and you pay for the minutes. The customer buys the device at ASPs somewhere in the $100,000 range. It comes preloaded with 3,000 pulses, enough for them with the starter kit to treat 10 patients-15 patients.
You charge the patient anywhere from $2,500-$3,500 for a full face and neck. Their cost to do the treatment is approximately $200, where each pulse is sold to them nominally at $150 per pulse, 100-150 pulses. Their margins on the procedure, which I'll show you very shortly, are 75%-80%. As these pulses are consumed, the provider simply goes to the e-store and downloads additional pulses by uploading their credit card into the e-store. It's stored. It's done virtually. There's no inventory to stock. They don't have to worry about dating issues. There's no capital outlay. They basically pay as they go, and they enjoy, again, high gross margin related to each procedure that they do. Looking at the ROI, just a little bit of a deeper dive here.
We have a lower acquisition cost in terms of the capital hardware. With the placements with the core physicians, it's particularly favorable since many of them pay cash or put it on a credit card. We get around their need to get outside leasing or third-party payer for it. This is a particular segment that we focus in. If you look at our DSOs, which we'll show shortly, they're very, very low as a result of this cash payment, as well as the fact that all of our pulse sales, which represents typically between 35% and 40% of our sales, are all done on a virtual basis via a credit card. We instantly get paid for that. If a provider finds with the broad array of indications, patients, they should simply be able to do two patients per week.
It's a full-body solution that we have, have multiple applications, again, ranging from acne scars, cellulite, lifting, laxity across various segments. We enjoy a premium procedure pricing, which is protected with a minimum advertised pricing policy that we have that we police that offsets the risk of price erosion. This is unlike other technologies where the competitive pricing related to microneedling, RF treatments, and other such treatments is a price war going on right now. We protect our providers in that manner. We also have lower operating costs. Our treatments are very fast. They take between 30 and 45 minutes. There's minimal downtime. The treatments are delegatable. Our consumable costs, again, going back to the cell phone, cell minutes analogy, are much lower than other competitive technologies, and they provide consistently higher margins.
Our ROI table in our Q3 numbers, we published our ROIs of every user's across the United States is much, much faster. It's four- to six months on average for our providers. It allows for the providers, again, great gross margin, great profitability, as well as the fact that they get excellent results and the patients are actually coming back for more. Treatments are clear. They're durable for lasting over one year, but in many cases, the patients are coming back for two to three visits in a particular year or they want treatments in a different area off face and on the body. Here's the ROI map I just referenced. If we look across New York City as an example, New York State, it's close to 200%. It's 192% for a provider.
If we look at California, another major market where we do have a significant install base, the treatments are over 215% ROI. Florida is another example, 191%. This gives us, again, a great talking point to our providers. In this business, it's, again, it's a for-pay business. As technologies are selected, they're selected not only for their efficacy, they're selected by the patient demand, but the ROI is another compelling component as part of the overall sales algorithm when we went to speak to a new provider. Our business model is, again, it's frictionless. This is DaVinci's perpetual motion machine illustrated there. We look at it that our customers are our partners. We are equipped in terms of our programs, our support once they acquire a device to create a win-win partnership, to create procedure growth.
We invest a significant portion of our revenue around brand awareness and around practice development tools. We increase the awareness that drives procedure demand, the satisfaction around the treatments, as well as the broad application causes the patients to go back. At the end of the day, the loyalty that comes back into the practice. The whole key is getting the patients in the door, as well as retaining these patients to sell the patients additional treatments. The equation of creating lifetime value of the patients, we play a key role, and we're emerging as a technology of choice in this area. If we look at one particular segment alone last year, we increased the dermatologist segment of it. We increased the number of Sofwave procedures, 43% year-over-year in terms of procedure growth. The digital presence is real. It's tangible.
Our website performance through the end, December 31, we have not reported our first quarter yet, with several hundred thousand users per month. We are a brand to watch in terms of the awareness. We have 1 million social followers organic. The engagement rate for our company, for our posts, is close to 6% at present time. The industry average is 1.5%. We are ranging at 6%. This is augmented by PR campaigns as well as influencer marketing and the like. Recently, in February, we had an organic—this is not a paid endorsement by the Kardashians. They had a treatment at a provider's office. They asked for additional treatments. They came out. Both Kim and Khloé Kardashian endorsed the Sofwave procedure for its differentiation, for its efficacy, for their need and their desire to have it as part of their routine beauty regimen.
This reflected in our Q1 numbers, which, again, I'm not going to go forward on this call, but there was a Kardashian effect as a result of this particular endorsement that we received that reflected very much so in the web numbers, as well as brand awareness, as well as inbound leads to the company. When we approach a customer, we look at the customer success. We have a complete wraparound. I think we're setting a new paradigm in terms of the services and the support that a customer receives. It's in our best interest to have uptime, maximum uptime, to have these devices utilizing pulses. It's in the provider's best interest from the standpoint that they get a significant ROI, as well as their patients like the treatment.
We have multiple aspects, multiple things related to loyalty programs, complete seamless patient product support, as well as IoT-enabled, as well as that minimum advertised price protection that makes this a complete turnkey solution for a provider. I mentioned earlier that we're selling in 40 countries at present time. We're anticipating several very important approvals in the Asian market, including Japan in the shorter term, as well as China in a little bit longer term. These, again, represent some of the most major markets. After this call here, I'm on my way to Brazil. We're starting to work with the Brazilian partner now and there. This will expand from our current 40 countries to allow us to grow in some of the other major aesthetic markets. The other part of our philosophy is steady product newness.
We have, again, broad, widespread clearances across the face and body. We have different applicator solutions, such as the precise applicator, which allows for treatments in detailed areas, such as the nasolabial folds and around the eyes, which is particularly important in certain populations. We've added to this capability a body device, the Pure Impact, as well as a body applicator, which we have the FDA clearance for, the liftHD applicator, which we're introducing at the upcoming ASLMS. Once a customer invests in our product, we simply allow them the ability, as their practice grows and as their needs grow, to add on a different applicator, a different solution to address a very wide, broad, fast-growing market indications. Here's an example of our Pure Impact. It's breakthrough from the standpoint. It's fourth-generation body toning. It's plyometric in nature. What that means is that it mimics functional exercise.
It's not unlike other earlier devices, which just basically mimic doing sit-ups or whatever. This is a full-body treatment, which recruits multiple opposing muscle groups and allows for a very fast 30-minute treatment, which is a superior outcome in a series of four treatments. In the standpoint, it gives us full capability to treat the patient, the GLP-1 patient, where not only are they having laxity, they also have the need to lift and tone the muscles. We also have a unique arm clearance there. I mentioned on the Sofwave device, we have an arm lifting clearance. We also have an arm toning indication on the Pure Impact. For that GLP-1 patient that now wants to wear sleeveless clothes, this is an ideal solution. Very, very unique. You can avoid surgical alternatives wherever possible. Quick look at the numbers.
Our revenue growth has been exceptional since we've launched the product. Our compound annual growth rate has been 69% year-over-year. Our last report, we reported our Q4 numbers. We did a 20% revenue increase in Q4 and a 19% increase year-over-year. Our pulse revenue, which is very significant, again, this is a high-margin consumable. It increased 63% year-over-year. Our pulse revenue increased to $23 million. We look specifically at the revenue growth. Quarter over quarter, we've grown. The percentage of our revenue coming from procedure utilization has continued to grow. All of this comes at an exceptional high margin. Our geographic split includes 59% in the U.S., 28% in Asia, and 13% coming from both Europe as well as the Latin American market.
We see, again, great potential for future growth, not only across the U.S., but in certain markets like Japan and China as we get to the point of having regulatory clearances in these marketplaces. We are at the point where we generated cash last quarter. We also made a profit. We had a one-time event related to a legal expense, which would have expanded our profitability. If you look at this consistently since we went public early on, we've narrowed the loss to the point where we now are generating EBITDA, and we're looking to expand this in 2025 as well. Financial highlights, the revenue or approximately $60 million occurring at a gross margin of 77%. I'm speaking now on a non-IFRS basis. Our expenses are in line. We're scalable from the standpoint that we invested in infrastructure, ERP, and CRM, as well as have a very stable headcount.
We have 127 people in the company. We're really only planning on adding very few people in the sales and marketing area as we continue our revenue growth. At the standpoint of achieving profitability, we have narrowed the loss to the point where in the last two quarters, we generated cash and achieved a profit for the year. Other financial highlights include the fact that our gross margins are continuing to expand. We see this as an area where we can continue to improve upon. Our pulses are virtual. There's no disposable inventory. The pulses, as well as our software, are not subject to any tariff as well. As we get to the questions related to tariff, I want to point that out upfront, and I'll handle it again as that question develops. This, again, is a focus.
Procedure growth, brand awareness, installing more consoles are all very important. Our percentage of sales, marketing, R&D, and G&A continue to decline as we scale our revenue and manage our costs. Our G&A expense had a one-time legal expense for trademark litigation. That's behind us. We are generating an operating profit. We have a balance sheet right now where we close the year with $21.6 million of cash. We are generating cash at this point in time. We expect to generate cash for fiscal year 2025. To sum up before we get to Q&A, we offer a company that has a unique proprietary technology, which is disruptive in the field, that features a very strong recurring revenue as a result of our virtual pulses. We've completed over 460 treatments through the end of 2024. Our product is probably one of the fastest-growing brands.
We're growing versus many of our competitors. We're simply taking market share from them at this point in time. Our growth last year was high double digits. Our structure is scalable. We're very, very lean. We're positioned to grow well throughout 2025 despite the headwinds, as well as achieve profitability. As far as the brand awareness, we see this as a result of recent events, again, to be another major catalyst for our growth. I'll now pause for Q&A.
Yeah, thanks. That was a great overview. I guess I do have a few questions here. You kind of started to address the tariff topic, but I thought I would just go ahead and ask about it. I mean, I think there's a 17% tariff on Israel. Hopefully, for everyone's sake, it goes away. Assuming it doesn't go away, how can you mitigate that?
I mean, you mentioned the pulses aren't subject to the tariff, but if it stayed in place longer term, I mean, could you potentially change your model to placing the systems and just charging more for the pulses as a way to cover the cost of the machines or something like that?
We are evaluating, we are watching it all at present time. We are very early into the announcements. From the standpoint of potentially raising the price of the console, I mentioned early on that we have the device priced below, not priced, but the ASPs are slightly below $100,000. We have not had a price increase in five years. We have that lever there. We are going to evaluate our competitive position and how we can increase market share. As we look at the pulses, the pulse is the software.
They're not a vendor at all, and they represent a significant portion. In terms of doing a pivot on the business model, we have that option. Certainly, when you want to grow the top line as aggressively as what our goals are, selling the capital and getting the bump around the capital is there. I would say we're in a much better position than competitors that are trying to sell devices at $250,000, $150,000+, and they have a capital equipment business model where they're selling basically just capital equipment that clearly are subject to the 17%. We're waiting. We're ready to react, and we're very agile and opportunistic.
Okay. The other big question I think people would have would be just around kind of the current environment. I know you haven't reported your first quarter, so I don't know how much you can really say.
I'm just wondering if you're seeing any of all these headlines around tariffs and other things affecting consumer demand for aesthetic procedures at all, or?
I would just say we carried tremendous momentum through Q1. As all of this is just upon us, it's like throwing a stone in the ocean, particularly where we're positioned. I mean, we're positioned in a fast-growing segment. The people who are on GLP-1s, for the most part, as some of your research has indicated, Mike, these people are out there. They're very interested in aesthetic procedures. If you have the best-of-breed solution for the tightening, lifting, and toning, it's going to put you in a very, very favorable position. We're getting that messaging and the execution out there. Despite the fact we've seen since COVID, geopolitical, currency effects, you name it, war in Israel, we continue to grow.
At this point in time, we remain bullish on 2025, but we're watching the situation very closely.
Okay, got it. All right. Just within the business, maybe you can comment on I'd imagine the pulses have really high gross margins. I mean, is it 100%, or is it less than that for some reason? Just compare the margins between the pulses and the actual hardware or systems.
The pulses are virtual. I mean, the only thing that really is in our COGS is the development costs of the pulses. They're in the high 90-something percentage range. Our console margins, again, we have a very favorable margin on the consoles, and they're ranging anywhere in the 65% range approximately. Again, we have not had a price increase in a series of years versus competitors that are priced much, much higher.
We argue the value proposition. We argue the value proposition, what the patient derives from the procedure cost, what the doctor can achieve in terms of the ROI. We think we have plenty of room to improve the gross margin as well as operational efficiencies.
Okay, got it. Just your customer base that you're selling to, how much of it is kind of MDs, be it dermatologists or plastic surgeons versus kind of more of like the med spa type setting where maybe you don't have an MD on the staff?
Everyone's money is green. To establish the technology, we went to the most discerning physicians first. We went to the core, the plastics and derms. I would say our market penetration in both is still very, very low above the plastic and derms. They represent additively about 50% of our total revenue. The med spas and everyone else represents the other 50%.
Okay. There is no reason that you need an MD doing the procedures, right?
It is a matter of local law. I mean, I could probably train you or anyone on this call. Me being the CEO, not being a nurse, it is that simple to understand the user interface, the device is that safe. Anyone can operate this device safely, but it depends, again, on local law.
Okay, I understand. Just on the minimum pricing, I mean, that seems like an interesting strategy. I think it makes a lot of sense. How do you actually sort of enforce that? How do you know what they are charging? I mean, it is minimum advertised price, I assume, not what they are actually charging necessarily.
I mean, I guess you could just cut off their pulse purchases effectively since it's all electronic if they aren't cooperating there, or?
We have that. We have that as a lever as well. Basically, we police whatever channel we can, which is basically enabled by social media listing. What we look for is really the overall discount. If someone hits above the 25% discount of the national average of the U.S. price, the light bulb goes off, and that customer no longer will be able to receive a promotional discount. We've only had minimum instances of this. I mean, people are getting a premium for this procedure. The patients simply think it's a better procedure.
Our enforcement, our measures are robust, but we haven't had to enforce it to the degree that you would expect because we are, again, unique, novel in the industry, and differentiated. This is a 24/7, 365 days a year surveillance, and it gives our providers a great degree of comfort how we go about doing it. We can shut them off. We don't like it. We have the ability on the eStore to disable any account and then get into the discussion remediation phase.
Okay. Maybe just finally comment on the DTC efforts. I mean, I imagine this is more kind of social media focused, but maybe just talk about what you're doing there to get the brand name out directly to the consumers or patients.
From day one, I mean, we've been in this industry a long time. We saw a shift as far back as 2008, where many of the providers want the companies to create brand awareness. Certainly, the pharma companies have been at it for years, and their budgets are huge to support this effort. This is a phenomenon in the device arena. We really have to have a very, very strong B2C component. We chose from day one to have an in-house digital team. We have a group of individuals that have know-how, both from the social perspective as well as the SEO perspective, allowing us to have a core competence and to do it in a cost-effective manner, which is scalable. I mean, we do not have—we are not out there trying to launch celebrity campaigns. We really look at influencer marketing.
We look at the synergies between marketing with the provider, what they do and what we do across the social channels, across their websites as well. It was a matter of demand. It speaks to the quality and the strength of the procedure to get a major celebrity endorsement. However, that cascades into the media coverage, the PR. It also cascades into the providers going out there and reposting some of the things and the like. As we look at our Q1 numbers, we'll see a clear inflection in terms of the brand awareness, both in terms of website visits as well as social users and the like.
We watch this very, very, very carefully, what the cost is for us to acquire a lead, what the cost, both on a B2B, B2C basis, and what the actual cost is for us to go out and what percentage of our revenue comes from these activities. We realize that to achieve a high double-digit EBITDA in the future, we need to control sales and marketing. We have, again, all the levers in-house to control those costs and to spend on the things that are the most meaningful.
Okay. All right. I think with that, we're going to have to wrap up. We're almost out of time, but thank you, guys. I hope you had some good meetings at our conference.
All right. Thank you so much. Have a wonderful day, everyone.
Thank you.