All good. Good morning, John Block with Stifel. Good to see everyone. We again welcome SofWave to the Stifel Healthcare Conference.
Thank you.
We're here with their CFO, Assaf Korner. Nice to have you here, and thanks for joining us.
Thanks for having us.
I'm going to turn it over to Assaf. He's going to go over some slides and then hopefully leave some time at the end for Q&A. I think there's a lot going on in the aesthetics market. I think, as you'll see from the presentation and the slides, these guys are on the right side of where they want to be, experiencing significant top-line growth and actually turning the corner the past couple of quarters on profitability with net income. Assaf over to you.
Thank you, John. Good morning, everybody. My name is Assaf Korner, and I'm the CFO for SofWave Medical. We are a publicly traded company on the Tel Aviv Stock Exchange, and this presentation is covered by Seth Haber and may include forward-looking statements. I'll give everybody a few seconds to read the disclaimer. SofWave Medical launched the next-generation technology, patented, protected ultrasound beam technology for safe, completely non-invasive head, neck, and body skin regeneration. We have a broad range of nine FDA clearances all the way from lifting, laxity, wrinkle treatment on the face, neck, and upper arm, as well as acne scars, reduction in acne scar treatment, appearance of cellulite, and now toning of the muscles. We have a very strong revenue growth trajectory. We actually just reported our third quarter of 2025 numbers.
We finished the quarter with all-time record revenues of $21.1 million to represent a 56% year-over-year growth. Between 2020 and 2024, we presented a CAGR growth of 69%. We have a superior treatment model, an ROI model that includes significant recurring revenue from selling consumables that I will discuss in the following slides. We have great support from the top KOLs, top dermatologists, and plastic surgeons in the U.S. and worldwide. We work in a strong market. The energy-based aesthetic device market is estimated at around $4 billion and growing at a CAGR of close to 13%. We are selling globally. We have a direct sales team and direct operations in the U.S. and in the U.K.. We also sell in over 50 countries worldwide through distributors. As I said, we are a publicly traded company on the Tel Aviv Stock Exchange.
We finished the third quarter with $26.5 million in the bank. We are very well capitalized, cash flow positive, and we have no debt. A few words about the people behind the company. First and foremost, our Chairman and co-founder, Dr. Shimon Eckhouse. Dr. Eckhouse is considered to be one of the founding fathers of energy-based devices in the aesthetic space. Dr. Eckhouse was the co-founder of Lumenis, the company we all know today as Lumenis, as well as the co-founder of Syneron that then became Syneron Candela. This is the third large public company that Shimon starts in the space and co-founding in this space. Shimon is the inventor of the IPL. He has over 70 US patents registered under his name. He has an incubator of medtech devices of over, I think, 15 companies right now.
Lou Scafuri, our CEO, has been in the space for over 25 years, a very well-known figure in the aesthetic space. He was in a leadership position with Shimon at Lumenis. He was the CEO of Syneron Candela. He led the consolidation of Syneron and Candela in 2010. He has been our CEO for over six years now. We are very lucky to have someone with Lou's experience and credential to lead us. I've been in the space for about 20 years, a little bit over that in biotechnology and life science, over 15 of them in public and private companies in the aesthetic space. I'm not going to go one by one here, but almost all the names that you see here have 20-plus years of experience in the aesthetic space. It's not our first rodeo.
We are really familiar with the market, with the distributors, with the customers, with the patients, and with the clinics. What is the problem that we are solving in the market right now? Currently, all the minimally invasive or minimally ablative solutions out there have significant downside and significant shortfall. We see here in the picture a very nice lady, eight hours post the Fraxel treatment. That is a CO2 laser, what is called minimally ablative. We see significant epidermal damage to this young lady that will require a long healing time, significant downtime. This person in this picture is not going on any Zoom call anytime soon, not going back to work, definitely, and going to be home probably for the next five to 10 days. These minimally invasive or minimally ablative technologies usually require multiple sessions for efficacy.
They are complex devices, many times require the physician themselves to do the treatment. It's not easy to delegate it to other clinicians within the clinic. They have significant risk for adverse events. We see the person in the picture all the way from bleeding to hyperpigmentation and additional complications that are unpleasant. The most important thing out of this slide is the significant downtime that the patient that goes through these procedures will have to go through. The mechanism of action, what the other company is trying to do, and us as well, is everybody trying to penetrate the epidermis, the upper layer of the skin, into the mid-dermis in order to induce a thermal injury at around 1.5 millimeters into the dermis layer at around 60-70 degrees Celsius. After inducing this thermal injury, our body is going into a healing process.
Part of the healing process is the creation, a regeneration of collagen and elastin that our body is slowing down in producing as we're getting older. The reason that we have saggy, wrinkled, loose skin as we get older is because our body is slowing down in production of collagen and elastin. By inducing this thermal injury in the mid-dermis layer, our body is restarting and regenerating again this collagen and elastin. The problem with the other technologies that we just discussed and saw in the previous photo is that everybody needs to mechanically penetrate the epidermis and create a significant epidermal damage. What we do very differently, we can do the same thing and create this thermal injury into the mid-dermis layer without penetrating and while protecting the epidermis completely non-invasively.
We do it with seven ultrasound beams that work in parallel on the skin to create a volumetric skin regeneration and mid-dermis injury that we just spoke about, completely non-invasively with almost no downtime, very safe for the patient as well as for the clinician. The doctor can delegate it to almost everybody in the clinic because it is very safe and easy to use and completely non-invasive. We get natural-looking results, which is something that patients look for more and more these days. They are not looking just for good results, but getting good, natural-looking results completely non-invasively. What I am showing you in the next picture, I am not trying to show you before and after to show you efficacy, but I am showing you this in contradiction to the person that we saw a few slides ago. This is a patient immediately post the SofWave treatment.
While we might see a little bit of redness because of this thermal injury that we discussed, you can see that this person has almost no downtime. This person can go back to work, can go out with friends to drink coffee, can go on a Zoom call, has almost no downtime. We call it a lunch break kind of treatment. She can do it during lunchtime, go back to work. Nobody knows that she has done any treatment. As I mentioned before, we have nine FDA clearances. I'm not going to go line by line on each one of them, but we have nine FDA clearances. We conducted over 14 clinical trials here in the U.S. We believe that the importance of strong clinical data is part of one of our core assets.
We have FDA clearances for all the way from treating the wrinkles, laxity on the face and the neck, eyebrow lift. We are one of the only two companies in the world with FDA clearance for eyebrow lift completely non-invasively. We get great results on the neck, as you can see it. We move more and more for body treatments. We have approval for short-term improvement in cellulite, as well as we have clearance for arm lift, which is becoming more and more important as we're going to talk on the GLP-1 and the GLP-1 agonist and how it affects the aesthetic market. In terms of the go-to-market, we've discussed the nine FDA clearances that we have. We have great support from KOLs.
Again, the people behind the company have been doing it for many, many years, know all the right people that you need to connect with, and you need to get behind your technology in order for them to believe and to support what you do. We have an in-house digital team that is working very hard on creating brand awareness. We do not do only B2B marketing. We invest quite significantly in B2C marketing. We would like to create the demand for our treatment from the bottom up, from the patients. We see great results. We do it all in-house, and we have great support and paid for from top celebrities that are posting to what we have now over a million followers on the different social medias. We got very supportive posts from Kim and Khloé Kardashian recently this year, as well as Brian Johnson.
We invest a lot in this brand awareness and digital marketing. As I stated, we sell directly in the U.S. and the U.K. and in over 50 countries through distributors. A few words about the GLP-1 and the GLP-1 agonist growth and effect on the aesthetic industry. This is some data from McKinsey from earlier this year. They surveyed 174 GLP-1 patients and asked them about their tendency to look for aesthetic treatment. Over 60% of the GLP-1 patients are now looking for facial aesthetic procedures, and they are new to the aesthetic space. 61% of these patients have lost between 11%-30% of their body weight.
That is leading to concerns that they now have around skin laxity and volume that they lost because when you lose a lot of fat fast, you remain with a lot of laxity and lose a lot of volume. The second thing that these patients also see is significant muscle loss that requires muscle toning. We at SofWave address exactly these two main concerns of the GLP-1 patients. Number one is the skin tightening. Number two, and we will talk about it in the following slides, is the muscle toning. Another interesting data point about GLP-1 and what it does to the aesthetic market is coming from ISAPS, the International Society of Aesthetic Plastic Surgeons, who surveyed patients and checked what patients need, GLP-1 patients need these days. They surveyed and see a decrease of 40% in fat reduction procedures.
On the other end, they see an increase of close to 40% in demand for skin tightening procedures. Obviously, with losing fat fast and quickly on GLP-1, you will need less fat reduction procedures, but you will definitely need more and more skin tightening solutions. In terms of our unique business model, we have what we like to call a frictionless sales model with the physician, where we create a partnership with the clinic. We do not just move boxes. We do not just sell capital equipment. With every device that we sell, we create a partnership with the clinic that causes and brings us significant recurring revenue. 40% of our revenue today is coming not from selling capital equipment, but is coming from selling treatments to existing users. How does it work? We sell the capital equipment to the clinic.
The MSRP here in the U.S. is $115,000. The device comes preloaded with 3,000 pulses. We call it pulses. These are virtual consumables that are preloaded on the device and are good enough for about 10-15 treatments. After the initial 10-15 treatments, the health care provider, the physician, needs to come back to our e-store, to our online website, and buy additional packages of pulses that are completely virtually going to be uploaded into their machine. What's interesting about it, first of all, it's a virtual consumable, so it does not have cost of goods, which supports a very healthy gross margin. Also, the operating expenses associated with selling a virtual consumable are significantly lower from the operating cost associated with selling capital equipment. That's a very important part of our business model and our continuing future profitability.
We sell these pulses at about $50 per pulse. That's the price list of a pulse. They can buy it in different packages. The overall idea is that it comes with a limited number of treatments. We see the customers come back again and again with, again, 40% of our revenue coming from selling these treatments and not only the capital equipment. We built this business model not only that it will work for us, but again, it's a partnership with the clinic, with the physician. We would like them to see a quick ROI and to benefit and to profit with the machine. The way we built the business model tells us that with two treatments a week of full face and neck, and they charge on average in the U.S. about $3,000 per treatment.
If they do two treatments per week at $3,000 per treatment, they will get back their ROI in less than six months, usually between four to six months, which is exceptionally attractive for the physicians. What we did in the next slide, we actually looked at the ROI, and this is a map of all the devices that we sold in the U.S. We did not cherry-pick all the best and the most profitable clinics. We looked at the ROI, how much money they make on the first 12 months of owning the machine. We looked at it state by state, and we see that all the way from California through Texas and obviously New York and New Jersey and Connecticut, you see the ROI ranges at 150% to even 6% and 700%.
California is at 210%, which means that in the first year of owning the device, they made only 210% of their initial investment. From now on, they buy the pulses, they enjoy the treatment, and we build the business model in a way that it will be very profitable for the physician and, as I said, also very profitable for us. A few words about the brand awareness. I explained earlier today that brand awareness and the in-house marketing effort that we do is part of our competencies, and this is part of our go-to-market strategy. We have an engagement rate of over 8.5%, which is an exceptional engagement rate to everything that we do online. We have over a million followers on the different social medias, and we continue to win awards, only five awards this year for the technology that we presented.
One of the things that I want to share with you is, again, going back to this idea of creating a partnership with the physician. Earlier this year, we did an internal survey, and we surveyed over 500 of our users here in the U.S. We asked them different questions. The main question was, how do you and would you recommend SofWave to your peers? The result of this survey that we did gave us an NPS. NPS is a Net Promoter Score of 86%, meaning over 94% of the people that we surveyed said that they will recommend SofWave to their peers. When you take down the people who said that they did not recommend, you get an NPS score of 86%, which is an exceptional NPS score compared to other competitive companies and compared to other products in the space.
It goes back to the whole story of making sure that we do not only sell capital equipment to the customer, but the customer is actually happy. They get the results. The patients are happy. We all enjoy these economics of these consumables that we are selling. In terms of product newness, here on the picture, we see the ultrasound device. The ultrasound device comes with one applicator, which is the Lift Applicator with the seven ultrasound transducers that I discussed earlier today. We also launched two other applicators that go together with the same ultrasound device. One is the Precise Applicator. It is a smaller applicator with only three ultrasound transducers. It is meant to have a more efficacious and easier treatment for smaller areas, especially around the face, around the eyebrow, and around the lips.
Earlier this year, we also launched the Lift HD applicator that has, again, seven ultrasound transducers, but the ultrasound transducers are double the size than the regular applicator. The whole idea is to move more and more for body treatments, to move the clinicians to treat with the device more and more in the body. We heard from our clinicians that they need something that will give faster results and more comfortable for the patient. Again, as part of the GLP-1 strategy and addressing the GLP-1 patient, we felt that it's very important to address also and provide a solution for body treatment. We are right now presenting or selling the device with up to three additional applicators. Additionally, we recently launched what we call the fourth-generation EMS device, Electric Muscle Stimulation Device.
Going back to the GLP-1 story of patients looking for skin tightening and muscle toning, this is the newest EMS device out there, completely wireless. We can treat up to six muscle groups at the same time without any intervention. While the patient is laying down on the treatment bed for 30 minutes, they can go through a full body exercise, emulating a full gym exercise with six different muscle groups: the arm, the thighs, the belly. At the same time, since it's a standalone device, the clinician can do a SofWave treatment on the face and the neck. Think about a clinic who has a SofWave device that now can add an EMS device next to the SofWave device. To see a SofWave patient that comes to a face and neck skin tightening treatment, that takes about 35-45 minutes.
At the same time, it's completely wireless and without any additional intervention. They can do also EMS muscle toning at the same time. Again, looking back at the ROI for the clinician, this is a very special and unique feature for the clinic to do these two treatments at the same time. Second of all, going back to the story, we are doing skin tightening and muscle toning, which we see is the most growing demand procedure in the market right now. In terms of where we sell, we're selling in 55 countries. I will talk a little bit about the geographical split as we move into the financials. We just reported our Q3 2025 numbers, $21.1 million. That's a whole-time record quarter for SofWave. It's coming in the third quarter that is seasonality, considered to be the weakest quarter in the space.
The aesthetic market is usually showing a slowdown in the summer due to obvious reasons. This is actually the quarter that we show our highest revenue ever. It represented a 56% year-over-year growth. We grew quite significantly both on consumables. Consumables in the third quarter were $8.3 million, which grew 55%. Even as important is to mention the capital equipment revenue growth of 57%, all the way to close to $13 million. On the right-hand side, we see our annual revenue going all the way to 2024. I would like you to pay special attention to the blue portion of the bar. In 2024, over $23 million of our revenue came from not selling capital equipment, but from selling a consumable, and again, a virtual consumable with basically a 100% gross margin.
If we look at our quarterly revenue growth, and this is Q1, Q2, Q3, and Q4, all the way from 2020 to 2025, what I would like you to pay attention to is the acceleration in growth over the last four quarters. We absolutely see an acceleration in growth both on the consumable and in the capital equipment. We see it almost everywhere in the world. In terms of the geographical split, over 50% of our revenue is coming here in North America. Right behind it is the Asia-Pacific region with over 30% of the revenue. The Asia market has always been a very strong market in aesthetic medicine. We got earlier today an approval of the Japanese FDA, and we launched a product in Japan. Japan is considered to be one of the top markets for non-invasive treatments in the world.
We are also doing exceptionally well in all the usual suspects in terms of aesthetic medicine in Asia, including Korea and Australia. We are very happy with the growth that we see in Asia. Important to say is that these numbers do not include sales in China. We do not have a regulatory approval in China yet. We signed a collaboration and distribution agreement with a Chinese company a few years ago called HDDK. HDDK is a Werber Pinkus company. They took upon themselves to take our product all the way from regulatory approval all the way to market it in China. The Chinese regulatory approval is a little bit lengthy and unclear. It is not something that we have good projection in terms of the approval and the timing of this approval.
It can be quite a significant inflection point for the company because there is a lot of data out there that's showing that the Chinese aesthetic market is going to be at the size of the U.S. aesthetic market in the next few years. Lastly, I will just say a few words about EMEA. We saw 13% of our revenue coming from Europe and the Middle East. We do see some improvement in Europe in the market. We see interest rates going down a little bit. We see an overall improvement in the European market. In terms of our progress in profitability and going all the way down from operating loss in 2022, we posted two consecutive quarters of operating income, $2.9 million in the second quarter, and $1.9 million in the third quarter.
We see the revenue trajectory is also bringing the profitability trajectory. The graph is going in the right direction. A few words about our P&L for the third quarter. We finished the quarter with over $21 million in revenue. I would like you to draw your attention to our very healthy gross margin, approximately 74% gross margin. We have a nice gross margin on the device. I am going back to the 40% consumable, that is a 100% gross margin. That is also very profitable all the way down to the operating margin. We finished the third quarter with $1.9 million of operating income. That is excluding stock-based compensation. This is comparing to a loss of $800,000 in the third quarter of last year. We actually finished the third quarter with a $1 million GAAP net income.
When we look at the nine months of 2025, revenues are close to $59 million. That's basically the revenue for the full year of 2024. We already almost reached it in the first three quarters of 2025. Again, gross margin very healthy of 75%. We see all our operating expenses continue to decline quite significantly as a percentage of revenue. We finished the first nine months of the year with $4.5 million of operating income versus close to $2 million of operating loss in the first nine months of 2024. The net income for the first nine months of 2025 was $1.4 million. A quick look at our balance sheet: $26.5 million in cash as of the end of the quarter. We actually generated $2.5 million in the third quarter. We generated close to $5 million in the first nine months of 2025.
We are growing over 50% in top line. We moved to a second straight quarter of profitability on the net income and operating income. We are generating cash, and we are very well capitalized. Just to summarize everything, John, SofWave, we are delivering the next generation patented energy-based non-invasive aesthetic skin treatment in an industry that needs this solution, especially in the light of the GLP-1 trends right now. Rapid growth of over 56% year over year in the third quarter with the lean infrastructure that supports continued high growth and profitability, broad FDA clearances, significant recurring revenue based on our estimation. We conducted already close to 667,000 treatments worldwide. We have significant brand awareness with over a million followers on the different social media.
That's great. Perfect overview.
That's us.
Yep. Great time. We've got five minutes for questions. Maybe I'll just get after it. Looking back at a couple of your past earnings calls, I think you guys have talked about being a net beneficiary of tariffs relative to competition. Maybe, Assaf, if you can elaborate a little bit on that. If you can go back to just the acceleration that you saw. I mean, you saw it in Q3, but then you moved forward a couple of slides. To your point, you saw it across 2025. When I think about aesthetic devices, it's rare as you get further into the product launch that you see an acceleration year over year. What would you attribute that to? Is it a GLP-1 thing? Is it a net beneficiary of tariffs? Maybe if you could elaborate a little bit there.
Great. I'll start with the tariff. Something that's interesting about the tariff, and interesting in terms of us being a capital equipment company, but with 40% of our revenue coming from basically selling software code. This virtual pulse is a software code that you buy online, and you upload it to the device. There's no tariff on software. If you think about other companies that are at 90% capital equipment sales, and there's tariffs on 90% of their cost of goods, for us, it's at around 60% of our cost of goods. That's one big benefit. Second of all, we manufacture in Israel, which for now at least has a relatively low tariff rate of 15%. Comparing to other competitors who manufacture maybe in Asia and other places in Europe, we are higher, the tariffs are higher.
We see some kind of a benefit on manufacturing in Israel as well. In terms of the accelerated growth, I think it's a combination of a few things. First of all, I really believe that we are in the early on stages of our growth. We don't give an accurate number of how many systems we placed out there, but we're counting it in a few thousands. We know from past experience, and Shimon has tons of experience. Shimon is right here with us in the audience. Danny in Lumenis and Syneron and Candela, we know that there are many more systems to place out there. We are not even at the stage, as you said, as the companies grow and mature, we are not there yet. There's definitely room for a lot of growth. We do see growth coming from additional regulatory approvals.
The approvals that are still pending or that you just got in Japan definitely help. We just launched the Pure Impact, the EMS device. This is another product that will need to go through regulatory approvals worldwide. As the regulatory approvals are coming in, we will continue to see, hopefully, the acceleration in growth. Again, we are very early on. You take the opportunity of placing so many more systems together with the unique recurring revenue model that we have, we still feel that we have a long runway in front of us. Going back, just one last comment to the GLP-1. We really feel good about the GLP-1 trend and what it can do to our business. We hear it from carers. We hear it from physicians. We address the exact two things that the GLP-1 is looking for.
I know I'm repeating myself, but that's an important point: skin tightening and muscle toning, skin tightening and muscle toning.
To your point, per some of the survey data that came back, it seems like there's sort of winners and losers. You were on the right side or the wrong side. To your point, you feel strongly that you're on the right side.
Exactly.
Assaf, maybe if you can elaborate a little bit on what you're seeing with the core and non-core channels. I think we've been hearing for an extended period of time that core was healthier, non-core was struggling a little bit, the high-rate environment weighing on the non-core. Tell us about your experience. What do we need to see from an interest rate environment to help that non-core channel out a little bit?
Absolutely correct. In a higher interest rate environment, I'll call it the Medicare spouse, the non-core businesses are struggling more to get financing and to pay for capital equipment. For us, it worked quite nicely that when the interest rates were starting to go down, but when the interest rates are high, we are still at the early stage of launching and introducing our technology. You start with the core physicians. You start with the dermatologists and the plastic surgeons. It worked very nicely for us. In addition to that, because of the GLP-1, I'm going back to the same point, we see more and more increasing demand from plastic surgeons generally. Plastic surgeons who in the past did not look really for non-invasive solutions are seeing growing patients' demand that are coming for GLP-1 treatments, need skin tightening treatments.
Not everybody wants to go under the knife. Not everybody can afford to go under the knife. Not everybody needs to go. Not everybody wants to. They see an increased demand for skin tightening generally. They are now looking for more non-invasive solutions, again, working very nicely with our go-to-market model. As we continue to grow, yes, there is significant growth opportunity in the medical spas. They will need a lower interest rate. You know, a medical spa, at least until six months ago, wanted to buy capital equipment. Interest rates of 15% or 16% many times, that's definitely scary and affecting the competition as we see. We see a decrease in interest rates, hopefully continue to see it. That will support also the growth in the non-core business.
OK. Please.
Yeah. The 50% of the business derived in North America, how do you see that kind of growing as the next years come upon us? You talked about approval in Japan. Where do you see the revenue coming from?
Good question. I think that for the near future, we see the same split. I think this is a pretty traditional and consistent split that we see in the space. With one thing that might come into effect, which is the Chinese approval. Again, we do not have a good projection of when and how it is going to happen. This can be changing the weight a little bit towards Asia. We think that the 50%-60% North America business is what we usually see in the market.
Thanks, everyone. We're going to have to conclude there. But Assaf, thanks very much for your time. Really appreciate it.
Thank you, John. Thanks for having us.