Nice to have you here, Louis, Assaf. We are going to today talk about, of course, SofWave, a company in a non-invasive aesthetic device industry, w here for me, I'm a shareholder, t his is not a recommendation. Actually, it's my biggest holding today, and it's a company that has identified all the pain points of the existing legacy devices and is growing dramatically faster than the competitors, even in years where the industry declined mostly. What the company does pretty much is it helps us with rejuvenation of the skin, and I let you describe how you guys do it.
JP, it's wonderful to be here today, thank you everyone for joining us both here in person as well as online. Our comments today are covered under safe harbors, I'll start first as a backdrop, the numbers, because at the end of the day, it's talk, talk, but it's the numbers. We are veterans of this space, the SofWave team, and there is a growing need with very strong secular tailwinds for the need to non-invasively improve the laxity and the lifting of the skin. SofWave was founded on the basis of breakthrough, disruptive, high-intensity, high-energy ultrasound technology that specifically targets the mid-dermis in the skin.
What we do is, in a very natural manner, cause the regeneration of new collagen, elastin, and hyaluronic acid. We do it in a proprietary method. We have nine patents issued in the U.S., nine internationally, and have over 50 office actions pending. I will add to what your opening statement was. Your opening statement was in the technology, I also think we introduced a business model which is utilization-driven, which is also quite different how people identify with aesthetic device companies.
It's very important to mention that the largest shareholder of SofWave is Shimon Eckhouse, which is considered the grandfather of the industry, and he invented two technologies already years ago. You were the president of Lumenis, the first company that you guys IPO-ed and sold eventually, was one of the first with Intense Pulsed Lighting technology, then later with Syneron, which was with light but radio frequency as well. You guys after many, many years decided to come together. How that came across. Most importantly because for me as a shareholder, that means a lot in de-risk execution. I have a team here who has built extraordinary multi-billion companies already, built extraordinary relations. How this happened again, how, and this also in your own words, how you explain that this is a really de-risk execution for the term of shareholders for them?
Well, obviously from my gray hair and maturity, I've learned in business, beyond the business model, beyond the technology, it gets down to execution. Execution is clearly what it's at. A nd when I first joined Shimon, prior to me joining Shimon, I was an employee in a startup in cardiology that we grew to be a company that we sold to GE for $1 billion, and I really was lost. The thirst to grow, to innovate, to build a market, to build a culture, to have financial performance to attract the GE and potentially Medtronic wanted to buy the company as well. I was younger than JP, younger than Assaf, and Shimon Eckhouse found me. The board had done a search. Lumenis, this is before the establishment of IPL and photorejuvenation, photofacial.
We found a way to appeal to a growing market and win not only on the basis of performance of the technology clinical outcome, but actually all the other attributes, and we began making a network of people, of friends, the key thought leaders in the industry. I rejoined, I retired, or did that for several years. We reached a billion-dollar market cap again. Shimon went on and started Syneron, and I rejoined him with the challenge. The challenge was the economy crashed in 2008. Syneron was a young company that was focused in one segment of the market. He wanted to make a change. I was very thankful he thought of me. I bored my wife, my children. It was time to go to work again. We came back, and Assaf was there already, and we then decided to use our balance sheet.
We think about how we deploy capital. We had a very strong balance sheet. We looked at industry consolidation, and we went out and bought a company called Candela, therefore creating the company with the largest revenue and then the market cap during our five-year tenure. After five years there, I decided I wanted to take a bit of time, and I went out and I invested personally. I became a MicroCap.
MicroCap.
I went out and I invested money in digital marketing because I learned one of the hardest things, you can invest money in R&D, and if you know what you're doing, you can come out with a product if you listen to the customer. The biggest thing that was happening in the 2014 era was the digital media. How do you skin the cat where you can get leverage and understand the conversion funnel in this new media that was coming? I invested seven figures plus of my money, along with some very well-known in the space, and I did that and created an entity which is still in operation today, prejuvenation.com.
And Shimon and I were left on a good form, and I received a phone call from probably considered to be the No. 1 dermatologist in this world, because I said the friends you make are equally important. Dr. Roy Geronemus, who said, "Shimon has a technology that's as important as the pulsed dye laser." Pulsed dye laser gets rid of these vascular birthmarks. It's really one of the good things that these lasers do on the dermatology side. It's a very important product. It's considered the industry staple. He said he had something for skin tightening. Non-invasive skin tightening has always been the holy grail.
It's what you're searching for to do this non-invasively, to have consistent results across all skin types, 12 months of year. It's something that's a universal appeal, even before the GLP-1s. Shimon and I talked about it for six months. We were just at the Series B round, and I became employee No. 6 of the company in 2019, and haven't looked back.
Thank you so much for the color of that. Now we need to understand a little bit the technologies.
Excuse me. Let him take control. [crosstalk]
No, tell us why you rejoined.
I rejoined because Shimon and Lou called me, and we were very successful together in Syneron. I was with Syneron Candela for about 11 years, leading together with Lou, the largest company in the space back then. I joined SofWave about five years ago, right after the company went public on TASE. I'd been together with Lou on and off since 2009, and with Shimon since 2004.
The only thing I can add is the cardiology company that I worked for eight out of 10 years was listed as one of the best companies to work for in America an d we're trying to go beyond that at SofWave. This reflects in what we do, what we have. The most important number that's not on here is to achieve these numbers, all we have is 157 employees. We have tremendous productivity from our internal team, as well as leverage, additional leverage to even improve further. I'm sorry to—
No, no. Absolutely. The more—
Overly excited.
The more you guys say, the better for us and all. What happens when you want to rejuvenate the skin in a natural way that you normally create an injury. The competition, whether on the same technology and on other technologies, have a lot of pain points, right? It would be, I think, very beneficial if you guys can describe the pain points on the competitors, which are deep, downtime, pain, safety, and all of that, and how you actually managed to not have them, because that's a very, very important reason that explains your high growth of the business.
When you've had the opportunity to have breadth and depth in your portfolio and had the opportunity to study not only the problem, the clinical, and the biology of what you're trying to solve, as well as have access over the years of the other types of energy, you understand what not to do, which saves you time and saves you a lot of pain when you make the same mistake over. We're not Edison. We basically took the company public with $8 million. Really, we raised $8 million, took the company. Today, it's over a $500 million market cap. We used the experience to understand the depth, which area, where the fibroblast activity was that we had to stimulate. We understood the temperature because we also were the first company to market RF microneedling, which is what InMode eventually made famous over the years.
We also understood how long you needed to create this energy. We studied all the people that came before us, and really, with great credit to them, it allowed us to advance that much further. The energy comes into the skin very differently than Ulthera, Thermage, RF microneedling. We deliver the energy through seven transducers that are cooled, which protects the skin into the mid-dermis, 1.5 to 1.8 millimeters deep on a parallel basis. Imagine that. Imagine the physics of being able to take energy as applied at 90 degrees, but have the actual effect done actually 180 degrees. It's parallel, which runs in direction with the collagen fibers.
If you were to look at the physics behind this, which is a fundamental called the Arrhenius equation, we're at the right time, temperature, and duration to preserve the skin, to stay away from the fat, the muscle, and the nerves, which other companies, the high-intensity focused ultrasound can go into, and we don't disrupt the epidermis, the skin as well. You literally can get on a Zoom call or go walk around here at MicroCap immediately after a SofWave treatment.
In laser you can have a burns mark, with Ulthera you can have deep pain or cut or actually kill your fat cells because it goes too deep. With Thermage you don't have consistency because the hydration on the skin can alter where it hits. All of that is covered by the super—
We can control the energy.
Exactly.
This is part of the consistency. No matter what the operator does, we control how much energy and where it goes into the skin.
Right. That means that there is no downtime. They can go back to work. They can go for lunch and then go back to work. There is no deep pain. Some pain, but not the one of Ulthera, for example. There is no marks. It is a substantial difference to the rest.
You can delegate it. I could teach anyone in the room here.
That's—
I promise. I promise I could train anybody in this room in 30 minutes to safely operate the device
That is very important. Why? Because of what I'm going to talk now, because the unit economics for the doctor, for the dermatologist. If you have microneedling, which like is InMode, you will need to have a doctor with that. In SofWave you don't, so you can delegate, which means the doctor can use his time for a surgery, which will cost $20,000 or whatever. That is also very interesting to understand the unit economics of the consumables, of the recurring revenue as well for them and for you guys.
If you can explain, because when I look at the competition, you have Thermage, which is radio frequency, which they have tips that expire, right? Imagine you are in the middle of treatment and expire, sorry, patient. You have Ulthera, you have to buy a lot of transducers before in both cases inventory. Well, right? With InMode, you have the needles and so a lot of consumables, inventory management. How you guys do it?
The basic business that I learned along the way is you make it easy for people to do business with you. We define a business model, which is frictionless. You don't have to stock, there's no immediate outlay, you don't have to worry about dating, you don't have to worry about defects. Part of being a person is putting yourself in somebody else's shoes, right? You put yourself in the shoes, what will a patient pay? What can a doctor charge? How does the doctor make money, and how does the patient keep coming back? We build the economics around that. Do you want to talk about the specifics, Assaf?
The way the business model works is that we sell a capital equipment, the ultrasound device, the MSRP in the U.S. is $115,000. Then with every utilization, every time they turn on the machine, they need to buy a pulse. The pulse is a click on the applicator that emits an ultrasound beam. For every pulse that they do out of the system, they pay a price of $1.50 to us. That means that there is an upfront capital equipment, and there is ongoing utilization fee. In a relatively short period of time, in less than six years since we launched the product, over 40% of our revenue today are not coming from selling the capital equipment, but actually coming from our customers using the device and pay us for every time they turn it on.
Which margin?
Exactly. I'm getting there right now. In addition to that, not only it's comfortable, convenient, and all the great things that Lou said at how comfortable it is for the clinician, it also has great financial attributes. Since it's a virtual consumable, it's like a software code, it does not have cost of goods. The effective cost of goods on over 40% of our revenue is zero. We have almost 100% gross margin over 40% of our revenue. In addition to that, we sell it online. We sell this software code online on our e-store. It's almost on a completely cash basis. The physician, the clinician go online, they put in their credit card, they charge the device with additional pulses, we get the money from the merchant account within less than 24 to 48 hours.
We have over 40% of our revenue at almost 100% gross margin and almost completely on a cash basis. Therefore, we were able to achieve profitability last year of EBITDA over 10%. We grew top line by over 50%. As I said, again, in terms of cash flow, we generated over $13 million of cash last year.
The biggest problem they face is they got to get people in the door. Certainly they have word of mouth, they have referrals, but they look at cost of acquisition, they look at cost of retention. We created a commercial flywheel that we have a procedure that has durable results, consistent results, where they don't have to give the money back. A lot of this industry, it's overpromise and underdeliver, we made sure we got the FDA approvals. We have a dozen FDA approvals across our portfolio as well. We made sure we did the clinical study. We know where it works, we know it's clearly labeled when it's not going to work, and the type of patients you're going to get the best success on.
The other thing that we've done uniquely is we've created a brand awareness around the brand through, from day one, we started with digital expertise. I would say that our digital marketing is a core competence of the company. It's as strong as the IP portfolio in terms of how we do it. The phone is ringing in the doctor's office. The phone's ringing, people want the procedure that helps to sell the device. Patients coming back asking for a second, a third treatment, asking for it on its body. This has created a circumstance that we're seeing in the numbers.
Now some important catalyst that has occurred and will continue to occur for a long time, that will drive high growth for SofWave. Also, because SofWave is not only one single device, it has more, which they play a role now. GLP-1, which leads that people sometimes lose 30%, 35% of the weight very fast because lose skin, then it becomes that they need to tighten that. They lose also muscle, so they need to build the muscle again. This has become a major growth force as a second derivative for SofWave. If you can explain that, how you approach it with your other devices as a complete platform now on that.
Skin tightening with people aging has always been a big, a great, a wonderful market. Having a consistent solution there, and I've talked to many of the people in the room in one-on-ones today, this has been a world. Since the seven years I've been here, it's a world of uncertainty. I don't know what's going to happen next. I don't even want to open my phone to see what's out of my control that's happening in this world. The one thing that we picked up on three years ago is there's one plastic surgeon, in Austin, Texas, Dr. Johnny Franco. You'll find him on Instagram, Austin plastic surgeon. I see him in the summer at one meeting, and I see him right before Christmas, and he's lost 70 pounds.
He starts telling me about GLP-1s, how he's built his entire practice, where he went from, I think, nine employees to the point where today he has three clinics and he has 90 employees, that he built it all around the GLP-1 practice. Getting to know him and other people that were involved deeply in this, we learned about the muscle loss. We had technology which was very different, that we said, "Okay, we can tighten your skin, but you also need to build the muscle back up." The muscle besides the GLP-1 patient, if you notice people have lost a lot of weight, they have arm laxity. If you see them, whatever, in clothing, you'll see that the skin itself, it just looks different. The other thing that they've lost is the muscle. Muscle, rebuilding the muscle is a challenge.
Today, even the most recent study today is when you start a GLP-1, start an exercise routine. To jump-start that exercise routine, you need a device that really works better than functional exercise. Better. So, we developed the Pure Impact VIP, which basically stimulates muscles and recruits adjacent muscle groups similar to doing plyometric or HIIT exercises. Advanced complex exercises which emulate 73 different very challenging exercises that probably we'd all be challenged to do. We see this as a very important point of the platform that we're selling. We're selling a solution to these physicians.
This regenerative spills over into the wellness and the anti-aging market. It spills over beyond the GLP-1s into the menopausal market. The demand, as Assaf said, that the overwhelming number of our placements, they're using more. We see our ability to have the pulses continue to increase utilization, increase, as well as the ability to continue to grow the top line and to place different consoles as well.
Not only that, when you use PureImpact, which is the device for the muscle, and well, on SofWave, it's very important because what happens with the patients which they use a GLP-1, they cannot lose more fat. You guys are expert because then you have Ariel, who was involved with UltraShape, who was removing fat, but you use that knowledge to ensure that you know how to remove it, to kill it, but you need to preserve it, because a GLP-1 patient now, using any technique that actually removes more fat will look like even worse. That is also another benefit for using SofWave on the GLP-1.
In the U.S., people are very sensitive to losing more facial volume, particularly now since the usage of fillers, that people want a natural look. That was another important point of the technology, the regeneration. It's very, very natural. We've sold certain consoles to female dermatologists in their 40s, that the neck is a very difficult area to treat in terms of neck lift or surgical procedure, and we can treat the necklace line very, very effectively. Why? It's not just the collagen stimulation, it's our ability to naturally regenerate elastin, where elastin productivity falls off dramatically on anyone over the age of 30.
Got you. Now we can talk about the fact that despite almost 50% growth, profitable and all, SofWave is just starting with around 50 countries, and just really recently, a few months in one of the top countries in the world for aesthetics, which is Japan. China is not in yet. How is going the geographic expansion? What people normally don't understand that is that is actually starting, much. It's not well progressed, or it's very well progressed, but it's not well penetrated yet.
This is an excellent point, and I'll just put up one I don't want to do the usual PowerPoint. I think it's fair to share the growth drivers. The growth drivers were all here. If you look at the ability to have the clearance in China. The Chinese market is at least the size of the U.S. We have an awareness growing around SofWave in China. We have a joint venture with a wholly-owned subsidiary of Warburg Pincus, HTDK. We feel very comfortable at our ability to enter the market as a premium brand as we did in Korea and as we're rolling out in Japan.
SofWave won the first brand award in Korea, which is ground zero for beauty treatments and aesthetic devices, and we're the number one brand there. We think China represents another major opportunity for us, and I just listed here a few other ways we think in the next two years that we'll grow as well.
Another avenue of growth, which is important, other uses. For instance, you guys are very good at helping remove acne scars. What is showing this platform, as we call it, is that it's not only about the rejuvenation of the skin only. It's proving a lot of new, different treatments that was not even thought at the beginning. If you can explain more about the acne scar opportunity or different kind of because you have a lot of FDA clearance or patents. You even have one patent to remove fat, which we could elaborate into other avenues of growth. The acne scars is one very key.
We think the SUPERB technology has application in things like acne scars, which is a very large market. Again, in order for our success in this market with uncertainty and with our lean team, we focused. We stayed focused and if we go back through the history, if you have the opportunity to look through our five-year financials, the word "pivot" never came. We wanted the holy grail, which is the skin tightening. We invested many resources there, but adjacent applications are well within our fingertips, and some of the IP still hasn't been published, but there's other very interesting treatment areas as well that we can expand SofWave and the PureImpact into.
Cool. Maybe just to finalize now and Assaf, the question for you, because the numbers are really remarkable, no. Let me just repeat. Growth around 49%, 46% last year. Cash flow positive, completely profitable, of course. The recurring revenue now is becoming almost 50%. How that was achieved in a relatively short period of time because the company is not that old, in a very challenging industry, and what can we expect going forward with all the avenues of growth that we just mentioned?
We know that the demand is there. We know that the technology is well-accepted. Now it gets down to execution. It gets down to the ability to continue to execute as effectively, efficiently, so we can continue the high double-digit growth and expand the EBITDA. I think it's really every quarter we start out with a vengeance, building upon what we just did last month. We really go and attack the job every day.
Cool. Just one thing that I also think is important to mention. Do you want to mention something on the numbers, Assaf, or?
No, I think you covered most of it.
Okay. Is that SofWave is one of the very few companies that actually has FDA clearance for the word "lifting," which it's very important because you can market that. You are having a real proper way of marketing something that is real proven, and there's not many companies that can do that. You have probably one more competitor, which is under the same technology, Ulthera, but the rest not.
To that end, two Fridays ago, we had Global Got Lift Day. Remember Got Milk? Remember the Got Milk, the ad where everybody had the mustache? We did Got Lift. People instantly remembered it's all IP cleared. We have 2,900 systems placed, and 2,573 of our practices posted with millions of impressions, with engagement rate of over 10% of people liked, shared, and commented. Very hard when you have the social proof, building a social community. Even though technology is technology, which is a great advantage for us, very hard psychologically for a competitor to offset that type of awareness that we're building.
Guys, thank you very much for your time and for this valuable conversation.
Thank you.