Earnings call transcript: Sofwave Medical sees 26% revenue growth in Q1 2025

Sofwave Medical (NASDAQ:SOFW), with a market capitalization of $165 million, reported a substantial 26% year-over-year revenue increase for the first quarter of fiscal year 2025, reaching $16.7 billion. The company’s stock price rose by 3.24%, reflecting positive market sentiment. The growth was driven by strong non-GAAP margins and significant recurring revenue, despite the lack of data on earnings per share forecasts. InvestingPro analysis shows the company maintains a "GREAT" overall financial health score of 3.04 out of 5, indicating robust operational fundamentals.

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Key Takeaways

• Revenue grew by 26% year-over-year to $16.7 billion.
• Recurring revenue saw a 49% year-over-year increase.
• Sofwave’s stock price increased by 3.24% following the earnings announcement.
• Expansion efforts in Japan, Brazil, and China are underway.

Company Performance

Sofwave Medical displayed robust performance in Q1 2025, with revenue reaching $16.7 billion, a 26% increase compared to the same quarter last year. The company attributes this growth to its innovative product line, which includes the Sofwave and Pure Impact devices, both of which have received multiple FDA clearances. The company is capitalizing on the growing demand for non-invasive aesthetic procedures, particularly in Japan, the third-largest market for such treatments.

Financial Highlights

• Revenue: $16.7 billion, a 26% increase year-over-year.
• Non-GAAP margins: 76.4%.
• Recurring revenue: $7 billion, a 49% increase year-over-year.
• Cash position: $20.4 million as of March 31.

Market Reaction

Following the earnings announcement, Sofwave Medical’s stock price rose by 3.24%, closing at $4.84. This increase reflects investor confidence in the company’s growth strategy and market expansion efforts. The stock is trading between its 52-week high of $5.46 and low of $3.60, with a notable YTD return of 13.38%. According to InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels.

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Outlook & Guidance

Sofwave Medical is optimistic about its future, targeting expansion in Brazil and China while launching full-scale operations in Japan this quarter. The company expects continued high growth and profitability, leveraging organic endorsements from high-profile influencers like the Kardashians to boost marketing efforts.

Executive Commentary

"Our technology is next generation. It is superior. It is patented, and it’s disruptive," said Lou, CEO of Sofwave Medical. He emphasized the company’s competitive edge in the aesthetic market, noting, "We’re not just competing in the category. We’re competing for the spend of aesthetic providers."

Risks and Challenges

• Market Saturation: Increased competition in non-surgical aesthetic procedures could impact market share.
• Regulatory Hurdles: Navigating different regulatory environments in new markets like Brazil and China.
• Economic Conditions: Global economic pressures could affect consumer spending on aesthetic procedures.
• Supply Chain Issues: Potential disruptions could impact product availability and distribution.

Sofwave Medical’s strategic expansion and innovative product offerings position it well for continued growth, though it must navigate challenges in a competitive and evolving market.

Full transcript - Sofwave Medical Ltd (SOFW) Q1 2025:

Moderator/Operator: Good morning, Lou.

Lou, CEO/Executive, Softwave: Please go ahead. Good morning, Shimon. Bogota, we’re very happy to report our q one twenty twenty five results. We had an outstanding quarter. Our momentum continues.

We achieved $16,700,000,000 in revenue, which represents 26% year over year growth. Our margins were 76.4% on a non GAAP basis. And it’s important to note that $7,000,000,000 of this revenue came on a recurring basis, which represents a 49% year over year growth. We ended the quarter as of March 31 with 20,400,000 cash, and we performed over half a million treatments in this number, continues to expand as we continue to execute our strategic plan. I don’t have to tell anybody on the call how challenging the world is, how challenging the market is, but it does create opportunities for software, particularly how we’re positioned with the ideal solution for the patients that are on GLP one agonist.

We have a superior solution for lifting, toning, and laxity. And as a result of all this and as well as the fact that our treatments actually volumize the skin, the natural appearance, we’re navigating quite well in this difficult marketplace. The other interesting thing of note that came during the latter part of the quarter was the tariffs, which I’m sure we’ll discuss sometime during the course of the call today. So as we look at the quarter, we had many many more high points than low points. Our momentum continues.

If you recall, we had a very strong q four. It’s good to start the fiscal year despite the macro with very strong console placements as well as pulse sales as well. We achieved record high levels. Our brand awareness continues to expand. And if we look at how our product is positioned from the standpoint of having demonstrated superior efficacy.

Patients like the treatments. Providers enjoy giving the treatments because it’s in high demand and offers superior results, as well as the fact that our value proposition, our return on investment is the best in class. It’s it’s simply superior to all of the other competitive offerings that are out there. We see a rising market demand for lifting and toning as as well as for laxity improvement as a result of the widespread use of the GLP-one. And we had an outstanding quarter and improved traction as well with world class plastic surgeons that are adopting Softwave as their noninvasive treatment of choice.

Our execution on the whole has been solid. We have a scalable lead infrastructure and systems in place that will continue to support our high revenue growth and expanded profitability. Why are we taking market share? I mean, it’s a competitive world out there. Compete we’re competing for dollars.

We’re not just competing in the category. We’re competing for the spend of aesthetic providers, but what we’re offering really is a superior patient that has proven outcomes. We have seven FDA clearances on the Softwave device, two on the pure impact. We’ve done numerous clinical studies on a day to day basis. The patients are coming back asking for more, and this demand, of course, achieves great ROI for the providers.

The utility rates are increasing. This is a result that this treatment can be delegated. It has minimum downtime, and we can treat all skin types twelve months a year that results in natural looking that’s superior, and they’re ideal complement for those patients that are on the GLP one throughout their patient journey. Our growth strategy has has three legs. The first is market expansion.

We recently announced our clearance in Japan. This is a major market for us. There are other markets that we plan on entering in the near term future such as Brazil. And in the longer term, we have market opportunity in major markets such as China. The success of our provider is important.

Customer success is very integral to our story. Having an ROI where not only does the provider receive exceptional value, but that the patients themselves feel that the treatment is worth it, then they ask for more, and they come back asking for more. And our entire business model is scalable and can be integrated into any practice. As far as the demand is concerned, we’re increasing patient awareness and leaps and bounds, and this is as a result of our, expanded social media and digital presence in large. If we go on and look at the Japanese market opportunity, Japan is the number three global market for nonsurgical aesthetic procedures, and it has as well the number three three amount of plastic surgeons according to the ISAS surveys.

The regulatory approval gives us a great market opportunity. In Japan, there’s an aging population, and it’s culturally important to seek natural looking results which Softwave achieves. There’s a surge in noninvasive procedure adoption. This culture in particular wants no downtime. The demand for tone, texture, and lifting, again, is driven by the adoption of the GLP weight loss drugs.

We have a partner in Japan, JMAK, that’s second to none. They’re a major entity. We have a very robust go to market strategy. They’re expanding their sales coverage as well as the fact that we’ll

Moderator/Operator: be doing

Lou, CEO/Executive, Softwave: consumer marketing across multiple channels that were in lockstep, and we’re planning on achieving results this quarter as a result of this, recent clearance. The story continues. Last quarter, we showed the red the return on investment. This is the most current map. And as we look at the map, if we look at some of the smaller markets such as Minnesota, we see the return on investment well over a 40%.

We look at other major markets like California and New York where we have, again, significant market penetration, but yet the return on investment continues to grow. We see this as scalable. We see this as we’re driving the patient demand because the patient is well received. The outcomes are superior as something that’s going to continue to mount momentum as we go forward. This is a major tool for our sales team, particularly in The US as they go out there.

And, again, as we compete for dollars, what should the clinician buy? What should they integrate in their practice? What investment they what are they going to make? And software, in essence, provides them with competitive advantage when they partner with us. The brand awareness, if we look at the numbers on the lower left hand side, you’ll see the web traffic, which increased by a hundred over a %.

We’ve also added on some key influencers. We spoke at the end of last quarter, in earnings call about the Kardashians, about how we had organically. And, again, this quarter, organic posts by the Kardashians supporting soft waves, supporting the uniqueness and the superior outcomes. This has driven, some of the awareness not only on the web traffic as well as on the social media, and we also extended our social presence on both Redline and WeChat, not only in North America where there’s very solid and growing Asian populations, in particular, as well as we began our efforts in Asia and China throughout the region. Of note as well was a recent recognition from Guidepost’s QSight, which is an independent marketing agency which serves over 3,000 providers, and Softwave was the number one growth in procedure sales.

Our we led the marketplace in this area. It’s a completely independent service from us. And so across the board, we’re firing on every cylinder and the awareness and the strategy around the digital investment we made continues to pay us dividends. If we look at the Kardashian effect, we see here let’s let’s I’ll call your attention to one number, the engagement rate. The engagement rate across the industry is one and a half percent.

Softwave in the last quarter alone achieved a six and a half percent engagement rate. Now what engagement is is a like, share, or comment. People enjoy and appreciate the content. The quality of the content that we’re putting out there is high. This engagement rate, pertains to all of our social media content, not just the Kardashian post.

And if we look at the growth in social media, it’s it’s it’s considerable. Recently, as of last week, as of last Wednesday, Kim Kardashian came out and posted on her third soft wave treatment. And if we look again towards the growth in the social media metrics on the next slide, you’ll see across every channel, we’re up by double digits year over year compared to q one twenty twenty four. If we look particularly at YouTube, we have close to a hundred thousand subscribers on YouTube, and our video views are up 23%, similarly across every channel. This is important as we as we go and sell to providers.

They want their phone to ring. They wanna make sure that the demand is there, the awareness is there from the patients. It makes the whole sales process easier. And Softwave, I think, is setting a new standard in the industry for brand awareness development. Again, now back to the next set is we look at what happening at our trade shows.

We have a very commanding presence, not only on the podium, but with world class KOLs that continue to help us sell our technology by recommending to their peers their successes, their belief in our mechanism of action, their belief in our efficacy, as well as their financial success with software within their practice. We have on this slide here among some of the very most well known physicians in the world, both from plastics surgery, dermatology, as well as from some very, very well known national med spa chains. So lastly, the most recent news, and this isn’t a forward looking statement since this already occurred organically. And I wanna repeat this. These are not paid posts.

We did not pay for the endorsement from either Kim or Chloe Kandashian. Just last week, Kim received her third treatment. She came out and posted about it. She was red carpet ready. She made appearances.

It was picked up across various news media outlets immediately. We picked up 3,400 followers. And if we look in terms of the number of views that we achieved on the Daily Mail and Youghu Entertainment, the reach is outstanding. Now this will continue to propel itself. We’ll kick in the entire marketing engine, and we’ll do some paid ads and some other very unique ways to make sure that this messaging gets out there.

And we see this setting the stage for us again in q two to continue the momentum and to continue to execute our strategic plan. I’ll now turn it over to Shamal. Thank you,

Moderator/Operator: Lou, back to you for summary.

Lou, CEO/Executive, Softwave: So in summary, a few points. First off, our technology is next generation. It is superior. It is patented, and it’s disruptive. It is a superior noninvasive skin treatment that’s in demand.

It’s far advanced compared to the other solutions that are currently available. Our numbers show the rapid industry adoption with a 26% growth in q one. Our infrastructure, our processes are lead. We think as we look into the future, continued high growth and profitability can be supported by the structure that we have in place already. Our FDA clearances are very broad.

Our provider has numerous patient candidates who apply software technology successful too, and our revenues recurring revenues are very unique that they’re coming on a 40% basis with over half a million treatments completed to date. The brand awareness story is a wonderful one. It’s a great story that continues to expand, and we now have over 1,000,000 organic followers. I’ll now open it up for q and a. Questions, please.

Moderator/Operator: Alright. The first question for you, Lou, is about the schedule for launch in Japan and the progress we are making there with the new approval.

Lou, CEO/Executive, Softwave: So first, I’d like to point out to everyone that through physician input license over the last several years, Softwave and our Japanese partner, JMAC, have been seeding the marketplace with the key plastic surgeons, the key dermatologists, the key thought leaders. There’s an awareness on the efficacy of the technology, the superior nature of what we’re doing. And what we’re in the process of doing this quarter is training the widespread sales team as well as the marketing team to prepare the consumer marketing effort into Japan. We will begin to see our first revenue of scale coming from Japan starting this quarter.

Moderator/Operator: Thank you, Lou. Another question actually for you, Lou, is do you think that we saw any substantial effect of the Kardashian the Kardashian effect on our Q1 results, and how do you see it going forward?

Lou, CEO/Executive, Softwave: Well, I mean, we can see it in the web numbers, and we can see it in the social media numbers. And we can see it in terms of, you know, the awareness as well as at the end of the day. If we look at the conversion funnel, we look at the number of leads that we generated just from the the the the Kardashian posts. Now, I, yes, I I think there were a few people who were on the edge that we closed. I think, you know, if you look at the b to c element, the amount of inbound leads our presider our our providers achieved.

That was significant. And when they went out and reposted on their own, I think we would talk to some of our physicians or med spas, they would say that they had a higher demand. But in terms of giving an exact number, I would say it was very, very positive. I’d much rather have that endorsement than not have that endorsement. But I think we have a national momentum.

We have the solution that GOP wants. We have, I would say, you know, an acceptance in the marketplace that continues to grow.

Moderator/Operator: Thank you, Lou. The next question is regarding profitability, so I’ll take it in Hebrew. And a couple of more questions about Japan, but I think that we we pretty much covered it. Ilal, Shimon, I think we can go back to you and summarize.

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