Apyx Medical Corporation Price & Performance (APYX)

Undertake no obligation to publicly update or revise our forward looking statements as a result of new information, future events or otherwise. This call will also include references to certain measures that are not calculated in accordance with generally accepted accounting principles or GAAP, We generally refer to these as non GAAP financial measures. Reconciliations of those non GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. I would now like to turn the call over to Mr. Charlie Goodwin, Apyx Medical's President and Chief Executive Officer. Charlie, please go ahead. Thank you, Jeremy, and thank you all for joining us today.

Per our usual format on these quarterly calls, I will be providing a review of our performance in the fourth quarter and full year 2024, and then I will turn the call over to Matt for a review of our fourth quarter and full year twenty twenty twenty four financial results as well as our full year 2025 guidance. We will then open the call for questions. Let me start with a review of our fourth quarter performance We reported total revenue of $14,200,000 for the quarter a slight decrease of 3% compared to $14,700,000 for the same period last year.

Looking at this by segment, sales of our advanced energy products exceeded our expectations for the fourth quarter at $12,100,000 which is essentially flat year over year. To this point, we were pleased to report that the Advanced Energy segment grew 30 This reflects the stronger sales of single use handpieces and the improved capital equipment sales in the second half where we more than doubled the units shipped. While it's too early to say that two quarters of data make a trend, we are encouraged by this momentum and are hopeful that we can build on it as we move into twenty twenty five. The softness in the aesthetic space throughout the last eighteen months is not specific to our business. As companies face similar challenges due to the macroeconomic environment and the rapid adoption of GLP-one drugs for weight loss. We believe the use of GLP-1s has caused patients to delay aesthetic treatments as their discretionary funds have been diverted to paying for GLP-one drugs. These drugs can range in price from about $300 for compounded versions and up to 1,800 a month for branded cash pay options. In addition to the financial commitment, we believe patients are postponing aesthetic procedures until they reach their ideal weight.

Importantly, we do not believe non invasive procedures which you normally see offered at the med spas, will be effective treatments for the loose and lax skin that many patients see after the weight loss associated with the use of the GLP-1s. We believe all the factors I just mentioned have contributed to declining revenues for plastic and cosmetic surgeons beginning in 2023 and continuing through 2024, causing many physicians to delay the purchase of capital equipment. However, we believe the wave of GLP-one patients that have reached their weight loss goal over the past twelve to eighteen months will be seeking a surgical solution. As the only true surgical aesthetics company we believe our Renuvion system is uniquely positioned to help surgeons capitalize on this burgeoning tailwind. Unlike others in the industry, we have proprietary technology that can address these patients' needs offering Renuvion as the only FDA cleared device for use following liposuction in body contouring procedures. We believe this minimally invasive surgical procedure is the best treatment option to address loose and lax skin providing a durable and transformational result. This is because of the significant amount of loosen lax skin that these patients will typically have after losing 15 to 20% of their total body weight.

It is our belief Renuvion should be the standard of care for these patients. To amplify our message, we have been executing our direct to consumer marketing strategy Since launching in Q2 of twenty twenty four, this program has delivered significant reach views and PR beyond our expectations. We surpassed our media place exceeded our impressions goal by over 13000%. Our brand has been featured in people, Oprah Daily, Glamour, Well and Good and more. We have also leveraged the influence of Fumi Monet and Dolores Cantina each bringing a unique voice Their messaging around body confidence, looking and feeling your best, and the importance of skin tightening post GLP-one weight loss has resonated strongly with consumers. Through their authentic storytelling and our strategic campaign execution, we have driven strong engagement, increased brand awareness and elevated our consumer demand. We are the number one trusted body contouring Continuing to capitalize on the minimally invasive surgical trends, I am also excited that we recently submitted our five ten ks 4A on body contouring system to the FDA which was ahead of our original schedule by nearly ninety days. This all in one surgical platform seamlessly integrates Renuvion, ultrasound assisted liposuction power assisted liposuction infiltration, aspiration, electrocoagulation and fat transfer into a single streamlined device.

When we started the development of Aon, we had not anticipated the GOP weight loss revolution. However, considering the major shifts in the market, we believe A. ON is a game changer for surgeons and will further differentiate us positioning Apyx as their preferred surgical partner.

Our goal for the next few years is to be able to walk into almost any surgeons practice and see an Aon positioned in the heart of their Operating Room. Regarding timing, we are preparing for a planned launch of A. ON in the back half of twenty twenty five pending FDA clearance. We expect this launch to kick start our capture new market share and expand our total addressable market in aesthetic surgery. For those of you interested in learning more about the Aon system and want to get an early look at this revolution we invite you to visit us from March '23 at the Aesthetic Meet at the Austin Convention Center in Austin, Texas. This is the premier event in aesthetics and we are really excited to introduce A. ON. I hope today's call along with previous announcements has helped convey just how excited we are to introduce A. ON to aesthetic surgeons. We look forward to gaining traction in 2025 and providing further updates as the year progresses.

Before turning the call over to Matt to do a deep dive on our financial results, I wanted to remind everyone that in November of twenty twenty four, we announced a restructuring program that reduced our U. S. Workforce by nearly 25% in order to better focus, optimize and streamline our operations. This program right sized our operations and reduced our costs given the changes in the market around the rapid adoptions of GLP-one drugs.

Our annualized future cost savings from this reduction in force is estimated to be a Through this initiative, we also identify over $4,000,000 of additional cost savings and anticipate our operating expenses to be below $40,000,000 in 2025. As part of a broader strategic initiative, we also announced in the fourth quarter of twenty twenty four that we strengthened our balance sheet by completing a registered direct offering with net proceeds of approximately $6,800,000 and amended our credit agreement with Perceptive Credit Holdings. We believe the collective actions taken in the fourth quarter have better positioned Apyx Medical for long term success. I will now turn the call over to Matt for a review of our fourth quarter and full year 2024 financial results in more detail, along with our financial guidance for 2025 which we refined in today's release. Thanks, Charlie.

Before I get started, please note that all references to fourth quarter and full year financial results will be on a GAAP and year over year basis unless noted otherwise. As Charlie mentioned, total revenue for the fourth quarter twenty twenty decreased 3% to $14,200,000 compared to $14,700,000 in the prior year period. Revenue for the Advanced Energy segment was flat at approximately $12,100,000 as a result of increased sales of new generators and single use antpieces in The U. S. And customer upgrades to the APYX-one console internationally. These increases were offset by a lower average selling price, of generators to domestic customers fewer domestic customer upgrades, to the Apex One console and a decrease in international sales of new generators. OEM segment sales decreased 16% or approximately $300,000 for the fourth quarter of twenty twenty four when compared to the fourth quarter of 'twenty three. The decrease in OEM sales was due to a decrease in sales volumes to existing customers. Domestic revenue increased 1% year over year to $10,600,000 and international revenue decreased 8% year over year to $3,700,000 Gross profit for the fourth quarter twenty twenty four increased to $9,000,000 compared with $8,900,000 in the prior year period.

Gross profit margin for the fourth quarter twenty twenty was 63% compared to 60.9% in the prior year period. The increase in gross profit margins was primarily attributable to changes in both product mix and geographic mix within the Advanced Energy segment with domestic sales comprising a higher percentage of total sales. This increase was partially offset by a decrease in the average selling price of generators to domestic customers and customer mix within the OEM segment. Operating expenses decreased to $12,000,000 for the fourth quarter twenty twenty four compared to $14,700,000 in the prior year period. The decrease in operating expenses was driven by a $1,900,000 decrease in selling, general and administrative expenses a $300,000 decrease in research and development expenses, a $300,000 decrease in professional service expenses, and a $200,000 decrease in salaries and related costs. Loss from operations decreased $2,700,000 or 47% to $3,000,000 Other expense net for the fourth quarter twenty twenty four and 'twenty three was $1,500,000 and $3,800,000 respectively. A decrease was primarily due to the $3,100,000 loss on extinguishment of the MidCap credit agreement in the fourth quarter of 'twenty three. Net loss attributable to stockholders was $4,600,000 or $0.12 per share for the fourth quarter twenty twenty four compared with $9,600,000 or $0.28 per share in the prior year period.

Adjusted EBITDA loss decreased 53% to $2,200,000 compared to $4,700,000 in the fourth quarter of 'twenty three. As a reminder, we provide a detailed reconciliation from net loss attributable to stockholders to non GAAP adjusted EBITDA loss in our earnings press release. For the three months ended 12/31/2024, cash used in operating activities increased to $2,900,000 compared to $2,200,000 used in the prior year period. As of 12/31/2024, the company had cash and cash equivalents of $31,700,000 compared to $43,700,000 as of 12/31/2023. In addition, during the fourth quarter of 'twenty four, we amended our credit agreement with our lender partner Perceptive Advisors reducing our revenue covenants and adding a maximum operating expense covenants at $40,000,000 and $45,000,000 or 25 and 26 respectively. Associated with the amendment, we issued to Perceptive 150,000 shares of our common stock. Turning to a review of our '25 guidance. Which is also included in our fourth quarter twenty twenty four financial results, press release issued earlier today. For the twelve months ending December 3125, we expect total revenue in the range of $47,600,000 to $49,000,000 compared to $48,100,000 the year ended December 3120 Our revenue guidance assumed advanced Energy revenue in the range of $39,600,000 to $41,000,000 as compared to $38,600,000 for the year ended 12/31/2024.

Reflecting current trends. OEM revenue is expected to come in at approximately $8,000,000 as compared to the $9,500,000 for the year ended December 3124. As we return to more normalized customer ordering, and order fulfillment. We anticipate gross margins of approximately 60% for the year and total operating expenses not to exceed $40,000,000 As a reminder, is somewhat of a seasonality to the aesthetic space or quarterly revenue is normally the lowest in Q1 and Q3 and the highest in Q2 and Q4. We believe based on our projections, including the uptake of the A. ON platform, working capital management our strict cost controls and the recent capital investment will yield cash into 2027. This completes our prepared remarks. Charlie and I will now open the call for questions. [indiscernible] Thank you. We'll now be conducting a question and answer session. Our first question today will be coming from the line of Matthew O'Brien with Piper Sandler. Please proceed with your questions. Good morning. Thanks for taking my questions. Matt, I just wanted to confirm, you said 60% gross margin for 25 here?

Yes. Sorry. Yes, great question. Yes, we're looking at [indiscernible] similar margins that we had for 'twenty four into 'twenty five at around 60 Apyx 60%. Okay. I'm just assuming there's probably some some weighting from the I don't know if it's the Aon launch or I'm just guessing just trying to figure out why that wouldn't recover just given the proportion of revenue coming from from Advanced Energy versus OEM, especially domestically?

So when you look at our gross margins, you're absolutely right. There's a it depends on many things, which include geographic mix, product mix and then segment mix. And what we're looking at for 2025 is [indiscernible] the current trends that we saw in 2024 will continue into 2025. Which puts our estimated gross profit about at that around that 60% mark.

Got it. Okay. Thanks for that. And then Charlie on Aon, just the timing getting moved up here by ninety days, congratulations on that. What are you assuming if anything, in the guide for the back half for Aon? And then how should we think about your interest level or options in terms of or versus leasing kind of arrangement? How should we think about that?

Yes. So Matt, if you remember, when we gave the guidance, we gave the guidance when we preannounced in January to what it was going to be. Our And we had predicted that we wouldn't file Aon until the end of the first quarter.

And so quite frankly, we haven't updated anything in our guidance for that. For the ninety days earlier. And the reason for that is look, we still predict that we will have approval in the first half of the year. But obviously, we don't have approval as we sit here right now today. And then when we do launch it in the back half of the year, we will have a soft launch like we always do with capital equipment to make sure that everything is working the way it's supposed to and all of that stuff. And so the amount of revenue that is associated in our original budget for Aon is obviously not very big because of all of those factors. So depending on when we get approval, depending on all of those things, we'll be able to update as the year goes on of what we think that Aon is going to do to the revenue, okay? That's number one. Number two, for your second question, is we actually believe that Aon will be something that all doctors are all surgeons are going to want to have in their operating room. Like we said, we've taken every technology that is available today and we've upgraded that technology.

We've made it state of the art. And then we've put everything together where the work flow and the efficiencies and everything else that go along with having a standalone system that is just for body contouring and all surgical procedures is something that exists everywhere else in surgery but it doesn't exist in plastic surgery. And so we think that this is going to have a great value proposition for the doctors. As far as how they are going to be able to acquire it, there's a couple of things. Obviously, they'll be able to buy it outright they'll be able to lease it, they'll do all of those things.

What we will do is we've always tried to take very good care our existing customers first. So everybody today that has an Apyx one generator and has already upgraded and done all of those things we'll have the opportunity to get special pricing if they want to buy it for a limited time right away. And then we will then obviously take back competitive technologies in trade to make sure that we're getting Aon into every OR that is out there. And so we've got a lot of programs that we'll be rolling out over time. A lot of things to show doctors that this is going to be a tremendous value for them to get involved with the technology and this system.

Got it. Thanks so much. [indiscernible] Our next question comes from the line of Matt Hewitt with Craig Hallum. Please proceed with your questions.

Good morning. Thanks for taking the questions. Maybe the first one one, you noted that the success that you had in the DTC campaign I'm just curious, kind of what were the changes that were implemented in how do you see that playing out in 2025?

So I think it's you got to go back and remember that we didn't actually start doing our direct to consumer campaign until the middle of twenty twenty three and that's when we got the clearance for Renuvion used after liposuction in body contouring as treatment for Lucentlax skin, okay. So that's when it actually started. And quite frankly, our first foray into that, the first back half of 'twenty three, we actually didn't have the right partner and and really didn't have the best message. In January of twenty twenty four, we [indiscernible] tremendous job for us. And we actually started rolling out the first programs of that in April of twenty twenty four. So we actually as we sit here today actually haven't been doing this direct to consumer for almost even a year yet. And so the results that we have seen from the campaign the results that we have seen that we are doing have just crushed every metric that we had before. And the fact of the matter is now is because of the adoption of GLP-one drugs and because of the need of these patients that are losing 15% to 20% of their body weight, we are a incredible treatment for loose and lax skin.

And we're the only FDA approved treatment for that. And the real answer is because of the amount of weight loss that they are going to have that they are going most of those patients are going to benefit [indiscernible] previous noninvasive therapies are going to be able help with that much skin laxity that the message is really resonating with consumers, influencers, doctors, everybody else is that this change is is really been good for us from a direct consumer point of view. And so I think those are some of the main change Some of it was on us not having the right partner and some of it is just what's going on in the marketplace.

That's great. And then I guess shifting gears a little bit, obviously, there remains it remains a challenging market but it seems like you are doing better domestically than you are internationally. Is there anything that you can learn or that you can take from, some of the improvements that you're implementing in The U. S. To the external markets? And what could that mean from for an upside perspective for '25? Thank you.

Yes.

So if you look at why we think The U. S. Is doing better relative [indiscernible] quite frankly. And those drugs will be adopted everywhere in the world The United States isn't the only nation that likes the food and consumes too much alcohol and all of that good stuff.

So those drugs will make it all over the place and we expect similar type results throughout the rest of the world because we believe that surgery is going to be the key to take care of the needs that this specific group of patients has. There was always a group of patients that needed surgery and benefited from surgery. But now that group because of the laxity in the skin is is just continuing to grow and it will for however long these drugs stay in vogue, if you will. And quite frankly, there's a lot of people that think that these drugs will be part of people's daily routines for sometimes the rest of their lives. So we don't see that changing. And quite frankly, we've always believed that surgery is really the thing that provides durable and transformational results in the aesthetic space. And our focus has always been on that. We think that can become the most dominant company in surgical aesthetics and our partnership with aesthetic surgeons is something that we look forward to for many years. Not only do we have a clinic vested interest because of our consumable and disposable business to have them help grow their surgical practices.

If they're doing better, we're doing better. And so we're aligned perfectly from that scenario. And we think that disruption in the marketplace to your point, it is a tough market, has been being And we think because of that major disruption that there are going to be companies that have the right technologies and products to treat those patients and there's going to be other companies that don't have the right technologies to be able to treat those patients. And we think that we're at the forefront of that.

That's great. Thank you.

Thank you. Next question is from the line of Sam Ibert with BTIG. Please proceed with your question.

Hi, good morning, Charlie and Matt. Appreciate you taking the questions this morning. Maybe I can just follow-up on that last point you were making and maybe get your thoughts on what you're hearing or what you're seeing from accounts that maybe have started to adopt GLP-one versus those who haven't? And if you're getting that pull through on the utilization for Renuvion at this point?

Yes. Look, I think that one of the things that we saw in the fourth quarter in particular was handpiece growth again in The United States. And I think that we had said that it would grow low double digits for the year and in fact it did. And it was actually a little bit higher in the fourth quarter than that. So we are seeing that from our usage data and quite honest to have our consumables in The United States grow low double digits in an incredibly different difficult aesthetic environment, I think speaks volumes to just that without me saying that it's it's being backed up in the numbers. And that now is over 60% of our total advanced energy revenue. And so that focus and that drive and those patients coming in to have their LucentLac skin treatment is something that our doctors are seeing. Their surgical practices are are good, they're solid, they're busy and a lot of the disruption that happened in twenty twenty four from a revenue per perspective for the offices was because of the noninvasive procedures were down almost a third. So we think that surgery is going to remain strong and we think that the doctors that are talking to these patients focused on these patients and bringing these patients in.

Their practices have never done better. '24 was the best year that they ever had. And we think more and more doctors obviously are moving to how they're going to deal with these patients and the offerings that they're going to have for these patients. And they're having to treat these patients differently because of the amount of laxity that is out there. So they're using combination procedures. They're doing all different kinds of things. And we're seeing this change happen within the aesthetic space. And that's why that's why this aesthetic space has been disrupted the way that it has is because everything is having to evolve and to morph to be able to address this huge patient population that is out there. [indiscernible] Makes a lot of sense. And maybe just as my follow-up here, where are we maybe in terms of the upgrades for the Apyx I console? I just want to understand if the majority of customers are now in the new system or if there's still more customers left to be converted here?

Yes, it's a good question. So we are previously before Aon, the only reason that you would potentially need to upgrade to the Apex one generator is if you wanted to use the micro handpiece And that was more important to doctors that were doing a lot of fine features, facial work, all of those type of things. The vast majority of our customers focus on the body and everything else. And so there wasn't a huge incentive for them to upgrade to the APYX-one. Now that Aon is here, now obviously the Apex Aon generator is the brains of the Aon system. And as I mentioned earlier, one of the things that we have always tried to do is to make sure that we're taking care of the people who have been our best customers. And so for the customers that have an APYX-one or that are going to upgrade to an APYX-one, before the launch of Aon we will give them the best pricing to upgrade to Aon once it is available. [indiscernible] for people that would need to upgrade to the APYX-one.

Very good. Thanks for taking the questions. Yes. Thank you. Thank you.

At this time, I'd like to turn the floor back to Charlie Goodman for closing remarks.

Thank you. Thank you everyone for attending the call. We appreciate your support and we look forward to keeping you updated on our progress as we progress throughout the year. Thanks a lot.

Thank you. This does conclude today's teleconference. Thank you for your participation. You may now disconnect your lines at this time.