Apyx Medical Corp Q3 FY2024 earnings call

• Organizational restructuring: Apyx reduced its US workforce by nearly 25%, Todd Hornsby left the company, Charlie assumed direct sales responsibility, Shawn Roman promoted to COO.
• Balance sheet actions: Amended credit agreement with Perceptive Advisors, $7 million registered direct cash investment from Nantahala Capital Management.
• Third quarter performance: Total revenue decreased 4% YOY; Advanced Energy revenue down 6% due to soft generator capital sales, but disposable handpiece revenue grew; impact of GLP-1 drugs on procedural volume negatively affecting capital equipment sales; Renuvion has ~400,000 procedures performed, and a direct-to-consumer strategy launched; development of Ayon body contouring system in final stages, aiming to be a game-changer for surgeons.

Total revenue for the third quarter was $11.5 million, a 4% decrease from $12 million in the same period last year. Advanced Energy products sales decreased 6% year-over-year to $9.3 million. Disposable handpiece revenue grew 9% overall and 15% in the US, with disposable revenue now accounting for more than 60% of total AE revenue. OEM segment sales increased 3% to approximately $0.1 million in Q3 2024. For full year 2024, total revenue is expected to be in the range of $46.6 million to $47.6 million, with Advanced Energy revenue at $37.2 million to $38.2 million (a 14%-12% decrease YOY) and OEM revenue at approximately $9.4 million (a 5% growth). For 2025, total revenue is expected to be in the range of $47.6 million to $49.5 million, with Advanced Energy revenue at $39.1 million to $41 million (a 5%-7% growth YOY) and OEM revenue at approximately $8.5 million (a 10% decrease YOY).

• 2024 guidance: Total revenue $46.6M-$47.6M, Advanced Energy $37.2M-$38.2M, OEM ~$9.4M. Net loss attributable to shareholders expected ~$25M. Gross margins ~60%, operating expenses $48M-$49M, cash used in operations ~$20.1M.
• 2025 guidance: Total revenue $47.6M-$49.5M, Advanced Energy $39.1M-$41M, OEM ~$8.5M. Operating expenses no greater than $40M.

• Macro challenges: GLP-1 drugs causing patients to postpone aesthetic procedures, negatively impacting capital equipment sales in the near future.
• Product development risks: Potential delays or issues with Ayon body contouring system 510(k) submission to the FDA.

Q: Matthew O'Brien from Piper Sandler asked about 2025 growth in Advanced Energy and where the growth is coming from.

A: Charlie Goodwin responded that growth would come from continued handpiece growth and a bit from Ayon in the back half.

Q: Matthew O'Brien also asked about Ayon development requirements.

A: Charlie Goodwin said Ayon is a game-changer, a 510(k) with predicate devices, pre-submission done with FDA, and expected to be on the right path for approval.

Q: Matt Hewitt from Craig-Hallum Capital Group asked about positioning for growth in 2025.

A: Charlie Goodwin said they're spending more on direct-to-consumer campaign and focusing on business-to-business.

Q: Matt Hewitt asked about Ayon cannibalizing Renuvion.

A: Charlie Goodwin explained Ayon system requires Apyx One generator, and it's designed to make procedures safer, faster, etc., with no cannibalization risk.

Q: Sam Eiber from BTIG asked about reduction in force.

A: Charlie Goodwin said it was across the board in the US, Bulgaria facility stayed the same.

Q: Sam Eiber asked about Ayon features being requested by surgeons.

A: Charlie Goodwin said surgeons asked for all procedures to be put together for safety, speed, etc., and Ayon helps with better patient outcomes.

Q: Ben Haynor from Lake Street Capital Markets asked about cost savings.

A: Charlie Goodwin said substantial cost reductions, with $0.6M charge in Q4 '24, and moving from ~$53M operating expense to no more than $40M next year.

Q: Ben Haynor asked about Ayon impact on capital sales.

A: Charlie Goodwin said doctors would not wait as they need Apyx One to use Ayon, and it's a net-net positive.