APYX - Earnings call transcript Q2 2022 | Apyx Medical Corporation

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Operator

Hello, and welcome, ladies and gentlemen, to the Second Quarter of 2022 Earnings Conference Call for Apyx Medical Corporation. At this time, all participants have been placed in a listen-only mode. At the end of the company’s prepared remarks, we will conduct a question-and-answer session. Please note that this conference call is being recorded and that the recording will be available on the company’s website for replay shortly.

Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including without limitation, those identified in the risk factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, our most recent 10-Q filing and the company’s other filings with the Securities and Exchange Commission. updated SEC, to our which be filings in website. may the with are factors from time time our Such available on forward-looking otherwise. We or of to obligation information, statements our new or undertake result as events, publicly future a no revise update also to certain will not that financial accounting accepted references with accordance in generally include principles, call measures are This calculated or GAAP. these as non-GAAP measures. to financial refer generally We in non-GAAP with of measures those of available earnings calculated GAAP financial accordance presented in our the on comparable Reconciliations release measures most and portion are the the press Relations to Investor website. to the like now would Mr. over I turn call to Goodwin, and Charlie Chief President Medical’s Executive Apyx Officer. go sir. Please ahead,

Charles Goodwin

to call Thanks, everyone our operator. today’s quarter joined by earnings Welcome Financial call. Chief on Semb. I’m our second Tara Officer,

we XX% what second during intend second update performance. year-over-year our areas the for with the second review the quarter of agenda our $X.X decrease increased XXXX on we that, to our expectations business financial quarter, we updated to QX focus call. $X.X release discussing driven Energy $XX.X which half The today, second earnings In on a $XX Then in low Advanced sales, quarterly you press during of and the revenue which Within the I’ll of anticipated, progress end begin drivers continued quick the performance resulted million. of the near sales products to second highlights let’s X% year-over-year total business communication discuss Advanced call Advanced our million will total by our financial our review to decreased a open XX% for performance which revenue I and to OEM with Advanced in which challenged our Q&A. $XX million. outlook quarter the sales, we before results. begin and earnings we our then safety million of March updated Energy website FDA and by was shared globally offset The of I’ll discuss on as XX. came detail to revenue in our our in our revenue medical communication, XXXX, QX. by an guidance today. in was quarter for With decreased had this results second our from be was the year-over-year quarter. that operational and Tara by results disruption the our impacted million partially Energy of provide device Energy range cover that over on business, will to Turning posted our The related course of

almost the States. demand From International me anticipated. sales a due of detail. in than distributors minute outside Energy driven experienced to of OUS was these to overall year-over-year more an United from unpack Advanced significant the Let a exclusively had we And a in our ordering products slowdown safety impacted were communication. we Energy dynamics take performance sales greater geographic perspective, decrease Advanced our by the in

in we demand most weaker our saw from handpieces in notably Advanced and both America. distributors select Specifically, for generators Energy Latin countries

aligns international and months of As XX% we two a quarter. last more with was international performance by impact delayed and exceeded Energy distributors year-over-year decreased the feedback communication of compared that safety indicating we were our sales business a was during of in In quarter, respectively. perspective, internationally the expectations. pleased the the the U.S. XX% handpieces the affected sales than timing our result, of the Advanced our the U.S., as which from to From most our received the generators This more performance

notably generator experience products in customers. As the Advanced our sales to of to most continue Energy slower U.S., anticipated, new we sales

that saw report during to our we each quarter. the improvement pleased business material in month I’m U.S. of trends However,

result sales in single digits decreased the our U.S. the on low quarter a in As Energy second products Advanced for a year-over-year basis.

products the communication, of specialists to do their to Since comfortable sales safety communication as engaging time second and they existing excellent address job our to surgeon of profile. has quarter, focus their customers appropriate with and posted, team products. existing as and ensure the the continued our the customers organization was as with information the risk answer of an During are clinical our to much support provide about our direct use spend needed been safety an our questions, understand our profile with

familiar be to earnings comparing proactive underlined call on communication proud including mentioned Energy the existing our am feedback postmarket of discuss U.S. their event of a resources, and appreciation Medical responded with Advanced willingness extremely estimate related to approach needed this us medical the a our letter adverse Board, share customers Apyx that technology provide our for way of the directly and As have with. our to with to development. and devices The Medical our of products in has we of communication, connected overview customers the an we customers has from I to the may summary received support. May, other our have Advisory from any direct I our profile safety U.S. all of rates safety,

strong passion period. directly has sell customer’s focus helium We our the manner. proactively technology to surgeons, for for distributive that support supporting partners engaging do plasma this given our Internationally, and their not been on appreciate during our also and to in it with we continue challenging same our

their U.S. our their resources in made customers. surgeon our cases And support used the available interactions All been of translated many inform with to distributors. to customers have to

discussion them and multiple on a to of our on our hosted products. for the for of our distributors with clearances communication highlights its also the updated educate during interactions progress have operational to we webinars quarter. securing related addition, our Energy FDA additional them In in the implications and safety and XXX(k) Advanced Shifting keep use the

progress we strong quarter engaging make efforts, areas second safety the in customer focus. communication our their during to addressing following continue with FDA, and of to the the addition In engagement

we with late to requested reported important held of and present postmarket the and March, in a As detailed medical adverse related a the context. analysis clarified meeting events a data our FDA’s provide team report device reminder,

the we Following FDA April with X website, feedback received this labeling including messaging meeting, our from on on certain requested to and revisions, training. changes

the to response Our incorporate quickly team agency. worked our FDA’s and submit revisions the requested to

progress these Advanced to in Energy also regulatory made related addition specific target of in In the securing our our use procedures. strong to indications clinical efforts, team products

to clinical obtain XXX(k) engage agency procedures. our in the during we quarter, indication second and to the XXX(k) a on FDA the use announce resurfacing in XX. several for interactions April clinical in they specific specific with for with were the May continued After dermal During May, clearance indication notification pre-market to early pleased the

for moderate Our Fitzpatrick new patients to rhytides, and severe treatment III. types procedures Renuvion skin with of Dermal dermatological wrinkles limited I, is for the now indicated Handpiece to or II

full Renuvion We are to end of continue by commercial for we target the begin Renewal, which preparing of to Facial launch XXXX.

We XXX(k) pleased procedures FDA XXX,XXX IDE potential performed also updated clearance Facial from resurfacing with market estimate for which We the dermal are effectiveness clinical important our to update Renuvion Renuvion communication now in this, the clearance. for and the are of the safety use Together sell and Renewal safety patients to safety reduction and related X, this represent on see we the XXX(k) study, new their data recognize market, year. validation June U.S. the were broader in to our surgeons in the communication each to able wrinkle and our technology.

multi-year our of In appearance objective addition to indication strategy, Renuvion these the an to continue to we efforts, of for regulatory procedures improve the the advance securing in lax skin. second of use

at beginning submitted of April. for this pre-market indication team regulatory the XXX(k) Our notification our

subjects of results were profile effectiveness both by the safety of at XXX(k) As team in the experienced which pain of demonstrated efforts safety pleased endpoints XX receipt of which strong clearance, supported The this of neck a procedure. the and study to clinical primary these related a and on the the XX.X% centers. notably, skin the IDE days final the of region seven in reminder, in effectiveness months, July request announced pain quarter in to second at of procedures. multiple X, announce moderate met. lax six study July treated was during the included on improvement the subjects our regulatory were and submental patients post-op no post Most XX.X% phase which Renuvion results we of this study, and our demonstrated We of appearance in procedure culminated XX.

clearance subcutaneous clearance Renuvion this skin indicated the in handpiece by or submental now region. was for XXX(k) the in annually. followed contouring dermatological of their addressable the XXX,XXX the another to further This to and neck and procedures our Our performed safety Obtaining is use loose shortly lax improve APR to include market appearance in another neck FDA expands update procedures U.S. communication. by aesthetics

to commercial recent help XXXX. communication with continue XXXX, mitigate the of the we clearances begin seen. indication believe expect we our end our the back, We lax resulting updates two new to of skin remaining safety Stepping months have disruption of the through launch business XXX(k) progress we to by the FDA’s will full as to that along that

Longer FDA our earnings continue with each be through to the developments of safety term, A years engagement disruption everyone Medical and these our and these the discussed market enhanced primary the who strategic the that work. we ability hard surgery have Apyx key one market team clearances to believe focus the strategy culmination recent thanks years and helping Given supported for on and of clearances along teams, our will we this on for from to to provide been customers to these FDA, cosmetic that represents special towards proactive aims these two transitory. addressable have and with for regulatory the us with products our of Medical we initiatives XXX(k) Renuvion to both of of related our many of initiatives focus we Apyx the since the clinical calls. that achieve Securing regulatory dedication began first expanded our seeking market. communication many

it to Let over Tara and quarterly me XXXX now results guidance. Tara? review to our financial turn

Tara Semb

benefits These compensation performance manufacture serve. higher registration Handpiece, as obtain our our inventory, gross quarter of into or $X.X by related compared expenses by geographic operating income was professional sales like million. I was $X.X primarily sales. to the due will administrative due higher already higher discussed general higher legal of $X.X EBITDA expense newer to million. with in and the to An of costs. as our due increase of within our the and which was we that increase million, offset which mix profit in and costs year-over-year domestic and mix fees was million, return OEM due Net of million an the and the by higher Charlie. our percentage expenses and The increased segment stock-compensation Charlie Income million to cost results. the Thanks, on primarily profit is $X.X of year selling, in-person partially XXXX. prior of was to by million in benefits second increase X% internal XX.X% which million, of services compared in expense. various share from in to or we period. driven training million quarter our year to XXXX and loss comprising the changes compared to second $X.X segment million sales in year-over-year driven year. EBITDA the we adjusted driven with Energy Advanced $X a in relief portion $X.X $X The comprising gross gross of an the of payroll experience sales attributable and compared year-over-year with slight total models line joint to the liability continue or X.X loss XXXX. the second increased $X.XX $X.X loss our product margin per them The $X.XX events And quarter of in year-over-year $X.X $XXX,XXX net margin for several to for from to the XX.X% statute trade to the $X.X margin APR total was decreased $X.X share year-over-year and increase of Total a million at our financial liability. primarily lapse prior segments our introduce million million period. mix second shows or million. countries million consistent of other per $X.X start in between XX% percentage XXXX by Gross second was prior since period. of was $X.X review Adjusted two expenses by last XX% primarily to salaries increased XXXX a the to to million year quarter benefit results profit quarter increase was Gross or of stockholders limitations for increase of $XX.X increased revenue Operating of Loss tax a shipping was the my operations were for

provided non-GAAP in stockholders attributable our to a we net EBITDA loss to reminder, a As release. loss reconciliation detailed earnings adjusted press from

million ensure able customer environment. We from global of As of company use to improve million six the for flow first XXXX initiative $XX.X of of compared to use our XX, compared to XXXX. anticipate of capital increase months June second and million $X.X to was equivalent cash of XXXX, XXXX. cash to Cash of December we XX, year. working operations half last in chain from cash is demand to to the of light as had are the inventory, cash challenging increase the million meet The in operations the our $XX.X XXXX, to compared of first supply attributable $XX.X in strategic half

for range financial Turning XX, million in which year-over-year. $XX press of December to X% million of XX% we of earnings to $XX.X our the prior updated $XX.X revenue of to representing X% million million $XX XX% today growth we our growth year-over-year. to total to compares or ending This to expect in range guidance, our of XX a XXXX XXXX, months release review the

year-over-year. total guidance of to million compared assumes of of our $XX.X year-over-year million revenue X% growth to respect revenue $XX prior growth XX% Energy or to With $XX.X Energy of range million to OEM Our Advanced growth revenue our to Advanced to guidance. unchanged $X.X to approximately range. XX% million $X year-over-year range million to prior million $XX And approximately X% to million XX% and revenue XX% compared guidance our to

medical negative potential global new reflects adoption result customer FDA as range guidance safety on handpieces and communication XXXX. device demand a our First, related procedure impacts XX, the on for March of

Second, our and skin. commercial resurfacing in specific indications lax improve to assume range the appearance for to from continues launches dermal new procedures clinical contributions procedures initial the guidance of

We continues continue demand in outside end expect enter markets. guidance driven of to assume year launch to that growth And to commercial these U.S. for our indications the both international range XXXX. is by full by third, existing

we $XX In of compared profitability compared expect $XX.X million our million of $X.X of for prior the EBITDA guidance range to to our in range stockholders of range to the adjusted to our year loss net XXXX, $X.X million terms in to fiscal attributable to of $XX.X million. $XX.X range million. million $XX.X million An million to $XX.X loss prior

considerations Our for formal XXXX the financial for following guidance purposes. modeling incorporates

primarily is XX% geographic Advanced revenue within expectation by approximately gross that segment. of incremental First, change Energy year sold in manufacturing our and XX% goods Advanced gross margins OEM previously to our of services with and our and this fiscal year, core segment between attributable driven capacity and and cost prior our in Inflationary and XXXX. our to Energy margin product XX% compared mix year-over-year headwinds to was of to transition shifts The to related XX% XX% costs prior Surgical. and Symmetry agreements compared year segments to approximately mix

prior increase XX% XX% assumptions. the in with to to expenses Second, year-over-year guidance operating range consistent our of

of interests expectation approximately of to weighted of of and million. Third, and Non-cash of $XXX,XXX. average of $X million. approximately XXXX. net stock-based $XXX,XXX approximately approximately million compared $XXX,XXX depreciation in interest diluted approximately compensation and expect XX.X tax $XXX,XXX expense other non-cash lastly, our approximately Non-controlling shares. prior income And we $X Fourth, shares income $XXX,XXX approximately outstanding to expense amortization

million. although Lastly, remarks. for in Energy business, from midpoint, the to for the the of at decline business, X% call range Advanced the we With third approximately our year-over-year the of revenue growth growth quarter wide of of Charlie guidance X% $XX.X our year-over-year growth a $XX.X that, XXXX, total closing approximately XX% XX% and assumes midpoint anticipate to back to we of I’ll approximately in OEM million expect turn expect we a our In range year-over-year. at

Charles Goodwin

Tara. Thanks,

performance We second our expectations second sales for Advanced are updating Energy of our quarter guidance half today during revised XXXX. reflect the to and the

safety revenue related reflects Specifically, the outside of guidance our updated now to communication disruption the business U.S.

these Given, ordering we indirect our more distributor trends guidance prolonged markets, are expect had recovery the contemplated. to in range be than prior

the than stronger revenue of expectations experienced Energy demand in during in to quarter prior updated second Advanced result for the guidance growth our the updated the U.S. demand in the of higher compared reflects XXXX. guidance we a second the expected and This our Importantly, XXXX for our range. is U.S. U.S. direct assumption in half

of effectiveness global supporting raising remaining Over the Medical new facilitate the XXXX, awareness full engaging months with market of enter commercialization clinical growth surgery the and its focused to cosmetic driving for two indications end. by our and on existing of Apyx customers, preparing in adoption is our year to and by safety Renuvion

Importantly, we on opportunity ultimately market Medical. in call for compelling. so our towards customers, strong, believe our With continued execution, will operator, Thank distributors, we years growth never on our to to shareholders, now our and multi-look strategic focus By and that, drive been call to progress today’s everyone let’s outlook come. support addressable questions. continuing capitalize you for open and employees, position on diligent expanded profitability sustained their of Apyx the Apyx the has

Operator

Securities. from go first Instructions] [Operator Dave JMP the come ahead. And question will Thank you. Turkaly Please with

Dave Turkaly

I even you their would specifically you think guess, those upfront. impact Charlie, the the way Great. distributors, or in guess, size, higher America Latin one impact that did and orders, did, do maybe glad that? expect relative they internationally. the OUS The was, just I'm – it you. why I But given maybe MDSC Thank from the

Charles Goodwin

the talking States? You’re outside United

Dave Turkaly

Yes.

Charles Goodwin

Yes.

was So distributors safety in demand to And the mostly slowdown both America select significant and remarks, hand We were OUS experience I the in as it in our in And distributors mentioned across overall international demand pronounced results in and June. due only May occurred we generator see slowdown notably communication. not Latin and below impacted. as the slowdown countries. a a expectations from all most piece ordering and OUS were did

initially U.S. yes, did forecast this outside a decrease not we so, to And for have the

Dave Turkaly

trying just it's I reason it with I'm was Yes, be? that why good came I But again, thinking domestically, seen – be was the have like, wasn't. I any, it specifically, that given thinking it you like ask the up this guess that to FDA might would more MDSC, was the that happened impact Do way. clearly,

Charles Goodwin

the did communicate, we Well, expected States in Outside market competitors was only as QX. on it performance it’s and expected. global sales performance than doctors less a – too a It U.S. people communicate. our what the communicate, in have though, the United

so yes, And time that outside saw little were work these sure. the challenges their there the we all U.S. bit But outside United of a take more out to way for things there. of States

Dave Turkaly

I to mean, just in, technically I of I'm going it. but the if guess, could. sneak I Got sort I got they're there, same two,

that in Energy month said saw you that you of I each month, quarter. I improvements low on you single when generators think guess, domestically? I the was saw material material in were also called U.S. that generators digits. each handpieces And U.S. and commented and improvement you out up the Advanced handpieces think

Charles Goodwin

Yes.

generators in note, answer that both. month customers we handpieces safety challenges, both sales was that, these was each during trends in to that the quarter. it the new as saw and of through what actually we as in improvements question. your were we quarter. in we saw to before, was It But impacted, despite mentioned and generators which saw material the more we As

Dave Turkaly

much very you Thank

Operator

you. Thank

Our Group. from Matt Hewitt ahead. next with question Please Capital Craig-Hallum go comes

Matt Hewitt

MDSC? your Maybe your perspective has could provide a Good light one And or bit of questions. – because afternoon. approvals. from new regarding Thank of you for the color those with bit sales in plan strategy the marketing has through Maybe or strategy or taking if the a you a the about first that and – little little or changed approvals. your walk

Charles Goodwin

we team launch will full we efforts hand strategy safety developing materials, our to and two part have. new confusion like of talked the are And laxity materials up and doing focused with is for our changed. doing the the about facial clearing some for from launch of only we’re and the is facial these itself. So the enter notice this marketing renewal be skin have The renewal that on thing dermal else, that these everything the also a preparing both direct-to-consumer commercial for soft piece, that new not just still indications but for we has

for strategy And the so doing this still same. is the

to focused our and and two is quarters, the much updated helpful two their mean. are understand the when this We It's It indications them got safety that people the through is just updates notifications. the very on through they having be from executing getting what FDA this new major. next going that both we

to marketplace, And are focused these and down so executing heads mentioned the this by of end things we we year. as bringing on

Matt Hewitt

then talk, queue early getting would you. could devices are you to Any these the And you lines has very maybe from but Okay. on it's color be the what reception approval? the be use days, to What they Thank hearing doctors? helpful. realize able into those been post Are along approvals? I post if

Charles Goodwin

us, is Yes. a this customers, – Look, milestone. major and this is for for our

technology actually We podium it. the product. got finally, companies this of this from had for we Board have giving validation that and we working already the and talking us to company been on are came efficacy come – a finally that's up with and on have since here, ever safety scientific-based I clinical-based giving evidence evidence their And there's for doctors about,

procedures to new yes, a in where couldn't and be we this milestone we able that for major, two and now, happier two major this these right having these are is so indications. being these and we after XXX,XXX And organization, approvals have prepare go

Matt Hewitt

Great. Thank you.

Operator

Thank you.

Kyle of go the with Street line Please from Capital. is Bauser ahead. question next Your Lake

Kyle Bauser

year Maybe Maybe the start all on launch the I’ll end. up follow just on here. by for commercial to Thanks full that. just updates Great.

months, look kind direct we to on point mean, Or guess of continue efforts could of on at out sales we, I kind both ramp services little if the physician on I count. services XX terms reduced education from of kind head similarly strategies some be kind how force any up see direct-to-consumer with I peer-to-peer of in and So internally? and guess kind just a should the professional moderate of sort And given we then of reliance, consumer. maybe that ramped of bucket statement the is it bit? gas on a of income foot both from anticipate professional

Charles Goodwin

Yes.

So Kyle, first, question. thanks, for the

the had have two the adding a glad reps in any we on adding team independent we reminder, second about agencies. rep to quarter, the our not And also a five And four this have around XX of quarter and launch in these of incredibly Board commercial the new reps on And team half the anticipate And second product. We as of we’re actually more do at sales added of we launches. now and includes First, end. reps plant’s reps a communicated advance managers side. in XXXX. handful

will as these direct on, that take we continue obviously, the your PMPs promotion, go our just And now performance which layer second our still advantage to we're of of advantage execute the us with then peer-to-peer the regard now we will have. question, with size And we is we to focus to and sales consumer which portion force. to need force, right sales happy incredibly the allow and And is these do that. to we're take two opportunities. of happy incredibly clearances of with the of so In and we new, our

will PMPs consumer. the we direct still so and continue the to on the layer And will

Kyle Bauser

kind Got internationally, it. know piece No, And registrations that. kind that follow have is, the makes then guess, have how curious of come country. every up just of it you of I new do for the sense. along? to I Appreciate my hand

have how the can Thank to international curious. of curious how the kind hand piece kind piece, of many new just you extent use markets to or share you. just many older So conversely, still hand the converted

Charles Goodwin

Yes.

level tailwinds can United don’t before APR which see that. We gross margin, and And which having gross we making the very but we’re or the of the out some the States. are of is that actually of where countries give also. handpiece question. margin we’ve on have good adopted and have about that one that And great – about outside So the aren’t, you continue detail as headwinds progress two will on on adoption tailwind next that be talked we year the for but

with there. progress happy that we’re making the So we’re

Kyle Bauser

I’ll Got it. Appreciate that. queue. jump in back

Operator

Thank you. of go [Operator Please Instructions] ahead. O’Brien Sandler. from Our next Piper question Matthew with comes the line

Unidentified Analyst

Hey, tonight. everyone. This is Joe on Matt from

Just us. a quick one for

there? XX Appreciate Thanks. in indication recent if anything neck, months, with the it. there's curious impactful next So skin laxity to how quantitative of we're approval the that could be your especially over business

Charles Goodwin

Yes.

our strategic and company. actually to use And talk So to initiatives after biggest and huge about one into a it’s increased it, this it year and are it of be the do expectations year been going baked – that to the market have going for of been already we beyond that it second to to has of to to definitely we’ve going sure. for have thing not half it’s the able this for this It’s quantitative guidance. company but what the be we’re and value our

tell what at it right So means we'll guys to you on date now later beyond. we’ll quarter, you for back – fourth we’re and and then executing get to the get XXXX and a third focused

Unidentified Analyst

Understood. Thanks, Charles.

Charles Goodwin

Thank you.

Operator

you. Thank

ahead. comes go Please Our from next Please with the ahead. question Securities. line of Dave JMP Turkaly go

Dave Turkaly

Charlie. Hey

quick one one. Just

in say. were the mentioned hand, kind recommending what MDSC, any they're the they of the in and I scary look don't don't how read original? they hey, clearances mean initially and the somewhat we now of I'm open-ended specifics not You I update. curious know with just procedures. I when those, on might they use the, all you updates, curious I'm now these use versus of but these they take I Renuvion the away did language? mean comment the seen – if that haven't

Charles Goodwin

Yes.

and for what that for So skin, the we that rhytides, two specific we skin under not indications top quite area are for for The resurfacing one updated it one after is we use neck the for that says and clearances for exists have submental safety fact liposuction. the wrinkles in have, the is notification after frankly, nobody of and they've dermal the on is cleared use area. cleared liposuction, that from it still still that for the

– space So from exists, only in that liposuction. the competes just that specific thing after remaining notice as that use this safety a that's far that's having is as not really but the for the for everybody indication same

Dave Turkaly

you it. Thank Got

Charles Goodwin

You bet.

Operator

Thank you.

this showing at We Thank remaining conclude for our does currently for today. your you participation. are time. conference That no questions

Apyx Medical (APYX) 14 Aug 222022 Q2 Earnings call transcript