8-K: Apyx Medical Reports Mixed 2023 Results, Provides Cautious 2024 Outlook

Apyx Medical reported a 16% increase in fourth-quarter revenue but a widening net loss, and provided a 2024 revenue outlook that suggests a potential decrease.

Summary

• Apyx Medical Corporation announced its financial results for the fourth quarter and full year of 2023, along with its financial outlook for 2024.
• In the fourth quarter of 2023, total revenue reached $14.7 million, a 16% increase year-over-year, with Advanced Energy revenue at $12.1 million, up 15%, and OEM revenue at $2.5 million, up 22%.
• The company's net loss attributable to stockholders for the quarter was $9.6 million, a 59% increase year-over-year, and the adjusted EBITDA loss was $4.7 million, a 14% increase year-over-year.
• For the full year 2023, total revenue was $52.3 million, an 18% increase year-over-year, with Advanced Energy revenue at $43.4 million, up 18%, and OEM revenue at $9.0 million, up 16%.
• The net loss attributable to stockholders for the full year was $18.7 million, a 19% decrease year-over-year, and the adjusted EBITDA loss was $13.4 million, a 13% decrease year-over-year.
• Apyx Medical secured a new five-year credit agreement with Perceptive Credit Holdings IV, LP, providing up to $45.0 million in senior secured term loans.
• The company's 2024 financial outlook projects total revenue between $49.7 million and $52.9 million, which could represent a decrease of 5% to an increase of 1% year-over-year.
• The 2024 guidance anticipates a net loss attributable to stockholders between $26.5 million and $24.3 million.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the projected revenue decrease and increased net loss in 2024, despite some positive results in 2023. The challenging market conditions and cautious outlook weigh heavily on the overall sentiment.

Positives

• The company achieved double-digit growth in sales of Advanced Energy products in the fourth quarter.
• Full-year revenue increased by 18% year-over-year.
• The company reduced its annual net loss attributable to stockholders by 19% year-over-year.
• The company reduced its adjusted EBITDA loss by 13% year-over-year.
• Cash used in operations was significantly reduced in 2023.
• The company secured a new credit facility providing up to $45 million in funding.
• The company has $44 million in cash and equivalents at year-end.

Negatives

• The net loss attributable to stockholders increased by 59% year-over-year in the fourth quarter.
• The adjusted EBITDA loss increased by 14% year-over-year in the fourth quarter.
• Gross profit margin decreased to 60.9% in the fourth quarter, compared to 65.3% in the prior year period.
• The company's 2024 revenue guidance suggests a potential decrease of up to 5% year-over-year.
• The company anticipates a larger net loss in 2024 compared to 2023, with a projected loss between $26.5 million and $24.3 million.
• Advanced Energy revenue fell short of expectations due to a challenging capital equipment purchasing environment.

Risks

• The company faces challenges in the cosmetic surgery market, with prospective surgeon customers hesitant to purchase new capital equipment.
• The company's 2024 revenue guidance indicates a potential decrease in revenue, suggesting market headwinds.
• The company's net loss is expected to increase in 2024.
• The company is subject to risks related to regulatory approvals, supply chain disruptions, and economic conditions.
• The company's business and operations are impacted by the FDA Safety Communication issued on March 14, 2022.

Future Outlook

The company anticipates a challenging 2024 with potential revenue decrease and increased net loss, primarily due to a cautious capital equipment purchasing environment in the cosmetic surgery market, offset partially by growth in handpiece sales.

Management Comments

• We generated double-digit growth in sales of our Advanced Energy products in the fourth quarter, driven by growth in global generator and handpiece sales of more than 25% and 10% year-over-year, respectively.
• Our Advanced Energy revenue fell short of our expectations, as the capital equipment purchasing environment proved to be more challenging than anticipated.
• We were pleased to return to double-digit revenue growth on a full year basis in 2023.
• We reduced our annual net loss attributable to stockholders and Adjusted EBITDA loss by 19% and 13%, respectively, and delivered a significant reduction in cash used in operations this year.
• Our 2024 guidance assumes Advanced Energy generator demand in the cosmetic surgery market will continue to be impacted, as prospective surgeon customers remain reticent to purchase new capital equipment, offset fully or partially by growth in handpiece sales this year.
• We intend to continue managing our resources efficiently while investing strategically, and with $44 million in cash and equivalents at year-end, we have the requisite capital to execute our initiatives.
• Our team remains focused on leveraging the strong progress we made in 2023, which enabled us to secure new 510(k) clearances for specific clinical indications, introduce our Renuvion Apyx One Generator and Micro Handpiece in the U.S., and expand awareness of the safety and efficacy of our technology.
• We believe Apyx Medical is poised to capitalize on the unique capabilities of our Renuvion technology and favorable long-term tailwinds in our industry to target sustainable and profitable growth in the future.

Industry Context

The company's performance is being impacted by a challenging capital equipment purchasing environment in the cosmetic surgery market, which is a broader trend affecting medical device companies that rely on capital equipment sales. The company is attempting to offset this with increased handpiece sales.

Comparison to Industry Standards

• Apyx Medical's revenue growth of 18% for the full year 2023 is a solid result compared to some medical device companies, but the projected revenue decrease in 2024 is concerning.
• Companies like InMode and Cutera, which also operate in the aesthetic medical device space, have seen varying growth rates, with some experiencing strong growth while others face similar challenges in capital equipment sales.
• The company's net loss and adjusted EBITDA loss reductions are positive, but the projected increase in net loss for 2024 is a significant concern.
• The company's reliance on capital equipment sales makes it vulnerable to market fluctuations and economic conditions, similar to other companies in the sector.

Management Changes

Stakeholder Impact

• Shareholders may be concerned about the projected revenue decrease and increased net loss in 2024.
• Employees may be affected by the company's efforts to manage resources efficiently.
• Customers may be impacted by the company's focus on handpiece sales over capital equipment sales.
• Suppliers may be affected by changes in the company's purchasing patterns.
• Creditors may be impacted by the company's financial performance and debt obligations.

Next Steps

• The company will continue to manage resources efficiently while investing strategically.
• The company will focus on leveraging the progress made in 2023, including new 510(k) clearances and product launches.
• The company will aim to expand awareness of the safety and efficacy of its technology.
• The company will target sustainable and profitable growth in the future.

Key Dates

Keywords

Apyx Medical, Renuvion, Advanced Energy, OEM, Financial Results, Revenue, Net Loss, EBITDA, Medical Devices, Helium Plasma Technology