Apyx Medical Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Apyx develops and sells Helium Plasma Technology products, including Renuvion for cosmetic surgery and J-Plasma for hospital surgery, and provides products and services through OEM agreements. Financial amounts below are in millions of dollars unless otherwise noted.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $10.24 | $12.14 |
| Gross profit / margin | $5.95 / 58.1% | $7.57 / 62.4% |
| Operating loss | $(6.62) | $(5.61) |
| Net loss | $(7.59) | $(3.53) |
| Net loss attributable to stockholders | $(7.58) | $(3.48) |
| Basic and diluted loss per share | $(0.22) | $(0.10) |
| Cash used in operating activities | $(6.34) | $(1.88) |
- Revenue fell 15.6%. Advanced Energy sales declined 23.1% to $7.45 million; OEM sales rose 13.8% to $2.79 million.
- Domestic revenue decreased 21.3% to $6.98 million; international revenue was nearly flat at $3.27 million. International sales rose to 31.9% of revenue from 26.9%.
- Gross margin contracted 4.3 percentage points, primarily due to sales mix: greater OEM and international contributions.
- Operating expenses decreased to $12.56 million from $13.18 million, but the lower gross profit and higher interest expense contributed to a larger net loss. Interest expense was $1.40 million versus $0.23 million.
- Q1 2023 included a $2.1 million tax benefit related primarily to the resolution of an IRS examination. Q1 2024 recorded $0.05 million of tax expense and a valuation allowance on deferred tax assets.
Cash, debt and liquidity
- Cash and cash equivalents were $37.28 million at March 31, 2024, down from $43.65 million at December 31, 2023. Working capital was approximately $51.5 million, versus $57.6 million at year-end.
- Operating cash use increased to $6.34 million, which management attributed to lower Advanced Energy sales and payment of accrued bonuses. Investing cash use was $0.04 million; financing cash use was $0.01 million.
- Perceptive Credit Agreement principal was $37.5 million; its net carrying amount was $33.41 million. The loan bears interest at one-month SOFR, subject to a 5% floor, plus 7% (12.3% at quarter-end). Principal repayments shown are $2.22 million in 2027 and $35.28 million in 2028.
- A $7.5 million delayed-draw loan is available through December 31, 2024, subject to conditions including achievement of a minimum revenue target. The company was in compliance with its financial covenants at March 31, 2024; the agreement also requires at least $3 million of cash.
- Management expects losses to continue in the near term and plans to fund operations with existing cash and product sales, with additional equity or debt financing if needed. It cautions that financing may not be available on acceptable terms. The company has an unused shelf registration statement for up to $100 million, including an ATM facility of up to $40 million.
Outlook, risks and unusual items
- No specific revenue, earnings or cash-flow guidance for 2024 is provided in the supplied filing text. Management cited economic uncertainty in the aesthetic capital-equipment market as a factor in weaker domestic generator sales, alongside lower single-use handpiece sales.
- Management is investing in product development, clinical studies, training and marketing to support adoption. It reported a 31-person direct sales force, three independent sales agencies and sales in more than 60 countries.
- The company disclosed multiple product-liability matters involving Helium Plasma technology. For two related cases, it recorded $1.45 million of estimated defense costs within an estimated loss range of $1.45–$1.95 million; two plaintiffs’ claims were dismissed in March 2024. For lawsuits filed in March 2024 concerning alleged off-label Renuvion use and mismarketing, it recorded $1.30 million within an estimated $1.30–$1.50 million defense-cost range and said additional loss is reasonably possible but cannot currently be estimated. The company denies liability and intends to defend the suits; it also noted a dispute with one insurer about available coverage.
- Inventory purchase commitments totaled approximately $2.7 million, substantially expected within twelve months. The China joint venture had not commenced principal operations as of the filing.
- Inflation had not materially affected results to date, according to management, but future raw-material, freight and labor cost increases could adversely affect performance. The filing reported no material changes to the risk factors in the 2023 Form 10-K.
Important facts for investors to verify
- Whether Advanced Energy demand, especially domestic generators and handpieces, stabilizes or continues to weaken.
- Progress toward Perceptive’s revenue covenant targets, access to the delayed-draw loan, and the company’s ability to meet cash needs while operating at a loss.
- Future gross margins and the effect of OEM and international sales mix.
- Developments in product-liability cases, insurance coverage and potential losses beyond amounts accrued.
- Whether management’s planned sales, marketing, product-development and clinical initiatives improve adoption and revenue.