Apyx Medical Corporation — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the supplied filing text does not provide standalone fourth-quarter results. Apyx develops and sells Helium Plasma Technology products, marketed as Renuvion in cosmetic surgery and J-Plasma in hospital surgery, and provides OEM products and services.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $52.3 million | $44.5 million |
| Gross profit / margin | $33.8 million / 64.5% | $29.1 million / 65.4% |
| Operating loss | $17.3 million | $23.6 million |
| Net loss attributable to stockholders | $18.7 million; $0.54 per share | $23.2 million; $0.67 per share |
| Cash used in operating activities | $5.2 million | $20.3 million |
| Cash and cash equivalents, year-end | $43.7 million | $10.2 million |
| Working capital, year-end | $57.6 million | $31.1 million |
Revenue increased 17.6%. Advanced Energy revenue rose 17.9% to $43.4 million and OEM revenue rose 16.3% to $9.0 million. Domestic sales increased 22.9% to $38.3 million; international sales increased 5.3% to $14.0 million. Advanced Energy contributed 82.9% of revenue.
Gross margin declined about 0.9 percentage point, which management attributed primarily to product and customer mix, higher material and inbound freight costs, and inventory reserves; a stronger domestic sales mix partly offset those factors. The operating loss improved year over year, while the net loss included higher interest expense and a debt-extinguishment loss.
At December 31, 2023, long-term debt, net of discounts and issuance costs, was $33.2 million; the Perceptive term loan had $37.5 million principal. The balance sheet reported $70.4 million of current assets and $12.7 million of current liabilities. Operating cash use included receipt of an approximately $8.1 million IRS refund. Investing cash flow was positive $6.7 million, principally from the facility sale; financing cash flow was positive $32.2 million, principally from borrowing.
Material changes and unusual items
- The company sold its Clearwater facility for $7.65 million in May 2023 and entered a 10-year leaseback. It received approximately $6.6 million net cash and recorded a $2.7 million gain.
- A November 2023 Perceptive agreement replaced the MidCap facility. Perceptive funded an initial $37.5 million senior secured loan; an additional $7.5 million draw is available through December 31, 2024, subject to conditions including a minimum revenue target. The loan matures in November 2028 and bears floating interest at one-month SOFR, subject to a 5% floor, plus 7% (12.4% at year-end 2023). The first 48 months are interest-only. The company recorded a $3.1 million loss on extinguishment of the MidCap debt.
- The 2023 income tax benefit was $2.4 million, reflecting, among other items, reversal of uncertain tax positions after completion of the IRS examination of 2018–2020 returns. The company received the refund in August 2023.
- Professional-services expense fell 22.3%, partly due to reversals of previously accrued legal losses, including a $250,000 distributor-related accrual. The filing also records a $1.3 million estimated loss for product-liability matters disclosed in March 2024.
Outlook, management commentary and risks
Management expects continued near-term losses and has no quantified company revenue or earnings guidance in the supplied filing text. It plans to focus on additional clinical evidence and regulatory indications, physician support, and manufacturing capabilities. Management said the FDA clearances obtained in 2023 were expected to mitigate the financial effects of the FDA’s 2022 Safety Communication, but demand for adoption and utilization remained reduced and could continue to adversely affect results. Management also stated that investments in development and marketing may weigh on operating performance and cash flow over the next 12 to 18 months.
The Perceptive agreement includes quarterly minimum trailing-12-month Advanced Energy revenue covenants, with year-end targets of $41.6 million for 2024, $57.0 million for 2025, $70.2 million for 2026, and $87.8 million for 2027, as well as a $3 million minimum cash balance. These are lender covenant thresholds, not stated management guidance. The company reported compliance at year-end 2023. Management believes its financing and other actions alleviated the conditions that previously raised substantial doubt about its ability to continue as a going concern for at least one year from issuance of the financial statements.
- Regulatory and commercial: The FDA Safety Communication, limits on cleared indications, future clearance requirements, and persistent demand weakness may constrain commercialization.
- Legal and insurance: The company faces product-liability litigation involving Helium Plasma Technology and a dispute with an insurer over available coverage. It recorded $1.3 million for defense costs on lawsuits disclosed in March 2024 and said additional loss is reasonably possible but not estimable. Management believes other identified matters are covered or not expected to be material, but outcomes remain uncertain.
- Debt and liquidity: The secured, floating-rate debt carries substantial interest cost, restrictive covenants, and prepayment fees. Further capital may be needed; equity financing could dilute shareholders and additional debt could increase obligations.
- Operations and market: Risks include elective-procedure demand and consumer financing, competition, sole-source suppliers and supply-chain costs, sterilization availability, and inflation. The company also identifies GLP-1 weight-loss drugs as a potential near-term headwind to liposuction demand, with possible longer-term opportunity in body contouring.
The independent auditor issued an unqualified opinion on the financial statements. Accounting for the 2023 credit agreements, warrants, embedded features, and related fair-value allocations was identified as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting as of December 31, 2023.
Important facts for investors to verify
- Whether Advanced Energy sales and handpiece utilization continue to grow enough to meet the Perceptive revenue covenants, and whether the delayed-draw loan becomes available.
- Cash burn excluding the one-time IRS refund and facility-sale proceeds, and the expected duration of available liquidity under the company’s operating plan.
- Debt interest, covenant headroom, repayment and prepayment terms, and potential dilution from the 1.5 million lender warrants and outstanding stock options.
- Developments in product-liability litigation, insurer coverage disputes, and the possible size of losses beyond amounts accrued.
- Whether FDA clearances translate into improved demand, and any further regulatory actions, product indications, or clinical evidence affecting commercialization.