10-Q: Apyx Medical Narrows Losses, Boosts Surgical Aesthetics Sales

Apyx Medical Corporation reported reduced net losses and increased Surgical Aesthetics sales in Q3 2025, driven by the AYON Body Contouring System launch, while navigating OEM segment declines and ongoing litigation.

Summary

• Net loss significantly reduced to $(1,955) thousand for the three months ended September 30, 2025, from $(4,724) thousand in the prior year period.
• Net loss for the nine months ended September 30, 2025, improved to $(9,865) thousand from $(18,900) thousand in the prior year period.
• Total sales increased by 12.1% to $12,877 thousand in the three months ended September 30, 2025, compared to $11,487 thousand in the prior year period.
• Surgical Aesthetics segment sales grew by 19.1% in the three months and 8.0% for the nine months ended September 30, 2025, primarily due to the commercial launch of the AYON Body Contouring System.
• Gross profit increased by 19.3% to $8,297 thousand in the three months ended September 30, 2025, with gross margin improving to 64.4% from 60.5%.
• Operating expenses (Research and development, Professional services, Salaries and related costs, Selling, general and administrative) saw significant reductions across the board due to cost-saving initiatives.
• Net cash used in operating activities improved significantly to $(5,471) thousand for the nine months ended September 30, 2025, from $(15,110) thousand in the prior year period.
• Cash and cash equivalents decreased to $25,135 thousand at September 30, 2025, from $31,741 thousand at December 31, 2024.
• The AYON Body Contouring System received FDA 510(k) clearance on May 13, 2025, and commenced commercial launch in September 2025.
• A 510(k) premarket notification was submitted on October 13, 2025, for AYON label expansion to include power liposuction.

Sentiment

Score: 7

Explanation: The company demonstrated significant improvements in reducing net losses and operating cash outflows, driven by successful cost-cutting measures and strong growth in its Surgical Aesthetics segment with the new AYON product launch. While overall revenue for the nine months was flat and the OEM segment declined, the positive trajectory in profitability and strategic product development, coupled with compliance with debt covenants, indicates a positive operational shift. However, ongoing liquidity concerns, increasing accumulated deficit, and product liability litigation temper the overall sentiment.

Positives

• Significant reduction in net loss for both the three months (60% decrease) and nine months (48% decrease) ended September 30, 2025, compared to the prior year.
• Strong sales growth in the Surgical Aesthetics segment (19.1% in Q3, 8.0% for 9M), driven by the AYON Body Contouring System launch.
• Improved gross profit and gross margin (64.4% in Q3 2025 vs 60.5% in Q3 2024), indicating better operational efficiency.
• Substantial reduction in operating expenses across Research and development (29.9% in Q3, 38.7% in 9M), Professional services (10.1% in Q3, 14.4% in 9M), Salaries and related costs (9.0% in Q3, 27.5% in 9M), and Selling, general and administrative (14.8% in Q3, 20.3% in 9M) due to cost-saving restructuring.
• Significant improvement in cash flow from operating activities, reducing cash outflow by nearly $10 million year-over-year for the nine-month period.
• Successful FDA 510(k) clearance and commercial launch of the AYON Body Contouring System, expanding product offerings.
• Compliance with all financial covenants of the Perceptive Credit Agreement as of September 30, 2025.
• China JV commenced operations and generated net income attributable to Apyx of $31 thousand in Q3 2025, reversing a loss from Q3 2024.

Negatives

• Overall total revenue for the nine months ended September 30, 2025, slightly decreased by 0.6% compared to the prior year.
• OEM segment sales decreased significantly by 17.6% in Q3 2025 and 31.4% for the nine months, primarily due to reduced sales volume to existing customers.
• Cash and cash equivalents declined from $31,741 thousand at December 31, 2024, to $25,135 thousand at September 30, 2025.
• Working capital decreased from $45,700 thousand at December 31, 2024, to $37,810 thousand at September 30, 2025.
• Accumulated deficit increased to $(87,823) thousand at September 30, 2025, from $(77,911) thousand at December 31, 2024.
• Continued recurring net losses and cash outflows from operations, with anticipation of losses continuing in the near term.
• Increased cash used in investing activities for the nine months ended September 30, 2025, ($839 thousand) compared to the prior year ($477 thousand).
• International sales decreased as a percentage of total revenue (27.5% in Q3 2025 vs 32.2% in Q3 2024; 29.2% in 9M 2025 vs 30.8% in 9M 2024).

Risks

• Inability to secure additional equity and/or debt financing on acceptable terms, leading to potential delays, limitations, reductions, or termination of sales, marketing, and product development.
• Dilution to stockholders if additional equity is sold.
• Further debt service obligations and restrictive operating/financing covenants if additional debt is incurred.
• Potential for damages from product liability claims to exceed aggregate insurance coverage limits or if insurance carriers disclaim coverage, leading to a material adverse impact on financial condition, results of operations, and cash flows.
• Uncertainty regarding the overall impact of trade policy and tariffs (e.g., on imports from EU, Canada, Mexico, China) on product cost competitiveness and gross margins.
• Potential adverse impact of inflation on raw materials, freight, and labor costs on future financial performance.
• Continued compliance with debt covenants is subject to meeting or exceeding forecasted Surgical Aesthetics revenues and reducing operating expenses.
• Economic uncertainty in the aesthetic market due to GLP-1s impacting capital equipment sales and requiring extended credit terms, increasing exposure in accounts receivable.
• Reasonable possibility of additional loss related to product liability lawsuits filed in March 2024, with the amount currently unestimable.

Future Outlook

The company anticipates continued net losses and cash outflows in the near term but expects cost-saving initiatives, including a 25% workforce reduction and other expense cuts, to reduce annual operating expenses below $40 million in fiscal 2025 and contribute to achieving cash-flow breakeven. The commercial launch of the AYON Body Contouring System and its potential label expansion are expected to drive future Surgical Aesthetics revenue, with specific targets of $37.0 million for 2025, $52.4 million for 2026, and $60.3 million for 2027 for this segment. The company also believes the increased use of GLP-1s will eventually provide a tailwind for Renuvion sales by increasing demand for body contouring procedures to address loose skin from rapid weight loss.

Management Comments

• We are a surgical aesthetics company with a passion for elevating peoples lives through innovative products, including our Helium Plasma Platform Technology products marketed and sold as Renuvion and the AYON Body Contouring System TM in the cosmetic surgery market and J-Plasma in the hospital surgical market.
• We believe the increased use of GLP-1s had an initial negative impact on the revenue for plastic and cosmetic surgeons and created uncertainty in the aesthetic space. However, we believe, that the use of these drugs will have a ripple effect which will drive people towards plastic surgery and may provide a tailwind for sales of our Renuvion products.
• Renuvion is the only FDA approved device for the treatment of this issue post liposuction.
• We estimate the annualized future cost savings from the reduction in force to be approximately $4.3 million which we expect to contribute to our goal of decreasing loss and achieving cash-flow breakeven.
• We foresee, in totality, these cost savings will reduce our annual operating expenses below $40 million in 2025.
• Our continued compliance with covenants is subject to meeting or exceeding forecasted Surgical Aesthetics revenues, as amended and reducing operating expenses.
• Inflation has not, to date, materially impacted our operations or financial performance. However, as these trends continue for raw materials, freight, and labor costs, our future financial performance could be adversely impacted.

Industry Context

The aesthetic surgery market is experiencing disruption from GLP-1 receptor agonists (e.g., Mounjaro, Wegovy, Ozempic), which initially caused uncertainty and negative impact on plastic and cosmetic surgeons' revenue due to weight loss. However, the company anticipates a 'ripple effect' where rapid weight loss from these drugs will lead to increased demand for body contouring procedures to address loose skin, creating a potential tailwind for Renuvion products, which are FDA-approved for post-liposuction skin laxity. The company is also navigating global supply chain instability, inflationary cost increases, and potential tariffs, which are common industry challenges.

Management Changes

Corporate Governance

Legal Proceedings

• Involved in a number of legal actions relating to the use of its Helium Plasma Platform Technology (Renuvion), which are being defended by the company's insurance carrier-appointed counsel.
• Two related product liability cases from 2022, with an estimated loss range of $1,650,000 to $1,950,000. The company accrued $1,450,000 related to these matters during 2022 and an additional $200,000 during 2024.
• New product liability lawsuits filed in March 2024, alleging off-label use and mismarketing of Renuvion products prior to FDA 510k clearance for those uses. The estimated defense costs range from $1,300,000 to $1,500,000, with $1,300,000 accrued in 2024. There is a reasonable possibility of additional loss, but the amount is currently unestimable.
• Management believes it has meritorious defenses and that claims are not expected to result in a material adverse effect, but warns of potential material adverse impact if damages exceed aggregate insurance coverage or if coverage is disclaimed.

Related Party Transactions

• Two relatives of Nikolay Shilev, Apyx Bulgaria's Managing Director, are employees: Teodora Shileva (accounting department) and Svetoslav Shilev (quality manager in quality assurance department).
• The partner in the China Joint Venture is also a supplier to the company. Purchases from this supplier were approximately $588,000 for the three months ended September 30, 2025 (compared to $189,000 for the same period in 2024), and $958,000 for the nine months ended September 30, 2025 (compared to $282,000 for the same period in 2024).
• Net payables to the China JV partner/supplier were approximately $482,000 at September 30, 2025 (compared to $243,000 at December 31, 2024).

Stakeholder Impact

• Shareholders: Potential dilution from future equity raises; improved financial performance (reduced losses, better cash flow from operations) could positively impact share value; ongoing accumulated deficit and litigation risks pose concerns.
• Employees: Workforce reduction of nearly 25% in November 2024 impacted employees; elimination of bonuses in 2024.
• Customers: Launch of AYON Body Contouring System offers new aesthetic treatment options; potential for Renuvion to address loose skin from GLP-1 induced weight loss.
• Suppliers: Efforts to find alternative suppliers and streamline the network to mitigate inflation and tariff impacts. China JV partner is also a significant supplier.
• Creditors: Compliance with Perceptive Credit Agreement covenants is crucial; long-term debt obligations remain substantial.

Next Steps

• Continue to fund operations and capital needs through existing cash, product sales, and potentially additional equity/debt financing.
• Monitor and mitigate the effects of inflation and tariffs on business and financial performance.
• Vigorously defend against product liability lawsuits.
• Work towards meeting or exceeding forecasted Surgical Aesthetics revenues and reducing operating expenses to maintain compliance with debt covenants.
• Evaluate the impact of ASU 2024-03 on consolidated financial statements.
• Pursue label expansion for AYON to include power liposuction, following the 510(k) submission on October 13, 2025.

Key Dates

Recommendation

Apyx Medical has shown significant operational improvements, particularly in reducing net losses and improving cash flow from operations, driven by aggressive cost-cutting and the successful launch of the AYON Body Contouring System. The growth in the Surgical Aesthetics segment is a strong positive, and the strategic positioning to capitalize on GLP-1 related body contouring demand is promising. However, the overall revenue for the nine-month period was flat, the OEM segment is declining, and the company continues to incur net losses and cash outflows, necessitating potential future capital raises which could dilute shareholders. The ongoing product liability litigation, with unestimable additional losses, also presents a material risk. Given the mixed signals – strong operational improvements in key areas offset by persistent losses, declining cash reserves, and legal uncertainties – a 'Hold' recommendation is appropriate. Investors should monitor the company's ability to achieve cash-flow breakeven, manage litigation, and sustain growth in Surgical Aesthetics while addressing the OEM segment's decline.

Keywords

Apyx Medical, APYX, 10-Q, Quarterly Report, Financial Results, Surgical Aesthetics, AYON Body Contouring System, Renuvion, J-Plasma, Medical Devices, FDA Clearance, Cost Savings, Net Loss, Revenue, Gross Profit, OEM, Product Liability, GLP-1, Body Contouring, Medical Technology