10-Q: Apyx Medical Reports Q1 2025 Results: Advanced Energy Growth Offsets OEM Decline, Cost-Cutting Measures Underway

Apyx Medical's Q1 2025 results show a mixed performance with growth in the Advanced Energy segment partially offset by a decline in OEM sales, while the company implements cost-saving measures to improve profitability.

Summary

• Apyx Medical Corporation reported its financial results for the first quarter of 2025.
• Total revenue decreased by 7.9% to $9.43 million compared to $10.24 million in Q1 2024.
• Advanced Energy segment sales increased by 5.8% to $7.887 million, driven by domestic handpiece sales and Apyx One Console upgrades.
• OEM segment sales decreased significantly by 44.7% to $1.543 million due to lower sales volume to existing customers.
• Gross profit decreased by 4.8% to $5.665 million, but gross margin increased to 60.1% from 58.1% due to segment and geographic sales mix.
• The company is implementing cost-saving measures, including a workforce reduction of nearly 25%, expected to save $4.3 million annually.
• Operating expenses are projected to decrease below $40 million in fiscal year 2025.
• Net loss attributable to stockholders was $4.150 million, or $0.10 per share, compared to a net loss of $7.576 million, or $0.22 per share, in Q1 2024.
• The company submitted a 510(k) premarket notification to the FDA for AYON, an all-in-one body contouring system, and anticipates clearance in the first half of 2025.
• The company had approximately $31.0 million in cash and cash equivalents as of March 31, 2025.
• The company is monitoring the potential impact of tariffs and inflation on its business.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the company is implementing cost-saving measures and has a new product in development, revenue is down and the company is still operating at a loss. The company is also exposed to risks related to product liability lawsuits and the potential impact of tariffs and inflation.

Positives

• Advanced Energy segment sales increased by 5.8%, indicating growth in the core cosmetic surgery market.
• Gross margin improved to 60.1%, reflecting a more favorable sales mix and improved profitability.
• Cost-saving measures are expected to reduce annual operating expenses below $40 million in 2025, improving the company's financial position.
• The submission of the 510(k) premarket notification for AYON represents a potential growth opportunity in the body contouring market.
• Net loss decreased significantly compared to the same period last year, indicating progress towards profitability.
• The company is in compliance with the financial covenants contained within the Perceptive Credit Agreement, as amended.

Negatives

• Total revenue decreased by 7.9%, primarily due to a significant decline in OEM segment sales.
• The company continues to incur net losses and cash outflows from operations.
• The company's future success depends on obtaining additional financing, which may not be available on acceptable terms.
• The company is exposed to risks related to product liability lawsuits, which could have a material adverse impact on its financial condition.
• The company is monitoring the potential impact of tariffs and inflation, which could negatively affect its business.

Risks

• The company's ability to achieve profitability depends on its ability to increase sales, reduce costs, and obtain additional financing.
• The company is subject to risks related to product liability lawsuits, which could result in significant financial losses.
• The company's success depends on the successful development and commercialization of new products, such as AYON.
• The company is exposed to risks related to competition, changing market conditions, and regulatory changes.
• The company is monitoring the potential impact of tariffs and inflation, which could negatively affect its business.
• 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.

Future Outlook

The company anticipates FDA clearance for AYON in the first half of 2025 and plans to launch it later in the year. The company plans to expand the indications with an additional 510(k) submission for AYON to include power assisted liposuction. The company plans to continue to fund its operations and capital funding needs through existing cash, sales of its products and, if necessary, additional equity and/or debt financing.

Management Comments

• The company believes 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.
• The company believes, as these drugs will have a ripple effect that will eventually drive people towards plastic surgery and may provide a tailwind for sales of our Renuvion products.

Industry Context

The report discusses the impact of GLP-1 drugs on the cosmetic surgery market, highlighting the potential for increased demand for body contouring procedures to address loose skin resulting from rapid weight loss. The company is positioning itself to capitalize on this trend with its Renuvion products and the upcoming launch of AYON.

Comparison to Industry Standards

• It is difficult to compare Apyx Medical's results directly to industry standards without specific competitor data.
• However, the report provides insights into the company's performance relative to its own historical results and strategic initiatives.
• The company's focus on cost-cutting and new product development aligns with common strategies in the medical device industry to improve profitability and drive growth.
• The company's Advanced Energy segment competes with companies such as Bovie Medical, Integra LifeSciences, and Medtronic in the electrosurgical devices market.
• The OEM segment competes with contract manufacturers such as Integer Holdings Corporation and Sanmina Corporation.

Legal Proceedings

• The Company is involved in a number of legal actions relating to the use of its Helium Plasma Platform Technology, which actions are being defended by the Company's insurance carrier-appointed counsel.
• During 2022, the Company was notified of certain procedures alleged to have been performed by the same physician and which are currently the subject of two related products liability cases within the courts.
• During March 2024, the Company was named as a defendant in a number of product liability lawsuits filed under the direction of a single plaintiffs tort firm alleging off-label use of Renuvion products and the Company's mismarketing of the same.

Related Party Transactions

• Two relatives of Nikolay Shilev, Apyx Bulgarias Managing Director, are considered related parties.
• The partner in the Companys China JV is also a supplier to the Company.
• For the three months ended March 31, 2025 and 2024, the Company made purchases from this supplier of approximately $29,000 and $51,000, respectively.
• At March 31, 2025 and December 31, 2024, respectively, the Company had net payables to this supplier of approximately $53,000 and $243,000, respectively.

Stakeholder Impact

• Shareholders face potential dilution from future equity financing.
• Employees have been impacted by the workforce reduction.
• Customers may benefit from the development of new products like AYON.
• Suppliers may be affected by the company's cost-saving initiatives.
• Creditors are exposed to risks related to the company's ability to meet its financial obligations.

Next Steps

• The company anticipates FDA clearance for AYON in the first half of 2025 and plans to launch it later in the year.
• The company plans to expand the indications with an additional 510(k) submission for AYON to include power assisted liposuction.
• The company will continue to monitor the potential impact of tariffs and inflation on its business.

Key Dates

Keywords

Apyx Medical, Renuvion, AYON, Advanced Energy, OEM, Financial Results, Q1 2025, Helium Plasma Technology, Cost Savings, FDA, Net Loss, Revenue, Gross Margin