8-K: Apyx Medical Secures $7 Million in Direct Offering, Restructures Operations and Updates Financial Outlook

Apyx Medical announced a $7 million registered direct offering, a cost-saving restructuring program, and updated financial guidance for 2024 and 2025.

Summary

• Apyx Medical reported a 4% year-over-year decrease in total revenue for the third quarter of 2024, with total revenue reaching $11.5 million.
• The company's Advanced Energy segment saw a 6% decrease in revenue, while the OEM segment experienced a 3% increase.
• The net loss attributable to stockholders was $4.7 million, a slight increase of 2% year-over-year.
• Adjusted EBITDA loss decreased by 20% year-over-year to $2.4 million.
• Apyx Medical completed a $7 million registered direct offering and amended its credit agreement with Perceptive, reducing revenue targets and adding operating expense covenants.
• The company is implementing a cost-saving restructuring program, including a nearly 25% reduction in its U.S. workforce, expected to save approximately $4.3 million annually.
• The company expects to incur pre-tax charges of approximately $0.6 million in the fourth quarter of 2024 related to the restructuring.
• Apyx Medical anticipates operating expenses to be below $40 million in 2025.
• The company is developing the Ayon body contouring system, with plans to submit a 510(k) to the FDA by the end of the first quarter of 2025 and launch in the second half of 2025.
• The company expects to ship nearly 90,000 single-use handpieces for the full year 2024.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company has secured funding and is taking steps to improve its financial position, the revenue decline and increased net loss are concerning. The restructuring and new product development are positive, but the overall sentiment is neutral to slightly negative due to the financial challenges.

Positives

• The company successfully raised $7 million through a registered direct offering.
• The amendment to the credit agreement with Perceptive provides more financial flexibility.
• The restructuring program is expected to result in significant cost savings.
• Single-use handpiece sales showed strong growth, indicating continued demand for the product.
• The development of the Ayon system represents a potential growth opportunity.
• The company has right sized the board of directors from eight to five members.

Negatives

• Total revenue decreased by 4% year-over-year in the third quarter of 2024.
• The Advanced Energy segment experienced a 6% decrease in revenue.
• Gross profit margin decreased to 60.5% from 66.6% in the prior year period.
• The company is incurring pre-tax charges of approximately $0.6 million in the fourth quarter of 2024 due to the restructuring.
• Net loss attributable to stockholders increased slightly year-over-year.
• The company has reduced its full year 2024 revenue guidance.

Risks

• The company's ability to obtain regulatory approvals for its products, including the Ayon system, is subject to uncertainty.
• The company is subject to risks related to supply chain disruptions, component shortages, and manufacturing issues.
• The company's financial performance is subject to changes in general economic, business, and demographic conditions.
• The company faces potential liabilities and costs from pending or threatened litigations, claims, disputes, or investigations.
• The company's future performance is subject to the impact of the March 14, 2022 FDA Safety Communication.

Future Outlook

The company expects total revenue for 2024 to be between $46.6 million and $47.6 million and for 2025 to be between $47.6 million and $49.5 million. The company also plans to submit a 510(k) for its Ayon body contouring system to the FDA by the end of the first quarter of 2025 and launch in the second half of 2025.

Management Comments

• We were pleased with the continued resiliency of our disposable handpiece, which grew 9% overall and 15% in the U.S.
• It has been a busy few months for us, as we initiated a cost reduction program, raised $7.0 million to strengthen the balance sheet, and amended the covenants with our lender and partner, which we believe will extend our cash runway and allow us to execute our growth strategy.
• The Aypx team is in the final stages of developing the Ayon body contouring system, a new product that we believe will dominate the aesthetic surgical space.
• Todd Hornsby, Executive Vice President of Sales and Marketing, will be leaving the Company effective immediately.
• Shawn Roman has been promoted from his current position of Vice President Research and Development to Chief Operating Officer.

Industry Context

The medical device industry is competitive, with companies constantly innovating and seeking regulatory approvals for new products. Apyx Medical's focus on its Renuvion technology and the development of the Ayon system positions it to compete in the aesthetic surgery market. The company's restructuring and cost-saving measures reflect a broader trend in the industry to optimize operations and improve financial performance.

Comparison to Industry Standards

• Apyx Medical's revenue decline in the Advanced Energy segment contrasts with some other medical device companies that have reported growth in similar segments.
• The company's focus on single-use handpieces aligns with a trend towards disposable medical devices for infection control and convenience.
• The development of the Ayon system is similar to other companies that are developing all-in-one platforms for aesthetic procedures.
• The company's cost-cutting measures are similar to other companies that are facing financial challenges or seeking to improve profitability.
• The company's reliance on a single technology platform (Helium Plasma) is a risk compared to companies with more diversified product portfolios.

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: The registered direct offering dilutes existing shares, but the restructuring and new product development could improve long-term value.
• Employees: The restructuring program will result in job losses for some employees, but the company is providing severance packages.
• Customers: The company will continue to provide its Renuvion and J-Plasma products, and the Ayon system could offer new treatment options.
• Suppliers: The company will continue to work with its suppliers, and the restructuring program could impact its purchasing patterns.
• Creditors: The amendment to the credit agreement with Perceptive provides more financial flexibility, but the company's debt remains a significant liability.

Next Steps

• The company will continue to implement its cost-saving restructuring program.
• The company will submit a 510(k) for the Ayon body contouring system to the FDA by the end of the first quarter of 2025.
• The company will launch the Ayon system in the second half of 2025, pending FDA approval.
• The company will continue to focus on growing its single-use handpiece sales.
• The company will continue to monitor and manage its operating expenses.

Key Dates

Keywords

Apyx Medical, Renuvion, Helium Plasma, Registered Direct Offering, Restructuring, Financial Outlook, Ayon, Medical Devices, Advanced Energy, OEM, Perceptive Credit, FDA, Cost Savings, Single-use handpieces