Q4 2020 Apyx Medical Corp Earnings Call
Please standby.
Good morning, ladies and gentlemen, and welcome to the fourth quarter and fiscal year 2020 earnings conference call for Apex Medical Corporation. At this time, all participants have been placed in a listen only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and that's a recording will be.
Available on the company's website for replay shortly before I begin I'd like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated including those identified in the risk for.
<unk> section of our most recent annual form on form 10-K filed with Securities and Exchange Commission as well as our most recent 10-Q filing.
Such factors may be updated from time to time on our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events or otherwise.
This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP. We generally refer to these non-GAAP financial measures reconciliations of those non-GAAP financial measures to the most comparable measures.
Calculated and presented in accordance with GAAP are available on the earnings press release on the Investor Relations portion of our website I would now like to turn the call over to Mr. Charlie Goodwin apex medical as President and Chief Executive Officer. Please go ahead Sir.
Thanks, Kevin and welcome everyone to our fourth quarter and full year 2020 earnings call I'm.
I'm joined on the call. This morning by our Chief Financial Officer Tara Sam.
Let me provide you with a quick agenda for today's call.
I'll begin with the review of our strong fourth quarter revenue results. Following this discussion I will provide you with an update on the operational progress we made during the quarter on our for initiatives. We are pursuing as part of our longer term growth strategy.
Tara will then provide a detailed review of our fourth quarter financial results and an overview of our 2021 financial guidance, which we introduced in our press release this morning.
I will conclude with some additional thoughts on our near term areas of focus.
And long term outlook as we enter 2021, we will then open the call for questions.
With that let's get started with a review of our Q4 revenue results.
We were extremely pleased to report total revenue of $11 5 million for the fourth quarter of 2020, an increase of 37% year over year.
Our total revenue results came in slightly above the high end of the preliminary range. We provided in January and greatly exceeded our expectations for the fourth quarter.
Recall that at the time of our Q3 earnings call. We expected total revenue to decrease year over year in the fourth quarter.
We were very pleased with the revenue results, we delivered this quarter, especially given the continued challenges related to COVID-19 in our primary markets around the world.
By geographic region, our total U S sales for the fourth quarter of 2020 increased 18% year over year to $6 6 million, while total international sales increased 74% year over year for 9 million.
And by business segment, our advanced energy sales increased 44% year over year to $9 9 million and our OEM sales increased 4% year over year to $1 6 million.
Our impressive advanced energy segment performance was largely driven by strong sales of our hand pieces, which grew 78% year over year, coupled with a 25% year over year increase in sales of our generators.
It's important to note that the 78% year over year growth. We saw in global sales of our hand pieces was primary driven by strong demand both domestically and internationally.
Yeah.
Looking at our advanced energy sales performance more closely in the U S. We saw hand piece sales increased 80% year over year.
Our U S hand piece sales were primarily driven by strong utilization based demand from our existing surgeon customers.
Nearly all of our existing U S customers were open and active throughout the quarter.
After working through their case backlogs during Q3, many reported they continued to see increased patient volumes throughout the fourth quarter, reflecting strong underlying procedure demand.
While our access to per prospective new customers improved during the fourth quarter the capital equipment environment in the U S remains challenging as a result U S generator sales declined high single digits on a year over year basis in the fourth quarter.
Outside the U S.
International sales were the largest driver of the upside that we saw in our advanced energy business during the fourth quarter.
I'm pleased to report that we saw year over year growth in international sales of both hand pieces and generators, which increased 75% and 88% respectively in Q4.
Our hand piece growth was surprisingly strong given the environment for.
The old impart by orders from our distributor in Brazil.
However, even excluding that demand or international Handpiece sales increased 45% year over year.
Importantly, our growth in international sales of generators was predominantly fueled by orders from countries that we entered over the first nine months of 2020, most notably orders from our distributor in Brazil.
Overall trends in our international advanced energy business remained difficult to generalize given that the pace of recovery continues to vary by both region and country.
Our performance in Latin America during the fourth quarter was bolstered by strong sales in Brazil, and we saw pockets of strength in the middle East while performance in Europe, Canada, and APAC regions continued to lag.
Turning to a discussion of our operational progress.
We complemented our strong fourth quarter sales performance with notable progress on our four strategic initiatives to position <unk> medical for long term growth in the cosmetic surgery market.
Starting with our first initiative to pursue specific clinical indications that will enable us to market and sell renew V on for new targeted procedures.
We were pleased to achieve multiple milestones during the fourth quarter with respect to our two <unk> clinical studies.
As a reminder, we are conducting these studies to support the pursuit of new indications for the use in dermal resurfacing and skin laxity procedures.
In early November we completed patient enrollment in our clinical study evaluating the use every new me on technology for dermal resurfacing procedures for.
Following the completion of enrollment our team has been focused on completing the 90 day follow up visits for the enrolled patients.
And collecting aggregating and analyzing the data from this study with the goal of submitting a request for a five 10-K clearance by the end of May 2021.
We also submitted one month safety data to the FDA from phase one of our IDE study evaluating the use of every new V on in skin laxity procedures in the neck and sub mental regions.
After reviewing the safety data the FDA concluded that we met the requirements completing the phase one portion of the study.
On November 23rd we announced that the FDA approved our supplement enabling us to move forward with phase two of this study.
<unk> proved supplement included changes to the treatment protocol based on feedback from our investigators during phase one as well as an updated statistical analysis plan and an increase in the number of investigational sites.
I am pleased to report that we initiated enrollment in phase II in December as anticipated and we will continue to expect to complete enrollment in the third quarter of 2021.
In terms of our O U S regulatory strategy, we continue to pursue regulatory clearance of our helium plasma technology in new countries with the goal of expanding our global commercial footprint.
During the fourth quarter I am pleased to report that our regulatory team was able to obtain new product registrations and for new countries in Latin America and Eastern Europe.
We do not expect these four countries to contribute materially to our performance in 2021, but remain pleased by our rapid pace of progress in obtaining new product registrations. Despite the global disruptions due to COVID-19.
Turning to our second strategic initiative, we continue to expand our portfolio of clinical evidence for renew beyond with several new publications during the fourth quarter.
On October 20th we announced the publication of two peer reviewed articles, which were both featured in the journal Dermatological reviews.
Each publication included data on our renew the on technology from multiple retrospective chart review studies.
<unk> evaluated the independent use of renew V on for sub dermal coagulation and the neck, while the other evaluated its use in combination with liposuction for sub dermal coagulation and various parts of the body.
On October 26th another peer reviewed article was published in the aesthetic surgery Journal Open Forum.
Which focused on the use of renewable beyond for sub dermal coagulation following the contouring, the upper and middle back regions with ultrasound assisted liposuction.
We were also pleased to see two additional publications during the quarter in the biomedical journal of scientific and technical research, which focused on the use of our technologies in areas outside of cosmetic surgery procedures.
Collectively these publications continue to bolster our portfolio of evidence supporting the risk benefit profile of our technology when used across multiple areas of the body.
With respect to our third strategic initiative, enhancing physician and practice support for our cosmetic surgery customers.
In lieu of in person events, our team continued to organize and conduct educational programs virtually.
In the U S. We hosted for virtual physician education events, which were similar in format.
Two are in person physician mentoring programs.
These virtual events drew attendance from approximately 60 physicians.
Outside the U S. We hosted two virtual training sessions to educate some of our distributors on the features and benefits of our helium plasma technology.
Our team continued to develop new marketing materials, which are now available for our existing renewed on customers to use via our online marketing portal.
On our fourth and final strategic initiative, improving our manufacturing capabilities and efficiencies.
Our efforts to reduce the per unit manufacturing cost of our advanced energy products continues to demonstrate progress as a result of the expanding commercial adoption of our APR handpiece for.
Following the launch of our APR Handpiece in early 2020, we have focused on introducing this next generation product to our existing customer base.
I'm pleased to report that by the end of 2020, nearly all of our North American customers have begun using our new hand piece for a portion of their procedures.
Importantly, the adoption of our APR Handpiece was the primary driver of the improvement that we saw in our total gross margins during the fourth quarter, which increased approximately 80 basis points year over year.
In summary, as a result of our strong sales performance in Q4 in spite of the continued headwinds created by the Covid pandemic. We were ultimately pleased to see sales declined by only 2% for the full year after experiencing a 24% decline in year over year sales during the.
First half of 2020.
As Terry will discuss further.
We complemented our exceptional sales performance during the fourth quarter with strong year over year proved mint and our total gross margins net loss and adjusted EBITDA.
And lastly, we continue to drive important progress on all of our long term strategic initiatives.
The impressive financial and operating performance that we achieved is a direct result of our team's execution and their dedication to supporting our customers and their patients.
I'd like to congratulate them on a great quarter, and a strong conclusion to a very challenging year.
With that let me turn the call over to Tara to discuss our fourth quarter financial results and 2021 guidance Tara.
Thanks, Charlie.
I will begin my review of our Q4 financial results by continuing down the P&L.
Gross profit for the fourth quarter of 2020 increased $2 1 million or 38, 4% year over year to $7 7 million.
Gross profit margin for the fourth quarter of 2020 was 67, 2% compared to 66, 4% last year.
The year over year increase in profit margins was driven in part by product mix within our advanced energy segment as well as improved product margins in our advanced energy segment due to our continued manufacturing efficiency initiatives.
And the introduction of new products, including the APR Handpiece.
The increase in profit margins was offset partially by product mix within our OEM segment and geographical revenue mix due to international sales growth outpacing domestic sales growth.
Operating expenses for the fourth quarter of 2020 decreased $1 $8 million or 15, 4% year over year to $9 8 million compared to $11 5 million for the fourth quarter of 2019.
The decrease in operating expenses year over year was driven by a 1 million one $2 million decrease in professional services.
<unk> 9 million decrease in SG&A expenses, and a $2 million decrease in R&D expenses, partially offset by a <unk> 5 million increase in salaries and related costs.
The year over year decrease in operating expenses reflects the continued benefits from our initiatives to control costs and reduce our discretionary spending early in 'twenty net in 2020 and response to the impact of COVID-19 on our financial condition.
Loss from operations for the fourth quarter of 2020, with $2 1 million compared to operating loss of $6 million last year.
Income tax benefit for the fourth quarter of 2020 was <unk> 4 million compared to approximately <unk> 4 million in the fourth quarter of 2019.
Net loss attributable to stockholders for the fourth quarter of 2020 was $1 5 million or for per share compared to $5 4 million or <unk> 16 per share for the fourth quarter of 2019.
Yes.
Fourth quarter 2020, adjusted EPS adjusted EBITDA loss was <unk> 7 million compared to $4 $8 million last year.
As a reminder, we provided a detailed reconciliation from GAAP net loss to adjusted EBITDA loss in our press release this morning.
As of December 31, 2020, the company had cash and cash equivalents of $41 9 million compared to $58 8 million as of December 31, 2019.
As of December 31, 2020, the company had working capital of $56 9 million.
Including our expected tax refunds of approximately $7 5 million that the company anticipates, receiving during 2021 related to the net operating loss carry backs, resulting from the 2020 cares Act.
Turning to a review of our 2021 financial guidance, which we introduced in our earnings press release. This morning, we expect.
Total revenue in the range of $36 7 million to $38 $7 million, representing growth of 32% to 40% year over year compared to total revenue of $27 7 million in fiscal year 2020.
Total revenue guidance assumes advanced energy revenue in the range of approximately $32 three to $34 3 million representing growth of 45% to 55% year over year compared to advanced energy revenue of $22 2 million in fiscal year 2020.
The advanced energy revenue range assumes that U S growth is only driven by contributions from renewing on sales related to its use as a sub dermal coagulator following liposuction procedures and that international growth is driven primarily by demand in existing international markets.
OEM revenue of approximately $4 4 million, representing a decline of 20% year over year compared to $5 5 million in fiscal year 2020.
In terms of profitability guidance for fiscal year 2021, we expect.
Net loss attributable to stockholders in the range of $18 four to $20 7 million compared to $11 9 million in fiscal year 2020.
And we expect adjusted EBIT loss in the range of 12 million to $14 6 million compared to adjusted EBITDA loss of $14 5 million in fiscal year 2020.
As a reminder, we have included a full reconciliation from GAAP net loss to non-GAAP adjusted EBITDA loss in our earnings press release this morning.
In addition to our formal financial guidance for 2021, we are providing some considerations for modeling purposes.
First our total company revenue revenue growth will be driven exclusively by our advanced energy business, which at the midpoint of guidance range assumes growth of 50% year over year more than offsetting the 20% decline. We expect an OEM sales in 2021, driven primarily by Covid related recovery trend.
And the impact on demand from our OEM customers.
The 50% growth at the midpoint in our advanced energy business. This year will be driven by strong growth in both U S and in international markets. However, we expect roughly 60% growth in sales to use advanced energy customers and roughly 35% growth in sales to international advanced energy.
Customers.
Third we expect gross margins in the range of 69% to 71% this year compared to 63, 2% last year, driven primarily by continued mix mix benefits by segment by geography and by product specifically our continued manufacturing efficiency.
As for our hand pieces, including the APR Handpiece.
Fourth we expect expected GAAP operating expense to increase approximately 22% year over year, driven by mid single digit growth in our normalized operating expenses, which excludes roughly $4 $3 million of COVID-19 related expense reductions, including discretionary travel.
On entertainment and other compensation related expenses that benefited our 2020 GAAP operating expense plus incremental stock based compensation expense in 2021 of approximately $1 3 million and approximately $500000 of initial expenses related.
Through our joint venture partnership in China, which we established last year.
Fifth.
Net interest and other expense of approximately $150000 in 2021 compared to a benefit of approximately 700000 last year.
Six income tax expense of approximately 180000 in 2021 compared to an income tax benefit of $7 $5 million in 2020, which included the aforementioned net operating loss carry back tax benefit from the 2020 Cares Act.
Finally, we expect non cash depreciation and amortization of approximately 700000 non.
Noncash stock based compensation expense in a range of five two to $5 5 million and.
Weighted average diluted shares outstanding of approximately 35 million shares.
In addition to our formal financial guidance for 2021.
While it is not our practice to provide quarterly guidance given that we are reporting in the last week of the fiscal for.
First fiscal quarter of 2021, we thought it would be helpful to share a range of expectations for total revenue in the interest of transparency.
We anticipate total revenue for the first quarter of 2021, and the range of 782 8 million represent spending growth of 55% to 60% year over year.
This total revenue range assumes advanced energy revenue in the range of approximately six eight to 7 million representing growth of 71% to 76% and.
In OEM revenue of approximately 950000, representing a decrease of 6% year over year.
With that I'll turn the call back to Charlie for closing remarks Charley.
Thanks, Tara as we entered 2021, we remain optimistic about the prospects of our advanced energy business and we are confident in our ability to drive advanced energy growth in the range of 45% to 55% year over year in 2021.
With respect to our Q1 expectations, specifically, we have continued to see evidence of strong utilization of our hand pieces in the U S along with demand from distributors internationally. Despite the surge in Covid cases in recent months.
Meanwhile, the capital equipment environment continues to be impacted and the pace and timing of recovery remains uncertain, both domestically and internationally.
As a reminder, we also see trends, we also tend to experience season seasonality in capital equipment purchasing trends.
With the first quarter generator sales typically representing the smallest portion of our full year generator sales.
Looking ahead, we continued strong global demand for our advanced energy hand pieces and expanded O U S distribution network and continued clinical and regulatory progress apex medical is better positioned as a result of our focused execution in 2020.
As we move beyond the first quarter, we look forward to recovering from the effects of COVID-19, while continuing to execute against our four strategic initiatives to further enhance our opportunities in the years to come.
Over the next few years, we believe aiming apex medical is poised to deliver strong sustained growth and improving profitability with our global multibillion dollar addressable market opportunity.
Strong balance sheet to support our growth initiatives and a truly differentiated technology supported by expanding portfolio of clinical evidence.
I'd like to close my remarks by emphasizing that we greatly appreciate the support of our employees customers distributors and investors as we continue our mission to elevate the cosmetic surgery market to the next level by enabling surgeons and their patients to achieve the <unk>.
<unk> that they are looking for.
With that operator, let's now open the call for questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
We do ask that you limit yourself to one question and one follow up if you'd like to ask additional questions, we'd like to add yourself for the queue again by pressing star one once you get that star one to be placed in the question queue and we ask you. Please limit yourselves to one question and one follow up our first question today is coming from Matthew O'brien from Piper.
Sandler Your line is now live.
Great. Thanks.
Thanks for taking my questions.
I guess you know.
Charlie or carrier based on what you just said about Q1 here.
And then what we saw on Q4, I mean, you did really well on advanced energy about $10 million.
Can you talk about some of the benefit that you saw in Q4, and then when I net out what you said about Q1 on advanced energy from the guidance for the year. It assumes about $8 5 million up for.
Each of the last three quarters, which is below what you did in Q4. So it just feels like Thats somewhat conservative again, given all the momentum globally, what are we missing as far as.
That kind of.
Run rate for the last three quarters of the year, maybe advanced energy that would be at that kind of lower level versus what you just printed in Q4.
Well.
Hi, Matt Thanks for the comment the first thing to remember is there is always the seasonality in Q1 Q1 is always our lowest.
Quarter.
Especially for capital sales in generator sales and that seasonality did not change at all.
As we're sitting here today so.
There's usually about a 20% to 30% decline in that seasonality from Q4 down to Q1, and so we would expect Q1, obviously to be our lowest on.
Our lowest number in the year.
Okay, sorry, just a follow up and I didn't ask the question real well you did $10 million in advanced energy in Q4, which is great.
Youre guiding the 32 to 34 for the year and.
So it's well below that annualized rate and I get it is key for us it's better than normal. It just seems like it's it's a conservative outlook for the advanced energy business given all the momentum is there something new customers' capex.
We really are trying to call out here or are you just trying to be conservative with that number based on what how did you pay for the 37% decline. We did nine nine in Q4, and then we guided to advanced energy in Q1 of six eight to seven.
So it's right in line with that 30% decline that we typically see from the normal seasonality of our business.
Got it Okay I will follow up offline and then secondly, the international strength was really good to see.
And I know this has been a domestic store for a while here, but can you just talk about.
What youre seeing and I think it was five new countries and one of them, obviously, but the strength that youre seeing there and then how much should international contribute to the story going forward because I know, it's a big component to a lot of other aesthetic companies. Thanks.
So total U S O U S sales, where we're at $4 9 million up $2, one which represented that 70 for for 74% year over year growth that you had talked about in.
Obviously, much better than our expectations.
And we were incredibly.
Impressed by the growth with the strong demand from those customers, especially given the challenges of Covid and some of those markets and the upside was really driven by a record December and the largest contributor to that upside was Brazil. They were about half of that with the.
The other half coming from demand in the middle East, which actually came back pretty good in the fourth quarter and then some of the other newer countries that.
Thailand, and Taiwan net put in some orders that we had that we had gotten and so we are very.
We are very positive on our long term prospects, especially in Brazil, being the second largest cosmetic market in the world, but if you look at surgical procedures, they actually do more surgical procedures than the United States I think the only thing that gives us.
Any form of pause in Brazil, and one of the things that surprised us in the fourth quarter a little bit is obviously they are being ravaged by COVID-19 down there.
And you know.
How do they get past this COVID-19 and what happens once they get past Covid. That's what we're really looking for and obviously I don't have a timeline.
What happens with Covid down in Brazil, but that's the only reason that we have a little bit of pause for the international sales once we get through all of this we will continue to be a driver, but we are only forecasting the growth for this year because of those factors.
We're only forecasting international to grow 35% this year.
Got it thank you so much.
Yes.
Thank you. Our next question is coming from Matt Hewitt from Craig Hallum Capital Group. Your line is now live.
Good morning, and thank you for taking the questions.
The first up what that's going to peak.
Two to kind of reinvigorate the generator sales is that are you know.
Obviously, we're seeing some progress on the vaccine front. So is it just.
Further rollout of that is going to allow the customers to get comfortable and ultimately the turbine generators can or is there some other factor at play.
Yeah, no. So I wanted to be clear that generators keep getting better. Okay Q4 was better than Q3 Q3 was better than Q2. So generators are improving they are just not at the level. They were pre COVID-19 and it really comes down to especially in the United States.
Is the protocols that offices are putting in place to try to keep everybody safe by not allowing new people in and so as we get everybody vaccinated and as we get.
More normalization to Tradeshows and things like that.
We would expect over time for those to get better I, just don't know exactly what that time is going to be.
We are starting to see a couple trade shows that are starting to have people at them live people instead of everything being done virtually but even with those live shows there the attendance isn't that great yet so.
We expect it to keep getting better as the year goes on but it's really tough to predict when and and.
When that flip switch flips if you will.
Got it and then maybe on <unk>.
People side.
Last year, obviously with the with everything that happened.
Hum.
Expenses were cut.
Across the board, but it was you know travel it was head count all sorts of areas as you look at this year.
Should we be thinking about the cadence of ramping those expenses back up.
Particularly as it comes to the travel and some of the incremental expenses and then I guess tied to that is you know what are your plans from a hiring perspective.
Particularly on the sales and marketing side. Thank you.
Yeah, So let me handle the sales and marketing side first.
We're happy with the size of the team that we have today and so we will we will continue with that team throughout all of 2021.
And <unk>.
Tara will be able to walk you through it.
Very good.
Exercise to show you, where the savings were and where we see the growth in expenses, but just figure there was about $4 $3 million of Covid related savings in 2020 that on a normalized basis will go back into the expenses and then obviously were.
We got the IV studies that we're investing in and getting ready for dermal launches and things like that so she can walk you through all of that as we.
When we talk after but she's got the whole thing laid out for you.
Great. Thank you.
Yeah.
Thank you. Our next question is coming from David <unk> from JMP Securities. Your line is now live.
Yes, Hi, this is actually Danny on for Dave just add a few quick ones first of all handpiece demand domestically it was gone.
Very strong this quarter, but we just wanted to ask more about the broader cosmetic surgery market beyond your own company's execution are you seeing any.
Market Diamond dynamics that might be driving this growth do you think there's a higher willingness from patients undergo these surgeries given the remote work more convenient recovery or maybe even additional stimulus any color on the more broader market would be fantastic. Thanks, Yeah, no. It's a very good question Danielle <unk>.
Yes, you hit on some of the factors that are driving this I think what we continue to see and what we continue to hear from our customers is that demand for these procedures continues to be.
Continues to be high I think the thing that is interesting is because of all these different factors I think are procedure in particular is.
Very good because it is a permanent solution. If you will unlike some of these other less invasive modalities and so I think you've got the function that you've got people at home they've got the time to recover and they would prefer a more permanent solution as opposed to something that really do.
Not quite get the job done and that's what our technology does and I think you can see that by the demand for these procedures given this time and so we're encouraged by that and obviously and.
From from the customer point of view that day.
They're very happy from that to and see that continuing.
Great and then just one follow up.
Yeah, you mentioned, obviously in <unk>, you had a bit of a backlog that.
Customers have worked through by August.
May have missed it but I just wanted to make sure was there any.
Backlog that you saw being built up in the <unk> with the resurgence in COVID-19 or just any color around that or anything you saw would be great. Yes, no no in the U S. All of our customers were open and working in Q4, and we just continued to see strong demand for those customers outside the United States, It's been a little trickier.
<unk>.
And that some of the countries have been under Lockdown in Q4, and so some countries outside the United States are obviously not as strong as we would like it to be but obviously overall strength outside the U S was obviously great in the fourth quarter, but there were still being affected by some of those countries for sure.
Sure.
The data, they're having shutdowns and arent working at 100%.
Great. Thank you.
Thank you.
Thank you. Our next question today is coming from Kyle Boser from Colorado Securities. Your line is now live.
Great. Thanks, Thanks for taking the questions today, great updates.
Maybe just following up on seasonality.
Seasonality and kind of the strength you've seen internationally I mean.
Back of the envelope math in Q4 O U S sales for advanced energy, where pretty much the same as U S advanced energy sales such as phenomenal considering you know couple of quarters before.
Maybe a million versus almost $5 million in Q4.
So just kind of wondering about the cadence heading into Q1.
I understand there is seasonality, but it did in Brazil, particularly it's a relatively new market.
Can you just talk about was there.
Bolus of demand pent up demand heading into getting clearance in that country and we've seen a lot of nice strength.
And then we should anticipate that.
Smoothing out a little bit or do you still see a pretty massive opportunity for some low hanging fruit in that geography.
Later this year.
Yeah.
So.
Our <unk>, our preliminary revenue expectations that we provided in our remarks assumed our growth advanced energy of 71% to 76% in Q1 and with that we are expecting O U S growth of about 90% year over year in Q1 and that is driven by the strong <unk>.
Pes demand from existing countries.
And obviously a lower comparison.
As Q1 last year, especially outside the United States Covid had an impact in the February March timeframe. So it's an easier comparison and our full year 2021 guidance on international assumes 35% year over year. When you were talking about Brazil, specifically.
You need to remember that obviously.
Every time that we have doctors from all over the world doing procedures. They are posted on Instagram and talking about them and doctors from all over the world that do these body contouring procedures get to see this and so when we enter a market like Brazil. There is obviously a lot of people that have seen the <unk>.
Work on a lot of these doctors and are looking forward to.
Acquiring the technology.
In a non COVID-19 environment.
I would expect us to be even doing more than we are in Brazil, right now and to be then growing more we think that Brazil is a very.
We'll be a very key market for us in the future as I mentioned before they're the second largest cosmetic surgery market in the world, but they actually do more surgical procedures in Brazil than the United States.
So if you look at it just from a surgical perspective, it's actually a bigger market in the United States and we would expect this market to be a big driver for years to come the reason that we're cautious and the reason that we are.
Not pounding the table on Brazil, right now is as you know they have COVID-19 going on like Crazy down there and I. Just don't have we just don't have good visibility on how long that's going to last what's going to happen in all of those types of things that go along with that so that's the only thing that gives us pause about Brazil in the long run.
It will be a very large market for us as we move forward.
Got it no that makes sense agreed I appreciate that and then.
In terms of operating expenses, you gave a lot of nice guidance here and maybe just more specifically in the professional services bucket.
<unk> down a decent amount sequentially in Q4, I know that's related to kind of peer to peer training.
And do you you said that we're going to see decent amount of incremental expenses coming back into 2021, but how how should we think about that bucket.
Should that step up.
Commensurate with the nearly $5 million in extra expenses this year.
Any color there would be great.
Yeah.
Bridge.
Yeah.
I think we have to first look at what the Opex was on 2020 and.
Talked about on the prepared remarks that to normalize that you'd add back about $4 3 million.
On Covid savings on.
And that would include that bucket to get to a normalized opex up for it and just under $42 million.
Just looking at an overall year over year change to that normalized opex amount of 6%. So mid single digits and really the other two big incremental spend items to consider.
One $3 million on additional stock cabinets expense and then we're ramping up activities in our China joint venture So thats about a half a million on top of that.
But overall look at the normalized 6%.
Year over year.
Okay.
And then with the incremental it's total of 22.
Okay got it thanks, so much for taking my questions.
Yeah.
Thank you as a reminder, that star one to be placed from the question queue. Our next question is coming from Russell Cleveland from Roth Capital. Your line is now live.
Thanks for the good report and congratulations on coming through on a really rough period. My question is around the F. D. A initiative, we talk about one of the initiatives the enrollment will be completed in the third quarter.
Explain that what that means on the tests are ongoing and we're just enrolling new people in the study.
Some color on these.
When we talk about for third quarter on these initiatives.
Okay. So remember there's two studies that we're doing the dermal resurfacing and the ITE for skin laxity and the Iga for skin laxity is the one that we are currently enrolling patients and just to remind everybody that there are 65 subjects that will be treated in up.
Two eight centers.
And we.
We actually started enrollment of those patients of those 65 subjects in December and we still expect to have all of those subjects.
Enrollment completed sometime at the end of the third quarter and then at the end of the third quarter. There is a six month follow up on those patients and then after the six month follow up we will.
Uh huh.
<unk> analyzed the data prepare the submissions and then submit to the FDA at that point in time.
They're so that's for the skin research or excuse me for the skin laxity study on the dermal resurfacing study that as Ben we announced that enrollment is completed on that on November <unk> and we are now in the process of following up the patients for their 90 day follow ups analyzing the data.
And everything else and we have always said that we're our goal is to submit for a 500 10-K by the end of May of this year.
And we are on track to submit that data to the FDA at the end of May of this year and then that typically has a 90 day plus process.
To hear back from the FDA on that.
Alright, well thanks for that clarification, so we're making progress there on all fronts. So I appreciate that that's all I have.
Yes, Thank you Russell and if I can just make one comment on top of that to the clinical team and our R.
Our our sites they did a magnificent job in working through Covid and keeping these studies on track and going in to be able to sit here and tell you that we're on track to do all the things that we talked about having to navigate through Covid is just a testament to all the people that we have involved in this and so if they're listening.
Thank you all very much for for all your hard work and keeping that going so thank you.
Thank you that does conclude our question and answer session I like to turn the floor back over to management for any further or closing comments.
Thank you.
That does conclude our conference today, we thank you for your participation today.
Thank you thank.
Thank you.