Q2 2024 Apyx Medical Corp Earnings Call
Thank you very much for joining us today.
Thank you very much for joining us today.
Operator: Hello and welcome, ladies and gentlemen, to the second quarter of Fiscal Year 2024 Earnings Conference Call for Apyx Medical Corporation. At this time, all participants have been placed in a listen-only mode.
Speaker Change: Please stand by.
Speaker Change: Hello and welcome ladies and gentlemen to the second quarter of fiscal year 2024 earnings conference call for apex medical corporation.
Speaker Change: 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 the recording will be available on the company's website for replay shortly.
Operator: 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 the recording will be available on the company's website for replay shortly. Before we begin, I would 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, without limitation, those identified in the risk factors section of our most recent annual report on Form 10-K, our most recent 10-Q filing, and the company's other filings with the Securities and Exchange Commission.
Operator: Such factors may be updated from time to time in 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 those as non-GAAP financial measures.
Speaker Change: Before we begin, I would 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
Speaker Change: That could cause actual results to differ materially from those indicated, including, without limitation, those identified in the risk factors section of our most recent annual report on Form 10-K .
Speaker Change: Our most recent 10-Q filing and the company's other filings with the Securities and Exchange Commission.
Speaker Change: Such factors may be updated from time to time in 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.
Speaker Change: This call will also include references to certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles, or GAP.
Speaker Change: We generally refer to those as non-GAAP financial measures.
Speaker Change: Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.
Operator: Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in 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, Apyx Medical's President and Chief Executive Officer. Please go ahead, sir.
Speaker Change: I would now like to turn the call over to Mr. Charlie Goodwin, Apyx Medical's President and Chief Executive Officer. Please go ahead, sir.
Charlie Goodwin: Thanks, Operator, and welcome, everyone, to our earnings call for the second quarter of 2024. I'm joined on today's call by Matt Hill, our Chief Financial Officer. Let me provide you with a brief outline of today's call.
Charlie Goodwin: Thanks, Operator, and welcome, everyone, to our earnings call for the second quarter of 2024.
Speaker Change: I'm joined on today's call by Matt Hill, or Chief Financial Officer.
Charlie Goodwin: I'll discuss our revenue performance in the second quarter and some of the highlights from our recent operational progress. Matt will review our Q2 financial results and full year guidance, which we updated in our earnings release today. I'll then share a few closing thoughts on our outlook and priorities for the balance of the year before we begin Q&A, starting off with a review of our quarterly revenue results. In the second quarter, total revenue decreased 10% year-over-year to $12.1 million.
Speaker Change: Let me provide you with a brief outline of today's call.
Speaker Change: I'll discuss our revenue performance in the second quarter and some of the highlights from our recent operational progress.
Matt Hill: Matt will review our Q2 financial results and full year guidance which we updated in our earnings release today.
Speaker Change: I'll then share a few closing thoughts on our outlook and priorities for the balance of the year before we begin Q&A.
Matt Hill: Starting off with a review of our quarterly revenue results.
Matt Hill: In the second quarter, total revenue decreased 10% year over year to 12.1 million.
Charlie Goodwin: By segment, sales of our advanced energy products decreased 17% year-over-year to $9.8 million, offset in part by sales of our OEM products, which increased 29% year-over-year to $2.4 million. We were pleased to see OEM sales that exceeded our expectations for the second quarter, driven primarily by stronger-than-expected sales to several customers. Looking at the performance of our advanced energy segment in further detail, as we had anticipated and communicated in the expectations shared on our last earnings call, our advanced energy performance in the second quarter continued to reflect the challenging environment in the cosmetic surgery market that we and other companies experienced since the middle of last year. Most notably, the market for capital equipment purchasing remains soft as prospective customers continue to delay purchase decisions given concerns about the broader macroeconomic environment.
Speaker Change: by segment.
Matt Hill: Sales of our advanced energy products decreased 17% year over year to 9.8 million. Offset in part by OEM, by sales of our OEM products, which increased 29% year over year to 2.4 million.
Matt Hill: We were pleased to see OEM sales that exceeded our expectations for the second quarter, driven primarily by stronger-than-expected sales to several customers.
Matt Hill: Looking at the performance of our advanced energy segment in further detail.
Matt Hill: As we had anticipated and communicated in the expectations shared on our last earnings call,
Matt Hill: Our advanced energy performance in the second quarter continued to reflect the challenging environment in the cosmetic surgery market that we and other companies have experienced since the middle of last year.
Matt Hill: Most notably, the market for capital equipment purchasing remains soft as prospective customers continue to delay purchase decisions given concerns about the broader macroeconomic environment.
Charlie Goodwin: As expected, this continued to impact global generator sales throughout the second quarter, which drove the year-over-year decrease in advanced energy revenue. However, in spite of this challenging environment, we were pleased to drive strong growth in sales of our handpieces, fueled by demand from our global base of customers as well as new users. Handpiece sales to customers in both the U.S. and international markets increased by more than 20% year-over-year, helping to mitigate the impact of lower generator sales as anticipated. Our handpiece sales performance was largely consistent with our expectations for the quarter.
Matt Hill: As expected, this continued to impact global generator sales throughout the second quarter, which drove the year over year decrease in advanced energy revenue.
Matt Hill: In spite of this challenging environment, we were pleased to drive strong growth in sales of our handpieces.
Matt Hill: fueled by demand from our global base of customers as well as new users.
Matt Hill: Handpiece sales to customers in both the U.S. and international markets increased by more than 20% year-over-year, helping to mitigate the impact of lower generator sales as anticipated.
Matt Hill: Our handpiece sales performance was largely consistent with our expectations for the quarter and we expect continued growth in the second half of 2024 as well as I'll discuss later.
Charlie Goodwin: And we expect continued growth in the second half of 2024 as well, as I'll discuss later. In addition to driving sales performance, we remain equally focused on controlling costs to optimize our cash efficiency in this environment. Turning to a discussion of our recent operational progress, our team has been working diligently to offset the challenging market environment by engaging with prospective surgeon customers to navigate the potential barriers to generator adoption. Leveraging the extensive and growing portfolio of clinical evidence for Renuvion, which supports our technology as the best on the market, and executing our marketing strategy to raise awareness of our best-in-class technology and its benefits at both the surgeon and patient levels. I'll now discuss our progress with respect to each of these three items in turn, beginning with our efforts to facilitate generator adoption.
Matt Hill: In addition to driving sales performance, we remained equally focused on controlling costs to optimize our cash efficiency in this environment.
Matt Hill: Turning to a discussion of our recent operational progress.
Matt Hill: Our team has been working diligently to offset the challenging market environment by.
Matt Hill: Engaging with prospective surgeon customers to navigate the potential barriers to generator adoption.
Matt Hill: Leveraging the extensive and growing portfolio of clinical evidence for Renuvion, which supports our technology, is the best on the market.
Matt Hill: and executing our marketing strategy to raise awareness of our best-in-class technology and its benefits at both the surgeon and patient levels.
Speaker Change: I'll now discuss our progress with respect to each of these three items in turn, beginning with our efforts to facilitate generator adoption.
Charlie Goodwin: In this market, we've seen prospective surgeon customers express concerns about the financing environment and high interest rates. To address these concerns, our team is focused on educating surgeons on the purchasing options available through our third-party partners and working with them to identify creative solutions to access our technology. As a reminder, in addition to traditional purchasing, we have third-party partners in place that are able to assist prospective customers in financing generator purchases through both subscription and leasing models.
Speaker Change: In this market, we've seen prospective surgeon customers express concerns about the financing environment and high interest rates.
Speaker Change: To address these concerns our team is focused on educating surgeons on the purchasing options available through our third party partners and working with them to identify creative solutions to access our technology.
Speaker Change: As a reminder, in addition to traditional purchasing, we have third party partners in place that are able to assist prospective customers in financing generator purchases through both subscription and leasing models.
Charlie Goodwin: Beyond addressing these concerns, we continue to raise awareness about the compelling benefits of our best-in-class technology, which ionizes helium to create cold atmospheric plasma. Renuvion enables surgeons to rapidly heat soft tissue to the ideal temperature for contraction and cool it back down in fractions of a second. Because of this, we believe it is inherently safer, faster, and more effective than alternative methods.
Speaker Change: Beyond addressing these concerns, we continue to raise awareness about the compelling benefits of our best-in-class technology leveraging our extensive portfolio of clinical evidence.
Speaker Change: By ionizing helium to create cold atmospheric plasma, Renuvian enable surgeons to rapidly heat soft tissue to the ideal temperature for contraction, and cool it back down in fractions of a second.
Speaker Change: Because of this, we believe it is inherently safer, faster and more effective than alternative methods.
Charlie Goodwin: The strong safety and efficacy profile of our technology is supported by an extensive portfolio of more than 90 published clinical papers, abstracts, and posters, as well as three multi-site IDE clinical studies. Most recently, a retrospective continuous series study of 450 patients compared Renuvion to a commonly used bipolar RF technology. Its results were presented by its lead author, Dr. Michael Kluska, at the AACS Scientific Meeting earlier this year and published yesterday in the peer-reviewed journal Plastic and Reconstructive Surgery Global Open. Dr. Kluska and his fellow researchers found that patients treated with Renuvion exhibited statistically significantly fewer adverse events than those treated with bipolar RF, including significantly fewer burns, hematoma, hypertrophic scar, and serom
Speaker Change: It's strong safety and efficacy profile of our technology is supported by an extensive portfolio of more than 90 published clinical papers, abstracts and posters, as well as re-multi-site IDE clinical studies.
Speaker Change: Most recently, a retrospective continuous series study of 450 patients compared Renuvion to a commonly used bipolar RF technology.
Speaker Change: Its results were presented by its lead author, Dr. Michael Kluska, at the AACS scientific meeting earlier this year and was published yesterday in the peer reviewed journal Plastic and Reconstructive Surgery Global Open.
Speaker Change: Dr. Kloska and his fellow researchers found that patients treated with Renuvion exhibited statistically significantly fewer adverse events
Speaker Change: than those treated with bipolar RF, including significantly fewer burns, hematoma, hypertrophic scar, and seroma.
Charlie Goodwin: They concluded that Renuvion may offer a safer alternative to bipolar RF following liposuction or body contouring procedures. We believe these and other clinical studies demonstrate that we have the best-in-class technology on the market to coagulate and contract soft tissue, which addresses loose skin directly at the source. Our team drove awareness of our best-in-class technology during the second quarter by educating and training surgeons via multiple avenues. Throughout the quarter, we hosted five physician mentor programs in key areas across the U.S., and participated in courses at the Body Contouring Academy.
Speaker Change: They concluded that Renuvion may offer a safer alternative to bipolar RF following liposuction or body contouring procedures.
Speaker Change: We believe these and other clinical studies demonstrate that we have the best-in-class technology on the market to coagulate and contract soft tissue, which addresses loose skin directly at the source.
Speaker Change: Our team drove awareness of our best-in-class technology during the second quarter by educating and training surgeons via multiple avenues.
Speaker Change: Throughout the quarter we hosted five physician mentor programs in key areas across the U.S.
Speaker Change: and participated in courses at the Body Contouring Academy.
Charlie Goodwin: All of these enabled prospective surgeon customers to experience the use of Renuvion in live surgeries and learn from their peers in the industry. We participated in six industry conferences and trade shows as well, where Renuvion was featured in a total of 37 podium presentations.
Speaker Change: All of which enabled prospective surgeon customers to experience the use of renew beyond in live surgeries and learn from their peers in the industry.
Speaker Change: We participated in six industry conferences and trade shows as well, where Renuvion was featured in a total of 37 podium presentations.
Charlie Goodwin: And we hosted a Renuvion users meeting in Las Vegas, where 150 participants from 13 countries discussed techniques and approaches for applying our technology based on their clinical experiences and latest research, with 27 presentations over two days. And lastly, in addition to these surgeon education activities, we continue and enhance our direct-to-consumer initiatives in order to raise awareness of Renuvion at the patient level as well. After bringing on new marketing leadership late last year, we've partnered with a leading communications firm to inform and support our DTC strategy.
Speaker Change: and we hosted a Renuvion users meeting in Las Vegas where 150 participants from 13 countries discussed techniques and approaches for applying our technology based on their clinical experiences and latest research.
Speaker Change: with 27 presentations over two days.
Speaker Change: And lastly, in addition to these surgeon education activities, we continue and enhance our direct-to-consumer initiatives in order to raise awareness of Renuvion at the patient level as well.
Speaker Change: After bringing on a new marketing leadership late last year, we've partnered with a leading communications firm to inform and support our DTC strategy.
Charlie Goodwin: We've been pleased with our increased presence on social media in recent months and the responses we've seen in the form of strong sequential year-over-year growth in impressions, new followers, and profile views. As part of the broader evolution of our DTC initiatives, on June 26, we announced the Renewing Lives campaign, a nationwide giving back program. For every Renuvion procedure performed in the U.S., Apyx Medical will donate to a fund to fund Renuvion procedures for people who can most benefit from our technology but are not able to afford the treatment.
Speaker Change: We've been pleased with our increased presence on social media in recent months and responses. We've seen in the form of strong sequential year over year growth in impressions, new followers and profile views.
Speaker Change: As part of the broader evolution of our DTC initiatives on June 26th, we announced the Renewing Lives campaign.
Speaker Change: a nationwide give-back program.
Speaker Change: For every renewing on procedure performed in the U.S., a picks medical will donate to a fund to fund renewing on procedures for people who can most benefit from our technology but are not able to afford the treatment.
Charlie Goodwin: In pursuing this give-back program, we aim to educate people about the positive impact our body contouring technology can have on a patient's mental health and expand the perception of our treatment as we continue to raise awareness in the market. We intend to feature the stories and images from some of these patients who receive treatment under the Renewing Lives Give Back program in our future marketing materials. In summary, our team worked diligently during the second quarter to navigate the challenging environment in our industry.
Speaker Change: In pursuing this give back program, we aim to educate people about the positive impact of our body contouring technology can have on a patient's mental health and expand the perception of our treatment as we continue to raise awareness in the market.
Speaker Change: We intend to feature the stories and images from some of these patients who receive treatment under the Renewing Lives Give Back program in our future marketing materials.
Speaker Change: In summary, our teamwork diligently during the second quarter to navigate the challenging environment in our industry.
Charlie Goodwin: We engaged with prospective customers, offering creative solutions to facilitate adoption while educating the market on the unique benefits of our technology, supported by our expanded portfolio of clinical publications and evolving DTC initiatives. Through these efforts, we were pleased to partly offset the headwinds in our industry by driving global growth in our handpiece sales, which exceeded 20% year-over-year in addition to 29% growth of our OEM product. And we continue to manage our expenses, conserving capital as we execute our strategy to position Apyx Medical for strong growth and value creation as these near-term headwinds subside. Matt will now review our second quarter financial results in more detail, along with our financial guidance for 2024, which we updated in today's release.
Speaker Change: We engaged with prospective customers offering creative solutions to facilitate the adoption while educating the market on the unique benefits of our technology.
Speaker Change: supported our expanded portfolio of clinical publications and evolving DTC initiatives.
Speaker Change: Through these efforts we were pleased to partly offset the headwinds in our industry by driving global growth in our handpiece sales which exceeded 20% year over year in addition to 29% growth of our OEM products.
Speaker Change: And we continue to manage our expenses, conserving capital, as we execute our strategy to position a picks medical for strong growth and value creation as these near-term headwinds subside.
Speaker Change: Matt will now review our second quarter financial results in more detail, along with our financial guidance for 2024, which we updated in today's release.
Matt Hill: Since Charlie has already covered our revenue results, I will begin with the Gross Profit Line. All references to second quarter financial results will be on a gap and a year over year basis unless noted otherwise.
Matt Hill: Thank you, Charlie.
Matt Hill: Since Charlie already covered our revenue results, I will begin at the gross profit line. All references to second quarter financial results will be on a gap and a year-over-year basis unless noted otherwise.
Matt Hill: Gross profit for the second quarter of 2024 decreased $1.8 million, or 19%, to $7.5 million. Gross profit margin was 61.7% compared to 68.4% in the prior period. The decrease in our gross margin was driven primarily by changes in the sales mix between the R2 segment, with our OEM segment comprising a higher percentage of total sales, and geographic mix within our advanced energy segment, with international sales comprising a higher percentage of total sales compared to the prior period.
Matt Hill: Gross profit for the second quarter of 2024 decreased 1.8 million dollars or 19% to 7.5 million dollars. Gross profit margin was 61.7% compared to 68.4% in the prior period.
Speaker Change: The decrease in our gross margin was driven primarily by
Speaker Change: changes in the sales mix between our two segments.
Speaker Change: with our OEM segment comprising a higher percentage of total sales, and geographic mix within our advanced energy segment with international sales comprising a higher percentage of total sales compared to the prior period.
Matt Hill: Operating expenses decreased $0.2 million or 1% to $13 million, reflecting our continued emphasis on controlling costs. The decrease in operating expenses was primarily driven by selling general and administrative expenses and salaries and related costs, which decreased $0.5 million and $0.2 million, respectively. These decreases were partially offset by professional service expenses and research and development expenses, which increased by $0.5 million and $0.1 million, respectively. Loss from operations increased $4.3 million or 349% to $5.5 million. It is important.
Speaker Change: Operating expenses decreased 0.2 million dollars or 1% to 13 million dollars reflecting our continued emphasis on controlling costs.
Speaker Change: The decrease in operating expenses was primarily driven by.
Speaker Change: Selling General and Administrative Expenses and Salaries and Related Costs, which decreased $0.5 million and $0.2 million, respectively.
Speaker Change: These decreases were partially offset by professional service expenses and research and development expense, which increased by $0.5 million and $0.1 million respectively.
Speaker Change: Laws from operations increase $4.3 million or $349 to $5.5 million. It is important.
Matt Hill: To note that the loss from operations in the second quarter of 2023 included a $2.7 million gain related to the sale-leaseback transaction of our Clearwater property that was completed during the period. Excluding that gain from our sale-leaseback transaction in the second quarter of 2023, our loss from operations increased $1.6 million, or 41%. Total other expense, net, was $1 million, compared to income of $0.3 million in the second quarter of 2023.
Speaker Change: To note that the loss from operations in the second quarter of 2023 included a $2.7 million gain related to the sale-leaseback transaction of our Clearwater property that was completed during the period.
Speaker Change: Excluding that gain from our sales leaseback transaction in the second quarter of 2023, our loss from operations increased 1.6 million dollars or 41%.
Speaker Change: Total other expense, net, was $1 million compared to income of $0.3 million in the second quarter of 2023.
Matt Hill: The change was driven primarily by increased net interest expense related to our outstanding debt obligations in the second quarter of 2024 as we had lower borrowings in the prior year period. In the second quarter of 2023, we also recorded the release of our joint and several payroll liability and a small insurance recovery that did not recur in 2024.
Speaker Change: The change was driven primarily by increased net interest expense related to our outstanding debt obligations in the second quarter of 2024, as we had lower borrowings in the prior year period.
Speaker Change: In the second quarter of 2023, we also recorded the release of our joint and several payroll liability and a small insurance recovery that did not recur in 2024.
Matt Hill: Net loss attributable to stockholders was $6.6 million, or $0.19 per share, compared to $1 million, or $0.03 per share, in the prior year period. Excluding the non-recurring gain related to the sale-leaseback transaction, in the second quarter of 2023, non-GAAP net loss attributed to stockholders increased $2.9 million, or 78% year over year. Adjusted EBITDA losses increased $2.7 million, or 166%, to $4.3 million compared to $1.6 million in the second quarter of 2023.
Speaker Change: Net loss attributable to stockholders was 6.6 million dollars or 19 cents per share compared to one million dollars or three cents per share in the prior year period.
Speaker Change: Excluding the non-recurring gain related to the sale-leaseback transaction, in the second quarter of 2023, non-GAAP net loss attributable to stockholders increased 2.9 million dollars or 78% year over year.
Speaker Change: Adjusted EBITDA loss increased $2.7 million or 166% to $4.3 million compared to $1.6 million in the second quarter of 2023.
Speaker Change: As a reminder, we provide a detailed reconciliation from net loss attributable to stockholders to non-GAAP-adjusted EBITDA loss in our earnings press release.
Speaker Change: For the three months ended June 30, 2024, cash used from operating activities was $4.3 million compared to $4.9 million in the prior year period. The reduction in cash use was driven by improvements in our working capital.
Matt Hill: As of June 30, 2024, the company had cash and cash equivalents of $32.7 million compared to $43.7 million as of December 31, 2023. Turning to a review of our 2024 financial guidance, which we updated in our earnings press release today, for the 12 months ending December 31, 2024. We now expect
Speaker Change: As of June 30, 2024, the company cash and cash equivalents of $32.7 million to pair to $43.7 million as of December 31, 2023.
Matt Hill: Total revenue was in the range of $50.6 million to $52.1 million, representing a decrease of approximately 3% to flat. This compares to our prior range of $49.7 million to $52.9 million, representing a decrease of approximately 5% to growth of approximately 1%. Our total revenue guidance range is assumed. Advanced Energy revenue of $41.6 million to $43.1 million, representing a decrease of approximately 4% to 1%, which compares to our prior range of $41.6 million to $44.6 million, representing a decrease of approximately 4% to a growth of approximately 3%, and OEM revenue of approximately $9 million, representing a growth of 1%, which compares to our prior range of approximately $8.1 to $8.3 million, down 10% to 7%.
Speaker Change: Turning to a review of our 2024 financial guidance which we updated in our earnings press release today.
Speaker Change: for the 12 months ending December 31, 2024. We now expect...
Speaker Change: Total revenue in the range of $50.6 million to $52.1 million, representing a decrease of approximately 3% to flat.
Speaker Change: This compares to our prior range of $49.7 million to $52.9 million representing a decrease of approximately 5% to growth of approximately 1%.
Speaker Change: Our total revenue guidance range assumes.
Speaker Change: Advanced energy revenue of $41.6 million to $43.1 million, representing a decrease of approximately 4% to 1%.
Speaker Change: which compares to our prior range of $41.6 million to $44.6 million.
Speaker Change: representing a decrease of approximately 4% to a growth of approximately 3%.
Speaker Change: and OEM revenue of approximately $9 million, representing a growth of 1%.
Speaker Change: which compares to our prior range of approximately $8.1 to $8.3 million, down 10% to 7%.
Matt Hill: In terms of our profitability guidance for fiscal year 2024, we now expect... a net loss attributable to stockholders of approximately $24.5 million to $23.5 million, compared to our prior expectation of approximately $26.5 million to $24.3 million. This updated net loss guidance reflects our revenue and loss results in the second quarter and revised expectations for the second half of 2024, specifically. The low end of our formal financial guidance for net loss attributable stockholders now assumes, for modeling purposes, gross margins of approximately 6% this year compared to our prior expectation of approximately 61%.
Speaker Change: In terms of our profitability guidance for fiscal year 2024, we now expect...
Matt Hill: Second, we now expect a total operating expenses of approximately $50 million, a decrease of approximately 7% year-over-year, compared to our prior expectation of approximately $52 million, or a decrease of approximately 3% year-over-year. Third, we expect GAP net interest expense of approximately $4.4 million versus our prior expectation of approximately $4.1 million, and forth. The low end of our net loss guidance range also assumes an income tax expense of approximately $0.3 million compared to an income tax benefit of $2.4 million last year and a non-controlling interest benefit of approximately $0.2 million.
Speaker Change: Net loss attributed with stockholders of approximately $24.5 million to $23.5 million compared to our prior expectation of approximately $26.5 million to $24.3 million.
Speaker Change: This updated net loss guidance reflects our revenue and loss results in the second quarter and revised expectation for the second half of 2024.
Speaker Change: Specifically, the low end of our formal financial guidance for net loss attributable stockholders now assumes the following for modeling purposes.
Speaker Change: First.
Speaker Change: Gross margins of approximately 6% this year, compared to our prior expectation of approximately 61%.
Speaker Change: Second, we now expect a total operating expenses of approximately $50 million, a decrease of approximately 7% year over year, compared to our prior expectation of approximately $52 million, or a decrease of approximately 3% year over year.
Speaker Change: Third, we expect GAP net interest expense of approximately $4.4 million versus our prior expectation of approximately $4.1 million.
Speaker Change: and forth.
Speaker Change: The low end of our net loss guidance range also assumes income tax expense of approximately $3 million to pair to an income tax benefit of $2.4 million last year and a non-cadrolling interest benefit of approximately $0.2 million.
Matt Hill: Lastly, at the low end of our net loss guidance, which calls for a loss of $24.5 million, we now expect cash used in operations in 2024 of approximately $21 million. This is compared to the prior guidance, which we assumed $26.5 million and $19 million, respectively. With that, I will turn the call back to Charlie for closing remarks.
Speaker Change: Lastly, at the low end of our net loss guidance, which calls for loss of $24.5 million, we now expect cash used in operations in 2024 of approximately $21 million.
Speaker Change: This is compared to the prior guidance, which we assumed a $26.5 million and $19 million respectively.
Charlie Goodwin: Thanks, Matt. Based on the trends observed in the first half of 2024, our updated Advanced Energy Revenue Guidance assumes the challenging capital equipment environment in our industry will continue through the balance of the year, impacting sales of our generator systems. As I mentioned earlier, we were pleased to drive strong handpiece sales during the second quarter with sales growth that exceeded 20% year-over-year, both in the U.S. and internationally. We expect continued growth in handpiece sales over the second half of 2024, fueled by demand from both new and existing users of our technology.
Speaker Change: With that, I will turn the call back to Charlie for closing remarks.
Charlie Goodwin: Thanks, Matt. Based on the trends observed in the first half of 2024, our updated advanced energy revenue guidance assumes the challenging capital, equipment environment in our industry will continue through the balance of the year impacting sales of our innovator systems.
Speaker Change: As I mentioned earlier, we were pleased to drive strong handpiece sales during the second quarter with sales growth that exceeded 20% year-over-year, both in the U.S. and internationally.
Speaker Change: We expect continued growth in handpiece sales over the second half of 2024, fueled by demand from both new and existing users of our technology.
Charlie Goodwin: Specifically, our updated guidance range now assumes low double-digit growth in global sales of our handpieces, which will help to significantly offset the impact of slower generator sales in 2024. With respect to our OEM segment, we are raising our 2024 revenue guidance to reflect our strong sales in the second quarter. Our updated guidance range continues to assume nearly four million units of OEM revenue in the second half of 2024 with more normalized customer ordering and order fulfillment.
Speaker Change: Specifically, our updated guidance range now assumes low double-digit growth in global sales of our hand pieces.
Charlie Goodwin: which will help to significantly offset the impact of slower generator cells in 2024.
Charlie Goodwin: With respect to our OEM segment, we are raising our 2024 revenue guidance to reflect our strong sales in the second quarter.
Charlie Goodwin: Our updated guidance range continues to assume nearly $4 million of OEM revenue in the second half of 2024, with more normalized customer ordering and order fulfillment.
Charlie Goodwin: When thinking about our revenue on a quarterly basis in the second half of 2024, remember that the fourth quarter tends to be the seasonally strongest quarter of the year in our advanced energy segment. The third quarter typically tends to be seasonally slower than the second and fourth quarters due to summer vacations during this period.
Charlie Goodwin: When thinking about our revenue on a quarterly basis in the second half of 2024, remember that the fourth quarter tends to be the seasonally strongest quarter of the year in our advanced energy segment.
Charlie Goodwin: The third quarter typically tends to be seasonally slower than the second and fourth quarters due to summer vacations during this period.
Charlie Goodwin: Looking ahead, our team remains focused on executing our growth strategy by continuing to raise awareness of renew beyond and educate surgeons and patients about the outcomes that can be achieved with our technology. We have also conducted a strategic review of our business together with our new chairman, evaluating ways to enhance our growth in order to further unlock value for our shareholders. In tandem, we continue to closely manage our expenses and control costs across the organization in order to optimize our cash efficiency while remaining poised for a return to strong, sustained growth.
Charlie Goodwin: Looking ahead, our team remains focused on executing our growth strategy by continuing to raise awareness of Renuvion and educate surgeons and patients about the outcomes that can be achieved with our technology.
Charlie Goodwin: We have also conducted a strategic review of our business together with our new chairman, evaluating ways to enhance our growth in order to further unlock value for our shareholders.
Charlie Goodwin: In tandem, we continue to closely manage our expenses and control costs.
Charlie Goodwin: across the organization in order to optimize our cash efficiency while remaining poised for a return to strong, substained growth.
Charlie Goodwin: As the near-term headwinds in our industry subside, we are well positioned to capitalize on multiple longer-term tailwinds, including the increasing social acceptance of aesthetic treatments, the rise of body contouring procedures, and the adoption of GLP-1 drugs. Whether it's results from rapid weight loss or the effects of the natural aging process, loose skin remains a key issue that patients will seek to address in order to improve their appearance. By coagulating and contracting soft tissue with cold atmospheric plasma, we believe Renuvion addresses the root cause of this issue safely, quickly, and effectively, and we are uniquely positioned to capitalize on this important clinical need going forward.
Charlie Goodwin: As the near-term headwinds in our industry, sub-side.
Charlie Goodwin: We are well positioned to capitalize on multiple longer-term tailwinds, including the increasing social acceptance of aesthetic treatments, the rise of body contouring procedures, and the adoption of GLF1 drugs.
Charlie Goodwin: Whether it's results from rapid weight loss or the effects of natural aging process, loose skin remains a key issue that patients will seek to address in order to improve their appearance.
Charlie Goodwin: By coagulating and contracting soft tissue with cold atmospheric plasma, we believe Renuvian addresses the root cause of this issue safely, quickly and effectively.
Charlie Goodwin: and we are uniquely positioned to capitalize on this important clinical need going forward.
Charlie Goodwin: We will continue establishing Renuvion as an integral component following liposuction and body contouring surgical procedures as we continue to penetrate the multi-billion dollar global market opportunity that these procedures represent. I'd like to close by thanking my fellow colleagues and our distributor partners for their dedicated efforts in Q2, as well as our customers and shareholders for their support of Apyx Medical. With that, Operator, I now open the call to questions.
Charlie Goodwin: We will continue establishing Renuvion as an integral component following liposuction and body contouring surgical procedures as we continue to penetrate the multi-billion dollar global market opportunity that these procedures represent.
Charlie Goodwin: I'd like to close by thanking my fellow colleagues.
Charlie Goodwin: and our distributor partners for their dedicated efforts in Q2, as well as our customers and shareholders for their support of Apyx Medical.
Speaker Change: With that, operator, that's now open the call for questions.
Operator: Thank you. If you'd like to ask a question, please signal by pressing the star, then the number one, on your telephone keypad now. If you're using a speakerphone, 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 would like to ask additional questions, we invite you to add yourself to the queue again by pressing star, then number one. And our first question will come from Matt Hewitt with Craig Hallam. Your line is open.
Speaker Change: Thank you. If you'd like to ask a question, please signal by pressing star, then the number 1 on your telephone keypad now.
Speaker Change: If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: We do ask that you limit yourself to one question and one follow-up.
Speaker Change: If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star, then the number 1. And our first question will come from Matt Hewitt with Craig Hallam. Your line is open.
Matt Hewitt: Good afternoon. Thanks for taking the questions and congratulations on the handpiece sales. I guess I'd like to start off there. So, you're still seeing strong growth with your handpiece, and obviously some of that is just the users driving better adoption. But I'm curious, as you look at the procedures where this is primarily being utilized, can you attach a percentage of that to GLP-1s, or what do you think is the one or two primary drivers of the utilization?
Matt Hewitt: Good afternoon. Thanks for taking the questions and congratulations on the hand piece sales. I guess I'd like to start off there.
Matt Hewitt: So, you're still seeing strong growth with your hand piece, and obviously some of that is just the users driving better adoption. But I'm curious, as you look at the procedures where this is primarily being utilized, can you attach a percentage of that to the GLP-1s, or what do you think is the one or two primary drivers on the utilization side?
Charlie Goodwin: Thanks for the question, Matt. And as we said in our prepared remarks, we were very happy with our sales performance of our handpieces, and it was largely consistent with our expectations in our budget that we had for the year. And we had global growth of over the 20% that we saw, and we did see strong demand from our base. And, yes, some of it is because some of the GLP-1 patients are starting to come in and need treatments for their loose skin. There's no question about that. And so we're happy with that performance, and, you know, as we mentioned, we plan on having double-digit growth in handpieces for the entire year.
Speaker Change: Thanks for the question, Matt, and as we said in our prepared remarks,
Speaker Change: Those, we were very happy with our sales performance of our handpieces and it was largely consistent with our expectations.
Speaker Change: in our budget that we had for the year. And we had global growth of over the 20% that we saw. And we did see strong demand from our base.
Speaker Change: And yes, some of it is because some of the GLP-1 patients are starting to come in and need treatments for their loose skin. There's no question about that. And so we're happy with that performance.
Speaker Change: And, you know, as we mentioned, we plan on having double-digit growth in handpieces for the entire year.
Charlie Goodwin: That's great. And then maybe, maybe shifting gears a little bit, new geographies. Is there any opportunity for you to add a new geography or two this year? Or is that kind of input on the back burner given the environment? Thank you. Yeah, no worries.
Speaker Change: Well that's great and then maybe shifting gears a little bit, new geographies, is there any opportunity for you to add a new geography or two yet this year or is that kind of been put on the back burner given the environment? Thank you.
Charlie Goodwin: Yeah, no worries. As we've mentioned before, the two markets that we're not in are the significant markets, South Korea and China, and we've got registrations in both of those countries. And so as soon as we obviously get news on that, that would be something we would let you know.
Speaker Change: Yeah, no worries. As we've mentioned before, the two markets that we're not in are the significant markets are South Korea and China, and we've got registrations into both of those countries. And so soon as we obviously get news on that, that would be something we would let you know.
Speaker Change: Got it. All right. Thank you.
Operator: Once again, to ask a question at this time, please press star then the number one on your telephone keypad. Your next question comes from Frank Takkinen with Lake Street Capital. Your line is open.
Speaker Change: Thank you.
Speaker Change: Once again to ask a question at this time, please press star, then number one on your telephone keypad.
Speaker Change: Your next question comes from Frank Takkinen with Lake Street Capital. Your line is open.
Frank Takkinen: Great, thanks for taking the questions. I'll also start with one on handpieces. I'm not sure if you parsed it out and it was potentially intentional, but maybe can you talk about U.S. versus international? I think I saw both were strong, but was one stronger than the other, and does that give you any insight into maybe capital equipment sales coming back if either of those said geographies were stronger than the other?
Speaker Change: Thanks for your questions. I'll also start with one handpiece. I'm not sure if you parse it out as potentially intentional.
Frank Takkinen: But maybe, can you talk about U.S. versus international? I think I saw both were strong, but was one stronger than the other, and does that give you any insight into maybe capital equipment sales coming back if either of those said geographies were stronger than the other?
Charlie Goodwin: Yeah, look, both US and international were both up more than 20% year over year for handpieces, so they both had very nice performances. When you're talking about the capital environment, we still see that it is challenged, and our guidance assumes that it will remain challenged, you know, throughout the rest of the year here in the US. That's basically how we have it in our guidance.
Speaker Change: Yeah look, both US and international were both up more than 20% year over year for hand pieces, so they both had very nice performances.
Speaker Change: When you're talking about the capital environment, we still see that it is challenged and our guidance assumes that it will remain challenged.
Speaker Change: you know, throughout the rest of the year here in the U.S. That's basically how we have it in our guidance.
Frank Takkinen: Okay, fair enough. And then one more specifically on guidance.
Speaker Change: Okay, fair enough. And then one more specifically on guidance. Heard the comments about...
Frank Takkinen: I heard the comments about seasonality in Q3, typically stepping down. With that context in mind, it does imply a pretty good step up to Q4, also in line with regular seasonality. What's contemplated from a macro perspective in stepping back up into Q4 and what seems to be pretty solid year-over-year double-digit growth for Q4.
Speaker Change: seasonality in Q3, typically stepping down.
Speaker Change: With that context in mind, it doesn't apply a pretty good step up to Q4, also in line with regular seasonality. What's contemplated from a macro perspective in stepping back up into Q4 and what seems to be pretty solid year over year, double digit growth for Q4?
Charlie Goodwin: Yeah, you're correct. Our guidance does apply a stronger year-over-year growth in the second half of 24 compared to the first half of 24. You know, as a reminder, we talked about that the challenging environment in cosmetic surgery really began in the back half of 23, and with that in mind, our fiscal year 24 guidance has always assumed a stronger year-over-year growth in the second half versus the first half.
Charlie Goodwin: Yeah, you're
Speaker Change: Yeah, you're correct. Our guidance does apply a stronger year-over-year growth in the second half of 24 compared to the first half of 24.
Speaker Change: As a reminder, we talked about that the challenging environment in the cosmetic surgery really began in the back half of 23.
Speaker Change: and with that in mind, our fiscal year 24 guidance has always assumed a stronger year over your growth in the second half versus the first half.
Frank Takkinen: Okay, thanks for taking the questions.
Operator: Your next question comes from George Sellers with Stevens. Your line is open.
Speaker Change: Okay, thanks for taking questions.
Speaker Change: Your next question comes from George Sellers with Stevens. Your line is open.
George Sellers: Hey, good afternoon, and thanks for taking the question. Apologies if I missed this in their prepared remarks, but I was just curious about system sales, you know, how much of that was from new customers? How many systems are you placing with new customers versus practices that already have experience with Renew Beyond that are maybe upgrading to Apyx One.
George Sellers: Hey, good afternoon and thanks for taking the question.
Speaker Change: Practices that already have experience with renewed beyond that are maybe upgrading to apex one.
Charlie Goodwin: Yeah, no, that's a good question. We didn't break that out in the prepared remarks, so you didn't miss it at all. But I would say the vast majority of the quarter was new customers that are adopting the technology. We always have doctors that are expanding their practice and adding more things, but typically, for us, the vast majority of capital in any given quarter is to new customers.
Speaker Change: Yeah, no, that's a good question. We didn't break that actually out in the prepared remarks, so you didn't miss it at all, but I would say the vast majority of the quarter was new customers that are adopting the technology. We always have doctors that are expanding their practice and adding more things, but typically for us the vast majority of sales of capital in any given quarter are to new customers.
George Sellers: Okay, got it. That's helpful. And then also, in a similar vein, just curious, with the customers who have upgraded to Apyx One or the new customers who bought Apyx One, have you started seeing any acceleration in utilization with the micro handpiece or greater demand from a patient perspective for the micro handpiece? Is that a piece of what's driving the strong growth in handpieces?
Speaker Change: Okay, got it, that's helpful. And then also on a similar vein, just curious with the customers who have upgraded the Apex Wanderer or the new customers who bought Apex Wanderer. Have you started seeing any acceleration in utilization with the micro-adpiece or greater demand from a patient perspective with the micro-adpiece? Is that a piece of what's driving the strong growth in hand pieces?
Charlie Goodwin: So the micro definitely is all new micro sales or growth because there's no comparison for those in the past, so there's no question that that is a part of it, but remember the micro is just there for small areas of the body, you know, the face, the hands, the knees, the labia areas, like that. The big driver of the growth for the hand pieces is still the body-contouring hand pieces. That's still the biggest Thanks for that!
Speaker Change: So the micro definitely is all new micro sales or growth because there's no comparison for those in the past so there's no question that that is a part of it but remember the micro is just there for small areas of the body you know the face the hands
Speaker Change: the knees, the labia, areas like that. The big driver of the growth for the hand pieces is still on the body contouring hand pieces. That's still the biggest driver that we see.
Speaker Change: But obviously, it's incremental growth anytime somebody picks up a micro-IMVs.
George Sellers: Okay, great. Thanks for that color, and I'll leave it there. Thank you. We are currently showing no remaining questions at this time.
Speaker Change: Okay, great. Thanks for that color and I'll leave it there.
Operator: We are currently showing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation and have a wonderful rest of your day. [music]
Speaker Change: [inaudible]
Speaker Change: We are currently showing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation and have a wonderful rest of your day.
Speaker Change: Thank you for watching, and I'll see you in the next video.
Speaker Change: [inaudible] I'm John Goodwin, I'm
Operator: MedicalCityHospital.com Matthew Hewitt, David Turkaly, David Turkaly,
Speaker Change: www.apyxmedical.com
Matt Hill: As a reminder, we provided detailed reconciliation from net loss, attributable to stockholders, to non-gap adjusted to EBITDA loss in our earnings personal. For the three months ended June 30, 2024, cash used from operating activities was $4.3 million, compared to $4.9 million in the prior year period. The reduction in cash use was driven by improvements in our working capital.