Q4 2024 Apyx Medical Corp Earnings Call

Operator: Greetings. Welcome to the Apyx Medical fourth quarter and full year 2024 conference call.

Greetings welcome to the apex medical fourth quarter and full year 2020 for a conference call.

Operator: At this time, all participants will be in listen-only mode.

At this time, all participants will be in a listen only mode.

Operator: The question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad.

A question answer session will follow the formal presentation.

If anyone today should require operator assistance. Please press star zero from your telephone keypad.

Operator: As a reminder, this conference is being recorded.

As a reminder, this conference is being recorded.

Jeremy Feffer: It is now my pleasure to introduce Jeremy Feffer with Investor Relations. Jeremy, you may begin.

Speaker Change: It's now my pleasure to introduce Jeremy Feffer with Investor Relations, Jeremy you may begin.

Jeremy Feffer: Thank you and welcome everyone to our fourth quarter and full year 2024 earnings call.

Speaker Change: Thank you and welcome everyone to our fourth quarter and full year 2024 earnings call representing the company on the call are Charlie Goodwin, Chief Executive Officer, and Matt Hill, Chief Financial Officer of Apex before we begin I would like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements.

Jeremy Feffer: Representing the company on the call are Charlie Goodwin, Chief Executive Officer, and Matt Hill, Chief Financial Officer of Apyx. 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.

Speaker Change: 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.

Speaker Change: With the Securities and Exchange Commission.

Jeremy Feffer: Such factors may be updated from time to time in our filings with the SEC, which are available on our website.

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.

Jeremy Feffer: 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 as non-GAAP financial measures.

This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP.

Speaker Change: We generally refer to these as 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 in the earnings press release on the Investor Relations portion of our website.

Jeremy Feffer: 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.

Charlie Goodwin: I would now like to turn the call over to Mr. Charlie Goodwin, Apyx Medical's President and Chief Executive Officer. Charlie, please go ahead. Thank you, Jeremy, and thank you all for joining us today.

Speaker Change: I'd now like to turn the call over to Mr. Charlie Goodwin apex, Medical's, President and Chief Executive Officer, Charlie. Please go ahead.

Charlie Goodwin: Thank you Jeremy and thank you all for joining us today.

Charlie Goodwin: Per our usual format on these quarterly calls, I will be providing a review of our performance in the fourth quarter and full year 2024, and then I will turn the call over to Matt for a review of our fourth quarter and full year 2024 financial results, as well as our full year 2025 guidance. We will then open the call for questions.

Charlie Goodwin: Per our usual format on these quarterly calls I will be providing a review of our performance in the fourth quarter and full year 'twenty 'twenty four and then I will turn the call over to Matt for a review of our fourth quarter and full year 'twenty 'twenty four financial results as well as our full year 2025 guidance. We will then open the call for questions.

Charlie Goodwin: <unk>.

Charlie Goodwin: Let me start with a review of our fourth quarter performance. We reported total revenue of $14.2 million for the quarter, a slight decrease of 3% compared to $14.7 million for the same period last year. Looking at this by segment, sales of our advanced energy products exceeded our expectations for the fourth quarter at $12.1 million, which is essentially flat year over year. To this point, we were pleased to report that the advanced energy segment grew 30% compared with the sequential third quarter of 2024. This reflects the stronger sales of single-use handpieces and the improved capital equipment sales in the second half where we more than doubled the unit ship.

Charlie Goodwin: Let me start with a review of our fourth quarter performance. We reported total revenue of $14 2 million for the quarter, a slight decrease of 3% compared to $14 7 million for the same period last year.

Charlie Goodwin: Looking at this by segment sales of our advanced energy products exceeded our expectations for the fourth quarter at $12 1 million, which is essentially flat year over year.

Charlie Goodwin: To this point, we were pleased to report that the advanced energy segment grew 30% compared with the sequential third quarter of 2024.

Charlie Goodwin: This reflects the stronger sales of single use hand pieces and the approved capital equipment sales in the second half, where we more than doubled the units shipped.

Charlie Goodwin: While it's too early to say that two quarters of data make a trend, we are encouraged by this momentum and are hopeful that we can build on it as we move into 2025. The softness in the aesthetic space throughout the last 18 months is not specific to our business as companies face similar challenges due to the macroeconomic environment and the rapid adoption of GLP-1 drugs for weight loss. We believe the use of GOP-1s has caused patients to delay aesthetic treatments as their discretionary funds have been diverted to paying for GOP-1 drugs. These drugs can range in price from about $300 for compounded versions and up to $1,800 a month for branded cash pay options.

Charlie Goodwin: While it's too early to say that two quarters of data make a trend. We are encouraged by this momentum and are hopeful that we can build on it as we move into 2025.

Charlie Goodwin: The softness in the aesthetic space throughout the last 18 months is not specific to our business as companies face similar challenges due to the macroeconomic environment and the rapid adoption of G. O P. One drugs for weight loss.

Charlie Goodwin: We believe the use of G O P ones as cause patients to delay aesthetic treatments.

As their discretionary funds have been diverted to paint for G O P. One drugs.

Charlie Goodwin: These drugs can range in price from about 304 compounded versions.

Charlie Goodwin: And up to 1800, a month for branded cash pay options.

Charlie Goodwin: In addition to the financial commitment, we believe patients are postponing aesthetic procedures until they reach their ideal weight. Importantly, we do not believe non-invasive procedures, which you normally see offered at the med spas, will be effective treatments for the loose and lax skin that many patients see after the weight loss associated with the use of the GLP-1. We believe all the factors I just mentioned have contributed to declining revenues for plastic and cosmetic surgeons beginning in 2023 and continuing through 2024, causing many physicians to delay the purchase of capital equipment. However, we believe the wave of GLP-1 patients that have reached their weight loss goal over the past 12 to 18 months will be seeking a surgical solution.

Charlie Goodwin: In addition to the financial commitment we believe patients are postponing aesthetic procedures until they reach their ideal weight.

Charlie Goodwin: Importantly, we do not believe noninvasive procedures, which you normally see offered at the med spas will be effective treatments for the loose and lag skin that many patients see after the weight loss associated with the use of the G O P ones.

Charlie Goodwin: We believe all the factors I just mentioned had contributed to declining revenues for plastic and cosmetic surgeons beginning in 2023 and continuing through 'twenty four, causing many physicians to delay the purchase of capital equipment.

Charlie Goodwin: However, we believe the wave of G. O P. One patients that have reached their weight loss goal over the past 12 to 18 months, we'll be seeking a surgical solution.

Charlie Goodwin: As the only true surgical aesthetics company, we believe our Renuvion system is uniquely positioned to help surgeons capitalize on this burgeoning tailwind. Unlike others in the industry, we have proprietary technology that can address these patients' needs, offering Renuvion as the only FDA-cleared device for use following liposuction in body contouring procedures. We believe this minimally invasive surgical procedure is the best treatment option to address loose and lax skin, providing a durable and transformational result. This is because of the significant amount of loose and lax skin that these patients will typically have after losing 15-20% of their total body weight.

Charlie Goodwin: As the only true surgical aesthetics company, we believe our renew Leon system is uniquely positioned to help surgeons capitalize on this burgeoning tailwind.

Charlie Goodwin: Unlike others in the industry, we have proprietary technology that can address these patients' needs offering renew V on as the only FDA cleared device for use following liposuction in body contouring procedures.

Charlie Goodwin: We believe this minimally invasive surgical procedure is the best treatment option to address loose and lax skin, providing a durable and transformation of result.

Charlie Goodwin: This is because of the significant amount of loosen lacks skin that these patients will typically have after losing 15% to 20% of their total body weight.

Charlie Goodwin: It is our belief Renuvion should be the standard of care for these patients.

It is our belief renew beyond should be the standard of care for these patients.

Charlie Goodwin: To amplify our message, we have been executing our direct-to-consumer marketing strategy with outstanding results. Since launching in Q2 of 2024, this program has delivered significant reach, views, and PR beyond our expectations. We surpassed our media placement goal by 187% and exceeded our impressions goal by over 13,000%. Our brand has been featured in People, Oprah Daily, Glamour, Well and Good, and more. We have also leveraged the influence of Fumi Mone, and Dolores Cantina, each bringing a unique voice and engaged audience to our campaign. Their messaging around body confidence, looking and feeling your best, and the importance of skin tightening post-GLP-1 weight loss has resonated strongly with consumers.

Charlie Goodwin: To amplify our message we have been executing our direct to consumer marketing strategy with outstanding results.

Charlie Goodwin: Since launching in Q2 of 'twenty 'twenty four this program has delivered significant reach views and P. R beyond our expectations.

We surpassed our media placement goal by 187% and exceeded our impressions goal by over 13000%.

Charlie Goodwin: Our brand has been featured in people Oprah daily glamour, well and good and more.

Charlie Goodwin: We have also leveraged the influence of Fumi, Monet, and Dolores cantina, each bringing a unique voice and engaged audience to our campaign there.

Charlie Goodwin: Their messaging around body confidence looking and feeling your best and the importance of skin tightening post G. O P. One weight loss has resignation strongly with consumers.

Charlie Goodwin: Through their authentic storytelling and our strategic campaign execution, we have driven strong engagement, increased brand awareness, and elevated our consumer demand. We are the number one trusted body contouring technology by doctors.

Charlie Goodwin: Through their authentic storytelling and our strategic campaign execution, we have driven strong engagement increased brand awareness and elevated our consumer demand.

Charlie Goodwin: We are the number one trusted body contouring technology by doctors.

Charlie Goodwin: Continuing to capitalize on the minimally invasive surgical trends, I am also excited that we recently submitted our 510k4a on body contouring system to the FDA, which was ahead of our original schedule by nearly 90 days. This all-in-one surgical platform seamlessly integrates Renuvion, ultrasound-assisted liposuction, power-assisted liposuction, infiltration, aspiration, electrocoagulization, and fat transfer into a single streamlined device.

Charlie Goodwin: Continuing to capitalize on the minimally invasive surgical trends I am also excited that we recently submitted our five 10-K for a on body contouring system to the F. D. A which was ahead of our original schedule by nearly 90 days.

Charlie Goodwin: This all in one surgical platform seamlessly integrates renew beyond ultrasound assisted liposuction power assisted liposuction infiltration aspiration electric quite utilization and bat transfer into a single streamline device.

Charlie Goodwin: When we started the development of AON, we had not anticipated the GOP weight loss revolution. However, considering the major shifts in the market... We believe Aon is a game changer for surgeons and will further differentiate us positioning Apyx as their preferred surgical partner. Our goal for the next few years is to be able to walk into almost any surgeon's practice and see an Aeon positioned in the heart of their operating room. Regarding timing, we are preparing for a planned launch of Aon in the back half of 2025, pending FDA clearance. We expect this launch to kickstart our equipment sales growth as we have an opportunity to capture new market share and expand our total addressable market in aesthetic surgery.

Charlie Goodwin: When we started the development of a on we had not anticipated the G O P weight loss Revolution.

Charlie Goodwin: However, considering the major shifts in the market.

We believe Aon is a game changer for surgeons and will further differentiate us positioning apex as their preferred surgical partner.

Charlie Goodwin: Our goal for the next few years is to be able to walk into almost any surgeon's practice and see an a on positioned in the heart of their operating room.

Charlie Goodwin: Regarding timing, we are preparing for our planned launch of day on in the back half of 'twenty twenty-five pending FDA clearance.

Charlie Goodwin: We expect this launch to kick start our equipment sales growth as we have an opportunity to capture new market share and expand our total addressable market in aesthetic surgery.

Charlie Goodwin: For those of you interested in learning more about the AON system and want to get an early look at this revolutionary all-in-one system, we invite you to visit us from March 20th through the 23rd at the Aesthetic Meet at the Austin Convention Center in Austin, TX. This is the premier event in aesthetics, and we are really excited to introduce AEON. I hope today's call, along with previous announcements, has helped convey just how excited we are to introduce AEON to aesthetic surgeons.

Charlie Goodwin: For those of you interested in learning more about the a on system and want to get an early look at this revolutionary all in one system. We invite you to visit US from March 20th through the 23rd at the aesthetic meet at the Austin Convention Center in Austin, Texas.

Charlie Goodwin: This is the premier event in aesthetics, and we're really excited to introduce a on.

Charlie Goodwin: I hope today's call along with previous announcements has help convey just how excited we are to introduce a onto aesthetic surgeons. We look forward to gaining traction in 2025 and providing further updates as the year progresses.

Charlie Goodwin: We look forward to gaining traction in 2025 and providing further updates as the year progresses.

Charlie Goodwin: Before turning the call over to Matt to do a deep dive on our financial results, I wanted to remind everyone that in November of 2024, we announced a restructuring program that reduced our U.S. workforce by nearly 25 percent in order to better focus, optimize, and streamline our operations. This program right-sized our operations and reduced our costs given the changes in the market around the rapid adoptions of GLP-1 drugs. Our annualized future cost savings from this reduction in force is estimated to be approximately $4.3 million.

Charlie Goodwin: Before turning the call over to Matt to do a deep dive on our financial results I wanted to remind everyone that in November of 'twenty 'twenty, four we announced a restructuring program that reduced our U S workforce by nearly 25% in order to better focus optimize and streamline our operations.

This program.

Charlie Goodwin: Graham right sized our operations and reduced our costs given the changes in the market around the rapid adoption of G. O P. One drugs.

Charlie Goodwin: Our annualized future cost savings from this reduction in force is estimated to be approximately $4 3 million.

Charlie Goodwin: Through this initiative, we also identified over $4 million of additional cost savings and anticipate our operating expenses to be below $40 million in 2025.

Charlie Goodwin: Through this initiative, we also identified over 4 million of additional cost savings and anticipate our operating expenses to be below $40 million in 2020 five.

Charlie Goodwin: As part of a broader strategic initiative, we also announced in the fourth quarter of 2024 that we strengthened our balance sheet by completing a registered direct offering with net proceeds of approximately $6.8 million and amended our credit agreement with Perceptive Credit Holdings. We believe the collective actions taken in the fourth quarter have better positioned Apyx Medical for long-term success.

Charlie Goodwin: As part of a broader strategic initiative, we also announced in the fourth quarter of 'twenty 'twenty four that we strengthened our balance sheet by completing a registered direct offering with net proceeds of approximately $6 8 million and amended our credit agreement with perceptive credit holdings.

Charlie Goodwin: We believe the collective actions taken in the fourth quarter have better positioned apex medical for long term success.

Matt Hill: I will now turn the call over to Matt for a review of our fourth quarter and full year 2024 financial results in more detail, along with our financial guidance for 2025, which we refined in today's release. Thanks, Charlie. Before I get started, please note that all references to fourth quarter and full year financial results will be on a gap and year-over-year basis unless noted otherwise. As Charlie mentioned, total revenue for the fourth quarter 24 decreased 3% to $14.2 million compared to $14.7 million in the prior year period. Revenue for the advanced energy segment was flat at approximately $12.1 million as a result of increased sales of new generators and single-use amp pieces in the U.S.

Charlie Goodwin: I will now turn the call over to Matt for a review of our fourth quarter and full year 'twenty 'twenty four financial results in more detail along with our financial guidance for 'twenty twenty-five, which re refined in today's release.

Matt Hill: Thanks, Charlie.

Matt Hill: Before I get started please note that all references to fourth quarter and full year financial results will be on a GAAP and.

Matt Hill: And year over year basis, unless noted otherwise as Charlie mentioned total revenue for the fourth quarter twenty-four decreased 3% to $14 $2 million compared to $14.7 million in the prior year period Rev.

Matt Hill: Revenue for the advance energy segment was flat at approximately $12 $1 million as a result of increased sales of new generators and single use and pieces in the U S and customer upgrades to the apex one console internationally.

Matt Hill: and customer upgrades to the Apyx One Console International. These increases were offset by a lower average selling price of generators to domestic customers, fewer domestic customer upgrades to the Apyx One console, and a decrease in international sales of new generators.

Matt Hill: These increases were offset by a lower average selling price of generators to domestic customers fewer domestic customer upgrades to the apex, one console and a decrease in international sales of new generators.

Matt Hill: OEM segment sales decreased 16 percent, or approximately $0.3 million for the fourth quarter of 24 when compared to the fourth quarter of 23. The decrease in OEM sales was due to a decrease in sales volumes to existing customers. Domestic revenue increased 1% year-over-year to $10.6 million, and international revenue decreased 8% year-over-year to $3.7 million. Gross profit for the fourth quarter, 24, increased to $9 million, compared with $8.9 million in the prior year period. Both profit margin for the fourth quarter 24 was 63.0% compared to 60.9% in the prior year period. The increase in gross profit margins was primarily attributed to...

Matt Hill: <unk> segment sales decreased 16% or approximately point $3 million for the fourth quarter of 24, when compared to the fourth quarter of 'twenty three the decrease in OEM sales was due to a decrease in sales volumes to existing customers.

Matt Hill: Domestic revenue increased 1% year over year to $10.6 million and international revenue decreased 8% year over year to $3.7 million.

Matt Hill: Gross profit for the fourth quarter, 24 increased to $9 million compared with $8 $9 million in the prior year period.

Matt Hill: Gross profit margin for the fourth quarter, 24 was 63.0% compared to 69% in the prior year period.

Matt Hill: The increase in gross profit margins was primarily attributable to.

Matt Hill: changes in both product mix and geographic mix within the advanced energy segment with domestic sales comprising a higher percentage of total sales. This increase was partially offset by a decrease in the average selling price of generators to domestic customers and customer mix within the OEM segment.

Matt Hill: Two changes in both product mix and geographic mix within the advanced energy segment with domestic sales comprising a higher percentage of total sales.

Matt Hill: This increase was partially offset by a decrease in the average selling price of generators to domestic customers.

Matt Hill: Customer mix within the OEM segment.

Matt Hill: Operating expenses decreased to $12 million for the fourth quarter of 24 compared to $14.7 million in the prior year period. The decrease in operating expenses was driven by a $1.9 million decrease in selling, general and administrative expenses, a $0.3 million decrease in research and development expenses, a $0.3 million decrease in professional service expenses, and a $0.2 million decrease in salaries and related costs. Loss from operations decreased $2.7 million or 47% to $3 million. Other expense net for the fourth quarter, 24 and 23, was $1.5 million and $3.8 million, respectively. The decrease was primarily due to the $3.1 million loss on extinguishment of the mid-cap credit agreement in the fourth quarter of 2003.

Matt Hill: Operating expenses decreased to $12 million for the fourth quarter 24, compared to $14.7 million in the prior year period.

Matt Hill: The decrease in operating expenses was driven by a $1 9 million dollar decrease in selling general and administrative expenses a point 3 million dollar decrease in research and development expenses at point $3 million decrease in professional service expenses and a point $2 million decrease in salaries and where.

Matt Hill: <unk> costs.

Matt Hill: Loss from operations decreased $2.7 million or 47% to $3 million.

Matt Hill: Other expense net for the fourth quarter, 'twenty, four and twenty-three was $1.5 million and $3.8 million respectively.

Matt Hill: The decrease was primarily due to the $3.1 million loss on extinguishment of the Midcap credit agreement in the fourth quarter of 'twenty three.

Matt Hill: Net loss attributable to stockholders was $4.6 million, or $0.12 per share, for the fourth quarter of 24 compared with $9.6 million, or $0.28 per share in the prior year period. Just even loss decreased 53% to $2.2 million compared to $4.7 million in the fourth quarter of 2015.

Matt Hill: Net loss attributable to stockholders was $4.6 million or 12 cents per share for the fourth quarter 24, compared with $9 $6 million or 28 cents per share in the prior year period.

Adjusted EBITDA loss decreased 53% to $2.2 million compared to $4.7 million in the fourth quarter of 'twenty three.

Matt Hill: As a reminder, we provide a detailed reconciliation from net loss attributable to stockholders to non-GAAP-adjusted EBITDA loss in our earnings purse. For the three months ended December 31, 2024, cash used in operating activities increased to $2.9 million, compared to $2.2 million used in the prior year period. As of December 31, 2024, the company had cash and cash equivalents of $31.7 million compared to $43.7 million as of December 31, 2020. In addition, during the fourth quarter 24, we amended our credit agreement with our lender and partner, Perceptive Advisors, reducing our revenue covenants and adding a maximum operating expense covenants at $40 million and $45 million for 25 and 26 respects.

Matt Hill: 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.

Matt Hill: For the three months ended December 31, 2024 cash used in operating activities increased to $2 $9 million compared to $2.2 million used in the prior year period.

Matt Hill: As of December 31, 2024, the company had cash and cash equivalents of $31 $7 million compared to $43.7 million as of December 31, 2023.

Matt Hill: In addition, during the fourth quarter 'twenty four we amended our credit agreement with our lender partner perceptive advisors, reducing our revenue covenants and adding a maximum operating expense covenants at $40 million and $45 million for 25 and 26, respectively.

Matt Hill: Associated with the amendment, we issue to Perceptive 150,000 shares of our common debt.

Matt Hill: Associated with the amendment, we issued to perceptive 150000 shares of our common stock.

Matt Hill: turning to a review of our 25 guidance, which is also included in our fourth quarter 2024 financial results press release issued earlier today. For the 12 months ending December 31, 2025, we expect total revenue in the range of $47.6 million. $49.0 million as compared to $48.1 million for the year ended December 31, 2021. Our revenue guidance assumed advanced energy revenue in the range of $39.6 million to $41.0 million, as compared to $38.6 million for the year ended December 31, 24, reflecting current OEM revenue is expected to come in at approximately $8 million, as compared to the $9.5 million for the year ended December 31, 2024, as we return to more normalized customer ordering and order fulfillment.

Matt Hill: Turning to a review of our twenty-five guidance, which is also included in our fourth quarter 2024 financial results press release issued earlier today.

Matt Hill: For the 12 months ending December 31, 25, we expect total revenue in the range of $47.6 million to $49.0 million as compared to $48.1 million for the year ended December 31 24.

Matt Hill: Our revenue guidance assumed advanced energy revenue in the range of $39.6 million to $41.0 million as compared to $38 $6 million for the year ended December 31, 24, reflecting current trends.

Matt Hill: OEM revenue is expected to come in at approximately $8 million as compared to the $9.5 million for the year ended December 31, 24, as we return to more normalized customer ordering and order fulfillment.

Matt Hill: We anticipate gross margins of approximately 60% for the year and total operating expenses not to exceed $40 million.

Matt Hill: Dissipate gross margins of approximately 16% for the year and total operating expenses not to exceed $40 million. As a reminder, there is somewhat of a seasonality to the aesthetic space, where quarterly revenue is normally the lowest in Q1 and Q3 and the highest in Q2 and Q.

Matt Hill: As a reminder, there's somewhat of a seasonality to the aesthetic space where quarterly revenue is normally the lowest in Q1 and Q3 and the highest in Q2 and Q4.

Matt Hill: Four.

Matt Hill: We believe, based on our projections, including the uptake of the AON platform, working capital management, our strict cost controls, and the recent capital investment will yield cash into 2027.

Matt Hill: We believe based on our projections, including the uptake of the Aon platform working capital management, our strict cost controls and the recent capital investment will yield cash into 2020 seven.

Charlie Goodwin: This completes our prepared remarks. Charlie and I will now open the call for questions.

Matt Hill: This completes our prepared remarks, Charlie and I will now open the call for questions operator.

Operator: Operator. Thank you.

Matt Hill: Thank you well now be conducting a question and answer session.

Operator: We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two to withdraw your question.

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Operator: participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up the handset before pressing the sarkies.

Operator: One moment, please, for our first question. Our first question today will be coming from the line of Matthew O'Brien with Piper Sandler. Morning. Thanks for taking my questions. Matt, I just wanted to confirm, you said 60% gross margin for 25 here? Yeah, sorry. Yeah, great question. Yeah, we're looking at at similar margins that we had for 24 into 25 and around 60% at 60%. Okay, I'm just assuming there's probably some some waiting from from the I don't know if it's the Aeon launch, or I'm just guessing, or just trying to figure out why that wouldn't recover just given the proportion of revenue coming from, from advanced energy versus OEM, especially, you know, So when you look at our gross margins, you're absolutely right.

Speaker Change: One moment please for our first question.

Speaker Change: Okay.

Speaker Change: Our first question today will be coming from the line of Matthew O'brien with Piper Sandler. Please proceed with your question.

Matthew O'brien: Oh good morning, Thanks for taking my question, Matt I, just wanted to confirm you said, 60% gross margin for or twenty-five here.

Speaker Change: Yeah, sorry, yeah, Yeah, Great question, Yeah, we're looking at are at.

Speaker Change: Similar margins that we had for 24 into twenty-five at around $60 at 60%.

Okay I'm just assuming there is probably some some waiting from from the I don't know if its the a on launch or I'm, just guessing or just trying to figure out why that wouldn't recover just given.

Speaker Change: Proportion of revenue coming from.

Speaker Change: Advanced energy versus OEM, especially domestically.

Speaker Change: So when you look at our gross margins, you're absolutely right. There's a it depends on many things which include geographic mix product mix and segment mix.

Matthew O'brien: There's a, you know, it depends on many things, which include geographic mix, product mix, and then segment mix. And, you know, what we're looking at for 25 is that You know, the current trends that we saw in 24 will continue into 25, which puts our estimated gross profit about, at that, around that 60%. Got it. Okay, thanks for that.

Speaker Change: And what we're looking at 425 is.

Speaker Change:

Speaker Change: You know that.

Speaker Change: Current trends that we saw in 24 will continue into 'twenty, five which puts our estimated gross profit about at that around that 60% Mark.

Speaker Change: Got it okay. Thanks for that and then Charlie on on a on Jeff.

Charlie Goodwin: And then, Charlie, on AON, just, you know, the timing getting moved up here by 90 days. Congratulations on that. What are you assuming, if anything, in the guide for the back half for AON? And then how should we think about You know, your interest level or options in terms of accessing that product from a just outright capital purchase versus, you know, leasing kind of arrangement. How should we think about that? Yeah. So Matt, if you remember, when we gave the guidance, we gave the guidance when we pre-announced in January to what it was going to be, and we had predicted that we wouldn't file A on until the end of the first quarter.

Speaker Change: Just the timing getting moved up here by 90, Dave Congratulations on that.

Speaker Change: What are you assuming if anything in the guide for the back half for E. On and then how should we think about.

Speaker Change: You know your interest level or.

Speaker Change: Options in terms of accessing that product from a just outright capital purchase versus leafing kind of arrangement how does how should we think about that.

Speaker Change: Yeah.

Matt: So Matt if you remember when we gave the guidance we gave the guidance.

Matt: When we pre announced in January to what it was going to what it was going to be are and we had predicted that we wouldn't.

Matt:

Matt: File a on until the end of the first quarter and so quite frankly, we haven't updated anything in our guidance for that.

Charlie Goodwin: And so, quite frankly, we haven't updated anything in our guidance for that, for the 90 days earlier. And the reason for that is, look, we still predict that we will have approval in the first half of the year, but obviously... you know, we don't have approval as we sit here right now today. And then when we do launch it in the back half of the year, we will have a soft launch like we always do with capital equipment to make sure that everything's working the way it's supposed to and all of that stuff. And so the amount of revenue that is associated in our original budget for AON is obviously not very big because of all of those factors.

Matt: For the 90 days earlier and the reason for that is look we still predict that we will have approval in the first half of the year, but obviously.

You know, we don't have approval as we sit here right now today and then when we do launch it in the back half of the year, we will have a soft launch like we always do with capital equipment to make sure that.

Matt: Everything is working the way, it's supposed to and all of that stuff and so the amount of revenue that is associated in our original budget for E. On is is obviously not very big because of all of those factors. So depending on when we get approval depending on all of those things will be able to update as the year goes on of of what we.

Charlie Goodwin: So depending on when we get approval, depending on all of those things, we'll be able to update as the year goes on of what we think that AON is going to do to the revenue. Okay, that's number one. Number two, for your second question, is we actually believe that AON will be something that all doctors, all surgeons are going to want to have in their operating room. Like we've said, we've taken every technology that is available today, and we've upgraded that technology, we've made it state of the art. And then we've put everything together where the workflow and the efficiencies and everything else that go along with having a Stand-alone system that is just for body contouring and all surgical procedures is Something that exists everywhere else in surgery, but it doesn't exist in plastic surgery And so we think that this is going to have a great value proposition for the doctors as Far as how they are going to be able to acquire it.

Matt: That E. On has is going to do to the revenue. Okay. That's number one.

Matt: Number two for your second question.

Matt: Is.

Matt: We actually believe that E on will be something that all doctors are all surgeons are going to want to have in their operating room. Like we've said, we've we've taken every technology that is available today and we've upgraded that technology. We've made it state of the art and then we've put.

Matt: Everything together, where the workflow and the efficiencies and everything else that go along with having a.

Matt: Stand alone system that is just for body contouring and all surgical procedures.

Matt: It's something that exists everywhere else in surgery, but it doesn't exist in plastic surgery and so we think that this is going to have a great value proposition for the doctors as far as how they are going to be able to acquire it.

Charlie Goodwin: There's a couple things Obviously, they'll be able to buy it outright. They'll be able to lease it. They'll do all of those things What we will do is we've always tried to take very good care of our existing customers first So everybody today that has an Apyx one generator and has already upgraded and done all of those things Will have the opportunity to get special pricing if they want to buy it for a limited time right away And then we will then obviously take back Competitive technologies and trade to make sure that we're getting Aon into every OR that is out there and so we've got a lot of programs that will be rolling out over time a lot of things to Show doctors that this is going to be a tremendous value for them to get involved with With this technology and and and this system Got it.

Matt: There's a couple of things, obviously, they'll be able to buy it outright there'll be able to lease it they'll do all of those things what we will do as we've always tried to take very good care of our existing customers first so everybody today that housed in apex, one generator and has already upgraded and done all of those things will have the opportunity to get special.

Matt: So pricing if they want to buy it for a limited time right away and then we will then obviously take back competitive technologies and trade to make sure that we're getting a on into every or that is out there and so we've got a lot of programs that will be rolling out over time, a lot of things to show.

Matt: Actors that this is going to be a tremendous value for them to get involved with the with this technology and this system.

Matt: Got it thanks, so much.

Matthew O'brien: Thanks so much. Yep.

Yep.

Matt Hewitt: Our next questions come from the line of Matt Hewitt with Craig Hallam. Good morning, thanks for taking the questions. Maybe the first one, you noted that the success that you had in the DTC campaign, I'm just curious, you know, kind of what were the changes that were implemented? And how do you see that playing out in 25?

Matt: Our next questions come from the line of Matt Hewitt with Craig Hallum. Please proceed with your questions.

Matt Hewitt: Good morning, Thanks for taking the questions maybe the first one you you noted that the success that you had in the DTC campaign I'm just curious.

Matt Hewitt: You know kind of what were the changes that were implemented in and how do you see that playing out in 'twenty five.

Charlie Goodwin: So I think it's, you gotta go back and remember that we didn't actually start doing our direct-to-consumer campaign until the middle of 23, and that's when we got the clearance for Renuvion used after liposuction in body contouring as treatment for loose and lax skin, okay? So that's when it actually started. And quite frankly, our first foray into that, the first back half of 23, we actually didn't have the right partner and really didn't have the best message. In January of 24, we actually brought in a new PR partner that has been doing a tremendous job for us, and we actually started rolling out the first programs of that in April of 24.

Matt Hewitt: So I think it's you got to go back and remember that we didn't actually start doing our direct to consumer campaign until the middle of 'twenty three and that's when we got the clearance for renew V. On used after liposuction in body contouring as a treatment for <unk>.

Matt Hewitt: Loosen lack scan okay. So that's when it actually started and quite frankly, our first foray into that the first back half of 'twenty three we actually didn't have the right partner and really didn't have the best message in January of 'twenty four we actually brought in a new P. R.

Partner that has been doing a tremendous job for us and we actually started rolling out the first programs of that in April of 24, So we actually as we sit here today actually haven't been doing this direct to consumer for almost.

Charlie Goodwin: So we actually, as we sit here today, actually haven't been doing this direct-to-consumer for almost even a year yet. And so the results that we have seen from the campaign, the results that we have seen, that we are doing have just crushed every metric that we had before. And the fact of the matter is now is because of the adoption of GLP-1 drugs and because of the need of these patients that are losing 15 to 20 percent of their body weight, we are an incredible treatment for loose and lax skin, and we're the only FDA-approved treatment for that.

Matt Hewitt: Even a year yet and so the results that we have seen from the campaign the results that we had seen.

Matt Hewitt: That we are doing it just crushed every metric that we had before and the fact of the matter is now is because of the adoption of G. O P. One drugs and because of the need of these patients that are losing 15% to 20% of their body weight we are.

Matt Hewitt: A incredible treatment for loose and lax skin.

Matt Hewitt: And.

Matt Hewitt: We're the only FDA approved treatment for that and the D. A.

Charlie Goodwin: And the real answer is because of the amount of weight loss that they are going to have, that most of those patients are going to benefit from a surgical intervention. And we don't believe that many of the previous non-invasive therapies are going to be able to help with that much skin laxity, that the message is really resonating with consumers, influencers, doctors, everybody else, is that this change has really been good for us from a direct-to-consumer point of view. And so I think those are some of the main changes. Some of it was on us not having the right partner, and some of it is just what's going on in the marketplace.

The real answer is because of the amount of weight loss that they are going to have that they are going most of those patients are going to benefit from a surgical intervention and we don't believe that many of the previous noninvasive therapies are going to be able to help with that much skin laxity that the message is really resignation.

Matt Hewitt: With consumers.

Matt Hewitt: Influencers doctors everybody else is is that this change is is really been good for us from a.

Matt Hewitt: Direct to consumer point of view and so I think those are some of the main changes come about was on us not having the right partner and some of that is just what's going on in the marketplace.

Matt Hewitt: That's great.

Speaker Change: That's great and then I guess shifting gears a little bit obviously, you know there remains it remains a challenging market, but it seems like you are.

Matt Hewitt: And then I guess shifting gears a little bit, obviously, you know, there remains, it remains a challenging market, but it seems like you are doing better domestically than you are internationally. Is there anything that you can learn or that you can take from some of the improvements that you're implementing in the US to the external markets? And what could that mean from for an upside perspective for 25?

Speaker Change: Doing better domestically than you are internationally.

Speaker Change: Is there anything that you can learn or that you can take from some of the improvements that you're implementing in the U S to the external markets and what could that mean from for an upside perspective for 25. Thank you.

Charlie Goodwin: Thank you. Yeah, so. If you look at why we think the U.S. is doing better relative to outside the United States, it has to do with the early adoption of GLP-1 drugs, quite frankly. And those drugs will be adopted everywhere in the world. The United States isn't the only nation that likes its food and consumes too much alcohol and all of that good stuff. So those drugs will make it all over the place. And we expect similar type results throughout the rest of the world because we believe that surgery is going to be the key to take care of the needs that this specific group of patients has.

Speaker Change: Yeah. So.

Speaker Change: If you look at why we think the U S is doing better relative to the outside the United States. It has to do with the early adoption of G. O P. One drugs quite frankly Ed.

Speaker Change: And those drugs will be adopted everywhere in the world the United States isn't the only a nation that that likes its food and consumes too much alcohol and all of that good stuff. So those drugs will make it all over the place and we expect similar type results.

Speaker Change: Throughout the rest of the world because we believe that surgery is going to be the key.

Speaker Change: To take care of the needs that this specific group of patients has there was always a group of patients that needed surgery and benefited from surgery, but now that group because of the laxity and the scan is is is just continuing to grow and it and it will for however, long these drugs ste.

Charlie Goodwin: There was always a group of patients that needed surgery and benefited from surgery. But now that group, because of the laxity in the skin, is just continuing to grow. And it will for however long these drugs stay in vogue, if you will. And quite frankly, there's a lot of people that think that these drugs will be part of people's daily routines for, you know, sometimes the rest of their lives. So we don't see that changing. And quite frankly, we've always believed that surgery is really the thing that provides durable and transformational results in the world.

In Vogue, if you will and quite frankly, there's a lot of people that think that these drugs will be part of People's daily routines for sometime.

Sometimes the rest of their lives. So we don't see that changing.

Speaker Change: And quite frankly, we've always believed that surgery is really the thing that provides durable and transformation of results in the aesthetic space and our focus has always been on that we think that we can become the most dominant company in surgical aesthetics, and our partnership with aesthetic surgeons.

Charlie Goodwin: And we've always been on that. We think that we can become the most dominant company in surgical aesthetics. And our partnership with aesthetic surgeons is something that we look forward to for many years. Not only do we have a clinical team, not only remarking directly to consumers, but we've got a huge vested interest because of our consumable and disposable business to have them help grow their surgical practices. If they're doing better, we're doing better. And so we're aligned perfectly from that scenario. And, you know, we think that disruption in the marketplace, to your point, it is a tough market, is being caused by the GLP-1 drugs.

Speaker Change: Is it.

Speaker Change: It's something that we look forward to for many years not only do we have a clinical team not only a remark and directly to consumers, but we've got a huge vested interest because of our consumable and disposable business to have them help grow their surgical practices, if they're doing better we're doing better and so we're.

Speaker Change: Align perfectly from from that scenario and you know, we think that disruption in the market place to your point. It is a tough market, it's been being caused by the G. L. P. One drugs.

Charlie Goodwin: And we think because of that major disruption, that there are going to be companies that have the right technologies and products to treat those patients, and there's going to be other companies that don't have the right technologies to be able to treat those patients. And we think that we're at the forefront of that. That's great.

Speaker Change: And we think because of that major disruption that they're going to be companies that have the right technologies and products to treat those patients and theres going to be other companies that don't have the right technologies to be able to treat those patients and we think that we're at the forefront of that.

Speaker Change: That's great. Thank you.

Sam Eiber: Thank you.

Speaker Change: Thank you. The next question is from the line of Sam <unk> with BTG. Please proceed with your question.

Sam Eiber: The next question is from the line of Sam Eiber with BTIG. Please proceed with your question. Hi, good morning, Charlie, and I appreciate you taking the questions this morning. Maybe I can just follow up on that last point you were making and maybe get your thoughts on what you're hearing. or what you're seeing from accounts that maybe have started to adopt GLP-1s versus those who haven't. And if you're getting that pull through on the utilization for Renuvion at this point. Yeah, look, I think that, you know, one of the things that we saw in the fourth quarter in particular was, you know, handpiece growth again in the United States, and I think that we had said that it would grow low double digits for the year, and in fact, it did.

Sam: Hi, Good morning, Charlie and I appreciate you taking the questions. This morning.

Speaker Change: Maybe I can just follow up on that last point, you were making in and maybe get your thoughts on what you're hearing.

Speaker Change: Or what Youre seeing from accounts that maybe have started to adopt G. L. P. One versus those who haven't and if youre getting that pull through on the utilization for renew V. On it at this point.

Speaker Change: Yeah look I think that.

Speaker Change: One of the things that we saw in the fourth quarter. In particular was in you know hand piece growth again in the United States and I think that what we had said that it would grow low double digits for the year and in fact, it did and it was it was actually a little bit higher in the fourth quarter than that so.

Charlie Goodwin: And it was it was actually a little bit higher in the fourth quarter than that. So we are seeing that from our usage data, and quite honestly, to have, you know, to have our consumables in the United States grow low double digits in an incredibly different, difficult aesthetic environment, I think speaks volumes to just that, without me saying it, it's being backed up in the numbers. And you know, that now is over 60% of our total advanced energy revenue. And so that focus and that drive and those patients coming in to have their loose and black skin treatment is something that our doctors are seeing.

Speaker Change: We are seeing that from our usage data and quite honestly to have.

Speaker Change: Have our consumables in the United States grow low double digits, and an incredibly different difficult aesthetic environment.

Speaker Change: Speaks volumes to just that without me, saying it that it's being backed up in the numbers.

Speaker Change: And.

Speaker Change: You know that now has over 60% of our total advanced energy revenue and so that focus and that drive in those patients coming in to have their loosen lack skin treatment is something that our doctors are seeing their surgical practices are.

Charlie Goodwin: Their surgical practices are good, they're solid, they're busy. And a lot of the disruption that happened in 24 from a revenue perspective for the offices was because of the non-invasive procedures were down almost a third. So you know, we think that surgery is going to remain strong. And we think that the doctors that are talking to these patients, you know, focused on these patients and bringing these patients in, their practices have never done better. 24 was the best year that they ever had. And we think more and more doctors obviously are moving to how they're going to deal with these patients and the offerings that they're going to have for these patients.

Speaker Change: Are good they're solid they're busy.

Speaker Change: And a lot of the disruption that happened in 'twenty four from a revenue perspective for the offices was because of the non invasive procedures were down almost a third so.

Speaker Change: You know, we think that surgery is going to remain strong and we think that the doctors that are talking to these patients.

Speaker Change: You know focused on these patients and bringing these patients in their practices have never done better 24 was the best year that they ever had and we think more and more doctors, obviously are moving to how they're going to deal with these patients and the offerings that theyre going to have for these patients and they're having to treat these patients.

Charlie Goodwin: And they're having to treat these patients differently because of the amount of laxity that is that is out there. So they're using combination procedures, they're doing all different kinds of things. And we're seeing this change happen within the aesthetic space. And that's why that's why this aesthetic space has been disrupted the way that it has is because everything is having to evolve and to morph to be able to address this huge patient population that is out there.

Speaker Change: Because of the amount of laxity that is that is out there. So they're using combination procedures theyre doing all different kinds of things and we're seeing this change happen within the aesthetic space and that's why that's why this the aesthetic space that's been disrupted the way that it has is because everything is having to evolve.

Speaker Change: All of them to morph to be able to address this huge patient population that is out there.

Sam Eiber: Yeah, yeah, it makes a lot of sense.

Speaker Change: Yes, it makes a lot of sense and maybe just as my follow up here.

Sam Eiber: And maybe just as my follow up here, where are we maybe in terms of the upgrades for the Apyx One console? I just want to understand if the majority of customers are now in the new system or if there's still more customers left to be converted here? Yeah, it's a good question. So, we are previously before Aon, the only reason that you would potentially need to upgrade to the Apyx One generator is if you wanted to use the micro handpiece. And that was more important to doctors that were doing a lot of fine features, facial work, all of those types of things.

Speaker Change: Where are we maybe in terms of the upgrades for the apex. One console I just want to understand if the majority of the customers are now in the new system or if there's still more our customers loved to be converted here.

Yeah. It's a good question. So we are.

Speaker Change: Previously before a on the only reason that you would potentially need to upgrade to the apex. One generator is if you wanted to use the micra hand piece and that was more important to doctors that were doing a lot of fine features facial work all of those types of things the vast majority of our <unk>.

Charlie Goodwin: The vast majority of our customers focus on the body and everything else. And so, there wasn't a huge incentive for them to upgrade to the Apyx One. Now that Aon is here, now obviously the Apyx One generator is the brains of the Aon system. And as I mentioned earlier, one of the things that we have always tried to do is to make sure that we're taking care of the people who have been our best customers. And so, for the customers that have an Apyx One or that are going to upgrade to an Apyx One before the launch of Aon, we will give them the best pricing to upgrade to Aon once it is available.

Speaker Change: Tumors focussed on the body and everything else and so there wasn't a huge incentive for them to upgrade to the apex. One now that a on its here now obviously the apex. One generator is the brains of the Aon system.

Speaker Change: And as I mentioned earlier, one of the things that we have always tried to do is to make sure that we're taking care of the people who have been.

Speaker Change: Our best customers and so for the customers that have an apex, one or that are going to upgrade to an apex. One before the launch of a on we will give them the best pricing to upgrade to a on once it is available and so we have a we have a long ways to go for people.

Sam Eiber: And so, we have a long ways to go for people that would need to upgrade to the Apyx One. Very good.

Speaker Change: It would need to upgrade to the apex one.

Sam Eiber: Thanks for taking the questions.

Speaker Change: Very good thanks for taking the questions.

Charlie Goodwin: Thank you.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Charlie Goodwin: At this time, I'd like to turn the floor back to Charlie Goodwin for closing remarks. Thank you. Thank you everyone for attending the call. We appreciate your support and we look forward to keeping you updated on our progress as we progress throughout the year. Thanks a lot.

Speaker Change: At this time I'd like to turn floor back to Charlie Goldman for closing remark.

Speaker Change: Okay.

Charlie Goldman: Thank you. Thank you everyone for attending the call. We appreciate your support and we look forward to keeping you updated on our progress as we progress throughout the year. Thanks a lot.

Speaker Change: Okay.

Operator: Thank you.

Operator: This does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines at this time.

Speaker Change: Thank you. This does conclude today's teleconference. We thank you for your participation you may now disconnect your lines at this time.