Business Overview and History

Apyx Medical Corporation is an advanced energy technology company with a passion for elevating people's lives through innovative products, including its proprietary Helium Plasma Platform Technology marketed and sold as Renuvion® in the cosmetic surgery market and J-Plasma® in the hospital surgical market. With a relentless focus on delivering transformative solutions, Apyx Medical has carved out a unique position in the fast-growing surgical aesthetics landscape.

Apyx Medical was incorporated in 1982 under the laws of the State of Delaware and has its principal executive office in Clearwater, Florida. The company's core focus has been on developing and leveraging its proprietary helium plasma and radiofrequency platform technology, which forms the foundation for its flagship products, Renuvion and J-Plasma. These innovative solutions offer surgeons a unique ability to provide controlled heat to tissue and achieve their desired results.

The company operates through two primary business segments: OEM and Advanced Energy. The OEM segment is primarily driven by development and manufacturing contracts, while the Advanced Energy segment focuses on selling both capital equipment and consumables, particularly single-use handpieces. In recent years, sales of handpiece units have constituted a substantial portion of Apyx's business.

Apyx has faced its share of challenges, including a 10.1% decrease in total revenue in 2022 compared to the previous year. This decline was primarily attributed to lower sales of generators in both domestic and some international markets, largely due to economic uncertainty in the capital equipment market within the aesthetic space. Additionally, the company has had to navigate the ongoing impact of the COVID-19 pandemic, which affected procedural volume and negatively impacted its financial performance.

Despite these headwinds, Apyx Medical has continued to focus on innovation and diversifying its product offerings to meet customer needs. The company has leveraged its expertise in unique waveforms through OEM agreements with other medical device manufacturers, further expanding its reach and capabilities within the industry.

Financials and Key Metrics

As of the latest reported quarter (Q3 2024), Apyx Medical had $28.01 million in cash and cash equivalents, with a current ratio of 5.46 and a quick ratio of 4.52, indicating a strong liquidity position. However, the company has incurred recurring net losses and cash outflows from operations, a trend that has continued in recent years. For the fiscal year 2023, Apyx Medical reported total revenue of $52.35 million, a gross profit of $33.76 million, and a net loss of $18.71 million.

In terms of profitability, Apyx Medical's gross profit margin stood at 64.4% in fiscal year 2023, showcasing the company's ability to maintain relatively high margins. However, the company's operating expenses, which amounted to $53.71 million in fiscal year 2023, have outpaced its revenue growth, resulting in operating losses and net losses.

For the third quarter of 2024, Apyx reported revenue of $11.49 million, representing a 4.1% decrease year-over-year. The net loss for the quarter was $4.70 million. The company's debt-to-equity ratio stands at 1.44, reflecting its financial leverage.

Apyx Medical has provided guidance for the full year 2024, expecting total revenue in the range of $46.6 million to $47.6 million, representing a decrease of approximately 11% to 9% year-over-year. The company anticipates a net loss attributable to stockholders of approximately $25 million for fiscal year 2024. Gross margins are expected to be around 60%, with total operating expenses projected in the range of $48 million to $49 million.

Looking ahead to 2025, Apyx expects total revenue in the range of $47.6 million to $49.5 million, representing growth of approximately 2% to 6% year-over-year. The company aims to reduce operating expenses to no greater than $40 million in 2025.

Segmental Performance

Apyx Medical operates in two business segments: Advanced Energy and OEM. The Advanced Energy segment, which includes the Renuvion and J-Plasma products, has historically been the company's core focus. In fiscal year 2023, the Advanced Energy segment generated $41.04 million in revenue, accounting for 78.4% of the company's total revenue.

For the third quarter of 2024, the Advanced Energy segment experienced a 5.6% decrease in sales due to lower generator sales in both domestic and international markets. However, the segment continues to show growth in handpiece unit sales, with approximately 64,000 units sold in the first nine months of 2024, compared to 59,000 units in the same period of 2023, representing a 9% increase.

The OEM segment, which primarily focuses on development and manufacturing contracts, has contributed a steadier stream of revenue, generating $11.31 million in fiscal year 2023, or 21.6% of the company's total revenue. This segment has shown more consistent profitability compared to the Advanced Energy segment. In the third quarter of 2024, OEM segment sales increased by 2.8% compared to the same period in the prior year, driven by increased sales volume to existing customers, including Symmetry Surgical under Apyx's 10-year generator manufacturing and supply agreement.

Geographic Performance

Apyx Medical has a significant international presence, with its products sold in more than 60 countries through local dealers. International sales represented approximately 32.2% and 30.8% of total revenues for the three and nine months ended September 30, 2024, respectively, compared to 27.8% and 26.6% for the same periods in the prior year. This increase in international sales has partially offset the decline in domestic markets.

Strategic Initiatives and Growth Opportunities

Apyx Medical has been actively pursuing strategic initiatives to drive future growth and enhance its market position. One of the company's key focus areas is the Ayon Body Contouring System, an all-in-one platform that seamlessly integrates Renuvion, ultrasound-assisted liposuction, power-assisted liposuction, infiltration, aspiration, electrocoagulation, and fat transfer. This innovative system is expected to be a game-changer in the surgical aesthetics market, positioning Apyx Medical as a comprehensive solutions provider for surgeons. The company plans to submit a 510(k) premarket notification to the FDA for Ayon by the end of Q1 2025, with an expected launch in the second half of 2025.

Additionally, the company has been leveraging its expertise in unique waveforms through OEM agreements with other medical device manufacturers, diversifying its revenue streams and expanding its reach within the industry.

In November 2024, Apyx announced a cost-saving restructuring initiative that included a nearly 25% reduction in its U.S. workforce to better focus, optimize, and streamline operations. This restructuring is expected to result in annualized cost savings of approximately $4.3 million, contributing to the company's goal of decreasing losses and achieving cash-flow breakeven.

Risks and Challenges

Apyx Medical operates in a highly competitive medical device market, where it faces challenges from both established players and emerging competitors. The company's reliance on a limited number of large customers in its OEM segment, as well as its exposure to regulatory changes and product liability risks, present ongoing concerns.

Furthermore, the company's history of net losses and cash outflows from operations raises questions about its long-term sustainability and the need for additional funding or strategic partnerships to support its growth initiatives. The company has a $7.5 million delayed draw loan available until December 31, 2024, subject to certain conditions, which may provide some financial flexibility.

Conclusion

Apyx Medical Corporation has established itself as a pioneering force in the surgical aesthetics market, leveraging its proprietary Helium Plasma Platform Technology to develop innovative products like Renuvion and J-Plasma. The company's strategic focus on the Ayon Body Contouring System and its OEM partnerships suggest a commitment to diversification and market expansion.

However, Apyx Medical's financial performance, marked by recurring net losses and cash outflows, remains a significant challenge that the company must address to ensure long-term viability. The recent cost-saving initiatives and restructuring efforts demonstrate management's commitment to improving operational efficiency and financial performance.

As Apyx Medical continues to push the boundaries of surgical aesthetics, investors will closely monitor the company's ability to capitalize on its technological advantages, optimize its operational efficiency, and deliver sustainable financial performance. The company's guidance for 2024 and 2025 suggests a path towards recovery and growth, but execution will be critical in achieving these targets and navigating the competitive landscape and regulatory environment.