All right, afternoon. Thanks, everybody, for joining us. Matt O'Brien, I cover MedTech here at Piper. We're very fortunate to have the Apyx management team here with us today. Charlie is the CEO of the company. Charlie, thanks so much for coming out.
Thanks for having me.
Appreciate it. Let's just get down to it. You know, Q3 was a little disappointing just in terms of, you know, how kind of things fell versus, you know, your expectations for things recovering. Just talk a little bit about what surprised you in the quarter, and then, you know, how you're thinking about, you know, remedying some of those, some of those issues.
Yeah. The third quarter, we actually grew our revenue, I think, about 40%, which, on a normal basis, would be good. The problem is we thought we were going to grow about 80%. I f you go back and you look at the quarter, where we missed, there were some execution things on our side. We've made some changes to the sales organization. We also made changes to our leadership in the Far East, as far as management goes, and we actually made some changes in the head of our marketing. We didn't think we were doing as good a job as we should have been doing on a direct-to-consumer point of view. T here were definitely some execution things that are on us, but we've addressed those and feel that we're in a much better position now going forward.
The other factor was, is that there was almost, it seemed like an air pocket a little bit this summer, especially the month of August and the first two weeks of September, where both it seemed like patients and doctors were on vacation. I t got the doctors actually a little bit spooked that, you know, to purchase new capital, are patients actually going to show up? W e were pleased to see that the last two weeks of September were really strong from that perspective, and it continued within this quarter also. And then just the overall macroeconomy played into it a little bit too, just making people a little bit unsure of what the future is going to bring.
I think those were the factors that contributed to the quarter, and obviously, we're not in charge of the macroeconomy, but the execution things on our end, that's, we've taken care of those and are addressing those.
Got it. How long does it take for some of those new folks to get into the place, assess what's going on, and then kind of make, you know, make their changes and get their programs up and running?
W hen you look at the changes that we made in the sales organization, in particular in the U.S., you know, we had a situation where when we got the safety notice in March of 2022, we basically put our arms around people and we really didn't want salespeople to leave our organization at that point in time. T hen we had some people that started to do a lot better, but there were still some people that lagged and didn't do as well as we would like them to do, a nd so we gave them a little bit more time, quite honestly, than we probably would have normally.
S o for the people that left, it's probably not going to be that big of an issue in Q4, because in a couple of the territories, we gave some of our top performers more geography, and quite frankly, the people that were there weren't contributing a lot anyway. T hat's in the US. Outside the US, we made a change in our Far East management. We have a new person that came on board November first, and actually, we would expect that to be positive to what we thought it would be for the fourth quarter in Far East. H e's already having a huge impact. He obviously had a ton of experience and knew a lot of people before, and that was really good. And then from a marketing perspective, our Vice President of Marketing is a wonderful guy.
He did a great job for us, and he got us in a great spot. He just never really was passionate about the direct-to-consumer side as much as we needed him to be. And fortunately, a couple of years ago, we had brought on Wendy Levine to our board, and we brought her on in particular because she came from Johnson & Johnson. She came from the device side of things, on the direct-to-consumer side of things. M ore importantly, she left MedTech, and she actually has her own agency here in town. It's called 21 GRAMS, and what they focus on is direct-to-consumer marketing for a lot of the companies. S he actually had a person that was perfect for us, and she left Wendy's company and came to work for us.
W e would expect that to be a positive, too, that we'll make more headway in the rest of this year than we would have before. So all in all, we think that the changes are obviously good, but they're obviously not gonna hurt us in the short run.
Got it. And I want to get into the DTC in a little bit, which I will, but, you know, on the other side of the equation, stuff you can't control-
Mm-hmm
... which is the macro side.
Sure.
It sounds like volumes are still good. People are still going to get treatments.
Yeah.
It's really the capital side that people are like, "High interest rates, I can't afford this. Too expensive." How impactful could that be to the business, you know, going forward?
Yeah. Look, there are ways that we can help the doctors out with the interest rate. Obviously, the car companies have done it for years.
Right.
W hen you're going to lease a piece of capital, we can actually help buy down the rates with just an more of a discount in some cases if we need to. And so, look, it is something that we deal with, but the crazy thing about where we are right now is, given the indications that we got in April and given just everything, there has never been a better time from an interest level, an excitement level, and a buzz level in our technology, both from a physician point of view and a customer point of view, a patient point of view. And so for us, it's really strange. In 2021, we had a market cap of about $600 million.
Now we're struggling to get to a $100 million market cap, and for us, it feels way better than it's ever felt.
Interesting.
Yeah.
I mean, a big part of that, obviously, was the safety notification, right?
Sure.
Where are we at in that whole, that whole process? I mean, you know, US, OUS, how much of that is behind you at this point?
Yeah. I would say in the U.S., it's probably pretty much totally gone. Once in a while we get it, but for the most part, we are the only company now that has the indication to contract soft tissue following liposuction for body contouring procedures, and nobody has that indication except for us. Where we do run into it more, believe it or not, is still outside the United States, but it's obviously not nearly what it was before. Obviously, we've had over a year now to prepare all the answers, all the clinical data, everything else, to be able to talk about that and combat it. A lot of times it's just extra work and more education because we do have the indication now to point back to and to make sure that people all over the world understand that.
Got it. You know, and I think domestic was good last quarter. What you know, what are you seeing as far as having these new indications and adoption of the new indications? We'll get into the GLP side of things in a second.
Mm-hmm.
T he new indications and being able to go out and market that, especially with some of these higher performing sales reps you talked about.
Yeah. I think it's important to understand, too, from a direct-to-consumer side, we just started to do that in January, and the only part that we were marketing directly to consumer at that point in time was the neck-
Yeah
W e had the neck indication at that point in time. Having the new clearance on April 27th allowed us then to be able to start talking about the whole body and being able to market the body. And as you know, the majority of the procedures are done on the body, not on the neck. Probably about 80/20 is the mix. So the body was incredibly important to us, and it is, it is huge for us to have that indication, because it's not only the indication, but it's all the evidence-based medicine and all the clinical data that we're able to deliver to new prospects and new customers. And where it really plays into are doctors that are looking to adopt one of these technologies for the first time. That's where it's a huge advantage to have all of that.
If somebody already obviously has our competitor's product, you know, they've already been using it and they're safe with it, and it's not as big of a deal there. But for new customers and, and new people looking to acquire the technology, that's, that's a huge difference.
Okay. What about the Apyx One console?
Mm-hmm.
Can you talk a little bit about that versus previous generation and just feedback you're getting on that system?
Yeah. So the Apyx One console has only been launched so far in the United States. We did just get approval in Brazil, which is really nice for that also, so it will start to make its way down there. But the significance of the Apyx One console is, it is really the first platform that is designed for the cosmetic and aesthetic market. All the other iterations that we had were really just off of the old surgical platform. This has really been designed for them, for this procedure, for body contouring procedures. A lot of the things that it has, it has presets for all the different body areas that the doctor can put in and they can use, so their staff can bring them right up. And then it's cloud connected, so they can...
It's got a joule counter on it, so they can record how much energy was used in different body parts. And if their staff doesn't have to write it down anymore, because it's cloud connected into the patient charts. I t's got a whole bunch of functions like that that are easy. It is still their Bovie generator, so it is they can use it for their open surgical procedures, too. T hen the other big thing is, it is the only platform that will power the new Micro Handpiece that we just came out with, that we got approval for, too.
Okay. You know, what, how do we think about that system itself? Is there an upgrade cycle that goes along with it?
Yeah. That's a great question, because I left that part out.
Yeah.
Our existing customers are able to upgrade to the new Apyx One. The Apyx One has a list price of $155,000, and our existing customers can upgrade to that unit for $55,000.
Got it. Okay. So we should have some kind of replacement cycle as we head into 2024. Is that fair?
Well, it is fair, yeah. And we'll have a pretty good relay cycle, because we just actually released the Micro Handpiece just about a week ago to everybody, so it's available for sale now.
Okay. Was there any kind of... I don't know if this actually was really the case with you guys, but I know the handpiece number in the quarter was a little softer, like more flatter than you know, than we had expected, although it is Q3. Can the new handpiece really accelerate growth? Was there any delay in purchasing, just waiting for that, or how do, how do we think about that?
I'm sorry?
Yeah, the new handpiece.
Yeah, the micro?
Yeah, the micro.
I don't know that there would be a delay, and I don't know that that's the right way to think of the Micro Handpiece. Because with the Micro Handpiece, to where it's really being used in the soft launch, where the doctors use it the most, was obviously in the facial area underneath the eyes and the forehead.
All right.
Areas that our existing handpiece wasn't being used for. It's also being used in the hand quite a bit, because people's hands start to stretch out, and they want to get that taken care of. And then the other area that it is being used a lot is for labiaplasty also.
Oh, okay.
The other devices for all of those areas were too big for that.
Okay. How-
I would think of it more as being able to treat the entire body now, from tip of the forehead all the way down to the ankles.
How many more procedures can you add in now between face, hand, and then labiaplasty?
Yeah, it's a lot. It's, it's in the hundreds of thousands of procedures for all of those different types of things.
Got it. Maybe just to back up a little bit, Charlie, how big is the actual procedural opportunity that you guys have?
... It is, so it's really, really, really a tough question, and it's gonna require a little bit of explanation. You got a little bit of time here for me?
We have 12.5 minutes.
All right, I think I can get it done in that length of time.
Okay.
If you look at the market, if you look at liposuction, liposuction has been the fastest-growing procedure according to ISAPS's data for both 2021, and we just got the 2022 data, okay? That has grown 20% each year, and in 2022, there were 2.3 million liposuction procedures that were done worldwide, and it's the biggest surgical procedure ahead of breast implants for the very first time, okay? So that's just straight lipo. But then, if you wanna look at all the non-invasive body contouring procedures, that market is at least double of the liposuction market. And then you've got all the traditional, cutting and sewing, open-type surgical procedures that exist. And we believe over the next decade, and we believe that's why you're starting to see the huge growth in liposuction.
That's why you see companies like AirSculpt that are opening up body contouring clinics all over the world. We believe that body contouring is going to be the procedure of the future over the next decade and continue to really grow and really expand. T he reason that we believe that is because if you look at the results that body contouring gives, minimally invasive surgical procedures, the results are spectacular, and they're durable. I f you look at all of the other types of procedures, the non-invasive procedures, they do not provide a dramatic result, and they typically don't even provide a durable result.
Right.
Then, on the other side of the thing, you've got traditional surgery, which works and is great, but it comes with a big scar, and patients don't like that. T hat's why we think minimally invasive body contouring is going to be a huge driver of procedures in the future. When we base our market opportunity, as we sit here today, we only do it off of the back of the number of liposuction procedures, and that alone in the United States is a $3 billion opportunity.
Right.
W hen we're talking about the market opportunity, it is huge. It's just ridiculous for us to talk about really anything else because of the size of just the lipo market, and we might as well just talk about that.
Right.
But the opportunity is gigantic.
Yep, got it. You didn't need the full 12.5 minutes.
That leaves you for GLP-1.
Yeah, well, we'll get to that in a second, b ut just to back up a bit, or not back up, but just to summarize all of this, we did an aesthetic day here. Feedback on Renuvion was great with all the clinicians. I don't hear anybody say in the channel, "I, I don't like it, it doesn't work." You just never hear that. W hen you think about that kind of product, and I know we had the safety notification but, you know, what is it that's keeping you in the near term from really accelerating growth massively? I don't know if it's a macro issue or something else like that. And then, what keeps you from, you know, continuing to have phenomenal growth over the next several years?
Yeah.
Is it DTC? Is it sales force? I mean, what is it?
I think it's a little bit about education. I think that, you know, obviously, before the safety notice in 2021, we did grow the business at 95% in 2021. I think that we maybe even underestimated a little bit about how tough it would be to ramp back up after the safety notice, okay?
Yeah.
I think that there's some of that on us. A s far as the opportunity and everything that we've talked about, we're more bullish on it now than we've ever been. But one of the things that has to happen in the marketplace is there needs to be a huge level of education to doctors and patients, and that's what we're working on doing in all of these things. T he reason that I say that, and the reason that it's important, is because, you know, the aesthetic space is still the Wild Wild West, where a lot of companies make claims for their technology that they actually don't have an indication for. And any company that has a device that creates heat says that they have some form of skin tightening, even though it hasn't been proven and even though it really doesn't.
Because scientifically, you need to contract collagen fibers underneath the skin to really get the skin to contract.
Right.
A lot of it is just having doctors understand. To your point about when you go talk to doctors, we have doctors that will tell you that the technology is a game changer in their practice and has totally changed what they do. T he reason that they're saying that is because they didn't think that they needed something for skin tightening before. They thought they had something for skin tightening, and they didn't realize how much better it actually could be. T hat's why you get those responses from the doctors, so it's, it's just gonna take us to keep out there talking about it. Our, our doctors are talking about it.
We had more doctors speak at worldwide conferences from the podium by probably a factor of at least two and a half than any other year that we've ever had, because people are that excited about what they're able to achieve with the technology and body contouring.
Got it. Okay. It's physician to physician, you know, education something you guys are doing a lot of?
It is.
Okay.
It's big for us. We do physician-to-physician education, and we just actually had a. We just came back from the plastic surgery show in October, that was in Austin this year, and we had a Dr. Johnny Franco, who is kind of spearheading the GLP-1 in the plastic surgery space, and he did a whole thing for us there, at an event there with a whole bunch of doctors, that was incredibly well attended after hours, to talk about all of this.
Okay. Okay, so you mentioned GLP-1s. I wanna get to that. We'll do that now, and then DTC in a second. You know, as a device analyst, I sit here and tell everybody that will listen, nobody listens, but that GLPs are not gonna hurt the device space negatively like knee replacements or stent in place, you know, implants, et cetera. So it's a little bit, it's a little bit contradictory to sit up here and be like, "But, you know, all that stuff I said is not gonna hurt here, it's actually gonna help you guys." So why is it gonna help you guys?
Yeah.
What are you seeing so far? I know it's early.
Yeah. I believe that, and there's a lot of people that believe, that the biggest beneficiaries of the GLP-1 drugs are going to be plastic and aesthetic surgeons. And the real simple reason for that is you're gonna lose weight, and it's gonna create lax and loose skin. And for a lot of these people, this is something that they've never been able to do in their life, is to lose weight, and now they're gonna lose it, and now they're gonna be incredibly well motivated to go that extra mile and to get a procedure done to be able to take care of it. So we believe that aesthetic surgeons, plastic surgeons, are gonna be the greatest beneficiary of this. We happen to have the best technology for tightening the skin, and so therefore, we think it's gonna be a huge benefit to us. I mentioned Dr. Franco.
What I didn't mention is what he's actually doing. He did a webinar for us in the summer in September, I think, or August, maybe it was September, that he did a webinar for other doctors, and he started the weight loss journey himself on Ozempic at the end of last year, and he was having great success with it. He started in Austin, Texas, marketing what he called the skinny shot. He was having patients bringing patients into his practice with that. In the month of August alone, of just this year, he brought in 1,650 new patients to his practice. I think July, he brought in 1,400 new patients, and it's just been a hockey stick. His practice now, as of this summer, was 50 people. He's hired two other doctors.
He bought another surgery center across the street. He's got 3 Renuvion machines, and he thinks by the end of the year, that he's gonna have to have 70 people in his practice, seven zero, to be able to keep up with all this demand. Obviously, as a plastic surgeon, he's not interested in prescribing GLP-1 drugs. That's not, that's not where he makes his... You know, that's not what this is all about.
Right.
H e's got a program for them to be able to take care of them and to take care of their skin laxity, and give them that final finish after they actually lose the weight. And that's what it's all about. And he—I can't tell you how many doctors from all other parts of the U.S. that have reached out to me personally and go: "Hey, do you think Dr. Franco would let me market the skinny shot in my area?" And Dr. Franco is a wonderful human being, and he will, and they are. But again, this is just starting, and there is a link that I can send you that you can watch. It is his webinar.
It's an hour out of your time, but it has so much information in there. One of the doctors, at the end, there was question and answer, and he asked Dr. Franco, he says: "Do you think this will mean that there'll be less liposuctions being done?" Dr. Franco chuckled before he answered, and he says: "No, just the opposite." Because there is this perception that liposuction is like a kind of a weight loss thing.
Yeah.
It has nothing to do with weight loss. It has to do with being able to contour the body, and the problem with the way we lose weight is, we lose it in areas that we might not want to lose it, and we don't lose it in areas that we might want to lose it in.
Yeah.
And so that's where fat transfer, body contouring, still is going to come into play, and he's seeing that in his practice right now.
How many of those 1,500 he saw in July did he end up tightening their skin?
To those, none, because when you listen to him, there's a lag.
Okay.
I f you were on the drug for six months, let's say, he's gonna make you wait six months to make sure that you keep the weight off before you do it. All of these patients will be coming.
Yeah.
They're just not here yet.
Yeah. That was what was interesting about the aesthetic day, is the woman that was having an AirSculpt done was already real thin.
Yeah.
S he was still having it done just because she wanted to move some of the cells to other areas, so.
That's exactly... Most people that have lipo and Renuvion are thin.
Right.
They just wanna make sure that they're better. In fact, I don't know, people might not know this, but typically, most doctors, if your BMI is over 30 and you want a body contouring procedure, they'll typically tell you to go lose weight and then come back.
Yeah.
So liposuction really is a procedure for thin people.
Yeah. Got it. All right, and just about a minute left.
Yeah.
We'll talk about finances real quick.
Okay.
Just talk about, you know, the... You're not, you're not one of these companies that's gonna burn a ton of cash, but you are burning right now.
Yeah.
Talk about, you know, the profitability outlook for the business and the capital availability.
F ortunately, we just did a deal with Perceptive. They're a new partner of ours. We did a $45 million facility. We took $37.5 million of that, and we had another facility that we paid back. But we should end the year with about $40 million in cash. We have the ability from the Perceptive deal to take another $7.5 million in 2024. So we think we've got plenty of capital to be able to get to profitability, and getting to profitability is important for us.
Got it. Okay. All right, as I look at the clock, I think we're just about out of time-
Okay
... so we'll go and wrap up there. Thanks, Charlie. Appreciate it.