Apyx Medical(US:APYX)2024-11-08 20:38Workforce Reduction and Cost Savings - The company reduced its US workforce by nearly 25% and expects annualized future cost savings of approximately $4.3 million from this reduction[70]. - The company plans to reduce annual operating expenses below $40 million in 2025 through identified cost savings[71]. - The company incurred pre-tax charges of approximately $0.6 million in the fourth quarter of 2024 due to the organizational changes[70]. Revenue and Sales Performance - Total revenue decreased by 4.1%, or approximately $0.5 million, for the three months ended September 30, 2024, compared to the same period in 2023[75]. - Advanced Energy segment sales decreased by 15.2%, or approximately $4.7 million, for the nine months ended September 30, 2024, compared to the same period in 2023[76]. - The OEM segment sales increased by 14.5%, or approximately $0.9 million, for the nine months ended September 30, 2024, compared to the same period in 2023[76]. - International sales represented approximately 32.2% of total revenues for the three months ended September 30, 2024, compared to 27.8% for the same period in the prior year[77]. Profitability and Expenses - Gross profit for the three months ended September 30, 2024, decreased 12.8% to $6.95 million, with a gross margin of 60.5%[79]. - Research and development expenses decreased 18.9% for the three months ended September 30, 2024, primarily due to lower compensation and benefits costs[81]. - Research and development expenses decreased by 1.8% for the nine months ended September 30, 2024, primarily due to lower compensation and benefits costs of $0.1 million[82]. - Professional services expense decreased by 10.0% for the three months ended September 30, 2024, primarily due to decreases in accounting and audit fees, board of director's stock-based compensation, and recruiting expenses totaling $0.4 million[82]. - Salaries and related expenses decreased by 22.6% for the three months ended September 30, 2024, primarily due to a decrease in bonus expense of $0.8 million[85]. - Selling, general and administrative (SG&A) expenses decreased by 11.4% for the three months ended September 30, 2024, primarily due to decreases in commissions and advertising expenses totaling $0.4 million[87]. Cash Flow and Financing - Net cash used in operating activities for the nine months ended September 30, 2024, was approximately $15.1 million, primarily funding a loss from operations of $15.8 million[97]. - At September 30, 2024, the company had approximately $28.0 million in cash and cash equivalents, down from approximately $43.7 million at December 31, 2023[96]. - The company plans to continue funding operations through existing cash, product sales, and potentially additional equity or debt financing, but there is uncertainty regarding the availability of such financing[100]. - The company closed a $7.0 million registered direct offering, issuing 3,000,000 shares of common stock and 2,934,690 prefunded warrants with an exercise price of $0.001 per share[105]. - The company issued 150,000 shares of common stock in connection with the amendment to the Perceptive Credit Agreement[103]. Financial Covenants and Agreements - The amendment to the Perceptive Credit Agreement reduced the financial covenant trailing twelve-month revenue targets for the Advanced Energy segment to $34.4 million for 2024, $37.0 million for 2025, $52.4 million for 2026, and $60.3 million for 2027[102]. - A maximum operating expense financial covenant was introduced with full year targets of $40.0 million for 2025 and $45.0 million for 2026[102]. - As of September 30, 2024, the company was in compliance with the financial covenants of the Perceptive Credit Agreement, as amended[102]. Inventory and Receivables Management - The company maintains a reserve for uncollectible accounts receivable, analyzing historical bad debt experience and the composition of outstanding receivables[111]. - A reserve for excess and obsolete inventory is maintained, reflecting the potential inability to sell products at prices exceeding current carrying costs[112]. - The company recorded a valuation allowance on net deferred tax assets due to historical losses and expectations of continued losses in the near future[115]. Market Conditions and Challenges - Inflation and global supply chain instability are being addressed through initiatives such as finding alternative suppliers and streamlining the supplier network[117]. Interest Income and Expense - Interest income increased by approximately $0.1 million and $0.8 million for the three and nine months ended September 30, 2024, respectively, due to a higher average balance in investments[91]. - Interest expense increased by approximately $0.8 million and $2.9 million for the three and nine months ended September 30, 2024, respectively, due to cash and noncash interest expense on the Perceptive Credit Agreement[92]. Other Financial Highlights - Gain on sale-leaseback for the nine months ended September 30, 2023, was approximately $2.7 million, resulting from the sale and leaseback of the Clearwater, FL facility[89]. - Purchase commitments totaled approximately $2.7 million, expected to be purchased within the next twelve months[105].