Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2019 Earnings Conference Call for Apyx Medical Corporation. At this time, all participants have been placed in a listen-only mode. At the end of the company’s prepared remarks, we will conduct a question-and-answer session. Please note that this conference call is being recorded and that the recording will be available on the company’s website for replay shortly. 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 those identified in the risk factors section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, as well as our most recent 10-Q filing. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles, or GAAP. We generally refer to 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. I would now like to turn the call over to Mr. Charlie Goodwin, Apyx Medical’s, President and Chief Executive Officer. Thank you. Please go ahead.

Welcome, everyone, to our fourth quarter and fiscal year 2019 earnings call. I’m joined on this afternoon’s call by our Chief Financial Officer, Tara Semb. Let me provide you with a quick agenda for today’s call. I’ll begin with a high-level overview of our financial and operational performance in 2019. I’ll then discuss our fourth quarter revenue performance and highlight some of our recent operational accomplishments. Tara will then provide you with a detailed review of our financial results for the fourth quarter and fiscal year 2019, as well as our guidance for first quarter 2020, which we introduced in our earnings press release this afternoon. I’ll then share some additional closing remarks about our prospects and priorities for 2020, including the four strategic initiatives we are pursuing as part of our long-term growth strategy, as well as our current thoughts on the potential business and procedure-related disruption as a result of the crisis caused by the spread of the coronavirus, COVID-19. And then, we will open the call for questions. With that, let’s get started. 2019 was a year of important progress for Apyx Medical. We are incredibly pleased to deliver total revenue growth of 69% year-over-year in 2019, exceeding our initial financial year – our fiscal year guidance range of 52% to 58% growth year-over-year. Our exceptional performance was primarily driven by Advanced Energy revenue growth of 73% year-over-year in 2019, reflecting the continued success of our commercial strategy to drive growth by increasing the adoption of our Renuvion generators and the utilization of our handpieces in the U.S. cosmetic surgery market. In markets outside the U.S., we are focused on fulfilling demand from our distributor partners in existing markets and securing product registrations and new distributor partnerships. We are very proud of the commercial success we had…

Thanks, Charlie. I want to start by providing an overview of the restatements and revisions that we are making to our historical financials, as announced in a separate press released after market close today and as detailed in the 8-K filed with the SEC this afternoon. Apyx Medical is committed to upholding the highest standards of financial reporting. Throughout 2019, we have been working diligently to remediate material weaknesses and internal controls identified in 2018. As discussed on our third quarter earnings call, we identified two items during the preparation of our form 10-Q filing for the period ended September 30, 2019. The first item related to the treatment of certain components included in the calculation of our state – stock-based compensation expense. The second item related to the accounting for predevelopment activities on certain OEM contracts. All revisions related to these items were incorporated into our Q3 – three and nine months results and were detailed in separate tables in our form 10Q for the period ending September 30, 2019. During the preparation of our 10-K for fiscal year 2019, we identified two new items, which we described in a separate press release and detailed in our reconciliation table, both of which were filed in an 8-K this afternoon. First, we reevaluated our subsidiary consolidation process and discovered an error in the accounting for the elimination of markup on intercompany sales. This resulted in the company including, intercompany markup in cost of sales and a corresponding understatement of selling, general and administrative expenses. Second, we identified errors in tax accounting for employee income and payroll taxes related to the exercise of stock options in 2018 and 2019. Due to the aggregated impact of the errors identified, our audit committed – committee concluded after consulting with management and our prior…

Thanks, Tara. In 2020, we expect to build on the progress we have made in this past year. We will continue to execute our commercial strategy and invest strategically to expand our share of the 1.5 billion U.S. cosmetic surgery market and will capitalize on the strong international demand for our products as well. In addition to executing our commercial strategy, we will continue to pursue our four strategic initiatives that we started in 2019 to enhance the foundation for long-term growth. I’ll now take a minute to review these four initiatives and provide you an update on specific priorities for each in 2020. Number one, the pursuit of specific clinical indications that will enable us to market and sell Renuvion for new targeted procedures. Building on our progress this past year in 2020, we are focused on conducting our two U.S. IDE clinical studies in dermal resurfacing and skin laxity to support the pursuit of clinical indications for these two target procedures. The second is to secure new clinical evidence, demonstrating the safety and efficacy of our Renuvion technology. 2019 was an important year for expanding our clinical evidence, including a peer-reviewed publication in the Journal of Plastic and Reconstructive Surgery, Global Open; a peer-reviewed publication; lasers in surgery and medicine; four abstracts and one poster presented at the Medical meetings; and a book chapter, The Art of Body Contouring. During 2020, we expect to expand our portfolio of clinical evidence with additional publications and presentations this year. We have submitted one study for publication already and expect to submit at least three more clinical manuscripts for publication in 2020. The third is enhance our physician and practice support for our cosmetic surgery customers. In 2019, our sales and marketing team did an excellent job of providing support and…

Thank you. [Operator Instructions] And our first question will come from Matt Hewitt with Craig-Hallum. Please state your question.

Good afternoon, and thank you for taking our questions. Maybe the first one, and you provided a little bit of color on the impact that you’re seeing from COVID-19. But I’m just wondering, as you’re talking to some of your surgeon and physician, customers and partners, what are you hearing from them, or what are they seeing from a demand – a patient demand standpoint? How has that changed over the last couple of weeks? Any additional color on that front would be helpful?

Yes. Unfortunately, at this point in time, Matt, it’s all over the map. Some doctors are not changing really anything. And a couple of them we just found out today have closed their practice until a couple of them have closed their practice where they’re not going to open for – to the end of the month, at least. So Europe has been, obviously, a little bit more hampered by that in the recent thing, but it really is area-by-area, state-by-state, country-by-country, it’s all over the place.

Okay. And then I guess, my follow-up. How – you’re working on two clinical trials right now. We’re hearing from others that there may be some disruption to the clinical trial processes. Are you seeing that? Are you – or is this – are you able to kind of get the work done, meet the patients and should need to meet to get those trials completed? Thank you.

Yes. At this point in time, we’re not seeing anything changed with that. But just like everything else that could change tomorrow and we could have a slowdown there potentially. I – we did start enrollment in 2019 in December and we’re working through it. But just like everything else with this, it’s fluid.

Understood. Thank you.

Thank you.

Our next question comes from Matthew O’Brien with Piper Jaffray. Please state your question. Matthew O’Brien: Good afternoon. Thanks for taking the questions. Just to follow-up on Math’s question. As you think about the guidance you provided here for Q1, you’re – I think you’re probably on track to do something more in the mid-7s, I would say, as far as revenue goes for the quarter, you’re now guiding to kind of $5 million to $5.5 million, so $5.2-ish million at the midpoint, $5.3 million. Does that essentially mean that your business has almost gone to zero here in March? And what can – if that math is anywhere close to accurate, what should we think about in the April/May timeframe as we’re working through COVID?

Well, so the first thing is, is that we’re very confident in the guidance that we gave in – for Q1 and it’s obviously a very fluid situation. And so the reason that we limited to the first quarter is, we can’t really speak to April and May and going forward, because it’s pretty tough to predict right now. It has not dried up. Our business has not went to zero in March. In some countries, it’s significantly decreased. But we haven’t seen that yet in the United States. Matthew O’Brien: Okay. And then maybe a question for Tara. Just on the spending side of things, obviously, you’re going to keep the sales force in place. You’re going to continue to spend on the R&D side with these studies. How do we think about – but the EBITDA loss for the quarter in Q1, not surprisingly, is much higher than we had been modeling. So how do we think about your leverage points on the spending side? And then I know you’ve got $58 million issued in cash coming out of last year, but how do we think about the burn rate here in 2020, and more specifically, on the need for additional capital going forward? Thank you.

Well, and – as far as the burn rate, I mean, we definitely, you know, feel confident that we’ll – the cash that we have will carry us into multi years. Q1 is generally higher than other quarters as far as OpEx. We have insurance premium renewals, a lot of trade shows, which – so that showed an increase of $1.8 million. We’re – we’ve started spending on the R&D clinical trials. But obviously, we’ll continue to monitor the situation and make adjustments to discretionary spending on an ongoing basis in response to what’s happening with sales. Matthew O’Brien: Okay. So burn rates started – just follow-up there, but just the burn rate something in the $20 million to $25 million range this year seems about, right?

We’re – yes, we’re not giving guidance for the whole year. And as Tara mentioned, the first quarter is always higher. And remember this, too, is that a lot of the events we had been planning to go on the first quarter, we already paid to. So if they’re cancelled now in the second and third quarter, obviously, we’re not spending the money for there. So you can think of it being less, but we’re only giving guidance through Q1. Matthew O’Brien: That’s very helpful. Thanks so much.

Thank you. Our next question comes from Dave Ciruli with JMP Securities. Please state your question.

Great, thanks. So just wondering if you could possibly provide us a little more color in terms of what you’re seeing from the capital standpoint and then maybe utilization, I appreciate what you said about March? And then the follow-up comment on the U.S., not at zero, but, I mean, are we assuming that you won’t sell capital until this goes away? Or is it both? Or I guess I’d like some color if you could give it on those two components?

Yes. No, I don’t think so. I think in certain areas of the country and certain countries, things are fairly standard and back to business – and people are still doing business. I think the thing that could affect in the U.S. is, if we had a total lockdown, like they did in China, where everybody can’t do anything, we still have a lot of customers today that are doing cases as we sit here today, and we still have people that are evaluating the technology. So it’s not an all or nothing. It’s based on the country. It’s based on the situation there. It’s based on what’s going on in each individual region. So it’s – that’s what makes it tough is every minute we get a different thing that comes up where they’re closing restaurants and bars in New York City and that then affects New York City. But Topeka, Kansas, there’s nothing that’s affected there right now. So it’s all over.

And then in terms of patients, I guess, like actual folks going in for the procedures, I imagine it’s too early to kind of know exactly what’s happening. But it sounds like some of your – maybe some of your good legacy accounts are not impacted, so they’re still seeing folks. But I guess, any thoughts on, just plastic surgery generally in its elective nature, sort of what you kind of anticipate if you have a thought on sort of the actual patients, what has happened? What it could look like? Thank you.

Yes. Again, I think that comes up to the individual patient. I know it’s hard to make broad brush comments about that. But personally, if I had 14 days to where I had to stay home and I need to have a little work done, that might be the perfect time to do it. So I think it’s just too dynamic to do that. I mean, hospitals right now are canceling all elective procedures that are happening in the United States. Fortunately, we’re not part of that, because most – almost all of our procedures are done in the doctor’s office or in their surgery center. So it’s up to them whether they want to keep working, and then it’s up to the individual patients in that area, whether they’re going to seek a treatment at that point in time.

Thank you.

Yep.

Thank you. [Operator Instructions] Our next question comes from Kyle Bauser with Dougherty. Please state your question.

Hi, Charlie and Tara, good evening. Thanks for taking the questions.

Hi, Kyle.

Maybe I’ll start on the trial. So how many patients have enrolled in the skin laxity trial? When might you be able to have the, I think, one-month follow-up safety data submitted to the FDA for that first phase? And then kind of same question for the dermal resurfacing. How’s that trial progressing in terms of enrollment?

Yes. Kyle, we’re not going to get into the practice of what we did last time with give kind of things. We’ll let you know when the enrollment is finished. And when we get something back from the FDA, we’ll let you know when we get to move forward with that, and we’ll give updates on a broader scale like that. The thing that you do need to know and that everybody needs to know is, obviously, these are incredibly important to us, and they’re a major focus for us moving forward. And so we will keep doing that, but we’re just not going to give the updates of where exactly we are until things are – until we start to move forward. And as we stated before, we believe that both of these studies are 2021 events and not 2020 events anyway.

Okay. So is it safe to say you do a press release, once the FDA gives you the nod to move into Phase II of the skin laxity trial?

Correct.

Okay. And then just on that new handpiece that was cleared back in October with a smaller diameter and bullet shaped tip. From our checks, it’s actually been quite a big enhancement and has allowed for the operators to be a bit more aggressive, particularly in neck procedures and around the jaw line. Can you speak to about what you’re hearing in the field? And if you think this is something that could actually drive utilization, or are these just kind of nice features that are nice to have and maybe won’t necessarily drive volumes?

No, first thing I like, Kyle, that you always do your homework, that is very good. But yes, we do expect it to drive utilization. And you did talk specifically about the neck and the face. And the problem with the other device was its size and it has limited surgeons to do certain things. And so, the great thing is, we had always talked about the other handpieces being a little bit of a headwind and that they were laparoscopic surgical devices. And these were designed for plastic surgeons and cosmetic surgeons with all of their input. And so we actually gave them a tool that will help do that. And we really think it will help us drive utilization over the long run. There’s no question about it. So I – 100% agree with that statement.

All right. That’s great. Thanks for taking the questions.

Thanks, Kyle.

Thank you. That does conclude our conference for today. Thank you all for your participation.