Please standby. Good morning, ladies, and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2021 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'd 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 to be filed with the Securities and Exchange Commission. Our most recent 10-Q filing, and the company's other filings with the Securities and Exchange Commission. 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 because 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. Charles Goodwin, Apyx Medical's President and Chief Executive Officer. Please go ahead, sir.

Thanks, Operator. Good morning, everyone, and welcome to our fourth quarter and fiscal year earnings call. I am joined on this morning's call by our Chief Financial Officer, Tara Semb. Turning to a quick agenda of what we intend to cover today. I'll begin by discussing our revenue results for the fourth quarter and the key drivers of our performance, followed by an overview of the financial and operational progress that our team made in 2021. I'll then provide some additional commentary on the recent FDA announcement related to our Advanced Energy products. Tara will cover the fourth quarter financial results in detail and review our financial guidance for 2022, which we introduced in our earnings press release this morning. Following Tara's commentary, I'll share some thoughts on our outlook and key areas of focus for 2022 before we open the call for questions. With that, let's get started with a review of our fourth quarter revenue results. We're very proud to report that total revenue of a 100 and -- excuse me, of $16.8 million in the fourth quarter of 2021, representing 47% growth year-over-year. Our total revenue growth was driven by Advanced Energy sales that significantly outceeded -- exceeded our expectations, increasing 52% year-over-year to $15 million, while the OEM sales increased 13% year-over-year to $1.8 million. Looking at our Advanced Energy results more closely, our outperformance in the fourth quarter was fueled by stronger-than-anticipated sales of both our Advanced Energy generators and hand pieces in the U.S., reflecting strong new surgeon customer adoption and strong utilization by existing surgeon customers. Specifically, we saw Advanced Energy sales in the United States increase by more than 100% year-over-year with the U.S. generator and handpiece sales growth in excess of 120% and 90% year-over-year respectively. From an execution standpoint, our…

Thanks, Charlie. And good morning, everyone. I will begin my review of our financial performance at the gross profit line since Charlie covered our revenue results. Gross profit for the fourth quarter of 2021 increased $4.4 million or 58% year-over-year to $12.2 million. Gross profit margin was 72% compared to 67% in the prior-year period and represented a record gross margin for the company. The increase in gross margin in Q4 was driven by sales mix between segments, improved handpiece margins due to continued manufacturing efficiency initiatives, the introduction of newer product models as we obtain registration in various markets, and higher production volumes. The year-over-year increase in gross margin this quarter was partially offset by higher inbound shipping costs related to the expedited sourcing of key component raw material inventories. Operating expenses increased $4.1 million or 42% year-over-year to $13.8 million. The increase in operating expenses year-over-year was driven by a $3 million increase in selling, general, and administrative expenses, $8.7 million increase in professional services, and $0.4 million increase in salaries and related costs. Loss from operations for the fourth quarter of 2021 decreased $0.4 million or 18% year-over-year to $1.7 million. We delivered strong operating leverage in Q4, driven by solid operating expense management, with our only variable commission expenses coming in higher in Q4, as a result of the better-than-expected sales results in the period. Total other loss net was $0.2 million compared to total other income of $0.1 million last year. Income tax expense was $0.1 million compared to an income tax benefit of $0.4 million in the fourth quarter of 2020. Net loss attributable to stockholders was $2 million or $0.06 per share, compared to $1.5 million or 4% per share for the fourth quarter of 2020. Adjusted EBITDA loss for the fourth quarter…

Thanks, Tara. Turning to our full-year 2022 revenue expectations for our Advanced Energy business. Our guidance calls for Advanced Energy revenue growth of 1% to 30% year-over-year with Advanced Energy sales growth at the midpoint of approximately 14% in the U.S, and approximately 19% internationally. Our full-year 2022 guidance range reflects our expectations for the continued utilization and adoption of our technology, as well as the potential impacts related to the FDA safety communication. Let me provide you with some additional thoughts on our supporting assumptions to help you evaluate our growth for the full year. First, our full-year revenue guidance assumes that our Advanced Energy business hand-piece revenue will represent the largest driver of our total Advanced Energy revenue growth again in 2022, reflecting the strong utilization-based demand we expect for our Renuvion hand-pieces. The high end of our full-year revenue guidance represents our original growth expectations for 2022, based on a continuation of the growth drivers over the last few years. Specifically, strong utilization and adoption by existing and new customers as we continue to increase our share of the over $3 billion global cosmetic surgery market. Importantly, the high end of our guidance range also assumes contributions from the initial commercial launches for new clinical indications in dermal and skin laxity categories, based on our current target of receiving these FDA clearances by the end of the third quarter. While the 30% growth implied by the high end of our guidance range reflects the continuation of above market growth for our Advanced Energy business in 2022, the low end of our 2022 revenue outlook reflects potential impacts on new customer adoption and procedure-related demand for handpieces as a result of the recent FDA safety communication. Specifically, the low end of our 2022 total revenue outlook assumes our…

[Operator Instructions] Our first question today is coming from Matthew Hewitt from Craig-Hallum. Your line is now live.

Good morning and congratulations on the strong finish to fiscal '21 and thank you for the incremental details regarding the safety communication. I guess on that front, Charlie, in your prepared remarks, you mentioned that you have reached out and spoken with many of your existing customers. And I'm curious, what are you hearing from them? What are they saying regarding this communication? And does that give you any sense on how things could turn out here over the very near-term?

Yes. Thanks, Matt. We have, obviously, as an organization, are spending time appropriately, reaching out and talking to all our stakeholders, all our customers, about the safety communication. And, obviously, it was a surprise to them just like it was to us. And for the most part, the response has been very supportive, very dogmatic, and very much -- very positive. But let's face it anytime something like this happens, there's a natural reaction. And so fortunately, we have our users ' meeting here at the end of the month where we will have 200 of our users together to talk about all of this. And right now, the team is appropriately talking to and taking care of our existing customers, but the feedback so far has been very positive and very supportive.

That's great. And then I guess as a follow-up, regarding the 510(k) for dermal resurfacing, I guess to clarify, I think you said that you're anticipating approvals by the end of third quarter, at least that's what would get you to the upper end of your guidance range. So maybe some contribution from dermal resurfacing and skin tightening or skin laxity in the fourth quarter; is that correct? So dermal resurfacing might take a couple of quarters longer?

We obviously don't know the timing and aren't in control of the timing. And so dermal resurfacing since it's in, could potentially come earlier, but from a conservative point of view, we just put that both would come at the end of the third quarter. And as you -- just to make sure that everybody's clear because sometimes we do confuse the two, we have two five 10-Ks that are currently in review for the FDA right now for dermal resurfacing. And at the end of this month, March, we will be submitting our data for our skin laxity from our IDE study for that indication. And so, we just put as a placeholder in there for the end of the third quarter, that's correct for both.

Got it. Thank you very much.

Thank you, guys. [Operator Instructions] Our next question is coming from Matt O'Brien from Piper Sandler. Your line is now live. Matthew O’Brien: Good morning. Thanks for taking the questions. Charlie, just to continue down this path on the communication, what are the next steps from here with the agency? And then how long do you think it's going to take to get through all of your users to communicate with them and make them feel comfortable with where things are at and then get on to getting the sales force back to selling into potential new users?

So, the first thing is right now we're engaged with the Agency on two different fronts, right? The post-market team is the team that put out the safety notification and we have reached out to them. They -- that we want a meeting with them, and they have accepted that, we were trying to work together right now to schedule a meeting date. So that is on the post-market side of things. On the pre -market side of things, we remain engaged with the FDA for our 510(k) submissions, both dermal submissions at this point, and then obviously at the end of this month, we will be submitting the skin laxity 510(k), and so we will be engaged with the pre -market team on that. As far as how long is it going to take for our team to talk to all our users and get them comfortable and make sure that the people that have supported us all along and at the very beginning, the early adopters are comfortable, we will actually take as much time as we need with them, they have been incredibly important to this company and we're very grateful to have them and so quite frankly I am willing to take as much time as they need to get them comfortable, to get them -- to make sure that they're comfortable with our technology and when that has happened, then we will continue on with our selling efforts and doing that. But appropriately right now, we're doing exactly what -- the team is doing, exactly what they should be doing, is making sure that everybody is comfortable with everything. Matthew O’Brien: Okay. And then just wanted to talk a little bit about the sequential commentary from Q4 to Q1. Q4 was a monster in Advanced Energy. And then it is a meaningful step-down, which is implied in the guidance for Advanced Energy into Q1. I don't know if there was some pull forward in Q4 that you saw, maybe on the generator side, but it's a meaningful step-down versus what you've seen over the last several years in Advanced Energy, is there something else going on there, outside of the communication, which again, was just announced a few days ago?

Yes. So, remember, Q1 is always our lowest quarter of the year and it's usually the lowest quarter of the year from -- because of capital and the fourth quarter is always the highest and it's usually the highest because of capital. And so, there's always a seasonality in this business for that. And so that is one of the reasons that you see that. But even if you look at our Q1 total growth, our Q1 total growth still for Advanced Energy and the guidance that we have is anywhere from 18% to 36% growth. So that growth rate is still there, it's just from a numbers point of view, Q1 is always a lower number. Matthew O’Brien: I'm sorry, just to put a little bit finer point on it. And I know, with Omicron and COVID, and everything your numbers are the most pristine, but you're down about 35% [Indiscernible]. And Advanced Energy this year, last year you were down about 23%. And I think in previous years it's been flatten down a little bit. So again, it's just a bigger step up in the sequential deceleration, if that makes any sense.

Yes. Well, I think the one thing that could help with that is the low end of our guidance represented the amount of business that we had as of yesterday. So, it doesn't -- the low-end assumes that, and just in the interest of transparency. So that's why the low end is where it is. Matthew O’Brien: Okay. Makes sense. Thank you.

Thank you.

Thank you. Our next question today is coming from Russell Cleveland, from RENN Capital. Your line is now live.

Hello, big question on the FDA. The procedure for removing this would be what? Is this -- the bureaucracy rarely changes things. So, are we going to have a near-term meeting and request that they change that or what's our procedure here with the FDA?

Our procedure right now with the FDA is to obviously we've requested a meeting and to have that meeting and we want to make sure that when they issued this warning that they had not even reviewed our data. So, we want to make sure that they review the data, that they're comfortable with the data. What the agency does after that, I can't speak to because I don't know what they would or what not do. Our focus is having the meeting, making sure they review the data, so they know exactly what's going on and they know how important patient safety is to us as an organization. So that's the goal of that meeting. And then the only other thing that we can control is the fact that we stay vigilant and engaged with the pre -market team to get our clearances. And so those are the two things that we control and what we're focused on right now.

Have you set a date with the FDA for a meeting?

We are working with them to get a date that both parties can meet. Yes, we're in discussions for a date, but there is not a date yet.

Okay. Well, our alternative is to go to court or what's our alternative on this? It's bizarre for the FDA to do this without more data and it's very, very bizarre. That's what I would call it. So, what our -- what legal remedies do we have here?

Our focus is on getting our 510-Ks and working with the FDA. And I don't know that at a legal battle with the FDA is in our best interest since we hope to be working with them for many, many years to come. And so, we will look at everything, but I don't know that a legal battle is where we want to be focused on at this point in time.

Yeah, of course not. But they've done enormous damage and have to be responsible for this without having all the data and not meeting with the company about this. So, it seems as though we need to take some kind of action here that's different because you just can't do something like this to help ruin the company's stock and everything without consequences. So, I don't know whether the bureaucrats are not thinking or what, but it's very bizarre. And the FDA makes mistakes. And the question is, what can we do? And we're going to have a meeting with them, but after the meeting, they rarely want to admit a mistake was made. So, what's our -- give me a little more color on how you see this thing being resolved.

Yeah, I don't know that I can give you any more color at this point in time because until we meet with them and talk to them, we won't know what's going on. And so, for us, it's a matter of just focusing on the meeting and focusing on our 510(k) s right now and we'll see what happens in the future.

Okay. Will you attend the meeting personally?

Of course.

Okay. Thanks, I will get past this, everything does pass. Thanks so much for taking my question.

Thanks, Russ.

Thank you. Our next question today is coming from David Turkaly from JMP Securities. Your line is now live.

Great, thanks. Charlie, to your knowledge, to the pre and post market teams at the FDA, did they communicate at all?

I'm sure that they do, but there is a pretty good dividing line between the two of them, but I'm sure that they do talk at some point, sure.

So, there's a chance when you meet with the post-market folks, when you have that date, you have that live meeting, I'm assuming it's probably going to be live that anything that comes out of that could impact the pre -market side, I mean, if they agree that the profile is good or no?

I don't think that that's necessarily the case. I think they look at things differently, and the fact that we have data to support our 510(k) s obviously really helps too, because remember, we did the IDE studies for both the dermal and for the skin laxity. And so, the pre -market team has data to use from those studies to evaluate the safety and efficacy of new beyond for those procedures. Then as far as the data for the dermal resurfacing, remember, because this is taking so long, we've published that data. And so, everybody has access to that data.

The timing is -- it's been a while. I guess when you look at precedent cases where a device was or warning was issued like this, to your knowledge, are there any legal issues with either hospital administrators or somebody else reading that and saying, hey, do not use this, where they might make the decision and it may not go down to the customers, the surgeons directly, or is that not even a concern?

Well, I think that the issue is, is every time that you go in for a procedure as a customer, you should be told what the risks are of the technologies that you're using. And all the things that are in the FDA warning are also in our labeling. So, there's nothing in there that they said that isn't already in our labeling. And the fact now that doctors actually know the incident rate of those events is more information than they had before. Quite frankly, when they're talking to a patient, they're always going over the risks of the procedure of the technology, but now they can actually give the patient the rate of occurrence of the 0.4% in 2021 and have the patient actually, in a lot of cases, make a more informed consent than they could have before when they didn't know what the data actually was. So in some cases, they actually have more data to use and are able to have a better conversation with the patient for the patient to make a more informed consent choice of whether they would want to use or do something.

And I guess --

[Indiscernible]

Go ahead.

No, go ahead.

I just wanted to say the specific language that they used, I'm just curious you mentioned the 32 MDRs. And we tried to look at a bunch of them and it seemed like pretty standard stuff, but the FDA used language like life-threatening. Of those 32, I think we found one that I guess could qualify as such. But do you have any -- where do they come from with that and do you have any numbers surrounding what you would consider to be life threatening MDRs of the 32? I can't imagine it's high, just curious if you -- why did they use that?

Yeah. Well, I think just to your point is that they found one where the patient was admitted to the ICU and that was the one that you were looking at and so quite honestly, that is life-threatening. Now, in that specific case, it was determined that Renuvion was not the cause of that. But remember, we only have 30 days to do all the investigation from when -- from the time that the incidence starts to file an MDR. So, there are times that we will file an MDR before we know exactly if it was Renuvion or not. In this specific case, it wasn't, and when we talk to the FDA and give them the details, we will talk to them about that. But that is if -- there was one, you are correct. That was the one out of 32. Remember too, as I just said in the transcript today, 14 of the 32 had not been trained by our nursing staff yet on the safe and effective use guidelines. And so quite frankly, if you take those 14 out of the 32, now our incident rate is 0.02%. And so now you're starting to get down to -- even 0.4 is incredibly safe, 0.02 is amazing. And so, we were very much surprised by this because this has been a major focus for us as an organization and the safety, and over the five years you have seen our rates of MDRs decline. And the reason that our rates of MDRs have been declining so much is because of the wonderful work that our clinical nurses have been doing all over the world teaching the safe and effective use guidelines that were developed by our wonderful medical advisory board. So this was a surprise to us because it's a focus of us too, and it's something that we laser focused on and always trying to improve and all this does is give us a chance to now retell everybody again, all the things that we're doing, showing them all the things that we're doing, and we will deal with the agency separately. The important thing right now for our customers is that we're making sure that they're comfortable and making sure that they understand exactly the risks when using our technology on their patients.

Thank you very much.

Thank you. Our next question is a follow-up from Matthew Hewitt from Craig-Hallum. Your line is now live.

Thank you. I just wanted to circle back on gross margins quickly. The guidance for this year is 62% to 67% down year-on-year. I'm curious, how much of that a function of inflationary pressures versus maybe a little bit of a shift between U.S. versus OUS for the Advanced Energy products? And then obviously you've got some OEM contribution or impact there as well, but maybe if you could help us understand that what's -- where the impact is really coming from. Thank you.

Well, I would say first and foremost, it is driven by the inflation, the inflationary environment that we're seeing along with all manufacturers. We're not quantifying that specifically, but between that and the fact that we're winding down our core manufacturing products to symmetry, on the high-end that's about 200 basis points and then on the low end it's definitely mix with AE revenue and then mix of product within Advanced Energy.

Got it. All right. Thank you.

Thank you. We're currently showing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.