Please stand by. Hello and welcome, ladies and gentlemen to Fourth Quarter and Fiscal Year 2022 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 without limitation to those identified in the risk factors section of our most recent Annual Report on Form 10-K 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 maybe 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. Please go ahead, sir.

Thanks, operator. Welcome everyone to our fourth quarter and fiscal year 2022 earnings call. I am joined on today’s call by our Chief Financial Officer, Tara Semb. Turning to a quick agenda of what we intend to cover today, I will start by reviewing our fourth quarter revenue results and the factors that contributed to our performance. Then I will provide you with an update of our operational progress during the fourth quarter and in recent months. Tara will then discuss our fourth quarter financial results in detail, as well as our financial guidance for 2023, which we introduced in our earnings release today. I will conclude with some thoughts on our outlook and key areas of focus in 2023 before we open the call for Q&A. Let’s get started with a review of our fourth quarter revenue results. Our total revenue in the fourth quarter decreased 25% year-over-year to $12.6 million. These results were approximately $300,000 below the low end of our guidance range we provided on our November earnings call. Our total revenue performance was driven by softer than anticipated Advanced Energy sales, which decreased 30% year-over-year to $10.5 million and offset partially by better than expected OEM sales, which increased 15% year-over-year to $2.1 million. Looking at the performance in our Advanced Energy business in more detail, global sales of our Advanced Energy products continued to be impacted by business interruption related to the medical safety device communication, which was posted by the FDA in March of 2022. While we anticipated continued disruption throughout the fourth quarter, the level of impact was higher than we anticipated, most notably, as it relates to global sales of our Advanced Energy Generators. In the fourth quarter, global generator sales decreased nearly 50% year-over-year driven by declines both domestically and internationally.…

Thanks, Charlie. 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 2022 decreased, $3.9 million or 32% year-over-year to $8.2 million. Gross profit margin was 65.3%, compared to 72.2% in the prior year period. The decrease in our gross margin was driven primarily by changes in the sales mix between our two segments, product mix within our Advanced Energy segment and higher cost to manufacture inventory as we continued to experience increased material and shipping costs. These headwinds to our gross margin performance were partially offset by geographic mix within our Advanced Energy segment with domestic sales comprising a higher percentage of total sales and by the increased mix of newer product models. Operating expenses increased $0.3 million or 2% year-over-year to $14.2 million. The increase in operating expenses year-over-year was driven by professional services expenses and research and development expenses, which each increased by $0.3 million. These increases were partially offset by a $0.2 million decrease in SG&A and a $0.1 million decrease in salaries and related costs. Our operating expenses came in approximately $0.7 million above what our low end of guidance had assumed, driven by higher than anticipated SG&A and Professional Service expenses related to higher insurance and legal expenses and higher consulting fees respectively. Loss from our operations for the fourth quarter of 2022 increased $4.2 million or 251% year-over-year to $5.9 million. Total other income that was $19,000 dollars, compared to total other expense of $0.2 million in the fourth quarter of 2021. Income tax expense was $0.2 million, compared to $0.1 million in the fourth quarter of 2021. Net loss attributable to stockholders was $6 million or $0.17 per share, compared to $2 million or $0.06…

Thanks Tara. As mentioned our 2023 revenue guidance assumes total revenue growth of at least 30% year-over-year to $58 million, driven primarily by Advanced Energy growth of at least 36% year-over-year to $50 million. In 2023, the low end of our revenue guidance assumes improving year-over-year sales results as we progress through the year with the stronger Advanced Energy year-over-year growth trends in the second half versus growth trends in the first half. We expect strong contributions to growth from improving generator sales, most notably in the U.S. as we move through the year. We also expect improving handpiece sales trends in both the U.S. and OUS as we move through the year. We expect this improving performance to be driven by the recent and continued efforts of our team to raise awareness and educate the market on the safety and efficacy of our Renuvion technology with important tailwinds related to; the recent commercial launch of our Renuvion clinical indications obtained in 2022 and our related consumer-focused marketing activities. Our recently obtained 510(k) clearance received for the use of Renuvion APR handpiece for the contraction of soft tissue and the recent commercial launch of our new Renuvion Apyx One generator. Importantly, the low end of our Advanced Energy revenue guidance assumes no change in the FDA safety communication as it stands currently. In addition to driving both adoption and utilization of our Advanced Energy products by leveraging these important tailwinds in 2023, we remain focused on continuing our strong pace of operational progress by executing on the following strategic initiatives: First, we remain focused on advancing our regulatory strategy to address the remaining limitations of the safety communication and improve our ability to market our technology. Second, we will continue to enhance our Renuvion product portfolio by working to bring…

[Operator Instructions] And our first question will come from Matthew O'Brien with Piper Sandler. Please proceed. Matthew O’Brien : Morning. Thanks for taking my questions. Either Charlie or Tara, can you just talk about the guidance for the year, especially in light of the Q1 commentary? Because as I look back, historically the company in Q4 of ‘21 did about $16 million in total sales. You'd have to do about that for the rest of the year for Q3 through – sorry Q3 to Q4 to hit the low end of your guidance range. It just seems like, after a year of difficult visibility, there's a lot of ramp that's built in, especially in the back half of the year to get, even to the low end of the guidance. So the why do that coming off such a tough year and what gives you all that confidence?

Yeah, thanks, Matt. I appreciate the question. So, the first thing is, is that we are confident in our ability to grow at least 36%. And the reason that we're confident for that is for a few reasons. We actually have multiple tailwinds for growth. And the first is, is remember, we just started in January our commercialization related to the 510(k)s that we obtained earlier in ‘22 and this is the first time that we have been able to market directly to patients, to be able to talk to them about the benefits of Renuvion for these specific procedures and that we believe will develop and have tailwinds at in 2023. Second, our latest 510(k) clearance that we just obtained in February, this allows us to market the use of our Renuvion hand piece for the contraction of soft tissue anywhere on the body as needed. And so that is another piece of marketing that we will be able to talk about and do as we move forward in 2023. And third, we actually just launched our new Apyx One Generator, which obviously features multiple enhancements and gives now the team another reason to engage with potential customers and not only will it do that is for the first time, we will have a source of revenue for upgrades associated with that from existing customers. So we've made important progresses in educating our users, potential new customers and we believe that these effects will help us in 2023. And importantly, that our low end of our guidance still assumes no change in the FDA safety communication and we also expect improving trends and contributions for our Advanced Energy growth to our existing OUS distributors to0. So we believe that we've got a lot of new tailwinds behind us. We also were faced with easy comparisons in the second, through fourth quarter, as far as percentages go. And we believe that we can get back to growing this business and in 2023. Matthew O’Brien : Got it. Thanks for that, Charlie. And then that kind of one part of the response there dovetails into the second question, just on Apyx One and the new generator. Can you give us a sense for what that replacement cycle might look like? I don't know, I’m sure you don't want to give us the number of customers you have but what level of upgrade or revenue opportunities be there in ’23 and even in ’24, as well. Thank you.

Yeah, thank you. And you are correct of talking about it in ‘23 and ’24, because it will be a multi-year program to upgrade everybody. I think the important thing for the Apyx One, and the important thing to remember there is that this for the first time is really a console, a surgical consult that was designed by members of this community, i.e., plastic surgeons to be able to function and do the body contouring procedures that they're looking to do. And so, we will be upgrading for a fee to our existing users and we will not be giving any of those, any of those away and we are right and we're building production as we speak in 2023 and we right now are continuing to offer both the Apyx One and the RS3, but we intend to be selling the Apyx one fully by year end and we’ will continue to sell the RS3 generator internationally. But the upgrade itself will be a new revenue source that we have actually never had here at Apyx. So, we're excited about what this means for us. What this brings to our customers. And the other thing too about Apyx One is, it will drive all future new instrumentation also. Matthew O’Brien : Very helpful. Thank you. Thank you.

Thank you.

Our next question is from Matt Hewitt with Craig-Hallum Capital Group. Please proceed.

Good morning. And thank you for taking the questions. Maybe just a follow-on on the revenue side a little bit, as you have launched these new marketing campaigns here recently, what has been the feedback and the response from the markets that you've been specifically targeting, are you, are you seeing that in the sales and the utilization or any color that you could provide there?

Yeah. Look, we are still in the initial months of our direct-to-consumer campaign. So I want to be clear there and make sure that, you know, we're, as we sit here today, we're two and a half months into this, but, the feedback that we have gotten from surgeon customers and patients has been very, very positive that the This is Me campaign is resonating with them. And when you're looking at this campaign and really if you're stripping things down from this campaign, what really is hitting home is the fact that people want to look like they look, they want to look natural, they don't want to be full of fillers and all kinds of things. They want a natural look. They just want to look younger and that's exactly what the Renuvion technology is allowing doctors to do is to bring that. And that is the whole - that is the whole genesis, if you will of the This is Me campaign and its really resonating both with the consumer side and the physician side.

That's helpful. And then maybe my follow-up, in the, OUS markets, it sounds like you're starting to see some recovery in the utilization, but that it's the generators that that are the lag there. What are you hearing from your distributor partners as you've received a couple of approvals? I mean, are they literally just waiting for this last piece and they - and at that that point they've said they'll come back? Or what do you think is going to be the catalyst to get them to come back for? Thank you.

Yeah, no, it's a really good question. And remember that worldwide, we grew, we grew generators 20 - we grew our installed base in our active or in the U.S., actually we grew our installed base and our active installed base 20% even through, even through all the things at the safety notice. And outside the United States, it's a little bit tougher because of our indirect model. But, yeah, I think the - when we were down in Brazil the part that was tough for the Latin American audience to understand was the part of the safety know that's where it says do not use after lipo. And after talking through that and walking them through that and the customers through that we made a lot of headway there and a lot of understanding on exactly what was going on. And I think that's why we saw such a strong fourth quarter in Latin America and we would expect improving trends in a lot of different areas as we move forward this year. And I think that, once we are able to get through of all of this, I think that, yes, that will take care of any existing markets that are out there today.

That's great. Thank you.

Our next question is from Frank Takkinen with Lake Street Capital Markets. Please proceed.

Hey, thanks for taking my questions. Wanted to first start with one of the most recent 510(k) clearance. Can you just speak to whether or not that actually, technically does cover use after liposuction? And whether or not there could be a potential amendment to the safety notification that's out there right now based on that 510(k) in advance of the actual specific, lipo 510(k)?

Yeah. So, I'm not going to answer the second question, obviously, we're working with the agency and doing everything we can to the agency to make sure that they are comfortable with the safety and the efficacy profile of our technology. And so that remains obviously a huge focus for us. But when you're talking about the second indication that we just obtained on February 27th, it has the contraction of soft tissue everywhere on the body and as needed. And so the real question is, is it needed after liposuction? And if the answer to that is, yeah, that that 510(k) suffice us for that. And so, it was an important 510(k) for us to get. It obviously shows that the agency believes that the technology is safe and effective. And now, we as an organization are still working through with the agency. And we still have our submission in that we submitted at the end of January.

Okay that's helpful. And then just for my second one maybe on the cash balance assuming the sale-leaseback closes and including the $8 million from MidCap, that got yet pro forma around the $25 million mark using year-end cash. Is that enough to drop the going concern? Or do you still need the tax credit to and have that going concern drop?

Well, we expect to end again the year 2023 with $18 million in cash and that's based on normalized operating investing activities of $14.5 million in 2023. $500,000 of which is CapEx and it also assumes that our non-cash items including depreciation and amortization are offset by cash used in working capital. And we do have the discrete items, the sale-leaseback and the tax refund, as well as the net proceeds of $8 million on our loan. We are not assuming in our guidance, anything on additional borrowings on either of the term, the term loan or the revolver in 2023 as we progress through that and those things do happen the tax refund comes in and we do close on the sale-leaseback that should remove the need to disclose anything. And I just want to clarify that the disclosure on our 10-K was that we assess the conditions and the potential environment to create a going concern. But all of these things that we just - that I just talked about, we believe in management disclose that, we believe that all of these things alleviate the risk of a going concern and that was agreed upon by our auditors in the 10-K, so.

Got it. Great. Thanks for taking my questions.

We are showing no further questions in the queue at this time. That does conclude our conference for today. Thank you for your participation.