Apyx Medical (NASDAQ:APYX) Q4 2019 Earnings Call

0:01 Please stand by. Good afternoon, ladies and gentlemen, and welcome to the fourth quarter and fiscal year 2019 earnings conference call for Apex 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 certainties 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.

1:02 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.

1:51 I would now like to turn the call over to Mr. Charlie Goodwin, Apex Medical's President and Chief Executive Officer. Thank you. Please go ahead.

2:04 Welcome everyone to our fourth quarter and fiscal year 2019 earnings call. I am joined on this afternoon's call by our Chief Financial Officer Tara Sim. 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.

3:11 And then we will open the call for questions. With that, let's get started. 2019 was a year of important progress for Apex Medical. We are incredibly pleased to deliver total revenue growth of 69% year over year in 2019 exceeding our initial 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 US cosmetic surgery market. In markets outside the US, we are focused on fulfilling demand from our distributor partners in existing markets and securing product registrations and new distributor partnerships.

4:13 We are very proud of the commercial success we had in 2019 and believe it reflects both the strong execution of our team this year, as well as the strong global demand for our helium plasma technology. In addition to our strong financial performance this past year, we also continue to make progress with respect to the four strategic initiatives we are pursuing to position Apex Medical for long-term growth in the cosmetic surgery market. I will discuss each of these initiatives later in my prepared remarks. Stepping back for a moment, fiscal 2019 marked the first full year following the sale of our core segment to Symmetry Surgical.

4:58 The Symmetry Surgical Transaction provided us with the infusion of capital and the ability to focus our efforts on maximizing the potential of our helium plasma technology. We entered 2019 with an enhanced sales team to expand our coverage of the US cosmetic surgery market and a new name, Apex Medical, which we chose to reflect our commitment to peak performance in everything that we do. Throughout the year, we have continued to invest thoughtfully in many key areas of our business in order to transform Apex Medical into a company that is well positioned to capitalize on our addressable market in the US and internationally deliver peak performance over a multi-year period.

5:47 Our financial and operational performance in 2019 reflect the success of these efforts and perhaps more importantly, We believe we're just getting started and have significant room for continued growth and improving profitability in the years to come. Turning to an update of our financial and operational performance during the fourth quarter, we are pleased to bring fiscal 2019 to a strong close in Q4. We achieved total revenue of $8.4 million, representing 41% growth year over year. Our total revenue growth was driven by global demand for our advanced energy products. In our advanced energy business, we generated sales of $6.9 million, an increase of 58% year-over-year.

6:40 Our advanced energy revenue growth is primarily fueled by strong utilization-based demand for our handpieces in both the U.S. and OUS markets, along with revenue contributions from the sale of our generators. are impressive advanced energy sales performance more than offset modest declines in our OEM business, which decreased by $64,000 or 4% year over year consistent with our expectations. From a geographic standpoint, our total US sales for the fourth quarter of 2019 increased by 1.2 million or 28% year over year and our international sales increased 1.3 million or 81% year over year.

7:31 Turning to our operational progress, during the fourth quarter of 2019, we made important progress with respect to our regular storage strategy to pursue clinical indications for the use of Renuvion technology in both dermal resurfacing procedures and skin laxity procedures. Consistent with our stated expectations, we began enrollment during the fourth quarter in two clinical studies designed to support our pursuit of the new clinical indications for these target procedures. Both studies are IDE perspective, multi-center, single arm, evaluator-blinded studies that will be conducted at up to five investigational centers in the United States.

8:21 In addition to our regulatory progress, we expanded our portfolio of clinical evidence supporting the use of Renuvion technology. In November, a new study was published in the journal Plastic and Reconstructive Surgery Global Open, an open access peer-reviewed journal owned by the American Society of Plastic Surgeons. The study is titled, A Single Site Post-Market Retrospective Chart Review of Subdermal Coagulation Procedures with Renuvion. And it was conducted by Dr. Dulaub, who examined de-identified data for 32 patients.

9:07 The study's objective was to collect safety and procedural information for patients who had undergone liposuction procedures where Renuvion was used for subdermal coagulation. Dr. Dulaub found that none of the patients required a revision or a secondary procedure suggesting that all had acceptable final outcomes and that no device-related adverse events or complications were noted. Lastly, during the fourth quarter of 2019, we began the limited commercial launch of our Apix Plasma RF or APR Handpiece, the latest addition to our Renuvion product portfolio. As we have shared with you on prior earnings calls, the APR Handpiece is available in multi-configurations and designed to be used percutaneously in order to meet the needs of our cosmetic surgery customers.

10:06 It features several important enhancements, a smaller diameter instrument shaft, a bullet-shaped instrument tip, a new handle design, and distance indicators to help surgeons minimize unwanted energy application near the incision entry site. The development of our APR handpieces was informed by extensive feedback and input from both our cosmetic surgery customers and members of our medical advisory board. Based on the strong surgeon feedback received in response to our limited launch phase, it is clear that this informed development process resulted in the creation of a handpiece that really resonates with cosmetic surgeons.

10:58 I'll now turn the call over to Tara to review our fourth quarter and fiscal year 2019 results in detail and discuss our financial guidance for first quarter 2020 which we updated in this afternoon's release. Tara?

11:13 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 release after a market closed today and as detailed in the 8-K filed with the FCC this afternoon. Apex Medical is committed to upholding the highest standards of financial reporting. Throughout 2019, we have been working diligently to remediate material weaknesses in internal controls identified in 2018. As discussed on our third quarter earnings call, we identified two items during the preparation of our form 10Q filing for the period ended September 30th, 2019. The first item related to the treatment of certain components included in the calculation of our stock-based compensation expense.

11:59 the second item related to the accounting for pre-development 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 10-Q for the period ending September 30th, 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 re-evaluated 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.

12:53 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 committee concluded after consulting with management and our prior auditors that the previously filed financial statements for the year ended December 31st, 2018 and the three and nine months ended September 30th, 2018 and the three months ended March 31st, 2019 can no longer be relied upon and will be restated. To complete the restatements, we intend to request a 15 calendar day extension to file our Form 10-K for fiscal 2019 and will make every effort to file within this period.

13:44 The discussion of our unaudited financial results today reflect the impact of these restatements as well as revisions to our historical financials. We have detailed the impact of these items in a separate press release and reconciliation table, both of which were filed on Form 8K this afternoon and are available on the Investors Relations page of our website. Turning to a review of our fourth quarter and fiscal year 2019 financial results. As a reminder, our results are reported on a continuing operations basis for the period ended December 31st, 2019. Any financial impacts related to the divestment and sale of our core business segment appear in our financial statements for fiscal 2018 as discontinued operations and are excluded from the commentary that follows.

14:38 Total revenue for fourth quarter 2019 increased 2.5 million or 41% year over year to 8.4 million compared to 5.9 million last year. By business segment, total revenue growth in the fourth quarter was driven primarily by advanced energy segment sales, which increased $2.5 million, or 58% year-over-year, to $6.9 million. OEM segment sales decreased 64,000, or 4% year-over-year, to $1.5 million in the fourth quarter of 2019. Advanced Energy and OEM sales represented approximately 82% and 18% of total revenue in the fourth quarter of 2019, respectively, compared to 73% and 27% in the prior year period.

15:28 Revenue in the United States increased approximately $1.2 million, or 28% year over year, to $5.6 million, and international revenue increased approximately $1.3 million, or 81% year over year to 2.8 million. International revenue represented approximately 33% of total sales in the fourth quarter of 2019 compared to 26% of total sales in the fourth quarter of 2018. U.S. sales were driven by a 44% increase in advanced energy offset slightly by a 2% decrease in OEM sales. The 44% increase in advanced energy sales in the U.S. in Q4 was driven by strong utilization-based demand for our Renubion handpieces, coupled with contributions from sales of our generators.

16:19 Our Q4 international sales growth was driven by strong utilization-based demand for our advanced energy handpieces and generators from distributors in our existing international markets, with Latin America and Asia Pacific being the largest contributors to our growth during the quarter. Moving down the P&L, Gross profit increased approximately 2 million or 58% year over year to 5.6 million compared to 3.5 million for the fourth quarter of 2018. The primary drivers of the increase in gross profit margin were higher advanced energy sales as a percentage of total sales as well as efficiencies realized in our manufacturing processes in the fourth quarter of 2019. Gross margin for the fourth quarter of 2019 was 66.4% compared to 59.4% last year. The primary drivers of the gross margin improvement this quarter were higher advanced energy sales as a percentage of total sales, efficiencies realized in our manufacturing processes, which are partially offset by a higher mix of advanced energy sales outside the U.S.

17:27 in the fourth quarter of 19 compared to the prior year period. Additionally, approximately 330 basis points of the year-over-year change in gross margin was a result of GPO fees included in cost of goods sold in the prior year period which did not impact cost of goods sold in the fourth quarter of 2019. GAAP operating expenses for fourth quarter 2019 increased 2.3 million or 25% year-over-year to 11.5 million compared to 9.3 million for the fourth quarter of 2018. The year-over-year change in operating expenses was primarily driven by a $1.4 million increase in professional services, a $0.7 million increase in selling general and administrative expenses, a $0.5 million increase in salaries and related costs, and a $0.4 million increase in R&D expenses.

18:23 Total GAAP operating expenses were partially offset by 0.7 million of severance costs related to the departure of the company's former CFO, which impacted Q4 2018 expenses and did not impact Q4 2019 GAAP operating expenses. Excluding the impact of these non-recurring expenses, fourth quarter operating expenses increased 2.9 million or 34% year over year. Loss from operations for the fourth quarter of 2019 was 6 million compared to operating loss of 5.7 million last year. Net loss from continuing operations for fourth quarter 2019 was 5.4 million or 16 cents per diluted share compared to a net loss from continuing operations of 3.9 million or 12 cents per diluted share for the fourth quarter of 2018.

19:16 Fourth quarter 2019 adjusted EBITDA loss was 4.8 million compared to an adjusted EBITDA loss of 4.6 million last year. Excluding the impact of the non-recurring severance costs in the prior year period, adjusted EBITDA loss increased 1 million or 27% year over year in the fourth quarter of 2019. As a reminder, we have provided a detailed reconciliation from gap net loss to adjusted EBITDA in our earnings press release this afternoon. Turning to a brief summary of our fiscal year 2019 results, total revenue for fiscal year 19 increased 11.5 million or 69% year over year to 28.2 million. By segment, total revenue growth of 11.5 million in fiscal year 2019 was driven by an increase of 9.5 million or 73% year over year in advanced energy sales and an increase of 1.9 million or 54% year over year in OEM sales.

20:15 Advanced Energy and OEM sales represented 80% and 20% of sales in fiscal year 2019, respectively, compared to 78% and 22% of sales in fiscal year 2018. By geography, total revenue growth of $11.5 million in fiscal year 2019 was driven by an increase of $6.7 million or 52% year-over-year in U.S. sales and an increase of 4.7 million or 124% year over year in international sales. US and international sales represented 70% and 30% of sales in fiscal year 2019 respectively compared to 77% and 23% of sales in fiscal year 2018. Gross margin for fiscal year 2019 was 67.9% compared to 64.7% in fiscal year 2018 and increase of 326 basis points year over year.

21:14 Operating loss for fiscal year 2019 was 20.9 million compared to 14.2 million in fiscal year 2018. The change in operating loss was driven primarily by an increase in operating expenses of 15 million or 60% year over year offset partially by an increase in gross profit of 8.3 million or 77% year over year. As of December 31, 2019, the company had cash and cash equivalents of $58.8 million and no short-term investments, compared to cash and cash equivalents of $16.5 million and short-term investments in U.S. Treasury bills of $61.7 million as of December 31, 2018.

21:59 The company had working capital of $64.4 million as of December 31, 2019, as compared to $81.2 million as of December 31, 2018. Now turning to review of our guidance for first quarter of fiscal year 2020, for the three months ending March 31, 2020, we expect total revenue in the range of $5 million to $5.6 million, representing a decrease of 11% to 0% year over year. This total revenue guidance assumes advanced energy revenue in the range of 4 to 4.6 million, representing a decrease of 8% to an increase of 6% year-over-year, and OEM revenue of approximately 1 million, representing a decrease of 21% year-over-year.

22:49 In terms of our profitability guidance for Q1 2020, we expect gap net loss in the range of 9 million to 8.6 million, compared to GAAP net loss of $5.6 million in first quarter of fiscal year 2019 and adjusted EBITDA loss in the range of $7.8 million to $7.4 million compared to adjusted EBITDA loss of $4.7 million in first quarter of fiscal 2019. As a reminder, we have included a full reconciliation from GAAP net loss to non-GAAP adjusted EBITDA in our earnings press release this afternoon. Lastly, for modeling purposes, Our first quarter of 2020 total revenue guidance assumes sales in the U.S. increased in the range of down 7% to up 3% year-over-year and sales to customers outside the U.S.

23:39 decreased in the range of 17 to 7% year-over-year. We expect Q1 2020 gross margins of approximately 64 to 65% compared to 64.6% in Q1 2019. stock-based compensation expense of approximately $1 million, depreciation and amortization of approximately $165,000, and weighted average diluted shares outstanding of approximately 34 million shares. With that, I'll turn the call back to Charlie for closing remarks. Charlie?

24:14 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.

25:00 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 US 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.

26:01 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 training for current and prospective surgeon customers by expanding our selection of in-office marketing materials and hosting our physician mentor programs. In 2020, we will continue to host new physician mentor programs in the US and we plan to expand this effort in select markets outside the US as well.

26:56 Additionally, our market share and overall awareness of Renuvion has increased in recent years and we plan to expand our presence at industry conferences and trade shows in 2020. Importantly, this expanded presence will further amplify our plans to focus on educational programming at these events with podium presentations from our key opinion leaders and advocates in the cosmetic surgery market. And lastly, number four, improve our manufacturing capabilities and efficiencies The progress we have made on this front began to evidence itself in the gross margin improvement we saw during the second half of 2019 and we expect to see continued improvements in 2020. While we are understandably pleased that our efforts to improve our manufacturing efficiencies are already contributing to our gross margin results, it is important to understand that this is a multi-year strategic initiative. We will continue to focus on implementing new lean initiatives in order to drive continued progress in the years to come and look forward to providing you with updates on our future progress.

28:13 Finally, I would like to share thoughts today on the crisis caused by the spread of the coronavirus, also known as COVID-19. This is an evolving situation that we are monitoring very closely, and we are focused on the health and safety of our employees, patients, customers, and international distributor partners around the world. We have a global business with customers in more than 40 countries outside the US, representing 30% of our sales in 2019. Importantly, our commercial exposure to the most affected regions outside the U.S., specifically Europe and APEC, represented approximately 11% of our sales in 2019.

28:59 We do not currently sell in China. The adoption and utilization trends in these markets so far in Q1 have understandably come in below our expectations coming into this year. In the U.S., after a solid start to the quarter, adoption and utilization treads have slowed beginning in March, and we have experienced a notable slowdown over the last week. The high level of uncertainty and the rapidly developing story of COVID-19 represents a huge challenge as it relates to providing the formal financial guidance for fiscal year 2020 as would be our normal practice on a Q4 call. Given the environment is anything but normal, we have decided to provide our expectations for growth in Q120 and will revisit our formal guidance strategy for 2020 as part of our first quarter earnings call in May.

29:57 As detailed in our press release this afternoon, we expect total sales in the first quarter of 2020 in the range of approximately $5 million to $5.6 million, compared to $5.6 million in the first quarter of 2019. By segment, the total revenue range will be driven by approximately $1 million in OEM sales and approximately $4 million to $4.6 million in advanced energy sales. The year-over-year change in OEM sales was entirely expected and at this time is not impacted by the COVID crisis. The year over year change in our advanced energy sales in the first quarter is driven by the COVID related weakness in sales in the U.S. and outside the U.S. compared to last year as a result of slower than anticipated demand.

30:52 Outside the U.S., the demand has slowed dramatically in March as COVID-19 crisis continues to deteriorate. In the U.S., as mentioned earlier, after a solid start to the quarter, Adoption and utilization trends have slowed materially in March and over the last week in particular also. We are in contact with key customers around the world and key surgeons in the US to determine how they are managing the uncertainty in their practice. Our guidance for Q1 is based off the best information we have today and have factored in significant impact to our business from COVID-19 over the balance of the quarter. Finally, I want to highlight two important points for consideration.

31:38 First, while our first quarter guidance expectations reflect material lower growth than we had expected coming into the year, we believe the underlying tailwinds to the multi-year growth story remain intact. We believe our helium plasma technology is truly unique energy modality with its ability to deliver heat to tissue in an incredibly efficient and controlled manner. Our growth performance and clinician patient experience in 2019 enhanced our conviction. And importantly, we think we just begun to tap the potential in the cosmetic surgery market. This gives us confidence that once this COVID-19 situation resolves itself, we are well positioned to continue to elevate the global cosmetic surgery market for the benefits of surgeons, patients and our shareholders.

32:34 Second, we have an incredibly strong balance sheet with more than $58 million in cash at the end of 2019 that we expect will allow us to execute our strategic growth initiatives for a number of years. Thanks to everyone on our team for their hard work in 2019, to our customers, to our shareholders for their support, and those on this call for their interest in Apix Medical. With that, operator, now let's open the call for questions. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, We invite you to add yourself to the queue again by pressing star 1.

33:33 And our first question will come from Matt Hewitt with Craig Hallam. Please state your question.

33:39 Good afternoon. 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? What are they seeing from a demand, a patient demand standpoint? How has that changed over the last couple weeks? Any additional color on that front would be helpful.

34:08 Yeah, 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 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.

34:43 Okay, and then I guess my follow-up, 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, or are you able to kind of get the work done, meet the patients that you need to meet to get those trials completed?

35:04 Thank you. Yeah. At this point in time, we're not seeing anything change with that, but just like everything else, that could change tomorrow, and we could have a slowdown there potentially. We did start enrollment in 2019 in December, and we're working through it, but just like everything else with this, it's fluid.

35:23 Understood. Thank you. Thank you. Our next question comes from Matthew O'Brien with Piper Jaffray. Please state your questions.

35:33 Thanks for taking the questions. Just to follow up on Matt's question, as you think about the guidance you provided here for Q1, you know, 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, you know, 5 to 5.5 million, so 5.2-ish at the mid-point, 5.3. Does that essentially mean that your business has almost gone to zero here in March. And what can, you know, if that math is anywhere close to accurate, what should we think about, you know, in the April, May timeframe as we're working through COVID?

36:20 Well, so the first thing is, is that we're very confident in the guidance that we gave 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.

36:56 Okay. and then maybe a question for Tara. Just on the spending side of things, obviously, you know, 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, you know, 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.

37:34 Well, as far as the burn rate, we definitely feel confident that 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, so that showed an increase of $1.8 million. 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.

38:16 Okay, so a burn rate, sorry, just to follow up there, but just a burn rate, something in the $20 to $25 million range this year seems about right?

38:25 Yeah, we're not given 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 canceled 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 given guidance through Q1.

38:47 Very helpful. Thanks so much. Thank you. Our next question comes from Dave Turkley with JMP Securities. Please state your question.

38:57 Great. Thanks. I was just wondering if you could possibly provide us with 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 are we assuming that – You won't sell capital until this goes away, or is it both? I guess I'd like some color if you could give it on those two components.

39:25 Yeah, 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 of 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 that's what makes it tough is every 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.

40:18 So it's all over.

40:21 And then in terms of patients, I guess like actual folks going in for the procedures, I imagine it's 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, you know, just plastic surgery generally in, you know, its elective nature, sort of what you kind of anticipate if you have a thought on sort of the actual patients, what, you know, what is happening, what it could look like.

40:57 Thank you. Yeah, 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 needed 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 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.

41:43 Thank you. Yep. Thank you. Just a reminder to ask a question, press star 1 on your telephone keypad to remove yourself from the queue. Press star 2. Our next question comes from Kyle Bowser with Doherty. Please state your question.

42:01 Hi, Charlie and Tara. Good evening. Thanks for taking the questions. Hey, 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? kind of same question for the dermal resurfacing. How is that trial progressing in terms of enrollment?

42:28 Yeah, 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's 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 gonna 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.

43:14 Okay, so it's safe to say you do a press release once the FDA gives you the nod to move into phase two of that skin laxity trial?

43:23 Correct.

43:24 Okay. And then just on that new hand piece 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 on neck procedures and around the jawline. can you speak to about what you're hearing and the feel and if you think this is something that you know could actually drive utilization or are these just kind of nice features that are nice to have and maybe won't necessarily drive volumes?

44:04 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 limited surgeons to do certain things and so you know the great thing is is we had always talked about the other hand pieces being a little bit of a headwind and that they were laparoscopic surgical devices and these were designed for you know 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.

44:54 All right, that's great. Thanks for taking the questions.

44:57 Thanks, Kyle. Thank you. That does conclude our conference for today. Thank you all for your participation.