Apyx Medical - Earnings Call - Q2 2019
August 7, 2019
Transcript
Speaker 0
Good afternoon, ladies and gentlemen, and welcome to the Second Quarter of Fiscal Year twenty nineteen Earnings Conference Call for ApiX 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 ks 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 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 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, Apex Medical's President and Chief Executive Officer. Please go ahead, sir.
Speaker 1
Thanks, Julie. Welcome, everyone, to our second quarter fiscal year twenty nineteen earnings call. I am joined on this afternoon's call by our Chief Financial Officer, Tara Sem. Let me provide you with a quick agenda for today's call. I'll start with an overview of our second quarter revenue performance and the drivers of our growth during the period.
Then I'll provide you with an update of our recent operational progress with respect to the four strategic initiatives that represent key components of our longer term growth strategy. Tara will then discuss our second quarter financial results in greater detail and review our fiscal twenty nineteen guidance, which we updated in our earnings press release this afternoon. I'll then conclude today's prepared remarks with some additional closing thoughts on our outlook before we open the call to questions. At the end of Q2 twenty nineteen, we reported total revenue of $6,600,000 representing 78 percent growth year over year. Our total revenue growth in Q2 was driven by performance in our advanced energy business reflected by strong global demand for our Renuvion cosmetic technology.
As a reminder, we're focused on driving growth in our advanced energy business by increasing the adoption and utilization of our Renuvion generators and handpieces in The US cosmetic surgery market, satisfying the increasing demand we are seeing from our OUS distributors, and improving our coverage and penetration of key OUS markets by entering into new distributor partnerships. Our continued execution with respect to each of these items during the second quarter resulted in Advanced Energy sales of $5,300,000 an increase of $2,200,000 or 69% year over year. We also saw impressive growth in our OEM business, which increased by $721,000 or 125 year over year. Our OEM growth was primarily driven by contributions from our electrosurgical generator and supply agreement with Symmetry Surgical, which we entered into in August as part of the divestiture and sale of the Bovie core business and brand. Turning to a review of our revenue performance by geography.
During the second quarter, our U. S. Sales increased by $1,600,000 or 53% year over year. U. S.
Sales were primarily driven by a 33% increase in advanced energy sales and a 147 increase in our OEM sales. Our advanced energy growth benefited from growth in sales of our Renuvion generators as well as strong utilization based demand. We were particularly pleased with our US performance given the challenges that we faced early in the second quarter. After a tough and distracting series of events in April, we rebounded in May and June to post very strong results overall for the quarter. I commend our team for staying focused on execution despite the disruption early in the quarter.
We also saw strong growth outside The U. S. With total international sales increasing 1,300,000 or 177% year over year. Our international growth was driven primarily by strong utilization related demand for our Renuvion generators and handpieces from distributors in our existing OUS markets. We entered two new countries in the second quarter, which contributed very modestly to growth year over year, but the overwhelming majority of our international growth was from distributor relationships that we formed in 2018 and to a lesser extent in early twenty nineteen.
Turning to an update of our operational progress with respect to our four strategic initiatives. As I've shared with you on prior earnings calls, we're focused on the following four strategic initiatives to position APICS Medical for long term growth in the cosmetic surgery market. Number one is formalize our regulatory strategy to pursue specific clinical indications that will enable us to market and sell Renuvion for our targeted procedures. Two, secure new clinical evidence demonstrating the safety and efficacy of our Renuvion technology. Three, enhancing physician and practice support for our cosmetic surgery customers.
And four, improving our manufacturing capabilities and efficiencies. Starting with our first strategic initiative, formalizing our regulatory strategy, in The US, we're focused on pursuing clinical indications that will enable us to market Renuvion for targeted procedures in The US cosmetic surgery market. The initial procedure that we have been focused on is dermal resurfacing, and I am pleased to report that we have made substantial progress. After withdrawing our initial five ten application for dermal resurfacing procedures on March 29, we committed publicly to developing a new five ten submission for this clinical indication as quickly and methodically as possible and engaged the help of external resources to advise us on the best path forward. Our clinical and regulatory teams worked diligently during the second quarter to develop a new clinical protocol and secure the necessary support that would enable us to prepare a new IDE application.
I'm pleased to report that on July 23, we submitted the IDE application for our new dermal resurfacing trial, and we're currently awaiting the agency's response and feedback on the materials we submitted. Once we receive and incorporate the agency's feedback and obtain the IDE approval, we expect to initiate a new clinical study to evaluate the use of Renuvion in dermal resurfacing procedures. The results of this trial would be intended to support the creation of a new application for five ten clearance. As discussed on prior earnings calls, our pursuit of new clinical indications for Renuvion has not been limited to our focus on dermal resurfacing. We have also identified other potential clinical indications where we believe our Renuvion technology would address important unmet clinical needs within The US cosmetic surgery market.
To that end, we are happy to announce that the indication we intend to pursue will be the treatment of skin laxity via the subdermal use of Renuvion in the neck. We intend to begin building clinical support for our pursuit of this indication in the coming months. Specifically, we expect to conduct a feasibility study consisting of approximately 20 patients to evaluate the safety profile of Renuvion in these procedures. I am very excited to announce that we obtained our IDE approval for this study on July 25 and expect to begin enrolling patients by December. In terms of our OUS regulatory strategy, APICS Medical is focused this year on expanding our geographic footprint by obtaining regulatory clearance for our technology in new countries, particularly those with large and growing cosmetic surgery markets.
In doing so, it is important to us that we own the product registrations in the countries that we enter. During the first quarter, we entered Canada and Mexico. As discussed on prior calls, our fiscal twenty nineteen guidance assumes growth will be driven by penetrating into existing countries as we service utilization based demand. To the extent that we enter new countries that we believe may be material contributors to our growth profile this year, we will announce them and incorporate them into our updated guidance expectations accordingly. In recent months, we've also made important additions to the APICS medical team to further bolster our regulatory affairs capabilities and support the development of our long term regulatory strategy.
In July, we appointed Doctor. LaBette Garber as our Director of Global Regulatory Affairs. We recruited Doctor. Garber from the FDA where she worked for ten years as a master scientific reviewer, leading the review of over 700 FDA submissions. Prior to her tenure with the FDA, she also worked as an electrical engineer at John Hopkins University Applied Physics Lab in Maryland and as a researcher in several engineering laboratories.
Doctor Garber will help develop our regulatory strategy and direct the day to day regulatory activities for all APICS medical sites. She will also support the planning and design of all clinical studies required as part of our strategy to pursue and obtain new regulatory clearances. I'm also excited to announce the appointment of Minnie Baylor Henry, the newest member of our Board of Directors. Ms. Baylor Henry joins our Board with over twenty years of regulatory and affairs and will be chairing a newly formed regulatory and compliance committee.
Among her many career highlights, Ms. Baylor Henry spent over fifteen years working in regulatory affairs for Johnson and Johnson and was ultimately promoted to worldwide vice president of medical and regulatory affairs in the company's medical device division. She also spent eight years with the FDA. Turning to our second strategic initiative, in addition to the studies we intend to pursue in support of our regulatory strategy, we're also focused on securing new clinical evidence demonstrating the safety and efficacy of our Renuvion technology and cosmetic surgery procedures. In the near term, our clinical team has been working on a retrospective clinical study examining the subdermal use of Renuvion in liposuction procedures, which we expect to publish during the 2019.
I am pleased to report that we completed and submitted the manuscript of this study during the second quarter and recently received confirmation that it has been accepted for publication in the Open Access Journal of Plastic and Reconstructive Surgery. The publication timing has not yet been confirmed, but we're looking forward to sharing additional details with you once the study becomes publicly available. On July 15, we announced the appointment of four new members to our medical advisory board with extensive expertise in plastic and cosmetic surgery. Doctor Brian Kenny, Doctor Paul Ruff, Doctor Richard Gentile, and Doctor Edward Zimmerman. With the addition of these four professionals to our existing board consisting of Doctor.
Diane Duncan and Doctor. Jack Zamora, we believe we've established an impressive team of advisors to evaluate and inform our clinical strategy, including the design of clinical trials to support our pursuit of new regulatory clearances. In July, we also appointed a Senior Director of clinical affairs, Ms. Carrie Larson, who will develop and manage our clinical research activities and support the development of our longer term clinical strategy. Ms.
Larson has spent over fifteen years of clinical resources experience working with both healthcare companies and clinical sites. Importantly, she has developed and managed clinical affairs teams and directed clinical research activities at three aesthetic medical device companies, Lutronic, Othera, and Myoscience. With respect to our third strategic initiative, enhancing physician and practice support for our cosmetic surgery customers, we continue to make great progress in developing our training and support for both new and prospective surgeon customers. During the second quarter, we continued to host physician mentor programs or PMPs, which were attended by both potential surgeon customers in key locations across The US. These PMP events include educational sessions and live cases performed by our consulting surgeons.
The primary goal of our PMPs is to provide surgeons with the ability to learn directly from their peers in formal educational settings. They've proven very effective in helping us engage with prospective customers and ensure that we are delivering high quality training across the country. To assist in our training efforts, we have also created a small team of clinical specialists charged with supporting our sales team. Following the sale of one of our Renuvion generators, our clinical specialists work closely with the new surgeon customer to deliver one on one training and provide support during their first cases. By ensuring that our new customers are well trained on the use of Renuvion, we believe our clinical specialists are able to encourage strong utilization of our technology while also allowing our reps to spend more of their time pursuing new business.
In addition to improving our surgeon training efforts, we also continued to expand our marketing support for the Renuvion brand. During the second quarter, we provided new patient focused marketing brochures to our surgeon customers that featured before and after photos. We've also received positive feedback from our surgeon customers on the first series of of patient focused Renuvion marking materials which we introduced during Q1. And lastly, in connection with our fourth strategic initiative, our Director of Global Operations for Advanced Energy, Laura Iverson, and her team continue to make progress in improving our manufacturing capabilities and efficiencies. She is currently pursuing several new lean initiatives with the input of our board member, Craig Swando.
Additionally, we've identified areas to improve the manufacturing cost of our handpieces. We expect to see these improvements evident themselves in our financial results as we continue to sell more handpieces. In addition to our recent progress with respect to our four strategic initiatives, I'd also like to congratulate our regulatory and R and D teams on an important achievement. On Monday, we announced that we received FDA five ten clearance for the next generation version of our J Plasma precise laparoscopic handpiece. In recent years, we've received feedback that surgeons in the OUS markets were interested in an upgraded version of our J Plasma precise handpiece for laparoscopic procedures that would enable them to utilize our Cool Coag feature.
As a reminder, Cool Coag is a feature that enables our surgeon customers to deliver standard monopolar energy and a non contact helium plasma spray called plasma beam coagulation in addition to our precise J Plasma energy in a single handpiece. This feature is particularly helpful when surgeons need to coagulate a wide area of tissue. In response to this surgeon demand, we leveraged our expertise in research and development and manufacturing to create this next generation version of our J Plasma precise handpiece. In addition to incorporating our COOL coag technology, this next generation handpiece is also 39% lighter than its predecessor for improved ergonomics. We're pleased to have enhanced our offering for laparoscopic surgical procedures, and we expect to begin a limited launch of this handpiece by the end of the third quarter.
Importantly, the J Plasma precise handpiece for laparoscopic procedures will be commercialized in the European market where many of our European distributors sell both our Renuvion and J Plasma products, which we believe are used in a variety of surgical procedures. Stepping back, as I mentioned earlier in my prepared remarks, I am very pleased with our company's performance during the second quarter. Despite the unfortunate setback we experienced with the withdrawal of our initial five ten submission for the dermal resurfacing at the March, our team has done an excellent job of exemplifying our core values under difficult circumstances, working together, challenging the status quo, and going the extra mile to create new opportunities for our company. I am also very pleased with the incredible talent that we have added to our team as we continue our journey towards becoming the world's leading innovator in unique energy solutions for the cosmetic surgery market. With that, let me turn the call over to Tara to discuss our second quarter financial results in greater detail and review our fiscal year twenty nineteen financial guidance, which we updated on this afternoon's release.
Tara?
Speaker 2
Thanks, Charlie. As a reminder, our results are reported on a continuing operations basis for the period ending June 3039. Any financial impacts related to the divestment and sale of our core segment appear in our financial statements as discontinued operations and are excluded from the commentary that follows. Total revenue for second quarter twenty nineteen increased $2,900,000 or 78% year over year to $6,600,000 compared to $3,700,000 last year. By business segment, total revenue growth in the second quarter was driven primarily by Advanced Energy segment sales, which increased $2,200,000 or 69% year over year to $5,300,000 Total revenue growth in Q2 also benefited from growth in sales from our OEM segment.
OEM segment sales increased $721,000 or 125% year over year to $1,300,000 in the 2019, driven primarily by the sales of generators related to our ten year manufacturing and supply agreement with Symmetry entered into as part of the divestiture of the core business last August. Advanced Energy and OEM sales represented approximately 8020% of total revenue in the 2019, respectively, compared to eighty four percent and sixteen percent in the prior year period. Revenue in The United States increased approximately $1,600,000 or 53% year over year to $4,500,000 and international revenue increased approximately $1,300,000 or 177 percent year over year to 2,000,000 International revenue represented approximately 31% of total sales in the 2019 compared to 20% in the 2018. Moving down the P and L. Gross profit increased approximately $1,900,000 or 76% year over year to $4,500,000 compared to $2,500,000 for the second quarter of 'eighteen.
The increase in second quarter twenty nineteen gross profit was driven primarily by strong sales in the company's Advanced Energy segment. Gross margin for the 2019 was 68.1% compared to 68.7% last year. The change in gross margin this quarter was primarily due to revenue mix by product and geography in our Advanced Energy segment and higher OEM sales as a percentage of total revenue this year. Operating expenses for second quarter twenty nineteen increased $3,500,000 or 63% year over year to $8,900,000 compared to $5,500,000 for the 2018. The year over year change in operating expenses was primarily driven by a $1,500,000 increase in salaries and related costs, dollars 1,000,000 increase in professional services, and an $870,000 increase in selling, general and administrative expenses.
Loss from operations for the second quarter of 'nineteen was $4,500,000 compared to operating loss of $2,900,000 last year. Net loss from continuing operations for second quarter twenty nineteen was $4,300,000 or $0.13 per diluted share compared to a net loss from continuing operations of $2,900,000 or $09 per diluted share for the 2018. Second quarter twenty nineteen adjusted EBITDA loss was $3,500,000 compared to an adjusted EBITDA loss of $2,400,000 last year. As a reminder, we have provided a detailed reconciliation from GAAP net loss to adjusted EBITDA in our press release this afternoon. As of June 3039, the company had cash and cash equivalents of $67,400,000 and no short term investments compared to cash and cash equivalents of $16,500,000 and short term investments in U.
Treasury bills of $61,700,000 as of December 3138. The company had working capital of $74,100,000 as of June 3039, compared to $81,800,000 as of December 3138. Turning to a review of our 2019 financial guidance, which we updated in our earnings press release this afternoon. For the twelve months ending December 3139, we now expect total revenue in the range of $26,500,000 to $27,500,000 representing growth of 59% to 65% year over year. This compares to the company's prior total revenue guidance range of 25,500,000.0 to $26,500,000 Our updated 2019 total revenue guidance assumes Advanced Energy revenue in the range of approximately 21,500,000.0 to $22,500,000 representing growth of 65% to 72% year over year.
This compares to our prior Advanced Energy revenue guidance range of $20,500,000 to $21,500,000 The $1,000,000 increase in this range is driven by our stronger than expected performance during the second quarter and higher growth expectations from international countries over the balance of 2019. Our OEM revenue remains unchanged at approximately $5,000,000 representing growth of 38% year over year. In terms of our profitability guidance for fiscal year twenty nineteen, we expect GAAP net loss in the range of 22,400,000.0 to $22,400,000 compared to our prior net loss in the range of 3,500,000.0 to 22,500,000.0 Roughly half of the $100,000 improvement in our fiscal twenty nineteen net loss guidance range versus our prior guidance is driven by the higher revenue growth expectations and the other half from higher gross margin assumptions for fiscal twenty nineteen. Specifically, we now expect 2019 gross margin to be approximately 61% to 60.5% this year compared to our guidance range of 59% to 61%. The increase in our gross margin range is driven by the stronger expected gross margins we reported over the 2019 and the early benefits of our focus on improving manufacturing efficiencies on our handpiece margins.
While we are pleased to report higher gross margin expectations for 2019, our margins will come in lower than the 64.7% margin we reported in 2018. As discussed on prior calls, the largest driver of the expected decline in gross margins this year is the impact of twelve months of contribution from our manufacturing agreement with Symmetry in 2019 compared to only approximately three months of contribution in 2018. Excluding the full year contribution to total revenue from this manufacturing agreement, our 2019 gross margin would be approximately 65%. Finally, we have also increased our adjusted EBITDA loss expectation in this afternoon's release. Specifically, we now expect adjusted EBITDA loss in the range of 18,800,000.0 to 17,800,000.0 compared to adjusted EBITDA loss from continuing operations of $11,700,000 in fiscal year twenty eighteen.
This compares to the company's prior guidance of adjusted EBITDA loss in the range of 19,900,000.0 to 18,900,000.0 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. With that, I'll turn the call back to Charlie for closing remarks. Charlie?
Speaker 1
Thanks, Tara. In summary, we're very pleased with our performance in the 2019, and we're raising our guidance today to account for our stronger than anticipated results in the second quarter. We look forward to driving impressive growth in our Advanced Energy business through the remaining months of the year as we continue to increase our share of the $1,500,000,000 cosmetic market in The United States, penetrate our existing international markets, and expand our distributor network into new countries. We will also remain focused on our strategic initiatives that comprise our longer term growth strategy and continue to allocate capital appropriately through targeted investments. Based on our strong performance to date, we remain convinced that our current and future opportunities we are pursuing in the cosmetic surgery market will ultimately position us to deliver sustained profitable growth and strong returns for our shareholders as we establish Apyx Medical as a leader in the cosmetic surgery market.
I'd like to close my prepared remarks today by thanking our employees for their hard work this quarter and their commitment to reshaping what's possible in this market by delivering game changing solutions to our surgeon customers and improving the lives of their patients. With that, operator, let's now open the call for questions.
Speaker 0
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. And our first question will come from Matt Hewitt from Craig Hallum Capital.
Your line is open.
Speaker 3
Good afternoon. Congratulations on the strong quarter and progress on your strategic initiatives. First question for me, could you give us an update on the size of your sales team today? I think last quarter was approximately 40 with, 28 of them, being internal. Where does that sit?
And do you have any plans to add to that team as the year progresses?
Speaker 4
Yes. So at the end of Q2,
Speaker 1
we had actually 29 direct sales reps and six independent agencies. So think of it roughly about 40 feet on the street in The United States and we're happy with that size for the rest of the year.
Speaker 3
That's great. And then implied within the guidance and kind of just working through some of the initial math here, and given some of the comments you made regarding the IDE submission, some of the clinical data that you're going be working towards, what kind of a step up should we be anticipating from an R and D perspective? And is that going to is there any timing related issues there, like where maybe Q3 would be lumpier or heavier than Q4? How should we be thinking about the back half from an R and D expense perspective?
Speaker 1
Yes, you're talking about total OpEx. If you notice that we haven't changed, we're still committed to spending about 40,000,000 to $41,000,000 but most of that will be in the third and fourth quarter. I think we spent about $18,000,000 in the first half. And the rest will be in the back half of the year.
Speaker 3
Okay. That's great. And then maybe one last one, if I can. And you commented on this a little bit, but gross margins, obviously, a pretty strong quarter there, better than we had expected and up sequentially. You're making some enhancements and improvements there to drive further growth.
How should we be thinking about that over, say, the medium term, over the next three to five years? Where do you think that can go without giving a specific range? But just help us understand where you see that going. Thank you.
Speaker 1
Yeah, thank you. And obviously, the manufacturing capabilities have been a strategic focus since I've gotten here, and it's been one of our core building blocks. And over three to five years, we would not only see this as an expanding revenue story, but also expanding gross margin story. But obviously, we're not going to get into specifics at this time, as we're just really in the early stages of starting to see some benefit from that.
Speaker 3
Understood. Thank you.
Speaker 1
Thank you.
Speaker 0
Our next question comes from Kyle Bauser from Dougherty and Company. Your line is open.
Speaker 4
Hi, thanks. Good evening. And, some great updates here. Congratulations on the IDE approval for the skin laxity trial. Can you speak a little bit more about this?
I mean, you have skin tightening claim in it? How many sites will you have for it? And will there be any overlap, with these sites and the dermal resurfacing trial?
Speaker 1
Yeah. So we're not going to get into a lot of specifics today with the skin laxity trial other than we're very pleased and very excited that we got approval to move forward with these 20 patients. We don't anticipate any overlap between the sites for the skin laxity site and the dermal sites. They will be separate sites. But we're obviously excited that we received IDE approval, and we're looking forward to enrolling patients towards the end of this year.
Speaker 4
Got it. And, so you mentioned still about 40 reps, or feet on the street, 29 of which are dedicated, reps. So if we kind of do back of the envelope math using your current advanced energy run rate, we're looking at maybe $500,000 of sales, that a rep is generating per year. I mean, what what's the goal for rep productivity? Maybe what your what are your competitors doing?
And and at what point do you envision needing to add more dedicated reps?
Speaker 1
Yeah. So I think it depends on on, obviously, how long the rep's been here. And, you know, they probably need a good six months to a year to get really up to speed and really start contributing. But after a year, you would expect them to generate in their second year somewhere around a million dollars in sales. So if you think about that as a as a ballpark, you know, that's that's a pretty good rule of thumb.
Speaker 4
Got it. And then quickly, just lastly, I I didn't catch it if if you did mention it, but I know Mexico and Canada came online in q one. What were the two new countries in q two?
Speaker 1
Yeah. We're not going to we had mentioned that we would give out countries if they were material for us. And the countries that we added in Q2 were smaller countries, and they're really not material and really didn't have any effect in guidance.
Speaker 4
Okay. Thanks for taking the questions. I'll jump back in queue here.
Speaker 1
Thanks, Kyle.
Speaker 0
Our next question comes from Russell Cleveland with Ren Capital. Your line is open.
Speaker 5
So congratulations on all the progress here with the FDA, both in dermal and the other throat area. I got a longer term question here. It looks like we're making a lot of progress in moving the business forward. And we are, you know, positioned ourselves. But some kind of indication here a little longer term.
I don't want any numbers or anything, but the philosophy, we have about 67,000,060. There is a limit to what we can spend, and create business. So what's the longer give me some long term here about what we're going to do here to make sure that our financial position remains really strong, along with growing the business.
Speaker 1
Yeah. Well, look, we've stated publicly that we are committed to making this a long term profitable, company. And we've also stated publicly that, the cash that we have currently is is is plenty for us to achieve that goal. And so that still remains our goal. We haven't changed from there.
We're looking at our investments and we're investing wisely, but we're not investing foolishly. And we're making sure that our investments are going to have long term growth for the company. And so that still remains our goal, and that hasn't changed.
Speaker 5
Great. Well, thanks again, and congratulations on the regulatory, progress. It's really great. Thanks so much.
Speaker 1
Thank you, thank you, Russell.
Speaker 0
Matt O'Brien with Piper Jaffray. Please go ahead. Your line is open.
Speaker 6
Hi, guys. This is Drew on for Matt. Thanks for taking the questions here, and congrats on a nice quarter.
Speaker 4
Thank you.
Speaker 6
Kind of on the five ten approval this week, sort of how your commentary reads, it sounds a little bit like a pivot, a little bit away from the cosmetics market back towards the surgical market. I mean, is that the right interpretation of it at all? And sort of kind of what have you heard that sort of prompted you with that direction? And does that open up any new markets that you're not currently targeting?
Speaker 1
Yeah. So no, that does not represent any pivot or anything like that. We are still 100% focused on the cosmetic surgery market in The United States, and that has not changed. As we have stated before, in Europe, we are actually selling both J Plasma and Renuvion because a lot of the Renuvion procedures are done in the hospital. And we had a open device that also a J Plasma open device that had cool coag on it, but we were getting a lot of requests from the surgeons that were doing the procedures to add that for a laparoscopic, version also.
So what we did is we took their feedback. We took the r and d team. It is it is a core competency of what we do is to be able to design and manufacture these types of devices. And we just took the strength that we have to add an important tool to the bag for those distributors in Europe.
Speaker 6
Okay. That makes a lot of sense. I appreciate the clarification. And then kind of, obviously, a very good quarter internationally for you guys. I believe you're still working through distributors there.
I know you had discussed in the past about some of the larger cosmetic markets, including Brazil, China, South Korea. And I know you added two international markets this quarter. But I guess what are the hurdles mainly to enter those big markets? I guess what's the stopping factor for you guys going after those?
Speaker 1
Well, it's it's it's not a stopping factor. It's just a time factor in that all of any market, it doesn't matter if it's those three, but any of the markets all have different regulatory requirements that you have to do in order to have your products registered to be able to sell. And it's just going through that process and getting things done. And so each one's a little bit unique. Each one's a little bit different.
And the timing on the different markets is all a little bit unique. So it's just a matter of us doing the work, and that's one of the reasons that we've invested so much into the regulatory this year is because we've got a lot of these countries that we're going to be going after and getting the registration for. So each country is a little bit different and we're just working through the process. Okay, very helpful. Thank you.
You bet. Thank you.
Speaker 0
Our next question comes from Matt Hewitt with Craig Hallum Capital. Your line is open.
Speaker 3
Just a quick follow-up for me regarding the neck skin laxity trial. If you're successful and get a label for that, how should we be thinking about market size? And will it be just for the neck? Or will doctors have the ability to kind of use that as they see fit on patients? But how should we be thinking about a market size, I guess, is the big question.
Speaker 1
Yeah. It's it's it's a very good question, and I appreciate the question. But I'm I'm I'm not gonna enter into the answer of that question right now, Matt. And and just for the main reason of, look, we've gotta go out and get the indication. And once we get the indication, we will totally then update you on all the market size and everything else for it.
Obviously, we think that it's very important, and we think that it has a lot of potential for us. But until we actually get the indication, until we can actually go out and do that, it doesn't do us a lot of good to talk about. Because remember, we're still a $20,000,000 business and a $1,500,000,000 opportunity in The United States. And so we've got plenty of stuff to do right now to keep executing and grow our share there. This is just something that we're letting you know that we're doing because we got the approval, and it's something that we're excited about.
But at the end of the day, we need to wait until we get everything done before we really start talking about the opportunity to add on there.
Speaker 3
Fair enough. Thank you.
Speaker 1
Thank you.
Speaker 0
Our next question comes from Jeffrey Bernstein with Cowen Prime. Your line is open.
Speaker 7
Thanks for taking my questions. Just a couple. Glad to hear you're starting to put some lean disciplines in there, and it sounds like you're already gonna have some benefit on some redesign of the handpiece. How much low hanging fruit is there in efficiency overall and manufacturing in particular? I'm only looking for a qualitative kind of answer.
Speaker 1
Yeah. Look, I think that any time that you are an organization, when you're a smaller organization and you're looking to really be able to scale and grow a business, I I think there is some things that you could potentially do because, know, there's there's definitely opportunity. And so, you know, we're we've been focused on it. As you know, it takes time, especially with manufacturing. And we think we've got the right people in here to help do it.
And we look forward over the next three to five years of of seeing the fruits of our labor for sure.
Speaker 7
And then just on the dermal resurfacing application, part two, is there any reason to think that this trial would be significantly bigger in terms of enrollment than the prior?
Speaker 1
No. I think you could think about it as about the same size and everything else. And obviously, we don't have, we just submitted, so we don't have approval back from the FDA, we don't have their comments yet. So, know, to talk about anything specific really doesn't matter, but you could think of it about the same size. Gotcha.
That's fair.
Speaker 7
Great. Thanks so much. Yep. You bet.
Speaker 0
That does conclude our conference for today. Thank you for your participation.