ASENSUS SURGICAL, INC. (ASXC)·Q1 2024 Earnings Summary

Executive Summary

• Q1 2024 revenue was $1.123M, up modestly year over year from $0.976M but down sharply from Q4’s $5.431M due to the absence of system sales; GAAP net loss was $22.5M (-$0.08 EPS) and adjusted net loss improved to $18.0M (-$0.07) .
• Cash and short-term investments were $8.0M at March 31; management guided runway into Q3 2024, with an additional $10M contingent tranche supporting operations into Q4 if a definitive agreement with KARL STORZ is signed .
• The company entered a non-binding acquisition proposal and exclusivity arrangement with KARL STORZ at $0.35 per share and received up to $20M of secured bridge financing; $7M of the initial tranche was drawn, materially impacting near-term liquidity and stock narrative catalysts .
• 2024 operational milestones were reaffirmed: 8–10 Senhance program initiations, 15–20% procedure growth, LUNA design freeze in Q3, and verification/validation in Q4 (a timeline already adjusted in March); nearly 900 procedures in Q1 indicate utilization resilience amid strategic review .

What Went Well and What Went Wrong

What Went Well

• Continued utilization momentum: “nearly 900 procedures” in Q1, with pediatric traction and a new Senhance lease at Sendai Tokushukai Hospital in Japan; CEO: “steady growth in the adoption of our digital surgery solutions” .
• Liquidity bridge and strategic optionality: KARL STORZ bridge financing and exclusivity provide operating runway and a potential exit at $0.35 per share; CFO: “available cash will now sustain operations into Q3 2024” .
• Non-GAAP improvement: adjusted net loss narrowed to $18.0M vs $22.0M in Q1 2023, reflecting non-cash revaluation items; CFO reiterated usefulness of non-GAAP to assess core operations .

What Went Wrong

• Sequential revenue compression to $1.123M vs $5.431M in Q4, driven by lumpy system sales (Q4 had $3.6M system revenue; Q1 consisted of lease, instruments/accessories, services) .
• Elevated operating expenses ($22.7M vs $20.4M prior year) and gross loss (-$1.933M), sustaining high burn despite cost actions initiated in 2H23 .
• Balance sheet erosion and prior going-concern risk disclosure (March): year-end cash/short-term investments of $21.1M fell to $8.0M by March 31; Q4 press release flagged a going-concern paragraph in the 10-K audit opinion, underscoring financing dependency .

Financial Results

Revenue composition by period:

Note: Q4 2023 additionally included $3.569M in system revenue, contributing to the sequential revenue delta vs Q1 2024 .

KPIs and operating metrics:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “the first quarter saw steady growth in the adoption of our digital surgery solutions and continued progress in enhancing the capabilities of the Senhance platform. We are excited about the potential opportunity to join forces with KARL STORZ…” .
• CEO on milestones: “freeze the system design in Q3, conduct verification and validation testing in Q4… anticipate LUNA’s 510(k) submission in the second half of 2025, clearance in the first half of 2026” .
• CFO: “adjusted net loss… was $18.0 million, or $0.07 per share… cash… approximately $8.0 million as of March 31, 2024… runway… into Q3 2024; additional $10 million… would support operations into Q4 2024” .

Q&A Highlights

• LOI timeline and exclusivity: Exclusivity began March 28 for up to 10 weeks; management declined to discuss integration plans until diligence completes .
• Operations impact: No observed hesitancy among customers; KARL STORZ brand perceived positively; pipeline execution continues .
• Regional adoption: Japan identified as a fast-growing market alongside Europe; pediatric focus aiding placements; aim to deliver on 8–10 systems in FY24 .
• LUNA timeline: No anticipated timeline shifts due to the potential transaction; development “on track” .
• Liquidity framing: Bridge financing structure and cash runway clarified; secured note mechanics and potential additional funding contingent on signing .

Estimates Context

• Wall Street consensus (S&P Global) for Q1 2024 revenue and EPS was unavailable via our data source mapping during this review; comparisons to consensus could not be provided. As a result, no estimate-based beats/misses are cited here [SpgiEstimatesError for ASXC].

Key Takeaways for Investors

• Sequential revenue decline reflects mix volatility: Q1 lacked system sales vs Q4’s $3.6M, underscoring reliance on episodic system transactions for topline leverage .
• Utilization resilience: ≈900 procedures in Q1 and growing pediatric/regional traction (Japan) support the digital surgery adoption narrative even during strategic review .
• Liquidity bridge de-risks near term: $8.0M cash at quarter-end with runway into Q3 (and potentially Q4) reduces immediate financing risk, but dependency on the KARL STORZ process remains a central narrative driver .
• Strategic optionality: The non-binding $0.35/share proposal and exclusivity materially elevate corporate event risk/reward; diligence outcomes and definitive agreement timing are key catalysts .
• LUNA execution: Milestones reaffirmed (Q3 design freeze; Q4 V&V), with traditional 510(k) pathway targeted; continued integration of advanced analytics and ISU hardware updates enhance medium-term thesis .
• Non-GAAP adjustments matter: Change in fair value of contingent consideration ($6.480M) and warrant liabilities impacted GAAP results; adjusted net loss offers clearer view of operational trajectory .
• Watchlist: Delivery of 8–10 programs, 15–20% procedure growth, and Japan/pediatric placements through 2024 will validate growth claims and support valuation amid the ongoing M&A process .