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AS

ASENSUS SURGICAL, INC. (ASXC)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 revenue doubled year over year to $2.207M as the company booked ~$0.8M of system revenue; however, losses widened with net loss of $25.749M (–$0.09/share) amid higher operating expenses and non‑cash fair value charges .
  • Liquidity remains strained: cash and equivalents were $7.782M at 6/30, total stockholders’ equity was negative ($11.327M), and the company had $15.309M outstanding on a senior secured note from KARL STORZ; management flagged substantial doubt about going concern absent the merger .
  • Strategic focus shifted to the $0.35/share cash acquisition by KARL STORZ; ISS and Glass Lewis recommended FOR; management reiterated that if the merger is not approved, the company expects to seek bankruptcy protection .
  • Near-term stock catalyst: the special meeting and merger vote (adjourned to Aug 20, 2024) with a requirement for a majority of outstanding shares; over 80% of votes cast to date were in favor, but turnout remained insufficient as of Aug 6 .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue mix showed a tangible system revenue contribution in Q2 ($0.8M), with total revenue up to $2.207M from $1.081M YoY .
    • Proxy advisors ISS and Glass Lewis recommended stockholders vote FOR the merger, supporting management’s proposed path .
    • Non‑GAAP adjusted net loss per share improved YoY (Q2’24 –$0.07 vs –$0.09) after excluding non‑cash amortization and fair value changes .

  • What Went Wrong

    • Operating expenses rose to $23.090M (vs $18.870M YoY), driving operating loss of $23.542M and net loss of $25.749M .
    • Balance sheet deterioration: negative equity ($11.327M) and dependence on a senior secured note that has first claim on assets; management highlighted likely bankruptcy if the merger fails .
    • Legal overhang: shareholder suits alleging disclosure deficiencies in the proxy; company plans to defend vigorously .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$1.081 $1.123 $2.207
Gross Profit (Loss) ($USD Millions)$(1.993) $(1.933) $(0.452)
Total Operating Expenses ($USD Millions)$18.870 $22.701 $23.090
Operating Income (Loss) ($USD Millions)$(20.863) $(24.634) $(23.542)
Net Income (Loss) ($USD Millions)$(20.662) $(22.497) $(25.749)
Diluted EPS ($)$(0.09) $(0.08) $(0.09)

Revenue composition – current quarter:

Q2 2024 Revenue BreakdownAmount ($USD Millions)
System Revenue$0.8
Lease Revenue$0.6
Instruments & Accessories$0.6
Services$0.2
Total$2.2

KPIs and balance sheet/lending items:

KPI / Balance ItemQ1 2024Q2 2024
Cash & Cash Equivalents (approx., excl. restricted)~$8.0M $7.782M
Total Stockholders’ Equity$13.024M $(11.327)M
Note Payable to KARL STORZ (principal + accrued interest)—$15.309M
Contingent Consideration Liability (current portion)—$14.400M

Notes: Adjusted non‑GAAP net loss was $18.114M (–$0.07/share) in Q2’24 vs $20.345M (–$0.09/share) in Q2’23 after add-backs (amortization, warrant and contingent consideration fair value changes) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Update (Q2)Change
Senhance program initiationsFY 20248–10 programs (Q1’24) Not reiterated in Q2 release; focus on merger vote Not reiterated
Procedure volume growthFY 2024+15%–20% vs 2023 (Q1’24) Not reiterated in Q2 release; focus on merger vote Not reiterated
LUNA milestones2024Design freeze in Q3; V&V in Q4 (Q1’24) No explicit update in Q2 materials Maintained by prior commentary; not updated
Corporate transaction2024Non-binding LOI (Q1’24) Definitive merger agreement at $0.35/share; vote adjourned to Aug 20 Upgraded to definitive; pending vote

Earnings Call Themes & Trends

TopicQ4 2023 (prior)Q1 2024 (prior)Q2 2024 (current)Trend
Merger/StrategicFinancing plan exploration; going-concern language LOI with KARL STORZ; up to $20M bridge Definitive $0.35/share deal; ISS/Glass Lewis FOR; bankruptcy if fails Intensifying focus on transaction
Liquidity/NoteCash burn reduction actions Cash into Q3 with initial funding; additional $10M if definitive agreed $15M drawn by 6/30; $20M total in July; note senior-secured with prepayment premium Reliance on secured note grows
LUNA programSurgeon lab; plan to freeze design in H2’24 Freeze Q3; V&V Q4; 510(k) 2H’25 target No explicit Q2 update; focus on merger Timelines maintained but overshadowed
Market development3,550 procedures in 2023; 8 initiations in 2023 ~900 procedures in Q1; Japan momentum Q2 revenue uplift includes system sale Mixed; utilization ongoing
Legal/Proxy——Proxy suits filed; company to defend New legal overhang

Management Commentary

  • “We’re at a critical juncture for our company... we believe the Merger proposal offers the best opportunity to maximize value… If the Merger is not approved, we expect to seek bankruptcy protection.” — CEO Anthony Fernando .
  • “Of the shares that have voted on the merger proposal, over 80%... have voted to approve… [but] we have only received proxies representing ~55% of outstanding shares.” — CEO commentary on vote dynamics .
  • CFO highlighted Q2 revenue of $2.2M (system $0.8M, lease $0.6M, instruments & accessories $0.6M, services $0.2M) and adjusted net loss of $18.1M (–$0.07/share) .

Q&A Highlights

  • No Q&A: management stated it would not take questions given the ongoing merger process and provided prepared remarks only .

Estimates Context

  • S&P Global consensus estimates for ASXC were unavailable via our feed; we could not compare actuals vs Street for revenue/EPS/EBITDA. Values not shown due to missing S&P Global consensus mapping.

Key Takeaways for Investors

  • Binary event path: with a definitive $0.35/share offer, the near-term setup is dominated by the Aug 20 vote; management indicated bankruptcy likely if the merger fails .
  • Capital structure risk: negative equity ($11.327M), limited cash ($7.782M), and a $20M senior secured note with first priority on assets create asymmetric downside risk for equity if the deal breaks .
  • Operations improved YoY on revenue, aided by a system sale, but losses remain large with OPEX of $23.090M and net loss of $25.749M in Q2, underscoring dependence on external funding or strategic alternative .
  • Legal and procedural overhangs (shareholder suits; high quorum requirement for majority of outstanding shares) add execution risk to closing despite favorable proxy advisor recommendations .
  • If the merger closes, upside is capped at $0.35 cash; if it fails, management’s stated expectation of bankruptcy implies low residual value for common equity given the secured note and contingent liabilities .
  • LUNA and ISU roadmaps remain strategic, but timelines are overshadowed by the balance sheet and transaction dynamics; any future optionality depends on deal completion or new financing .

Appendix: Additional Data Points

  • Revenue by geography (Q2 filing data is primarily aggregated; Q1 disaggregation shows majority OUS): for six months ended 6/30/24, EMEA 62%, Asia 22%, US 16% .
  • Contingent consideration revaluation to $14.4M (current) reflects high probability weighting of merger in fair value model .

Sources:

  • Q2 2024 8‑K and press release, including prepared remarks .
  • Q2 2024 10‑Q for financial statements, liquidity, note details, going concern, legal .
  • Q1 2024 8‑K and transcript for prior guidance and KPIs .
  • Q4 2023 8‑K and transcript for historical context .