ASENSUS SURGICAL, INC. (ASXC)·Q3 2023 Earnings Summary

Executive Summary

• Revenue fell 57.5% year over year to $1.09M, roughly flat sequentially; GAAP EPS improved to $(0.07) from $(0.08) YoY, while adjusted EPS improved to $(0.06) from $(0.07) YoY .
• Management lowered 2023 Senhance program initiation guidance to 8–10 (from 10–12), citing an evolving capital environment; cash runway extended to late Q2 2024 after a $10M July financing .
• Strategic progress continued: Flex engaged as LUNA manufacturing partner; NVIDIA collaboration to enhance ISU augmented intelligence; preclinical evaluation of LUNA targeted for Q4 completion with design freeze planned in Q1 2024 .
• Pediatric adoption is a growing wedge: Mayo Clinic’s exclusive pediatric program increased inbound interest; Japan remains a strong region, while Europe saw summer seasonality pressures on volumes .

What Went Well and What Went Wrong

What Went Well

• Strategic partnerships solidified: finalized manufacturing strategy with Flex for LUNA and collaboration with NVIDIA to advance ISU edge AI (Holoscan), with Google Cloud supporting data architecture .
• Pediatric momentum: Mayo Clinic’s exclusive pediatric program launched; management noted increasing inbound interest from U.S. children’s hospitals following Mayo and key pediatric meetings .
• Non-GAAP loss narrowed YoY: adjusted net loss improved to $(15.6)M and adjusted EPS to $(0.06), supported by non-cash warrant liability marks and lower intangible amortization .

Quote: “We anticipate reaching important milestones in the upcoming quarters… our primary objective continues to be the completion of our preclinical evaluation [of LUNA] planned for December this year” — CEO Anthony Fernando .

What Went Wrong

• Topline contraction: revenue declined to $1.09M from $2.56M YoY, driven by lower product revenue; quarterly procedures grew only 2% YoY with Europe seasonality and softer U.S. volumes .
• Guidance trimmed: 2023 Senhance program initiations reduced to 8–10 from 10–12 previously due to capital environment constraints .
• Operating expense pressure: total OpEx increased YoY to $18.5M; gross loss remained elevated at $(1.78)M, reflecting mix and scale challenges .

Financial Results

Income Statement Snapshot (USD Millions except per-share)

Revenue Breakdown by Source (USD Thousands)

KPIs and Liquidity

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We anticipate reaching important milestones… completion of our preclinical evaluation planned for December this year with the full LUNA system.” — Anthony Fernando, CEO .
• “Based on the recent financing and our current operating plan, we project our cash runway has been extended through late second quarter of 2024.” — Shameze Rampertab, CFO .
• “Regarding Senhance initiations, we are refining our expectations to initiate 8 to 10 new programs in 2023, down from 10 to 12.” — Anthony Fernando, CEO .
• “The simple answer is yes [to increased inbound interest]… having a leading hospital like Mayo Clinic validates that thesis.” — Anthony Fernando .

Q&A Highlights

• Installations/Guidance Confidence: Management affirmed confidence in reaching 8–10 initiations, noting advanced pipeline accounts and near-term closing steps despite compressed timelines .
• Procedure Mix & Pediatrics: Mix remains led by general surgery, then gynecology and urology; pediatric cases growing in Europe and now in U.S. at Mayo, with increasing weekly case scheduling .
• Regional Volumes: Quarterly slowdown driven primarily by Europe’s summer holidays; U.S. volumes softer; expecting to drive higher annualized growth in Q4 .
• Flex Partnership: Manufacturing outsourcing to specialists like Flex to leverage supply chain and cost advantages; two-year dialogue culminated in full-platform engagement .
• KARL STORZ Discussions: Ongoing, complex multi-domain agreement (visualization, digital elements, global regulatory/commercial scope); update to be provided upon conclusion .

Estimates Context

• S&P Global consensus estimates for ASXC Q3 2023 were unavailable via our data connection (tool returned missing mapping). As a result, we cannot benchmark reported results against Street expectations in this recap. Values retrieved from S&P Global.
• Given limited sell-side coverage, investors should focus on sequential trajectories, guidance adjustments, and execution against LUNA/ISU milestones as primary drivers .

Key Takeaways for Investors

• Revenue contraction and guidance trimming are likely to pressure sentiment near term; watch for confirmation of 8–10 initiations and procedure trajectory in Q4 to stabilize the narrative .
• The LUNA milestone cadence is the critical medium-term catalyst: completion of integrated testing and preclinical evaluation in Q4, design freeze in Q1 2024, and verification/validation thereafter .
• Pediatric adoption is a differentiated wedge (Mayo validation) that can drive placements and utilization independent of broader capital cycles; track additional U.S. children’s hospital wins .
• Strategic partnerships (Flex, NVIDIA, Google) de-risk manufacturing and accelerate AI capabilities; expect increased ISU functionality and clarity on ISU manufacturing partner in Q4 .
• Liquidity runway into late Q2 2024 reduces near-term financing overhang; near-term execution on initiations, LUNA milestones, and ISU manufacturing will be key to avoiding incremental dilution .
• Regional mix matters: sustained strength in Japan vs. European seasonality; any rebound in U.S. volumes could improve lease and services revenue stabilization .
• With Street estimates unavailable, emphasis should be on qualitative milestones and quantitative progress in revenue mix (product recovery) and adjusted loss trajectory improvement .