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Avinger Inc (AVGR)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $1.9M, flat both sequentially (Q4 2023) and year over year (Q1 2023), while gross margin compressed to 18% (vs. 20% in Q4 2023 and 34% in Q1 2023) due to lower production activity and inventory optimization; adjusted EBITDA loss improved sequentially to $(3.9)M .
  • Strategic actions strengthened liquidity and capital structure: Zylox-Tonbridge funded $7.5M in March (first tranche of up to $15M), and CRG exchanged Series A preferred (aggregate liquidation preference ~$61M) for new Series A-1 valued at $10M with no liquidation/dividend preference, and extended debt principal to Q1 2027; cash ended the quarter at $7.2M .
  • Execution milestones advanced: Phase III verification/validation for the image-guided coronary CTO-crossing device initiated; IDE filing targeted for Q3 2024; Tigereye ST continues market penetration and Pantheris LV is building case experience ahead of broader commercialization later in 2024 .
  • China strategy progressing via Zylox partnership (exclusive distribution/manufacturing rights in Greater China; royalty-bearing sales); management now expects product registration potentially “prior to the end of 2025,” a more conservative timeline than the prior Q4 outlook (9–15 months, potential H1 2025) .

What Went Well and What Went Wrong

What Went Well

  • Coronary device development advanced to Phase III verification and validation, with IDE submission anticipated in Q3 2024 (“excited to commence Phase III… in preparation for filing an IDE application later this year”) .
  • Strategic partnership and funding: Zylox-Tonbridge initial $7.5M investment closed; partnership offers China market access, potential cost-plus manufacturing to improve gross margin and cost structure (“opportunity… to reduce cost of goods sold, improve gross margin”) .
  • Sequential operating improvement: Adjusted EBITDA loss improved to $(3.9)M from $(4.3)M in Q4 2023, aided by expense controls and the capital structure reset; cash increased to $7.2M by quarter end .

What Went Wrong

  • Gross margin deterioration to 18% vs. 34% YoY driven by lower production activity while optimizing inventories and conserving cash; operating expenses rose on sales headcount additions and transaction-related costs .
  • Net loss widened YoY to $(5.5)M (from $(4.6)M), reflecting higher OpEx; while EPS improved sequentially (less negative) due to the gain on preferred exchange, underlying losses remain elevated .
  • China registration timeline de-risked to “prior to end of 2025,” extending from prior guidance (9–15 months, hopeful H1 2025), which could delay anticipated regional revenue contributions .

Financial Results

MetricQ1 2023Q4 2023Q1 2024
Revenue ($USD Millions)$1.888 $1.906 $1.859
Gross Margin (%)34% 20% 18%
Operating Expenses ($USD Millions)$4.894 $4.989 $5.432
Loss from Operations ($USD Millions)$(4.258) $(4.615) $(5.089)
Net Loss & Comprehensive Loss ($USD Millions)$(4.644) $(5.024) $(5.517)
Net Loss Applicable to Common ($USD Millions)$(5.862) $(5.024) $(3.674)
EPS (basic & diluted, $USD)$(10.70) $(3.93) $(2.49)
Adjusted EBITDA ($USD Millions)$(3.941) $(4.303) $(3.910)
Cash and Equivalents ($USD Millions)—$5.275 $7.174

Notes:

  • Operating expenses increased due to added sales headcount and Zylox-related and corporate activities .
  • Net loss applicable to common improved in Q1 2024 due to a $1.908M gain on the preferred exchange; EPS reflects reverse split impacts and capital actions .
  • Gross margin compression attributed to lower production activity while optimizing inventory levels and conserving cash .

KPIs and Operating Metrics

KPIQ3 2023Q4 2023Q1 2024
Tigereye ST adoption (physicians/sites)17 physicians, 13 sites (≈60 cases cumulative) 32 physicians, 25 sites; Tigereye ST revenue +>50% QoQ Continued market penetration (qualitative)
Pantheris LV casesLimited launch underway; progressing ≈50 cases by 19 physicians; limited launch ongoing Building clinical experience; preparing for expansion later in 2024
Sales headcountExpansion plan announced (>25% increase planned) Sales headcount reached 26; +>25% since Q3 New reps/clinical specialists onboarded and gaining proficiency
Cash ($USD Millions)$8.7 (Sep 30, 2023) $5.3 (Dec 31, 2023) $7.2 (Mar 31, 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Coronary CTO device IDE filing2024Mid-2024 (anticipated) Q3 2024 (anticipated) Maintained/clarified
Pantheris LV commercialization2024Full commercial launch “early next year” Full commercial launch targeted midyear 2024; continued limited launch Maintained/refined timing
China product registration (Zylox)20259–15 months; hopeful H1 2025 Registration could be achieved prior to end of 2025 Lowered/extended timeline
China manufacturing capability2025Build capability alongside registration Capability validated within registration timeframe; option for cost-plus sourcing thereafter Maintained
Revenue milestone for second Zylox trancheRolling$10M aggregate revenue over 4 consecutive quarters Unchanged Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2023; Q-1: Q4 2023)Current Period (Q1 2024)Trend
Product performance (Tigereye ST)Full commercial launch; 17 physicians/13 sites, ~60 cases (Q3). Q4: strong momentum; 32 physicians/25 sites; revenue +>50% QoQ Continued penetration; CTO business growth supported Improving
Product performance (Pantheris LV)Limited launch (Q3); expected full launch early next year (Q3). Q4: ~50 cases; preparing for full launch mid-2024 Ongoing case experience; preparing for commercial expansion later in 2024 Progressing to launch
Regulatory (Coronary IDE)Plan to file IDE by mid-2024 (Q3); Q4: anticipating Q3 2024 Phase III V&V underway; targeting IDE filing in Q3 2024 On track
Regional strategy (China)New Zylox partnership; 9–15 months clearance; hopeful H1 2025 Registration possibly by end of 2025; exclusive rights; royalty-bearing sales Timeline extended
Cost structure/manufacturingPotential cost-plus sourcing from Zylox post-U.S. FDA manufacturing registration (future margin benefits) Reiterated opportunity to reduce COGS and improve margin Positive long-term
Europe (Germany)Distribution focus; reimbursement and KOL relationships Opportunity to distribute certain Zylox CE-marked products; prioritizing China registration first Opportunistic

Management Commentary

  • “We are excited to commence Phase III verification and validation studies for our innovative coronary CTO solution in preparation for filing an IDE application later this year.”
  • “Our collaboration with Zylox is off to a great start… providing a pathway to vast new markets and creating the opportunity to improve our gross margin and cost structure over time.”
  • “We anticipate being in a position to file an IDE submission with the FDA in the third quarter of this year to allow for initiation of a clinical study following approval.”
  • “Our new Tigereye ST CTO crossing device… continues to increase market penetration… and we continue to gain valuable clinical experience with our new Pantheris LV… as we prepare for commercial expansion later this year.”

Q&A Highlights

  • China commercialization timeline: Management now projects registration “prior to the end of 2025,” with Zylox’s internal efforts and regulatory pace the key drivers; manufacturing capability at Zylox expected within that timeframe .
  • Europe opportunity: Primary focus remains Germany; potential to distribute certain Zylox CE-marked products into existing accounts, but priority is China registration and manufacturing capability .
  • Coronary IDE submission prerequisites: Completion of Phase III V&V (including biocompatibility testing), study design/sites, and any required GMP animal studies; target to file before end of Q3 2024 .
  • Capacity to fulfill China demand pre-Zylox manufacturing: Current facility can support incremental demand; lease extended to support Zylox prior to their manufacturing clearance .
  • Sales productivity ramp: New hires typically reach productivity within ~6 months; expected contribution through 2H 2024 and into 2025; Pantheris LV full launch anticipated to aid growth .

Estimates Context

  • Consensus estimates via S&P Global for Q1 2024 were unavailable for AVGR at the time of this analysis (missing CIQ mapping). As a result, we cannot quantify beats/misses versus Street for revenue or EPS [SpgiEstimatesError].
  • Given the lack of published consensus, investors should focus on sequential and YoY trends and upcoming catalysts (IDE filing, Pantheris LV full launch, China registration milestones) .
MetricQ1 2024 ActualQ1 2024 ConsensusSurprise
Revenue ($USD Millions)$1.859 N/A (unavailable)N/A
EPS (basic & diluted, $USD)$(2.49) N/A (unavailable)N/A
Gross Margin (%)18% N/A (unavailable)N/A

Key Takeaways for Investors

  • Liquidity and capital structure improved via Zylox funding and CRG preferred/debt restructuring; cash increased to $7.2M, extending runway into key 2024–2025 milestones .
  • Coronary CTO device remains the central value inflection; Phase III V&V underway with IDE filing targeted for Q3 2024—successful filing/approval could be a major catalyst .
  • Peripheral portfolio momentum continues: Tigereye ST adoption grew in Q4; Pantheris LV is nearing full commercialization, supporting medium-term revenue growth potential .
  • Near-term margin headwinds (18% GM) stem from lower production; medium-term margin expansion could come from Zylox cost-plus manufacturing once qualified .
  • China timeline extended to potentially end-2025 for registration, tempering near-term international contribution; focus remains U.S./Germany execution meanwhile .
  • Without available Street consensus, trading setups hinge on execution milestones (IDE submission, Pantheris LV full launch) and signs of revenue acceleration toward the $10M/4 quarters milestone for the second Zylox tranche .
  • Monitor quarterly OpEx discipline and manufacturing activity to track gross margin recovery, alongside the cadence of case adoption and sales force productivity ramp .