Apyx Medical Corporation (NASDAQ:APYX) Q3 2022 Earnings Conference Call November 10, 2022 8:00 AM ET
Company Participants
Charles Goodwin – President and Chief Executive Officer
Tara Semb – Chief Financial Officer
Conference Call Participants
Matt Hewitt – Craig-Hallum Capital Group
Matthew O’Brien – Piper Sandler
Kyle Bauser – Lake Street Capital Markets
Dave Turkaly – JMP Securities
Russell Cleveland – RENN Capital
Operator
Hello and welcome, ladies and gentlemen to Third Quarter of 2022 Earnings Conference Call for Apyx Medical Corporation. At this time, all participants have been placed in 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 without limitation to those identified in the risk factors section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, our most recent 10-Q filing and the company’s other filings with the Securities and Exchange Commission. Such factors maybe updated from time-to-time in our filings with the SEC, which 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 as 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, Apyx Medical’s President and Chief Executive Officer. Please go ahead, sir.
Charles Goodwin
Thanks, operator. Welcome everyone to our third quarter earnings call. I am joined on today’s call by our Chief Financial Officer, Tara Semb.
Turning to a quick agenda of what we intend to cover today, I will start by reviewing our third quarter revenue results and the factors that contributed to our performance. Then I will provide you with an update of our operational progress during the third quarter and in recent months. Tara will then discuss our third quarter financial results in detail as well as our financial guidance for 2022, which we updated in today’s earnings release. I will conclude with some thoughts on our updated guidance and key areas of focus in the fourth quarter before we open the call for Q&A.
Let’s get started with a review of our revenue results for Q3. Our total revenue in the third quarter decreased 23% year-over-year to $9.1 million. These results were approximately $1.5 million below the low end of the range of our expectations that we provided on our second quarter earnings call in August. Our softer than anticipated total revenue performance was driven by Advanced Energy sales, which decreased 31% year-over-year to $7.1 million and offset partially by OEM sales, which increased 34% year-over-year to $2 million.
Turning to a more detailed discussion of our performance in our Advanced Energy business, while it is worth noting that our Advanced Energy sales results were impacted, in part, by timing of orders late in the quarter, our softer than anticipated global sales performance in Q3 was largely related to the Medical Device Safety Communication posted by the FDA in March. We continue to experience business disruption as a result of the safety communication, which impacted global sales of our Advanced Energy products. This disruption ultimately proved to be more pronounced and prolonged than we had anticipated both internationally and domestically.
In terms of our monthly sales trends in the third quarter, our global Advanced Energy sales performance in July saw the largest impact during the quarter, as we continued to experience pronounced headwinds with international and domestic customers not moving forward with the adoption of our technology. Our third quarter expectations had assumed improving adoption trends in August and September following the receipt of two new 510(k) clearances for our Advanced Energy products, which we announced on May 26 and July 18 as well as the corresponding updates to the safety communication on June 2 and July 21. We were pleased to see improving trends in the U.S. during August and September. However, the pace and magnitude of these improvements were ultimately lower than we had anticipated.
Looking at our Advanced Energy performance by geographic region in more detail, third quarter sales of our Advanced Energy products in the U.S. decreased by more than 20% year-over-year. The year-over-year decrease in U.S. Advanced Energy sales was primarily driven by weakness we saw during the month of July. Relative to July, we were pleased to see improved year-over-year performance in both August and September, although as I mentioned, our improved performance remained below the levels that we had anticipated.
Outside of the U.S., we experienced slower ordering throughout the quarter in each of our primary markets due to the safety communication. These declines continued to be driven primarily by weaker demand for both generators and handpieces from distributors in key countries, most notably Latin America and Europe. In the Asia-Pacific region, we also experienced lowered demand in our largest market, Taiwan, which was driven in part by COVID-related lockdowns. As a result, international sales of our generators and handpieces both decreased by more than 40% year-over-year.
Shifting to a discussion of our operational performance and recent progress, during the quarter, our team was focused on two primary priorities. First, engaging with our new and existing U.S. customers and o-U.S. distributors to provide them with the latest information on important updates related to the safety communication, our two new clearances and the safety and efficacy profile of our products and second, continuing to advance our regulatory strategy to secure additional 510(k) clearances related to the use of our Renuvion technology in cosmetic surgery procedures.
With respect to our first priority, we have remained focused on spending as much time as needed with our existing customers and distributors as well as new prospects to ensure that they are comfortable with the appropriate use of our products and understand their risk profile. After receiving two new 510(k) clearances, we updated our portfolio of marketing materials to reflect the incremental specific clinical indications.
Our sales team has been focused on sharing these materials and working with our current users and prospects so that they understand our new specific clinical indications as well as the recent updates to the safety communication and how the communication remains focused on the use of Renuvion under our general indication for cutting, coagulation and ablation of soft tissue. Ultimately, this process is taking time, but we are encouraged by the increasing effectiveness of our sales force in recent weeks as they engage with customers and prospects to address their questions, eliminate potential confusion related to the safety communication. In our international business, we have remained focused on providing our distributor partners with the support and materials needed to engage with and educate their surge in customers in the same way.
Specifically, in the third quarter, we have been focused on engaging with our distributors in the many countries where our technology is used to explain our recent U.S. clearances and share our updated portfolio of marketing materials. As a reminder, the process of engaging with educating and updating surgeons outside of the United States has been more prolonged as we do not engage directly with the clinicians. The feedback that we have received globally from our customers continues to be positive, with the large majority appreciating our proactiveness and transparency, their portfolio of evidence-based support for Renuvion technology and its strong safety and efficacy profile.
With respect to the second priority that I outlined securing additional 510(k) clearances related to the use of our Renuvion technology and cosmetic surgery procedures, in Q3, we were very pleased to obtain the second of two new 510(k) clearances for new specific indications related to the use of our Renuvion technology. As we announced on July 18, our Renuvion APR handpiece is now indicated for use in subcutaneous dermatological and esthetics procedures to improve the appearance of lax or loose skin in the neck and supplemental region.
As I mentioned earlier, following the receipt of this clearance, the FDA posted related update to their safety communication. This clearance and the 65-patient multicenter IDE clinical study that supported our 510(k) application further validates the safety and effectiveness of our Renuvion technology. The clearance also expands our addressable market opportunity in the cosmetic market to include 200,000 neck contouring procedures performed in the U.S. annually. We remain on track to begin the limited commercial launches for our two new 510(k) clearances by the end of 2022. Having secured two new 510(k) clearances followed by related updates to the safety communication, there is no question we are better positioned with the important real world validation and clinical evidence to support our strong safety profile of our technology.
With that said, it is apparent that the disruption related to the safety communication has not been fully resolved. It continues to impact our performance and receiving two new 510(k) clearances this summer, while beneficial to overall demand has not resulted in the pace of recovery our prior guidance had assumed. Given the slower than anticipated pace of recovery in recent months, our regulatory team have been proactively engaging with the FDA to understand the potential path and/or potential new regulatory submission to secure an additional indication, which we believe will directly address the remaining limitations of the safety communication. In September, we submitted a pre-submission request for feedback of our proposed submission for specific indication demonstrating the safety of our Renuvion technology when used to improve the appearance of skin in combination with liposuction. Assuming normal timelines, we would expect to receive the FDA’s formal response and feedback on our proposed plan in December.
Stepping back, we are obviously frustrated with the ongoing challenges related to the FDA safety communication. But our team remains engaged, positive and productive. Most importantly, we remain convinced in the strong safety and efficacy of our technology. Through our proactive and collaborative engagement with the FDA, we aim to demonstrate our continued commitment as an organization to the responsible business practices and evidence-based therapies that safety improved patient outcomes. This is how we have always thought to distinguish Apyx Medical and established leadership within the industry.
We look forward to and support the FDA’s continued focus on ensuring that everyone in the industry is adhering to the safe and effective use of cosmetic surgery technologies, especially those used during or after liposuction procedures, which to the best of our understanding there are no products with a specific clearance to do so on the market today.
Let me turn it over to Tara to review our quarterly financial results and 2022 guidance. Tara?
Tara Semb
Thanks, Charlie. I will start my review of our third quarter results at the gross profit line since Charlie already discussed our revenue results. Gross profit for the third quarter of 2022 decreased $2.3 million or 29% year-over-year to $5.8 million. Gross profit margin was 63.2% compared to 68.1% in the prior year period. The decrease in our gross margin was driven primarily by changes in the sales mix between our two segments, with our OEM segment comprising a higher percentage of total sales, product mix within our Advanced Energy segment, and higher costs to manufacture inventory, as we continue to experience increased material and shipping costs. These headwinds to our gross margin performance were partially offset by geographic mix within our Advanced Energy segment with domestic sales comprising a higher percentage of total sales, and by the increased mix of newer product models like our APR handpiece, as we obtained registrations and introduced them into the various countries we serve.
Operating expenses decreased $0.5 million, or 4% year-over-year to $11.5 million. The decrease in operating expenses year-over-year was driven primarily by $0.3 million decrease in salaries and related costs, which was primarily due to the elimination of our bonus accrual. Loss from operations for the third quarter of 2022 increased $1.8 million, or 46% year-over-year to $5.8 million. Total other income net was $37,000 compared to total other expense, $0.2 million last year. The year-over-year change was driven primarily by the wind down of the supplier arrangement with symmetry surgical related to the divestiture of our core business segment. Income tax expense was $50,000 compared to $73,000 last year.
Net loss attributable to stockholders was $0.58 million or $0.17 per share compared to $0.42 million or $0.12 per share for the third quarter of 2021. Adjusted EBITDA loss for the third quarter of 2022 was $3.9 million compared to adjusted EBITDA loss of $2.7 million in the prior year period. As a reminder, we provide a detailed reconciliation from net loss attributable to stockholders to non-GAAP adjusted EBITDA loss in our earnings press release. As of September 30, 2022, the company had cash and cash equivalents of $14.8 million, compared to $30.9 million as of December 31, 2021.
Cash used in operations for the first 9 months of 2022 was $15.8 million, compared to $10.7 million last year. The increase in use of cash from operations is primarily attributable to the year-over-year increase in our net loss and our strategic initiative to increase our inventory levels in order to ensure we are able to meet customer demand in light of the challenging global supply chain environment.
Turning to a review of our 2022 financial guidance, which we updated in our earnings press release today. For the 12 months ended December 31, 2022, we expect total revenue in the range of $44.8 to $47.9 million, representing a decline of 1% to 8% year-over-year. This compares to our prior range of $51 million to $56.4 million, or growth of 5% to 16% year-over-year.
Our total revenue guidance range assumes Advanced Energy revenue of $37.3 to $40.3 million, representing a decline of 6% to 13% year-over-year, compared to our prior range of $44.5 to $49.4 million, or growth of 4% to 15% year-over-year, and OEM revenue of approximately $7.5 to $7.7 million, representing growth of approximately 36% to 39% year-over-year, compared to our prior range of approximately $6.5 to $7 million, or growth of approximately 17% to 26% year-over-year.
With respect to our Advanced Energy revenue guidance. First, our guidance range continues to reflect potential negative impacts on global new customer adoption and procedure related demand for handpieces as a result of the FDA medical device safety communications on March 14 2022. Second, our guidance range continues to assume contributions from the initial commercial launches for new specific clinical indications in thermal resurfacing procedures and procedures to improve the appearance of lax skin in the neck and sub mental regions. We continue to expect to enter full commercial launch for both of these indications by year end 2022. And third, our guidance range continues to assume that growth outside the U.S. is driven by demand and existing international markets.
In terms of our profitability guidance for fiscal year 2022, we now expect net loss attributable to stockholders in the range of $22 to $19.9 million, compared to our prior range of $20.1 to $16.6 million and adjusted EBITDA loss in the range of $14.1 to $11.9 million, compared to our prior range of $11.8 to $8.2 million. Our formal financial guidance for 2022 incorporates the following considerations for modeling purposes, first gross margins of approximately 66% to 67% this year, compared to our prior expectation of approximately 67% to 69%, and 69% in fiscal year 2021. Second, operating expenses to increase in the range of 8% to 9% year-over-year, compared to our prior expectation of approximately 14% to 16%. The midpoint of our updated guidance range reflects the reduction in our full year operating expense expectations by approximately $3 million versus what our prior guidance had assumed.
Third net interest in other income of approximately $650,000. Fourth, income tax expense of approximately $300,000 to $400,000, compared to $300000 to $500,000 previously, and we also expect non-cash depreciation and amortization of approximately $900,000 compared to $1 million previously, non-cash stock based compensation expense of approximately $6.8 million, compared to $7 million previously, non-controlling interest of approximately $114,000 and weighted average diluted shares outstanding of approximately 34.6 million shares.
Lastly, our 10-Q to be filed with the SEC includes language related to our balance sheet condition as of September 30, 2022. This language raises substantial doubt about the company’s ability to continue as a going concern for a period of at least 1 year, while it is not our practice to provide guidance related to expected cash burn, in light of the revision to our financial guidance for 2022 and today’s earnings release, we wanted to provide additional color for consideration when evaluating our balance sheet and financial condition.
First, as of September 30, we had cash and cash equivalents of $14.8 million. Second, as noted in our discussions with analysts and investors in 2022, we have an income tax receivable on our balance sheet, which represents incremental liquidity of approximately $7.5 million. Third, the midpoint of our updated financial guidance reflects a $3 million or 6% decrease in total GAAP operating expenses compared to what our prior guidance assumes. And fourth, the low end of our updated guidance range assumes a GAAP net loss of $4.9 million in Q4, reflecting modest sequential improvement. We now expect working capital use of cash in Q4 to be approximately $5 million, which is offset partially by non-cash, depreciation and amortization and stock compensation expense of $2 million. Together, these are expected to result in cash at year end of approximately $7 million.
We actively continue to evaluate all potential options to enhance our balance sheet provide additional flexibility and to secure the capital needed to run the business and 2023 given the continued uncertain timing of our income tax receivable from the U.S. government.
With that, I’ll turn the call back to Charlie for closing remarks.
Charles Goodwin
Thanks, Tara. We have revised our financial guidance for 2022 to reflect both the softer than expected sales results in Q3 and more gradual pace of recovery in business trends during the fourth quarter compared to what our prior guidance had assumed. In addition to Tara’s guidance related comments, I want to emphasize that we are very focused on prudent expense management to maximize our resources during this challenging time. Through our efforts in 2022, we expect to position Apyx Medical to return to our historical cadence of strong growth and our trajectory of progress towards profitability in the years to come. With this in mind, we are working to secure the requisite capital to facilitate our strategic growth initiatives.
Looking ahead, in the fourth quarter, we continue to engage with and support our customers and prospects helping them better understand the recent developments related to the safety notice and appreciate the two new clearances we have received. In doing so we will leverage the updated promotional language now featured in our marketing program. We will also continue our recent pace of progress on the regulatory front to secure new clearances with additional clinical indications related to the use of Renuvion technology, while preparing to commercialize our Renuvion technology for the new indications we have received.
More than ever, we are excited by the safety and efficacy outcomes demonstrated by our Renuvion technology and its differentiation within the marketplace. We appreciate our employees and distributors for their efforts helping us drive innovation in the cosmetic surgery market by facilitating its awareness and adoption. I would like to thank our customers, investors and everyone on today’s call for their continued support of Apyx Medical and our mission.
With that, operator, let’s now open the call for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And our first question comes from the line of Matt Hewitt with Craig-Hallum Capital Group. Please proceed with your question.
Matt Hewitt
Good morning. Thank you for the update and for taking the questions. Maybe one question then a follow-up, but the first question is domestically, you’re putting a pretty strong second quarter. And that was despite the FDA safety communication in March, what happened between Q2 and Q3 that caused the U.S. or the domestic market to pull back a little bit?
Charles Goodwin
Yes, thanks, Matt. Our U.S. AE sales decreased by more than 20% year-over-year in Q3 as I stated before, our sales performance in July drove the majority of that year-over-year decline. And we did see improved performance in August and September, but the pace was still lower than we expected versus the guidance, the U.S. drove about half of that mix versus the low end of our guidance. And the softer than anticipated sales performance was primarily due to a slower adoption by new customers related to the safety impact.
Matt Hewitt
Okay, so maybe just a delayed reaction from the safety communication in the U.S. And then as far as the international markets are concerned, and I think that you had kind of laid this out on your Q2 call that you’re expecting a little bit more of a slower recovery international, but as you talk to distributors in the international markets, are there any that have had some success kind of bouncing back maybe a little bit quicker than their peers? And if so, is that something that you can replicate with the remainder? Thank you.
Charles Goodwin
Yes, you bet. I just want to be clear that outside the U.S. it’s still the same. It’s the sale decreased was by more than 40%, and but we did see sequential improvements in August and September, even outside of the United States and Latin America and Europe saw the most notable impact from the safety communication. But things in both of those regions are still improving. They are just not improving at the pace that we thought that’s it want everybody understand that things are getting better. They are just not getting better as quickly as we thought they were.
Matt Hewitt
Got it. Thank you.
Operator
Our next question comes from the line of Matthew O’Brien with Piper Sandler. Please proceed with your question.
Matthew O’Brien
Great. Thanks for taking my questions. I guess Charlie, you guided in the middle of August, you knew July was really soft, but seemed like maybe your thoughts on the rest of the year are a little bit more aspirational than I guess balanced. So, as we look at Q4, there is a big step up again, especially in the advanced energy business. So, why the competence and that type of improvement, and what are you seeing as far as new indications go and enthusiasm for those new indications?
Charles Goodwin
Yes. So, we are confident in the ability to deliver at least the low end of our guidance range. And we believe it represents a realistic view of the potential risks and headwinds that we are facing in the fourth quarter. We do have multiple tailwinds. Also, in the fourth quarter, obviously, there is – it’s the quarter where we see the strongest growth from Q3 to Q4, because of the seasonal dynamics in our business. Our visibility is improving month-to-month, and what’s going on in the U.S. and outside the U.S., and our engagement with prospects in recent months has resulted in the strong pipeline. The key though is that it is taking longer to close in Q3 than we would like, which obviously puts a lot more potential sales in Q4. And so we believe that the Q4 trends to-date are very encouraging. And look, the last thing that we want to do is be in this situation again, come March, we had always done a very good job of being able to forecast this business before the safety notice. And it has proven more difficult for the safety notice, but we are very comfortable with the low end of our guidance.
Matthew O’Brien
Okay. That’s helpful. And then your comments about getting back to more historical growth rates, you are going to have a really easy top here in ‘22. So, I mean should we see – should we anticipate your guiding to more of a big snapback next year or just more kind of similar growth to what we have seen historically and hopefully, there is some upside?
Charles Goodwin
Yes. So, look, we appreciate the question. But as of right now, we are not obviously going to talk much about ‘23, other than what was in the prepared remarks. But we obviously remain incredibly bullish about this business, incredibly bullish about our opportunity. And in March, we will definitely talk about what we think ‘23 is going to bring to us.
Matthew O’Brien
Okay. Understood. Thank you.
Operator
Our next question comes from the line of Kyle Bauser with Lake Street Capital Markets. Please proceed with your question.
Kyle Bauser
Great. Thanks for taking my questions and for all the updates. Charlie, you mentioned in the prepared remarks a little bit about your request to go back to the FDA and evaluate pathways to get a clearance in conjunction with WIPO. Just wondering if you could provide a little bit more color on, what the potential pathways would be? I know that you are waiting to hear back by December. Just kind of curious, do you think you have the data that could be sufficient for a clearance to need to run a trial, just kind of curious? Thank you.
Charles Goodwin
Yes. Thanks Kyle. I appreciate the question. As I have said in our prepared remarks, we are focused on securing additional indications that we believe would directly address the remaining limitations of the safety communication. And we submitted a pre-submission request to the FDA in September. And we always were going after to get new indications, just because we got the first two doesn’t mean that we were stopped. It’s always been our plan to get more. The objective of this specific request, though, is to obtain their feedback on the proposed submission for a specific indication demonstrating the safety of our Renuvion technology when used to improve the appearance of skin in combination with liposuction. So, our request is supported by safety data from our existing IDE study in the supplemental area, and real world evidence in peer reviewed clinical studies. And so we believe that it is a very strong case. And it very much highlights the safety of Renuvion. And assuming the normal timelines, we would expect the FDA’s formal response and feedback from our plan in December.
Kyle Bauser
Got it. And I appreciate that. And then we get the follow-up to that. Have you gotten pushback from I guess either distributors or physicians in the U.S. who have said, I would like Renuvion, but I am just waiting for a clearance with Renuvion in conjunction with lipo or is there I guess the marketing efforts, of course, just been towards treatment in the segmental region and subdural coagulation and resurfacing. So, maybe that doesn’t come up, but I am just wondering, are there physicians out there that are kind of waiting for that final clearance to move forward and make a decision?
Charles Goodwin
Yes. So, I don’t know if specifically waiting for that is necessarily the right thing where there is confusion in the marketplace among new prospects is that when you look at the safety notice the use in combination with liposuction, if they believe that other technologies have the indication for that, because they have not been called out by the FDA, okay and we have. And so the confusion is that something is approved in combination with liposuction for these procedures. And what we are having to do is go in with data, the facts and everything else and talk to prospects and convince them and that’s why the sales process is taking longer than we thought. So, I don’t know that they necessarily are waiting for something. But it’s just taking our sales teams all over the world longer to get the prospects comfortable that they have that. But the fortunate thing for us is the facts are the facts. And they are to our knowledge, this indication doesn’t exist for anybody.
Kyle Bauser
Got it. Okay. So, just kind of resolving the confusion in the marketplace, getting people educated is going to be key here, okay. Got it. Appreciate it. Thank you, Charles. I will jump back in the queue.
Charles Goodwin
Thank you.
Operator
Our next question comes from the line of Dave Turkaly with JMP Securities. Please proceed with your question.
Dave Turkaly
Okay. Good morning Charlie. Maybe just quickly, could you talk a little bit about your rep headcount? And what’s been going on there? Are you still – are you adding people? Are you losing anyone because of this? I guess I just love your thoughts on how that forest looks today versus maybe in the past?
Charles Goodwin
Yes. So, our team is actually the same that it’s been it’s about 40 feet on the street, like it has always been through this whole time. And I can’t actually tell you how proud I am of the team. I mean it is a battle out there for them every day, but they remain steadfast and passionate about the technology and are doing everything that they can on a daily basis to help alleviate the confusion that exists in the marketplace today as a result of the safety notice. And so knock on wood as we sit here today, the team remains active engaged, and it’s the same team that we have had for the entire year.
Dave Turkaly
That’s great. And just to follow-up on the lipo, the specific language, so I recall the communication, but I didn’t remember that it had something specifically within combo with lipo, which I am imagining now that it did. I just wanted to confirm that. And then as you look at sort of, I could see new customers saying, yes, maybe I don’t buy this before I feel totally comfortable. But the existing folks, I mean it seems like they must be impacted as well, given the numbers. So, I am just curious if there is any delineation between someone that’s new, which I think would be more understandable versus say, a legacy person. That’s looking at the statement now has two new clearances. And why they might not be more willing to jump right back in if they had been using it that way in the past?
Charles Goodwin
Yes. So, the first part of your question is yes, there were three parts of the safety notice. Two of them had been reversed by our indications for submental area and for wrinkles and rhytides. The other part of the safety notice was used in combination with lipo. And so that portion still exists. And in fact, when the FDA updated their safety communications after our clearances for the two specific indications they still made a point in the updates of talking about the fact that it hasn’t been proven safe or effective with use for lipo, okay. So, that’s number one that still does exist. Your second part of the question is that we actually have had a tremendous amount of customer retention all over the world. In certain parts of the world, there was a pause to see what this means, but because of the work of our sales reps and distributors all over the world, we have had to – we have been engaged with our existing customer base and we have done a great job of holding our existing customer base. And the FDA safety communication has clearly impacted our adoption. But we have increased our active installed base by more than 30% year-over-year in both the U.S. and international markets. And we are pleased to see our active installed base increased in the mid-single digits on a quarter-over-quarter basis, both U.S. and internationally. And this reflects the strong execution of our sales team, and gives us the confidence that we are on the road to recovery, albeit at a much slower pace than we originally assumed. So, we are holding well through that.
Dave Turkaly
Thank you for that.
Operator
[Operator Instructions] Our next question comes from the line of Matthew O’Brien with Piper Sandler. Please proceed with your question.
Matthew O’Brien
Thanks for taking the follow-up. And I am not sure if it’s for Charlie or Tara, but I would just love to hear a little bit more on the cash side of things. I mean I think Tara, you said you came out of Q3 with about $15 million cash, are expecting the end of this year to be at $75 million [ph], but you are making some adjustments as far as spending goes, still seems like a lot of burn here in Q4. So, can you flesh that out a little bit more, options that you have or how soon we could see some of those options executed on in terms of raising capital? And then sorry for the long question. But just any sense of the income tax receivables timing of when you can get that I am assuming that $75 million is not in your year-end cash number? Thanks.
Tara Semb
It is not. And we are very close with the IRS on that process. It’s been a long painful process. Again, this was part of the Cares Act, which under COVID, happened 2 years ago. But we do see that we feel that we are close to the end of the processes that we have been in the interaction we have had with the IRS. So, we are very hopeful to get that. But yes, it’s not included in that that ending balance. And we continue to look at expenses to make sure they are commensurate with the revenue expectations. And as we speak, we are actively looking at all options for enhancing the balance sheet and increasing our liquidity in the near-term.
Matthew O’Brien
Got it. Thank you.
Operator
[Operator Instructions] Our next question comes from the line of Russell Cleveland with RENN Capital. Please proceed with your question.
Russell Cleveland
Hello fellows. One of my questions, the enormous harm that was done to us by the FDA, with their safety communication, I am wondering what the FDA could do to make amends here. I know the bureaucrats basically don’t – will never admit a mistake. But there seems to me a need for clarification, because we have now had our 510(k) which have shown were safe and effective on many of our products. So, the question is, what can we do to interact with the FDA to clear up this mess they have created. I really don’t believe they have come out to ruin the company. But that’s what’s exactly what’s happening. So, could you comment on that?
Charles Goodwin
Yes. So, look, we are doing everything that we can do with the agency, our regulatory teams are involved in getting the new clearances and getting the requisite things that are taken care of there for to do that. And we are partnering with them in order to get everything that we need. So, we can be the company in a leadership position as we move forward. And we will get through this. This isn’t something that we wanted or isn’t anything that we asked for, is not very fun for us on a day-to-day basis. But we as a company believe in our technology, but we believe in our mission. We will get this taken care of. It’s just taking a turn that we didn’t want. But we respect the agency, and we will continue to keep working with the agency to get things done.
Russell Cleveland
Well, specifically, what could the agency do to make amends here? I think that’s the big question. And at the time, I expressed to you that this communication needed to be challenged. And so the big question is, what can they do from the FDA to clear up this whole misinformation really about our products?
Charles Goodwin
Yes. Well, we are working…
Russell Cleveland
What can they – what can we do as a company to talk to the FDA about this?
Charles Goodwin
Yes, we are working with – talking to the FDA as the company and working with them. And we are not going to talk publicly about what a lot of those things are, but our focus is definitely on working with the agency to get this resolved.
Russell Cleveland
Okay, So, are they aware of the damage they have done?
Charles Goodwin
Look, we have dialogue – we have constant dialogues with the agency. The agency is aware of what’s going on, yes.
Russell Cleveland
Okay. Thanks so much for taking the question.
Operator
And we are currently showing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.
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