MiMedx Group, Inc

Good afternoon, and thank you for standing by. Welcome to the Memetics First Quarter 2023 Operating and Financial Results Conference Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Matt Notarianni, Head of Investor Relations for Memetics. Thank you. You may begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the Memetics first quarter 2023 operating and financial results conference call. With me on today's call are Chief Executive Officer Joe Capra and Chief Financial Officer Pete Carlson. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the investor relations website at memetics.com. Joe will kick us off with some opening remarks, and Pete will provide a summary of our operating highlights and financial results for the quarter, and then Joe will conclude with some additional updates, including a discussion of our financial goals. We will then be available for your questions. Before we begin, I would like to remind you that our comments today will include forward-looking statements, including statements regarding future sales growth, future margins and expenses, expected market sizes for our products, and potential timelines for clinical trials and FDA submissions and reviews. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors. Actual results, market sizes, timing, and FDA review will depend on a number of factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances and delays, the results of our clinical trials, our interpretation of those results, and other factors. Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K and our quarterly reports on Form 10-Q. Also, our comments today include non-GAAP financial measures, and we provide a reconciliation to GAAP measures in our press release, which is available on our website at www.memetics.com. And with that, I'm now pleased to turn the call over to Joe Catler. Joe.

Thanks, Matt. Good afternoon, everyone. Well, it's only been two months since our last call. We have a lot of exciting news to share, starting with our outstanding first quarter performance, setting the stage for what we anticipate will be an extremely successful 2023. I've been on board now for a full quarter, and as I stated on our last call, this early assessment process continues to present a business that far surpasses my original expectations. During these first 90 days, I've spent time analyzing all parts of business, formalizing our strategic planning process, meeting with customers, business partners, and several of you in the shareholder community, all in an effort to determine our best path forward. While still early on, it's becoming clear to me that we operate in a relatively less orderly area of the healthcare industry, which is abundant in untapped opportunity. I will discuss in more detail our plan to ensure the company capitalizes on these many opportunities while continuing to optimize our operating platform. But first, I want to hit on some of the most noteworthy highlights from the first quarter. Q1 year-over-year net sales grew by nearly 22% to $71.7 million, the highest first quarter net sales performance we have delivered in five years. Gross profit margin is 82.7%, which was an improvement sequentially. And adjusted EBITDA was $5.5 million, up from a loss of $1.7 million a year ago, a $7.2 million swing in the right direction. These positive results all reflect superb execution on the part of the entire company. Among these impressive numbers are adjusted EBITDA warrants special attention. To be able to generate $5.5 million of positive adjusted EBITDA so early in the year clearly shows that we are beginning to unlock leverage in the business, which will undoubtedly improve with scale. We have no interest in revenue just for the sake of growing. We must and will improve our profitability as we grow. Naturally, this will increase free cash flow generation, our balance sheet will improve, and we will create growth funding optionality. Our better-than-expected performance becomes that much more impressive when you consider that our expense burden in Q1 is typically higher than other quarters during the year. Specifically, we had about $3 million of expense during the quarter as a result of payroll taxes reset in January 1st and the cost of our national sales meeting, both of which will not recur for the remainder of the year. These expenses and the annual bonus payout were used to build cash specific to the first quarter. As such, we expect to build cash as we move further into the year. Pete will unpack the numbers in more detail, but suffice it to say, we could not be more excited about this great start to the year. Our best-in-class products, highly skilled team, and improving financial profile give me tremendous confidence in our ability to create significant value as we take my medics to new heights. It is my practice on earnings calls to report the company's progress as it relates to the key elements of our strategic focus. On our last call, I spoke about the three areas in which we are concentrating our time and resources in order to drive growth and sustained value creation. As a reminder, our first growth objective is to build on our leadership position in the wounded surgical markets by enhancing our product portfolio and expanding geographically. Success in achieving this objective will be dictated by how well our commercial organization performs over time. This first quarter was certainly an example of what commercial excellence looks like. To that end, during the quarter, we achieved year-over-year revenue growth across all sites of service. we had a welcome sales increase in the private office segment. You may recall that this has been a particularly challenging area for us, given the current Medicare reimbursement environment, which creates an opportunity for certain companies to manipulate the system. During the quarter, the OIT published a report relating to the reimbursable practices we have repeatedly raised as concern. While the OIT report is clearly aligned with our position, it is premature to determine if and when these practices will be reined in. We continue to stay close to the rulemaking process and remain optimistic it will result in a more level playing field. In the surgical recovery segment, we continue to build momentum, particularly around our new products, which were launched in the second part of last year. We believe the future for growing our footprint across a variety of surgical procedures remains bright, particularly as a body of real-world evidence for a wide range of applications continues to grow. And finally, we made more headway developing our business in Japan, with initial sales starting to come in from this important international market. We anticipate adoption to begin to ramp in the coming months and quarters. Our second growth objective is to develop opportunities in adjacent markets to create additional growth drivers for companies. Think about this as a means to, first and foremost, strengthen our position in the market segments in which we currently compete by blogging our offering. As such, we have formalized the process for assessing and prioritizing various strategic opportunities as they arise. Additionally, we will look for ways to leverage our technology and commercial strength in order to develop adjacent opportunities, with the knee OA project representing our major investment. To that end, we were excited to get the knee OA study officially up and running and to begin enrolling patients during the quarter. As a reminder, in this first of two required studies, we expect enrollment of approximately 470 patients with three arms, a six-month observation period, and six additional months of monitoring. We will continue to report on the project as we achieve critical milestones or have newsworthy information to share. Finally, our third objective is to build a corporate discipline around expense management, rationalization, and continuous process improvement in order to ensure our growth becomes more profitable over time. As the Q1 results indicate, this approach is already beginning to take shape within the organization. Our efforts to enhance efficiencies and production yields and operations resulted in a sequential improvement in gross margin. I anticipate that the team will continue to execute on our plan. We saw the inverter, margin improvement, and enhanced ability to scale over time. Additionally, the wound and surgical contribution margin improved to 28.5% in Q1. As you will recall, our goal is to get to 30%, and we are well on our way. Another efficiency metric we've spoken about is to get our corporate expenses as a percent of our net sales to 20% or below. For Q1, this number improved to 20.4% as a result of efforts to curb G&A across the enterprise. All in all, the team did an excellent job building on the momentum we had coming out of last year. Our formula for success lies in our ability to consistently identify and execute against the most relevant growth drivers for our business. As I mentioned on our last call, if we remain focused and execute on the plan I just outlined, I'm confident we will continue to build on this franchise, have the opportunity to create tremendous value, and once again, establish Plymedics as a world-class healthcare company. Now let me turn the call over to Pete, who will recap our first quarter results. Pete?