MiMedx Group, Inc

Good afternoon, and thank you for standing by. Welcome to MiMedx third quarter 23 operating and financial results conference call. At this time, all participants are in 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 MiMedx. Thank you. You may begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx Third Quarter 2023 Operating and Financial Results Conference Call. With me on today's call are Chief Executive Officer Joe Capper and Chief Financial Officer Doug Rice. 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 MiMedx.com. Joe will kick us off with some opening remarks, and Doug 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, EBITDA, free cash flow, and cash balance costs. future margins and expenses, and expected market sizes for our products. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors. Actual results and market sizes will depend on a number of factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances and delays, 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, which we provide a reconciliation to GAAP measures in our press release, which is available on our website at mymedics.com. With that, I'm now pleased to turn the call over to Joe Capper.

Joe? Thanks, Matt, and good afternoon, everyone. Thank you all for joining us on today's call. It is my pleasure to report on another excellent quarter. As you will hear today, the company is executing across the board, commercially, operationally, and financially. In addition to delivering outstanding results for the period, we continue to improve the operational effectiveness of the company and prepare for the launch of another new product. I will detail these positive developments one by one, starting with our strong financial performance. Q3 marked the third consecutive quarter during which we grew revenue by 20 plus percent. This type of consistent sales performance with above market growth rates is a testament to the team's stellar execution and our sound strategic plan. We've also been clear in our messaging that we expect to generate greater profitability as the business grows. In fact, on our last call, we guided to an adjusted EBITDA margin of above 20% for the second half of 2023, demonstrating excellent leverage as the business scales. We are happy to report that we did indeed achieve this objective in Q3. We have a powerful combination of highly talented individuals, innovative solutions that help people heal, and industry-leading sales and operations infrastructure. Our multifaceted approach in the wounded surgical markets is generating the impressive results we were targeting when we repositioned the business this past summer. As importantly, the organization is well situated to continue our momentum and significant growth for the foreseeable future. More on our long-term growth plan in a minute. First, I'd like to touch on some of the more noteworthy accomplishments from the quarter. Q3 year-over-year net sales grew by approximately 21% to $81.7 million, another outstanding growth quarter. Gross profit margin was 82% and would have been even higher, but for a contractually committed last-time buy of some lower-margin product. Adjusted EBITDA was $17.6 million, or 21.6% of sales, up from the adjusted EBITDA of $2.4 million in Q3 of last year, representing a year-over-year increase of over $15 million. We ended the quarter with $81.2 million in cash, up $12.5 million in the quarter. We announced a collaboration with VediWound, a global leader in wound care, which plans to use our EpiFix product during the wound healing phase of its Ascarx Phase III study in venous leg ulcers. And we recently announced the launch of EpiEffect, a new product designed to meet the expanded needs of customers in the private office segment. I'd also point out that our efforts to streamline operations and build on our leadership position in the wounded surgical markets are working as designed and have helped to dramatically improve our financial profile over the last few quarters. As you will recall, this was the course we charted when I arrived nine months ago. My intent has been to create value by focusing our commercial efforts and unlocking leverage in the business as we grow. We are clearly on the right track as evidenced by the nearly 22% adjusted EBITDA margin in the third quarter. Moving now to the company's progress on our three primary growth drivers. As a reminder, these are the areas in which we are concentrating our time and resources in order to best position the company for long-term success. Our highest priority is to continue to build on our leadership position in the women's surgical markets by enhancing our product portfolio and expanding geographically. For the third quarter, this focus again produced growth in all sites of service. Sales grew by about 18% over the prior year quarter in the hospital sector, which continues to benefit from our two new product introductions late last year. We continue to invest in clinical research, and are looking to expand our medical affairs efforts, investments which are critical to support our growth in general, and more specifically in the surgical suite, which is certainly a focus for the customer. In the private office segment, we grew sales by 17%. While still a healthy clip, this growth rate slowed a bit sequentially, likely driven by the massive amount of confusion created by the ill-fated attempt to introduce new local coverage determinations, or LCBs, for skin substitutes by three of the Medicare administrative contractors, or MACs. The proposed LCDs, which cover 15 states, were scheduled to go into effect on October 1st and would have set an arbitrary cap of four outgrads per application per patient, potentially reducing levels of care. The LCDs also have dramatically restricted the number of products and companies eligible for reimbursement. Ultimately, the plan was abandoned, but not before creating much confusion. We believe this uncertainty impacted ordering behavior during the quarter, as providers grappled with how they might have to modify care protocols. Our position on this subject has been clear. We will continue to advocate in favor of changes that would level the playing field by eliminating the opportunity to gain a reimbursement system while ensuring access to products like ours that have proven to be highly effective. That said, we recently strengthened our offering in the private office setting. The newest addition to our advanced wound care solutions product portfolio, EpiEffect, was recently added to the Medicare ASP list, clearing the way for its full commercial launch, now underway. EpiEffect offers a thick, tri-level configuration of amnion, chorion, and intermediate layers with handling characteristics and product attributes that make it Preferable treatment option for deep tunneling wounds or cases or securing the graft in place with sutures is desired. We are excited to highlight this product to so many of our customers at SAWC later this week. We remain committed to organic product development and innovation of our market-leading placental drive technology as we see this as an essential element of future growth. Speaking of best-in-class products, as I mentioned, we are pleased to be supporting MediWound, which has chosen to use our EpiFix product in its Phase III trial for Ascorax, its next-generation debridement product now in development. According to MediWound, by incorporating market-leading and extensively studied EpiFix into its trials, it aims to maintain consistency among study subjects and optimize the potential for complete healing throughout the study duration. It's rewarding to receive such a high-quality third-party validation of our technology. Finally, we remain encouraged by the strides we continue to make in developing the Japanese market. Those that are familiar with launching new products in Japan know there is typically a longer lead time to realize the potential of a product than in other geographies. However, given the large market opportunity, it is well worth the time and effort. We are encouraged by the early strides we are making and remain optimistic about the future of this business. Our next priority is to develop opportunities in adjacent markets to create additional growth drivers for the company. As I stated on previous calls, we are evaluating ways to expand our skin substitute portfolio beyond amniotic tissue to include xenografts and or synthetics. Notwithstanding the superior qualities of our percentile-derived allografts, this is a market-driven strategy which will open up segments of the market where it is difficult, if not impossible, for us to compete today. We believe this approach will be highly complementary to our current business, allowing us to leverage our entire commercial infrastructure. On the surface, this seems like an area where an inorganic effort could make sense. Given our much improved financial profile, I know many of you are excited to see us move in that direction. As applicable opportunities arise, we will give them careful consideration. To be clear, any potential inorganic target would have to first and foremost be an excellent cultural and strategic fit, which would accelerate our growth plan. It would also have to have a clear pathway for becoming creative. And finally, our last objective is to build a corporate discipline around expense management, rationalization, and continuous process improvement. While we continue to exceed the goals put in place to measure our progress in this area, this objective is really more about building a culture that is focused on getting the best return from our limited resources. It has been my experience that institutionalizing this mindset early on will pay dividends in terms of gaining operating expense leverage as the business scales. During the quarter, we made excellent progress executing against these three strategic objectives. Our results demonstrate that our approach is having the desired effects. We will continue to identify and execute against most relevant growth drivers for our business, as we see sustained long-term performance as the best way to create tremendous value. Before I turn the call over to Doug, I want to provide a few comments on the series of the preferred stock repurchase we executed this past Friday. First, I would like to thank Haysman for their past and continued support of the company. We could not ask for a better partner. As our stock started to show signs of meeting the mandatory conversion criteria, we began conversations with Haysman about how we might help them manage an orderly transition. Ultimately, this resulted in us buying back half of their position at $6.13 per effectively converted common share for a total of $9.5 million. A stock repurchase at this point in the company's evolution would not typically be my highest priority for use of capital. However, this was opportunistic and made good sense since it stopped the 6% preferred dividend on the shares repurchased and was executed at a discount to the convert price of $7.70. Given the rate at which we are building cash and our much improved borrowing capacity. We do not see this as in any way impairing our ability to capitalize on strategic opportunities that may arise. Now let me turn the call over to Doug for more detail on our financial results.