MiMedx Group, Inc

Good afternoon, and thank you for standing by. Welcome to the MiMedx First Quarter 2024 Operating and Financial Results Conference Call. At this time, all participants are in a listen-only mode. The 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 now begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx First Quarter 2024 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. 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 growth, 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 report on Form 10-Q, which we plan to file shortly. 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.mymedics.com. With that, I'm now pleased to turn the call over to Joe Caffer. Joe?

Thanks, Matt, and good afternoon, everyone. We thank you for joining us on today's call, as we are very pleased to report the results of another outstanding quarter. As we communicated on our last quarterly call, we expected the momentum we generated in 2023 to continue into the first quarter of this year, and that's exactly what happened. In fact, as you will hear, the business performed even stronger than we expected in Q1, with revenue climbing at a rate of 18% year-over-year. On our year-end call a few months ago, we stressed the importance of the transformative steps we had taken in 2023 to establish a strong foundation from which we could build upon. That seems to be exactly what is happening. As a result of our leadership team's solid execution on our key initiatives, coupled with the debt refinancing completed in January, we are now operating with a much improved balance sheet and profitability profile. This provides far greater flexibility as we seek to establish additional growth drivers and strengthen our market position while remaining highly focused on being a growth-oriented and profitable med tech business. Given our success improving the financial profile of the company in a relatively short period of time, I am confident we have the right strategy to create substantial value in the business, even in the face of the typical regulatory and reimbursement uncertainty any health care business encounters. As an industry leader, we will continue to endeavor to shape conversations in these areas. Rest assured, we are working proactively with the help of outside advisors to do just that. Later in the call, we will provide our initial thoughts on the proposed local coverage determination that were published late last week and why we think this is ultimately a positive development for MiMedx in the coming quarters and beyond. But first, we need to take a few minutes to discuss our outstanding first quarter results and update you on the progress we made regarding our strategic initiatives. For the first quarter, net sales grew year over year by approximately $13 million, or 18%, to $85 million, marking another outstanding growth quarter. Gross profit margin improved to 85% in the quarter. Adjusted EBITDA was $19 million, or 22% of sales in the first quarter, representing an increase of $9.5 million over the prior year quarter. We acquired certain assets from Telebio and established a distribution agreement with Regenity, paving the way for the introduction of our first Xenograph product. As previously announced, we refinanced our debt facility under more competitive terms in January, dramatically improving our financial profile. We ended the quarter with $48 million in cash after using $30 million to pay down a revolving line of credit and $5 million to complete the telebio regenerative transaction, in addition to other Q1 cash obligations. And finally, we were pleased to be able to add two new directors during the quarter with the appointments of Tiffany Olson and Dorothy Pui, two highly accomplished individuals whose deep MedTech expertise will make them valuable assets to the board moving forward. Additionally, as we disclosed in our proxy filing last week, Dr. Phyllis Gardner and Dr. Michael Giuliani will not be standing for reelection at our upcoming annual meeting. Phyllis and Michael played pivotal roles in shaping the direction of the company during particularly challenging times, and we are incredibly thankful for their contributions over the last several years. Turning now to our strategic focus. On our last four quarterly calls, I provided updates on our progress executing on the following three primary growth drivers, which we laid out at the beginning of 2023. One, continuing to build on our leadership position in the wound and surgical markets by enhancing our product portfolio and expanding geographically. Two, developing opportunities in adjacent markets to create additional growth drivers. And three, building a discipline around expense management, rationalization, and continuous process improvement. I am incredibly pleased with the progress the team continues to make in these areas, which has fueled our success. Given the evolution of the business, we have refined our plan for 2024 and will provide updates around the following growth initiatives. First, we will continue to innovate and diversify our product portfolio to maximize growth. It has become increasingly clear that all of the sectors we serve within the wound and surgical markets are benefiting from the products we have brought to market. Over the last 18 months, we have introduced three new allografts, two geared toward the surgical market, AmnioEffect and Axiofil, and one for the private office, EpiEffect, the launch of which continues to exceed our expectations. All three products have been met with widespread market acceptance, and we have received exceptional feedback on the clinical benefits being derived from each. In fact, during the first quarter, we once again grew in all sites of service due in large part to the success we are experiencing with these products. And of course, we continue to have success developing our EpiFix business in Japan, where our sales grew by 146% in Q1, albeit off of a low base. We remain confident that this market will continue to develop into a meaningful contributor over time. This leaves me with two overriding themes to expect from us going forward. Number one, we need to continue to innovate products designed to meet emerging customer needs. This is a proven competitive advantage we must leverage. As we have experienced, our customer base will readily adopt the product when it hits the mark. Number two, the organization has a strong core competency at introducing new products into the various market segments. With this in mind, we hope to introduce as many as three more products over the next 18 months, one of which will be our first Xenograph product. This is a good segue to our second area of focus, which is to develop and deploy programs intended to expand our footprint in the surgical market. One of the rationales for suspending our knee OA program last summer was to redirect resources to better capitalize on opportunities in various surgical settings. There are tens of millions of surgeries performed in the US every year, many of which could benefit from the use of our products. While increase in our surgical presence has been of strategic importance, this year we are ramping up our clinical and marketing investments and refining this focus in select surgical settings where evidence is mounting as to the efficacy of our products. We added and will continue to add resources to our medical liaison group to improve our support in target areas. We are partnering with key opinion leaders to publish on outcomes in markets like neurosurgery for craniectomies, dermatology, pulmonary surgeries, and colorectal anastomosis. We are excited to fund these activities with the firm belief that the future for growing our footprint across a variety of surgical procedures remains bright. particularly as the body of real-world evidence for a wide range of applications continues to grow. And of course, with the upcoming launch of our first xenograft product, we will soon offer a more enhanced portfolio of solutions where such products may be more appropriate for various reasons. As a reminder, this is a 510 cleared bovine-derived collagen matrix particulate that is indicated for the management of moderately to heavily exuding wounds and to control minor bleeding. We expect to be ready for a soft launch of this product in third quarter with full market release later this year. Our third initiative is to introduce programs designed to enhance customer intimacy. You might wonder why this is of such importance that it rises to the level of one of our three most important strategic initiatives. The answer is simple. We want to lower our customer churn. In our markets, customer turnover is high relative to other industries, which impacts margins. We believe we have an opportunity to change this and build a much stickier association to an expanded customer-centric offering, thereby increasing the lifetime value of each customer. This will not be easy, especially when dealing with non-contracted price-sensitive markets. However, we plan to implement a series of interconnected initiatives designed to improve customer intimacy, embedding it into the DNA of the organization. To that end, during the first quarter, we were excited to launch MyMedics Connect, our new customer portal, providing a far more streamlined digital connection with referring practices, with many enhanced features and more in development. We are experiencing significant customer acceptance and enrollment far in excess of our initial early adoption projections. Before I turn the call over to Doug, I want to again provide a quick update on Axiofil and our path forward. As you will recall from previous communications, the FDA has taken a position that because Axiofil is manufactured as a particulate, it is more than minimally manipulated and therefore subject to regulation as a Section 351 product or biologic drug. As you will also recall, we followed the FDA's request for designation process at their suggestion. In response to both the pre-RFD and later the RFD, the agency maintained the position that Axiofil is a 351 product. They went out of their way in both responses to tell us why the 510 pathway is also not appropriate for Axiofil. This was all the more confusing since in February, the FDA issued a 510 clearance on a nearly identical human tissue-derived particulate product prior to sending our RFD response. There are now three nearly identical products in the market. One has a 361 designation, one has a 510 pay clearance, and Axiophil, which is being classified as a 351, requiring the most time-consuming and expensive path to approval. Our only available means for further appeal was to file a legal claim in federal court, which we filed in March. given the arbitrary and capricious manner in which the FDA is regulating these lifetime products. Because of the administrative nature of these proceedings, we expect the process to take a year or less at a cost estimated to be in the six figures. In the meantime, we will continue marketing the product, which, as a reminder, has an amazing safety and efficacy record. In addition to fighting the good fight for continued access to Axiophil as a 361 product, Our mitigation plan calls for the submission of a 510K application on a human tissue-derived product later this year. This product will have characteristics similar to AxioFill and the 510K clear product I referenced earlier. And as mentioned, because AxioFill revenue remains immaterial to our overall performance, we believe the launch of our Xenograft particulate could offset most, if not all, of any potential revenue loss if we ultimately fail to reach a resolution to keep axial fill on the market. Above all else, we hope this proceeding will shine a light on the need for regulatory clarity for the skin substitute market. Regulatory, clinical, and commercial stakeholders should all be aligned in providing patient access to safe and efficacious solutions in a reasonable and consistent manner. That may ultimately result in a transition toward an increased regulatory burden for many human-derived allografts. like a 510 clearance, which is a far more reasonable pathway than a 351 approval and a resolution we would support. Now let me turn the call over to Doug for more detail on our financial results.