MiMedx Group, Inc

Good afternoon, and thank you for standing by. Welcome to the MiMedx Third Quarter 2024 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 call over to your host, Mr. Matt Notoriani, Head of Investor Relations of MiMedx. Thank you. You may begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx Third Quarter 2024 Operating and Financial Results Conference Call. With me on today's call are Chief Executive Officer Joe Caffer 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 a summary of our operating highlights And Doug will provide a review of our 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, operating results, and cash balance growth, future margins and expenses, our product portfolios, 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, including competition, access to customers, the reimbursement environment, unforeseen circumstances, and delays. 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.mymedics.com. With that, I'm now pleased to turn the call over to Joe Capper. Joe?

Thanks, Matt, and good afternoon, everyone. It is my pleasure to welcome you to today's call as we provide an update on our business, which continues to move in a very positive direction. For the third quarter, we once again achieved year-over-year top-line growth and maintained an excellent operating margin, in spite of the challenges in the private office and associated care settings due to the massive abuse of the Medicare reimbursement system being perpetrated in those sectors. We generate approximately 25% of our revenue from Medicare fee-for-service patients in the areas being impacted by this fraudulent activity. Based on feedback we have received, During numerous recent interactions with relevant governing bodies, we are confident that corrective action is on the near-term horizon, which we expect will restore good fiscal governance to this market. I will talk more later in the call about why we are optimistic that our tireless efforts to effect change are gaining traction. Importantly, despite these headwinds, our business continues to flourish. As you will recall, we achieved a significant structural transformation of the company in 2023, which is now not only safeguarding the business as we navigate the current disruptive reimbursement environment, but allowing us to execute our strategy from a position of financial strength. Based on our results, it is clear we have the right strategy in place. We grew the top line and generated a solid operating margin in the quarter in which our business was under duress. That makes us very optimistic about our future, as we expect such headwinds to dissipate in the coming year. I'll take a few minutes to discuss the highlights of the third quarter, and then update you on the progress we're making regarding our strategic priorities. For the third quarter, net sales grew year over year by $2 million, or 3%, $84 million, in line with the expectations we highlighted on our last call, and marking another solid growth quarter. I should also remind you that in the second half of 2023, we experienced significant growth, which makes for more challenging comparisons for Q3 and Q4 of this calendar year. Gross profit margin was 82%. Adjusted EBITDA was $18 million, or 22% of net sales in the quarter, representing an increase of $600,000 over the prior year period. I want to acknowledge the team for their outstanding work as we rapidly adjusted our operating cost structure in light of the challenges we are facing. As a result, we were able to maintain a healthy operating margin. We ended with $89 million in cash, an increase of $20 million in the quarter. This too warrants a call out. As a result of our debt refinancing earlier in the year and ongoing cash accumulation, we have gone from incurring net interest expense of $1.7 million in Q3 of last year to earning net interest income of close to $300,000 this year, or a nearly $2 million per quarter positive cash swing, which will help fund future growth initiatives. We continue with the market release of Heliogen, which is the commercial name for the bovine-derived particulate we acquired earlier in the year. We met with CMS, the MACs, and numerous congressional offices during the quarter to seek needed reimbursement reform in the private office and adjacent care settings. It is clear they share our concerns and are working on corrective action. And last, you may have read an excellent article about the benefits of placental tissue that was published by the New York Times on October 10th. The amazing benefits of our products were on full display. While my medics was not mentioned in the article by name, We were a major contributor to the piece, and we're happy to help educate the public on the incredible and vast healing properties of our products. Turning now to our strategic priorities. As outlined on prior calls, our plan is focused in three areas. First, we will continue to innovate and diversify our product portfolio. As discussed, the company has done an excellent job developing and commercializing unique product configurations designed to meet explicit customer needs. We have introduced four new products in the last two years alone. The first three received widespread market acceptance, while our most recent product, Heliogen, is currently in its initial market release phase. AmnioEffect continues to do well, growing at 29% year over year in the surgical market. And EpiEffect, which we launched late last year, continue to show significant strength in the private office. Both products have received excellent physician feedback, as they have become integral parts of their care protocols. Additionally, we continue to make progress building our EpiFix business in Japan, which posted another quarter of exceptionally high growth. We now have nearly 800 physicians trained and are in over 140 accounts, with top decile customers ordering routinely. End-user sales for 2024 will likely grow nearly threefold from 2023. We sometimes get the question, why isn't this business growing even more rapidly given the quality of your product? As a reminder, it is first of its kind in Japan, and it is a premium price product to the standard of care. It's also important to understand that physicians in Japan will take into consideration the patient's co-pay when selecting treatment. Building on the success of these recent product introductions, we expect similar performance as we move towards full market release of Heliogen, our first xenograph. We are making good progress working through the mechanics of the early launch phase, like the value analysis process. And the product is successfully being applied in various surgical procedures. We expect Heliogen to be a meaningful contributor in 2025. Our second priority is to develop and deploy programs intended to expand our footprint in the surgical market. In order to achieve this objective, we have made a significant commitment to the production of real-world evidence and scientific research. We now have multiple studies in flight, which are designed to demonstrate support for the use of our percentile drug allografts in a variety of surgical procedures. On last quarter's call, I highlighted our recent publication in Nature Scientific Reports, which continues to receive very positive feedback. As a reminder, this study found that the use of MyMedix's proprietary placental-based allografts may function to interrupt pathological fibrosis and restore tissue homeostasis. The potential for reduced scarring or adhesion formation through the use of MyMedix's proprietary technology could enable accelerated and improved quality of healing leading to enhanced surgical outcome from improved functionality to superior cosmetic results. Again, coupling these potential benefits with the tens of millions of surgeries performed in the U.S. each year, we believe the market opportunity could be massive over time. On the heels of the Nature publication, we were asked to contribute to the article which appeared on the front page of the New York Times on October 10th. The headline read, quote, Her face was unrecognizable after an explosion. of placenta restored it," unquote. While highlighting the many benefits of placental allografts for a variety of wound care and surgical procedures, the article chronicled the real-world healing journeys of two individuals who had tremendous outcomes with mimetics products. This was an excellent general awareness piece with contributions from several clinicians who were using placental tissue in a variety of ways. As the article states, quote, research has found placental-derived grafts can reduce pain and inflammation, heal burns, prevent the formation of scar tissue and adhesions around surgical sites, and even restore vision, end quote. All of this is to say we are likely still in the very early market development phase for placental-derived products. In addition to research and awareness, it is critical that we continue to expand our product and service offering in order to build a stronger presence in the surgical environment. Our third initiative is to introduce programs designed to enhance customer intimacy. As a reminder, the primary focus of this initiative is to develop programs which improve relationships and ultimately lower our customer churn. To strengthen the connection with our customers, we have undertaken a variety of initiatives aimed at institutionalizing customer-centric behavior. we continue to experience excellent adoption of MiMedx Connect, our new customer portal, which provides a streamlined digital connection with our referring practices to perform functions such as insurance verification and product ordering. We are actively developing additional features designed to improve customer workflow and strengthen the bond between MiMedx and our customers. We have begun executive customer feedback sessions around the country and are developing a comprehensive set of programs to embed a customer-centric mindset across the enterprise. Our commitment to this approach will lead to enhanced customer relationships, improved net promoter scores, higher margins, and ultimately an increase in the average lifetime value of a customer. Now let me turn the call over to Doug for more detail on our financial results. Then I will close with comments about the private office reimbursement dynamic and the full year guidance. Doug?