MiMedx Group, Inc

Good afternoon, and thank you for standing by. Welcome to the Memetics Third Quarter 2025 Operating and Financial Results Conference Call. At this time, all participants are in listen-only mode. The question-and-answer session will follow the forum presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Matt Natariani, Head of Investor Relations for Memetics. Thank you. You may now begin.

Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx Third Quarter 2025 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 a summary of our operating highlights, as well as a discussion of our financial goals, And Doug will provide a review of our financial results for the quarter. And then Joe will conclude before we make ourselves 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 product. 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 report on Form 10-Q. Also, our comments today include non-GAAP financial measures, and we provide a reconciliation to the most comparable 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. Good afternoon, everyone. Thank you all for joining us for today's call. I'm very pleased to report that our third quarter performance was outstanding across the enterprise, generating strong top-line growth in both our wound and surgical franchises. We set new company highs for quarterly revenue, adjusted EBITDA, and adjusted EBITDA margin, which added $23 million of cash in the quarter. I am extremely proud of the team's focus, which drove these superior results. We continue to prove we can adjust to challenges and advance on opportunities whenever they arise. As such, we are once again raising our full year 2025 revenue growth guidance and our expectations for adjusted EBITDA margin. Our goal for the remainder of the year is to maximize near-term opportunities to ensure a strong finish and usher in the pending Medicare reimbursement reforms from a position of strength. The final rules are likely to be implemented at the start of 2026, and we are well prepared for a range of potential scenarios, especially given the dramatic financial improvements we've made to the business over the last few years. I will touch on some of the highlights of the quarter and then provide an update on our strategic focus, which I'm confident will help you understand why we are so bullish about the future for Mimetics. For the third quarter, year-over-year net sales growth was an exceptional 35%, finishing at a record $114 million. Our adjusted gross profit margin was 88% in the quarter. Adjusted EBITDA was $35 million or 31% of net sales. We continued to build cash, NEQ3 with $124 million in net cash, a sequential increase of $23 million for the quarter, and we expect to end the year with a net cash balance of more than $150 million. Our surgical business was an important contributor, growing 26% this quarter, driven by the continued growth across the portfolio. We now have over half of the target patients enrolled in our EpiEffect randomized controlled trial. And we have recently completed an interim analysis with favorable results. We launched a few strategic collaborations with companies offering complimentary solutions in the wound care market. And we continue to evaluate additional products to expand our portfolio for both our wound and surgical businesses. In terms of our strategic focus, we continue to make excellent progress in the three areas we have consistently highlighted as the most important for our long-term growth. Our top strategic priority is to continue to innovate and diversify our product portfolio. As you have witnessed, one of the ways we have been able to maintain strong momentum in the business has been with the introduction of products designed to address the numerous unmet needs in both the wound care and surgical markets. In this year alone, we continued with the full market release of EpiEffect, licensed and introduced Heliogen, Celera, and Emerge. We have just begun the rollout of Epi-Express. A randomized control trial for Epi-Effect continues to progress on schedule. As mentioned, we have over half of the target number of patients enrolled and randomized, which provided sufficient data for integral analysis and manuscript submission. These favorable results will be presented tomorrow at the Tissue Repair Evidence Summit. This is excellent news. as we will then have completed all the necessary steps to request reimbursement coverage for EpiEffect as required by the pending LCDs. On our last call, I mentioned that we had received a TRG letter for EpiExpress, which confirmed its status as an FDA Section 361 product. EpiExpress is a fenestrated allograft designed to be used in post-acute cases where the flow or extraction of fluid is of critical importance to the healing process. The full market release of EpiExpress is now underway, and the early feedback is extremely positive. Celera and Emerge, allografts we licensed to remain competitive in the private office marketplace until Medicare reform is enacted, both performed well in the quarter, contributing to our growth in wound care. We also continued executing on the previously announced co-marketing pilot with Vaperox. As a reminder, the Vaperox system, named VHT, or vaporous hyperoxia therapy, is a 510K cleared device that delivers ultrasonic mist and concentrated oxygen for the treatment of nine types of hard to heal chronic wounds, including diabetic foot ulcers, venous leg ulcers, and pressure ulcers. We are receiving excellent early feedback about this solution. Our second priority is to develop and deploy programs intended to expand our footprint in the surgical market. To achieve our continued success in this area, exemplified by our 26% surgical revenue growth in Q3, we have committed significant resources toward the introduction of products like our xenograft particulate heliogen, additional commercial resources, and development of robust real-world evidence demonstrating the potential clinical benefits for patients, the healthcare economic payoff, and the immense business opportunity for my medics. By way of example, We've mentioned the use of our technology in anastomosis procedures a few times in the past. One of those common complications from those procedures are leaks, which occur in upwards of 9% of patients who undergo colorectal surgery and are associated with statistically significant increases in morbidity, mortality, length of stay, and rehospitalization. The cost associated with these complications is estimated to be approximately $28 million for 1,000 patients. making anastomotic leaks a nearly $14 billion challenge for the healthcare system. As we have demonstrated in peer-reviewed publications, the application of AmnioFix as a protective barrier at the surgical closure site has proven to help reduce anastomotic leaks by nearly 50% and readmissions by approximately 40%, which would provide massive savings. Given there are over 500,000 colorectal surgeries per year in the US, our TAM is in excess of $500 million for amniotic just in colorectal procedures. We will continue to make these critical investments and expect to generate evidence across a variety of procedures. Our third initiative is to introduce programs designed to enhance customer intimacy. As we have mentioned, we believe the way we interact with our customers and our company's comprehensive value offering will help drive engagement and retention, especially as we transition to a reimbursement environment where profit potential is no longer primary driver in product selection. We continue to invest in ways to enhance these relationships, including increase and improve customer interaction at various levels within the company. We also continue to experience excellent adoption of MiMedx Connect, our proprietary customer portal, In the third quarter, we saw sequential sales growth of nearly 60% for orders managed within MyMedics Connect. We also recently added bill pay functionality within Connect for online payments and invoicing, and we are actively developing additional features to this system designed to improve workflow and strengthen the bond between MyMedics and our customers. We believe 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. On last quarter's call, we discussed the reforms CMS plans to implement to address the runaway fraud, waste, and abuse plaguing the skin substitute market. As a reminder, CMS announced the following initiatives. First, at the end of June, CMS introduced the Wasteful and Inappropriate Service Reduction, or WISER model, which is focused on leveraging artificial intelligence and machine learning in concert with human clinical review to curb fraud, waste, and abuse in healthcare. This voluntary model, which aims to encourage safe and evidence-supported best practices for treating Medicare beneficiaries, will run from January 1, 2026 through December 31, 2031 in five states and will examine several product categories, including skin substitutes. Next. In July, CMS posted the proposed Physician Fee Schedule, or PFS, and the Outpatient Prospective Payment System, or OPPS, for calendar year 2026. These proposed rules move away from the ASP methodology in the private office and the bundle in wound care centers in favor of a fixed payment for skin substitutes of $125.38 per square centimeter in all outpatient sites of care, private offices, and wound care centers alike. We submitted our comments to the proposed rules in September, recommending CMS consider setting a higher application fee for providers covered by the PFS, reimbursing skin substitutes as pass-through items, setting the fixed price using other reasonable inputs we highlighted, resulting in a relatively modest increase to the price per square centimeter, applying an inflationary index moving forward, and phasing in the price change over time. We believe these suggestions taken together would compensate providers appropriately for the important work they do, eliminate perverse incentives to overutilize skin substitutes, and ensure product developers continue to invest in cutting edge technologies and solutions, all while saving US taxpayers, the Medicare Trust Fund, and beneficiaries billions of dollars. Final rules are expected to be published in November to take effect at the start of the new year. Lastly, the much discussed LCDs are scheduled to go into effect on January 1st. It remains to be seen if they will be modified and or delayed once again. But as I said earlier, we are well positioned for any scenario. As we stated in the past, we are extremely confident of the company's position post Medicare reimbursement reform. When product performance is once again the primary factor driving product selection, our best-in-class technology will carry the day. Let me offer three facts in support of this statement. First, in 2023, we grew our business by 20% with constant pricing. It was all volume-related growth driven in part by the introduction of a few new products and commercial executions. This was just about the time we started to see a rapid uptick of new high priced skin substitutes entering the market, which subsequently caused our growth to slow. Second, in the surgical market, where profit potential does not so overwhelmingly drive product selection, we have been outperforming in the market, as evidenced by our 26% growth in third quarter. And third, we've recently introduced a few boom products that are, quote unquote, more competitively priced. While these products are priced below the mean of other available products on the market, they have been enough to stem the attrition of customers in search of these opportunities. These three points illustrate that when profit potential is not such an outsized motivator in product selection and performance and outcomes are of greater importance, mimetics grows faster than the market. We also expect to see a number of competitors decrease in the wound care market when the reimbursement reform goes into effect, as certain business models will become significantly less attractive. We, therefore, see this as an excellent opportunity to pick up market share. Before I turn the call over to Doug for a detailed financial review of the quarter, I'd like to share some of my thoughts on guidance. First, we had a great third quarter, and we expect to finish the year in similar fashion. As such, we are increasing our full year 2025 revenue growth rate outlook from the low teens to the mid to high teens. We also now expect our full year adjusted EBITDA margin to be at least in the mid-20s as a percentage of net sales. Second, you are no doubt trying to determine how to model the business for 2026 post the implementation of the proposed reforms. We are somewhat in the same boat. However, it would not be prudent to project the base case from the proposed numbers and current volumes given the other factors which will no doubt benefit our business. Until we have clarity on the CMS final rules for the PFS and OPPS, which have yet to be published, we do not want to over-speculate. At a higher level, we do expect some choppiness in the early part of the year as the industry navigates the changes. Still, We welcome these reforms and expect the change will bring much needed stability and predictability to the market. We firmly believe that the change is an opportunity for MiMedx to pick up share due to our numerous competitive advantages. We have a fully vertically integrated business from product development to manufacturing to commercialization, including donor recovery. We have an excellent, robust and defensible intellectual property portfolio. We have arguably the most comprehensive and effective commercial organization in the States. And over the past two and a half years, we have dramatically improved our financial position to include an anticipated net cash balance of more than $150 million by year end. I've been running MedTech companies for decades, and I can tell you that these types of events have a way of shaking out the marginal players. Our fundamentals are solid. and we are going to leverage our competitive advantages to ensure continued success in this new area. That is why I am incredibly bullish regarding the prospects for my medics. Now let me turn the call over to Doug for a more detailed review of our financial results.