Sanara MedTech Inc.

Welcome to the Cenera MedTech fourth quarter and full year 2025 earnings conference call. Please note that this conference call is being recorded and a replay will be available on the investor relations page of the company's website shortly. The company issued its earnings release earlier today. Before we begin, I would like to remind everyone that certain statements on today's call are will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K. This call will also include references to certain non-GAAP financial measures. Reconciliations of those non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release available on the Investor Relations section of our website. Today's call will include remarks from Seth Yon, President and Chief Executive Officer, and Elizabeth Taylor, Chief Financial Officer. I would now like to turn the call over to Mr. Yon. Please go ahead, sir.

Thanks, operator, and welcome everyone to our fourth quarter and full year 2025 earnings call. Let me outline the agenda for today's call. I'll begin by reviewing several key financial accomplishments for the full year 2025. I'll then discuss our fourth quarter net revenue performance, as well as our commercial execution across the three key initiatives, our commercial strategy. After this, I'll provide an update on a few other select areas of operational progress in the quarter. Elizabeth will cover our fourth quarter financial results in further detail and review our full year net revenue guidance for 2026, which we reaffirmed in our earnings release today. I'll then conclude our remarks with some thoughts on our positioning as we enter 2026, our strategic priorities for the year, and our outlook before we open the call for questions. With that said, let's get started. Looking back at our financial performance for the full year 2025, I'd like to highlight several key accomplishments to demonstrate the significant progress we've made as an organization. First, we exceeded 100 million of net revenue for the first time in our company's history. Specifically, we generated 103.1 million of net revenue for the full year 2025, representing growth of 19% year over year. Importantly, we accomplished this impressive performance while maintaining the size of our failed sales team with 40 representatives at the end of 2025. Our field sales headcount at the end of 2025 was essentially unchanged compared to the end of 2024, 2023, and 2022. Our performance demonstrates the strength of our hybrid commercial model, which includes both field sales reps and a growing network of independent distributor partners. Together, they raise awareness of our products and educate prospective surgeon customers on their benefits and clinical applications. Second, we drove significant improvements in our profitability profile on a year-over-year basis. Specifically, we expanded our gross margins by approximately 200 basis points to 93% for the full year 2025 and demonstrated notable operating leverage. We ultimately achieved a $1.5 million or 80% reduction in net loss from continuing operations and a $7.9 million or 86% improvement in adjusted EBITDA, resulting in $17 million for the full year 2025. Third, this performance coupled with improvements in our working capital management ultimately enabled us to generate $6.8 million of cash provided by operations for the full year 2025. This compares to $24,000 of cash used in operations for the full year 2024. In short, our financial results in 2025 reflect the fundamental strength of our surgical business and support our recent strategic decision to focus our resources and capabilities on the surgical market. Turning to an overview of our fourth quarter net revenue performance, our team delivered solid commercial execution in the fourth quarter, generating net revenue of 27.5 million, representing growth of 5% year over year. Our net revenue growth was largely driven by sales of soft tissue products, with modest contributions from sales of our bone fusion products as well. As a reminder, our net revenue in the fourth quarter of 2024 benefited from approximately $1.8 million of bias surge sales due to the industry disruption caused by Hurricane Helene. Excluding the $1.8 million of bias surge sales related to this dynamic, our net revenue in the fourth quarter of 2025 increased 13% year over year. Importantly, our fourth quarter net revenue performance came in at the high end of both the preliminary range that we provided in our press release on January 23rd, 2026, as well as the expectations we shared on our third quarter's earning call in November 2025. With these results as our backdrop, I'll now share on our commercial execution. In 2025, our team continued to drive momentum across the three key initiatives of our commercial strategy. which represents important drivers of our growth. As a reminder, these three initiatives are, one, strengthening our relationships with independent distributors, two, selling into new healthcare facilities, and three, expanding the existing healthcare facilities we serve. I'll now share updates on our progress across each of these initiatives, beginning with our relationship development with independent distributors. In 2025, we significantly grew our network of distributor partners. Specifically, we ended 2025 with over 450 contracted distributors, compared to over 350 at the end of 2024. Given the significant progress we've made in expanding the size of our distributor network, our team has also focused increasingly on optimizing our distributor relationships. We are doing this by onboarding newly contracted distributors, training their sales representatives, and partnering with them to educate prospective surgeon customers about the clinical benefits of our products. Our partnership approach to engaging and working with our distributor remains our core component of our commercial philosophy. We believe it's one of the items that differentiates Sonera in the market and provides important advantages for our organization going forward. Turning to our second commercial initiative, adding new facility customers. We continue to leverage our network of distributor partners to begin selling into new healthcare facilities where our products have been contracted or approved. I'm pleased to report that we achieved our stated target which we initially provided on our first quarter earnings call in May 2025 of selling into over 1,450 healthcare facilities by the end of 2025. This compares to over 1,300 facilities in 2024. we continue to see significant runway to add new healthcare facility customers to our base of over the coming years as our products were contracted or approved for sale in over 4,000 facilities at year end. With respect to the third initiative I mentioned, penetrating our existing facility customers, we continue to drive adoption of our products by adding new surgeon users within the healthcare facilities we currently serve. In both the fourth quarter and full year 2025, we realized strong year-over-year growth in the size of our surgeon customer base. We continue to add new surgeon users ranging across a variety of specialties, including our traditional focus of spine and orthopedics, as well as general, plastic, and vascular surgery. Despite our progress in 2025, our surgeon penetration within the over 1,450 healthcare facilities we serve remains relatively low. With that in mind, we believe that the opportunity to go deeper within these existing facilities remains perhaps our largest untapped opportunity for future growth. In summary, our progress across each of the key commercial initiatives leaves us well positioned as we enter 2026 with multiple levers to drive continued growth in the surgical market. In addition to our commercial execution, the broader Cenera team made significant progress during the fourth quarter with respect to multiple areas of our strategy. I'd like to take a minute to highlight several important operational accomplishments. During the quarter, we continued to wind down the operations of Tissue Health Plus, or the THP segment, following our decision to cease operations, which we discussed in detail on our third quarter 2025 earnings call. I'm pleased to report that the THP wind down process was substantially complete at the end of 2025, consistent with our previously stated expectations. From a financial perspective, total cash use related to THP over the second half of 2025 was 5.3 million, below the 5.5 to 6.5 million range we shared on our second quarter earnings call in August 2025. As a reminder, the operations of THP, which we were previously reported as the THP segment, are classified as discontinued operations for the three months and full years ending December 31, 2025 and 2024. And importantly, we continue to anticipate no material cash spend related to THP going forward. With this in mind, we are entering into 2026 as a leaner pure play surgical company focused on continuing to bring innovative products to the operating room setting in the fourth quarter. We also continue to support the future growth of our bias surge product by expanding into healthcare facility approvals. Most notably, we secured an innovative technology contract from vision for those unfamiliar. Vizient is the largest group purchasing organization in the US with an extensive client base of healthcare facility customers. Through Vizient's innovative technology program, Vizient works with councils led by hospital experts from its client base. These councils are tasked with evaluating products and assessing their potential to bring innovation to healthcare delivery. Following evaluation, Our BioSurge product was awarded innovation technology contract as it was deemed to offer unique qualities and a potential benefit over other products available on the market today. As a reminder, BioSurge is a no-rinse irrigation solution that enables surgeons to cleanse the wound bed more efficiently than with saline alone. It also provides broad-spectrum antimicrobial effectiveness, helping to reduce the risk of surgical site infections. Beginning January 1st, 2026, BioSurge is now available to Vizient's network of healthcare facility customers. We believe this contract provides approximately 1,800 healthcare facilities with access to BioSurge at contracted pricing and pre-negotiated terms. All in all, it represents a significant opportunity to further expand BioSurge customer base in 2026 and the coming years. In addition to these efforts, we continue to support our surgical product portfolio by expanding and enhancing our body of clinical evidence. Our products were featured in multiple peer-reviewed studies published during the first quarter. I'll take a moment to highlight two of them. A comparative peer-reviewed in vitro study featuring Biosurge was published in the Journal of Arthroplasty. It evaluated the effectiveness of nine commercially available irrigation solutions, including BioSurge. Specifically, it assessed their ability to prevent the formation of biofilm on orthopedic implant materials by two common types of bacteria that are notorious for causing severe antibiotic-resistant infections in surgical wounds. The researchers also evaluated the cytotoxicity of each irrigation solution to ensure the patient's safety. In this study, BioSurge exhibited high antimicrobial efficacy and low cytotoxicity. It is identified as one of the two irrigation solutions that were most effective in preventing biofilm formation among the nine products tested. Our Allocyte Plus product was also featured in a long-term clinical study published in the Journal of Spine and Neurosurgery. This study evaluated the outcomes of lumbar spinal fusion that used Allocyte Plus as a standalone graft substitute. Ten patients were followed for 24 to 36 months, demonstrated successful solid bone healing within six months of receiving the operation. No adverse events, including complication, graft failures, or revision surgeries were reported during the follow-up period. Importantly, these patients also demonstrated sustained improvements in both neurological and clinical outcomes as well. The study's findings support our position that Allocyte Plus provides a safe, biological, active alternative to using traditional autogenous iliac crest bone grafts, which tend to be associated with a complication in donor site morbidity. Our R&D team also remains focused on expanding our IP portfolio to protect and advance our existing products. As a reminder, in 2024, we submitted 11 provisional patent applications covering innovations in proprietary antimicrobial and hydrolyzed collagen technologies, including novel formulations, treatment applications, and key component advancements. Over the course of 2025, Our team converted these 11 provisional patent applications into non-provisional filings, a major step forward in the progress towards securing approval, while also submitting the corresponding U.S. and PCT applications for international protection. In addition to this progress, we submitted an additional three provisional patent applications that protect specific components and compositional aspects of our Celerate RX surgical products. We look forward to continuing to expand the breadth of IP protection as well as our future product development efforts related to our surgical products. Lastly, we continue to make progress in our efforts to expand our portfolio through our partnership with Biomimetic Innovations, or BMI, with a goal of bringing OSTIC to the U.S. commercial market. As a reminder, during the first nine months of 2025, BMI achieved all of the key product development, clinical, regulatory, and medical education milestones outlined under our agreement. Based on their continued progress in the fourth quarter of 2025 and the initial months of 2026, I'm pleased to report that we remain on track to introduce the OSTIC synthetic injectable bone bioadhesive to the U.S. market in the first quarter of 2027. Given its status as an FDA-designated breakthrough device, We believe OSTIC will be the first synthetic injectable bone bioadhesive available in the U.S. once it receives regulatory approval. In preclinical mechanical testing, OSTIC demonstrated bonding to bone that was 40 times stronger than traditional calcium phosphate bone cement. We expect OSTIC to represent a new anchor product for our bone fusion portfolio and look forward to bringing this innovative technology to support the more than 100,000 periarticular fractures that occur in the U.S. each year. In summary, 2025 was a significant transition year for Senera MedTech, perhaps most notably Sonera transitioned to new leadership in both CEO and CFO roles to guide the next phase of our growth and development as an organization. As a company, we navigated the strategic realignment of our business to focus solely on the opportunities in the surgical market going forward. And in tandem, our team successfully executed our strategy in the surgical market, driving significant commercial, financial, and operational progress across all major fronts, Our progress this past year is a credit to the remarkable team of individuals who work at Senara MedTech. It also reflects our team's commitment to advancing the treatment of surgical wounds for the benefit of all the constituents in the healthcare industry, including patients, surgeons, and healthcare systems. With that said, I'll turn it over to Elizabeth to cover our fourth quarter 2025 financial results in greater detail and review our full year net revenue guidance for 2026.

Thanks, Seth. I will begin by reiterating that the operations of THP, which were previously reported as the THP segment, have been classified as discontinued operations for the three months and full years ended December 31st, 2025 and 2024. As such, Unless noted otherwise, all commentary that follows is on a continuing operations basis. In our earnings press release issued today, we have included tables detailing our historical results of operations on a continuing operations basis in 2025, 2024, and 2023, which aligns with our reporting going forward. Given that Seth covered our net revenue results for the quarter, I'll begin with gross profits. All percentage changes referenced throughout my remarks compare to the prior year period, unless otherwise specified. Fourth quarter gross profit increased 1.6 million, or 7%, to 25.7 million. Fourth quarter gross margin increased approximately 175 basis points to 93% of net revenue, driven primarily by sales of soft tissue repair products and lower manufacturing costs related to Celerate RX Surgical. Fourth quarter operating expenses increased $2.8 million, or 13%, to $24.6 million. The change in operating expenses was driven by a non-cash impairment charge of $1.8 million in the fourth quarter of 2025, which was related to a write-down of certain IP assets in connection with our strategic shift to focus on products in the surgical market, and a $1.2 million increase in research and development expenses, which was primarily due to product enhancement initiatives associated with our soft tissue repair products. Operating income for the fourth quarter was $1.1 million compared to $2.3 million last year. Excluding the aforementioned 1.8 million non-cash impairment charge in the fourth quarter of 2025, our operating income increased 0.6 million or 28% to 2.9 million. Other expense for the fourth quarter was 2.2 million compared to 1.3 million last year. The increase in other expense was primarily due to higher interest expense and fees related to our CRG term loan, as well as higher share of losses from equity method investments. Net loss from continuing operations for the fourth quarter was $1.1 million or $0.13 per diluted share compared to net income from continuing operations of $0.9 million or $0.10 per diluted share last year. Adjusted EBITDA for the fourth quarter of 2025 was $4.7 million compared to $4.1 million last year. Turning to the balance sheet, as of December 31st, we had $16.6 million of cash and $46 million of long-term debt. This compares to $15.9 million of cash and $30.7 million of long-term debt as of December 31, 2024. For the full year, 2025, we were pleased to generate $6.8 million of cash provided by operating activities compared to $24,000 of cash used in operating activities in the full year, 2024. The increase in cash from operating activities was driven in part by the reduction in net loss from continuing operations and improvements in working capital efficiency compared to the prior year. Importantly, we estimate that $6.8 million of cash generated from operating activities in the full year 2025 was inclusive of approximately $9 million of cash used in operating activities related to THP. As Seth mentioned, we continue to anticipate no material cash spin related to THP going forward. Turning to our net revenue guidance for the full year 2026, which we introduced via press release in January and reaffirmed in our earnings release today, we continue to expect full year 2026 net revenue to range from $116 to $121 million, representing growth of approximately 13% to 17% compared to net revenue of of 103.1 million for the full year 2025. Lastly, we would like to share a few additional considerations for modeling purposes. With respect to operating expenses, as Seth will discuss further, in connection with our enhanced focus as an organization on the surgical market, we are investing in our field sales team and R&D initiatives to lay the foundation for strong, sustainable growth in 2026 and the coming years. With $16.6 million of cash at December 31st, 2025, combined with our expected cash flows from operations, we are comfortable with our balance sheet liquidity in 2026. From a modeling perspective, as a reminder, we typically pay employee commissions and annual bonuses in the first quarter of our fiscal year, requiring a higher outlay of cash. Lastly, given the proximity to the end of the first quarter and for avoidance of doubt, we would like to provide additional transparency regarding our expectations for the first quarter net revenue results. Specifically, we expect net revenue of approximately $26.7 million to $27.2 million for the first quarter of 2026, representing growth of approximately 14% to 16% year over year. With that, I will now turn it back to Seth for closing remarks.

Thanks, Elizabeth. Tenera MedTech is providing full year net revenue guidance in 2026 for the first time in our company's history. The decision to introduce net revenue guidance was made as a part of our commitment to provide increased transparency regarding our anticipated future performance. It reflects the significant scale we have achieved as a company in recent years, as well as the evolution and development of our organization across multiple fronts. As Elizabeth mentioned, We are reaffirming our full year net revenue guidance today, which reflects growth of 13% to 17% in 2026. We look forward to delivering growth within this range and providing updates on our progress throughout the year. Before opening the call for questions, I'd like to share some closing thoughts on our positioning and strategic priorities as we enter 2026. In short, we like how we're positioned heading into this year. We are entering 2026 as a focused pure play surgical company dedicated exclusively to the operating room setting with three anchor products. Two currently in the market, Celerate RX Surgical and Biosurge, and one in our pipeline, Ostick. Our anchor products possess differentiated capabilities that enable them to satisfy clear clinical needs in the treatment of surgical wounds. They are not subject to reimbursement risk and they collectively address a multi-billion dollar annual opportunity in the surgical market. To effectively capitalize on this opportunity, we've developed an effective time-tested commercial team, model, and strategy that has enabled us to achieve significant commercial scale and momentum. And based on our historically strong margin profile and balance sheet condition as of December 31st, 2025, We believe we have the resources necessary to achieve our primary strategic and financial objectives this year through focused execution and disciplined capital allocation. In terms of our strategic priorities for 2026, we are focused on the following three items. First, continuing to penetrate the surgical wound market by executing our commercial strategy with our existing products. Specifically, we remain focused on driving further progress in developing our distributor network, expanding our facility customer base, and adding new surgeon users within the facilities we currently serve. These three initiatives have been the foundation of our commercial success in recent years, and we see substantial runway for continued growth across each of them as we move through 2026 and beyond. Second, pursuing targeted investments in our business to support our growth in 2026 and future years. Stepping back, given Sonera's broader scope of focus in prior years, the company historically pursued investments in opportunities outside of our core business in the surgical market. Going forward, we are committed to pursuing a focused approach as a pure play surgical company. With that commitment, We are intent on supporting our surgical product portfolio and commercial distribution network with investments that will protect and enhance our position in the surgical market and prove to be truly impactful over time. Specifically, we are investing in our surgical field sales team and R&D initiatives to lay the foundation for strong, sustainable growth. With respect to our field sales team, as I mentioned earlier, the size of our team has remained essentially consistent for multiple years with roughly 40 sales representatives. During the first quarter of 2026, we are making targeted investments to expand our sales rep coverage in key territories across the US. We are currently focused on onboarding and training, and we expect these new reps to become increasingly productive as they develop over the balance of 2026. With respect to our R&D initiatives, We will continue our efforts to expand the portfolio of clinical evidence supporting our anchor products while bolstering our IP protection. In addition, we are investing in several longer-term product development initiatives with a focus on pursuing enhancements to strengthen our existing surgical portfolio and address the evolving needs of our customers. These investments are designed to deepen our competitive mode and ensure that we maintain our position as a leader in bringing innovative surgical products to the market. Lastly, we are focused on bringing OSTIC to market through our strategic partnership with BMI and preparing for U.S. commercialization in the first quarter of 2027. We believe OSTIC represents a significant opportunity to expand our presence in the bone fusion market and provide surgeons with a truly differentiated solution for periarticular fracture repair. In conclusion, we are committed to focused execution and targeted capital allocation across these three strategic priorities in 2026. We believe our successful execution on these items will position us for strong, sustainable growth this year, as well as cash generation and profitability in the years to come. I'd like to close by thanking the entire SNHERA MedTech team for their exceptional work in 2025. I'd also like to thank our shareholders and customers for their continued support and to those on today's call for their interest in Scenera MedTech. With that, operator, you may now open the call for questions.

Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star 1. One moment, please, while we poll for questions. Your first question for today is from Yi Chen with HC Wainwright.

Hi, this is Eduardo on for you. Congrats on all the progress in the year. A question on on bias search following the vision contract effective by January 1, how much of your growth in 2026 do you think is attributable to this, this new volume of GPO versus organic growth in existing accounts? And do you anticipate any other of these deals to materialize in 2026?

Good morning. This is Seth. So I'll answer that question. First of all, the Vizient contract was a really significant thing for us to accomplish and to get onto that contract. To our knowledge, we're the only wash to have done that. It will still take a little bit of time to go out and educate at the facility level. And so we haven't given guidance specific to a product in past, just talking more about soft tissue repair, which BioSurg would fall to. So our team is working daily inside those 1800 accounts to continue to get access into those accounts and bring that technology to life. It was a major step forward for us as we think back to a soft launch in that product just a couple of years ago. You're doing that at a pretty slow pace, right? You have to do that one facility at a time. And now to have, you know, on contract 1800 plus facilities, we think that gives us great runway to perform in 2026, but truly well beyond that as well.

Got it. Thanks so much. And then if I could ask another one on Celerate Rx growth. So with this new study, cost effectiveness, do you see any opportunity for what do you think the impact on growth and maybe reimbursement in terms of cost effectiveness? And do you expect any other studies for Celerate to come out during this next year that could also bolster?

Yeah, well, first of all, we believe strongly in clinical evidence specific to our anchor products, accelerate by a surge and then soon to be off stick as well once that commercializes. So we'll continue to put energy against that from all those different fronts, both scientifically, clinically and then economically. You know, we feel really confident in that economic study that came out. We think that facilities will see great value in that as well. to showcase a product that, again, is a supply cost inside the DRG. So I think it's really important to understand for everybody on this call, we don't have reimbursement risk with that product and won't into the future. That, again, is a supply cost. So I think it only strengthens, you know, our relationships inside the hospital with the clinical evidence that we have specific to Celerate and now the economic evidence to come alongside of that. is really significant. So we think it has an impact for our numbers going forward as a result of all of that research that's been done.

Great. Thanks so much for taking the questions. Congrats again on the year. Thank you. Thank you.

Once again, if you would like to ask a question, please press star 1. We are currently seeing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.