Q3 2023 Anika Therapeutics Inc Earnings Call

Okay.

Speaker 1: Good evening, ladies and gentlemen, and welcome to Erika's third quarter twenty twenty three earning conference call. All participants will be in.

Good evening, ladies and gentlemen, and welcome to Emerson's third quarter 2023 earnings Conference call.

All participants will be in listen only mode.

Speaker 1: Should you need assistance, please signify conference specialists by pressing the Starkey followed by zero. After today's presentation, there will be an up-

Should you need assistance. Please signal a conference specialist by pressing the star followed by zero.

After todays presentation, there will be an opportunity to ask questions.

Speaker 1: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note today's...

To ask a question you May press Star then one on your telephone keypad.

Your question. Please press Star then two please.

Please note today's event is being recorded.

Speaker 1: I'd now like to introduce Mark Nemeroff, Vice President, Investor Relations, ESG, and Corporate Communications. Please proceed. Mark Nemeroff, Vice President, Investor Relations, ESG, Corporate Communications

I'd now like to introduce Mark Nemeroff, Vice President Investor Relations and corporate Communications. Please proceed.

Speaker 2: Thank you. Good afternoon everyone and thank you for joining us for Annika's third quarter conference call.

Thank you good afternoon, everyone.

Thank you for joining our.

Because third quarter conference call and webcast.

Speaker 2: I'm QB earnings press release, the CSU after the close of the market today. And then available on our Investee Relations website, located at amica.com. As our supplementary PowerPoint slides, there will be news for the discussion today.

The earnings press release was issued after the close of the market today.

On our Investor Relations website, located at <unk> Dot com as our supplementary Powerpoint.

The discussion today.

Speaker 2: With me on the call today, I'd like to share with Blanchard, President and Chief Executive Officer, and Mike Levis, Executive Vice President, Chief Financial Officer and Treasurer.

With me on the call today.

Thank you Cheryl Blanchard, President and Chief Executive Officer, and Mike <unk>, Executive Vice President and Chief Financial Officer Treasurer.

Speaker 2: Please take a moment and open the slide presentation and refer to slide number...

Please take a moment and open the slide presentation and refer to slide number two.

Speaker 2: Before we begin, please understand that certain statements made during the call today constitute for looking statements as defined in the Saturis Exchange Act of 1934.

Before we begin please understand that certain statements made during the call today constitute forward looking statements as defined in the Securities Exchange Act of 34.

Speaker 2: These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties.

Based on our current beliefs and expectations and are subject to certain risks.

Speaker 2: The company's actual results could differ materially from any anticipated future results, performance or achievement.

The company's actual results could differ materially.

Materially from any anticipated future results performance or achievements.

Speaker 2: We make no obligation to update these statements. Should future financial data or events occur that differ from the political statements presented today?

We make no obligation to update these statements.

Future financial data for events occur that differ from the political statements presented today.

Speaker 2: Please also share most recent SEC filings for more information about risk factors that could affect our performance.

Please also see our most recent SEC filings for more information about risk factors that could affect our performance.

Speaker 2: In addition, during the call, we may refer to several adjusted or non-gaveled uninformatics.

In addition, during the call we may refer to several adjusted or non-GAAP financial measures, which include adjusted gross margin adjusted EBITDA adjusted net debt.

Speaker 2: which includes the congested gross margin, adjusted EBITDA, adjusted in income, and adjusted earnings per share, which are used in addition to results presented in accordance with Gap Finance.

And adjusted earnings per share, which are used in addition to results presented in accordance with GAAP financial measures.

Speaker 2: We believe that non-doubt measures provide an additional way of viewing aspects of our operational performance.

The non-GAAP measures provide an additional way of viewing aspects.

Operation performance.

Speaker 2: but when considered with death by nature measures and the reconciliation of of GAAP measures , they provide an even more complete understanding of.

But when considered with GAAP financial measures and a reconciliation of GAAP measures. They provide an even more complete understanding of our business.

Speaker 2: A reconciliation of these adjusted non-get financial measures to the most comparable gap measurements are available at the end of the presentation's project in our third quarter of 2023.

A reconciliation of these adjusted non-GAAP financial measures to the most comparable GAAP measures are available under the presentation slide deck and in our third quarter of 2023.

Speaker 3: And now I'd like to turn the call over to our president, and CEO , Dr. Sharon Blaser. Sure. Thanks, Mark. Good afternoon, everyone. And thanks for joining us. Please turn to slide three.

And now I'd like to turn the call over to our President and CEO, Dr. Shawn Lynch sure.

Thanks, Marc good afternoon, everyone and thanks for joining US please turn to slide three.

Speaker 3: We are pleased with our third-quarter results, which underscore the strength of our strategy and reinforce our confidence in the powerful growth engine we've created. Following a period of purposeful investments to enable our transformation into the largest and highest opportunity areas of the joint preservation market, we are beginning to see the accelerated growth and momentum building across the business. We've been working toward for some time.

We are pleased with our third quarter results, which underscore the strength of our strategy and reinforce our confidence in the powerful growth engine, which created some.

Following a period of purposeful investments to enable our transformation into the largest and highest opportunity areas at the joint preservation market.

Getting to see the accelerated growth and momentum building across the business, we've been working toward for some time.

Speaker 3: We delivered 14% growth in joint preservation and restoration in the quarter and higher than expected growth in OAP management, which has now grown 11% year to date.

We delivered 14% growth in joint preservation and restoration in the quarter and higher than expected growth in the OA pain management, which has now grown 11% year to date.

Speaker 3: The acceleration and joint preservation and restoration is being led by our newest products, ex-twist and ReveMotion, which are gaining traction and generating a lot of interest in the markets we serve. The double digit growth in the quarter positions us well for Q4 and as we head into 2024. The continued growth in our OAP business follows a strong second quarter led by Monivist Growth globally and double digit single growth outside the U.S.

The acceleration in joint preservation and restoration is being led by our newest products ex twist and leave the motions, which are gaining traction and generating a lot of interest in the markets we serve.

The double digit growth in the quarter positions us well for Q4 and as we head into 2024.

The continued growth in our paint business, followed a strong second quarter led by Monovisc growth globally, and double digit cingal growth outside the U S.

Speaker 3: Given the strong performance across our business, we are raising our revenue and EBITDA margin guidance for the year, which might go into in a minute.

Given the strong performance across our business, we are raising our revenue and EBITDA margin guidance for the year, which Mike will go into in a minute.

Speaker 3: Our expanding joy preservation and restoration portfolio has been key to our continued growth, and we achieved a number of important milestones in the third quarter.

Our expanding joint preservation and restoration portfolio has been key to our continued growth and we achieved a number of important milestones in the third quarter.

Speaker 3: Our Revea Motion Reverse Shoulder Archaeology System had a very successful full market release in September at the O-Set Annual Meeting in Boston, attracting strong interest from surgeons.

I read the motion reverse shoulder arthroplasty system had a very successful full market release in September at the O set annual meeting in Boston, attracting strong interest from surgeons.

Speaker 3: We also received the final sighting take clearance from the FDA for our integrity implant system, and we're on track for full launch in the first quarter of 2024.

We also received the final five 10-K clearance from the FDA for our integrity implant system and.

We're on track for full launch in the first quarter of 2024.

Speaker 3: As a reminder, integrity is our truly differentiated, regenerative HAP base patch system for the augmentation of rotator cuff and other tendon repairs.

As a reminder, integrity is our truly differentiated regenerative H eight based patch system for the augmentation of rotator cuffs and other tendon repairs.

Speaker 3: Our ex-twistification system also achieved a significant milestone in this quarter, receiving 510K clearance for the biocomposite version, complementing the peak version that was released earlier this year.

Our extra with fixation system also achieved a significant milestone this quarter, receiving five 10-K clearance for the bio composite version.

Lamenting the peak version that was released earlier this year.

Speaker 3: The clearance of X-Wiz biocomposite now allows ANICA to address the full $600 million US rotator cuff market.

Parents of extras Biocomposites now allows me and it got to address the full 600 million dollar U S rotator cuff market.

Speaker 3: We are on track to launch the Biopin POSA version in Q1 of 2024.

We are on track to launch the Biocomposites version in Q1 of 2024.

Speaker 3: We also reached a milestone in medical education, training over 500 surgeons this year across our full joint preservation and restoration portfolio.

We also reached a milestone in medical education training over 500 surgeons this year across our full joint preservation and restoration portfolio.

Speaker 3: We'll please to see that OAP management continues to outperform. This includes J&J's above market growth and share capture as they continue to expand their number one market position in the US OAP management segment.

We're pleased to see the OA pain management continues to outperform this includes J&J is above market growth and share capture as they continue to expand their number one market position in the U S O a pain management segment.

Speaker 3: Outside the U.S., single has consistently delivered double-digit growth. And is the next generation non-opioid, asrathritis pain product of choice in over 35 countries.

Outside the U S. Cingal has consistently delivered double digit growth.

Is the next generation non opioid osteoarthritis pain product of choice in over 35 countries.

Speaker 3: Singal's highly differentiated clinical profile and its demonstrated real-world benefits have underpinned its international growth. We continue to explore Singal partnership opportunities in the US and select Asian countries with significant interest from several parties.

Cingal highly differentiated clinical profile and its demonstrated real world benefits has underpinned its international growth.

Continue to explore cingal partnership opportunities in the U S and select Asian countries with significant interest from several parties.

Speaker 3: We're also continuing to engage with the FDA to advance single-alters US regulatory approval.

We're also continuing to engage with the FDA to advance cingal towards U S regulatory approval.

Speaker 3: As a reminder, we had a type C meeting with the FDA earlier this year, and we are awaiting feedback on our proposal to them on next steps to complete non-clinical work so that we can file an NDA as quickly as possible.

As a reminder, we had a type C meeting with the FDA earlier this year and we are awaiting feedback on our proposal to them on next steps to complete non clinical work. So that we can file an NDA as quickly as possible.

Speaker 3: We will continue to keep everyone updated on this process. Our single market adoption and double-digit growth outside the US reinforces that this next-generation product would be a meaningful addition to US clinicians arsenals to treat OA pain with a non-opioid product.

We will continue to keep everyone updated on this process, our cingal market adoption and double digit growth outside the U S. Reinforces that this next generation product would be a meaningful addition to U S. Clinicians arsenals to treat OA pain is it not.

On opioid product.

Speaker 3: On slide four, I'd like to spend a few minutes reviewing our integrity system, which will be a key value driver for ANICA, and a game changer in how surgeons augment their rotator cuff and other tendon repairs.

On slide four I'd like to spend a few minutes reviewing our integrity system, which will be a key value driver for anika and a game changer in how surgeons augment their rotator cuff and other tendon repairs.

Speaker 3: Integrity's key differentiating feature is the inherent structural integrity of the hyaluronic acid-based scaffold compared to the current collagen patches on the market.

Integrity is a key differentiating feature is the inherent structural integrity of the hyaluronic acid based scaffold compared to the current collagen patches on the market.

Speaker 3: The strength comes from its HAP-based hybrid structure, resulting in a patch that is over 50% stronger than the leading collagen patch in pencil strength, suture retention and tear resistance, even when hydrated.

This strength comes from it's H eight based hybrid structure, resulting in a patch that is over 50% stronger than the leading college and patch in tensile strength suture retention and terrorist instance, even when hydrated.

Speaker 3: That provides for the ability to confidently manipulate the patch interoperatively and strongly affix it with staples, tax or suture during the repair.

That provides for the ability to confidently manipulate the patch intra operatively and strongly affects it with staples tax or suture during the repair.

Speaker 3: Another key value driver for integrity is in its regenerative capacity. The hyaluronic acid scaffold supports healing through improved cell infiltration, tissue remodeling, and tendon thickening. In a head-to-head animal study, the integrity patch demonstrated about three times the regenerative capacity compared to the leading college and patch.

Another key value driver for integrity is in its regenerative capacity, how ironic as it scaffold support healing through improved cell infiltration tissue remodeling intend and ticketing.

No head to head animal study the integrity patch demonstrated about three times, the regenerative capacity compared to the leading collagen patch. This data is important to both the surgeon and the patient.

Speaker 3: This data is important to both the surgeon and the patient.

Speaker 3: The combination of integrity, strengths, increased regenerative capacity, and an efficient, reproducible delivery system is what is getting surgeons really excited. We are feeling a poll from surgeons excited for integrity to launch. We're confident that it will become the standard of care and rotator cuff augmentation, and along with our recently launched Revemoshing and X-Twist, position us to drive growth for years to come. Please.

The combination of integrity strength increased regenerative capacity and inefficient reproducible delivery system is what is getting surgeons really excited you are feeling a poll from surgeons excited for integrity to launch we're confident that it will become the standard of care and rotator cuff augmentation and along with.

Our recently launched read the motion and ex twist position us to drive growth for years to come.

Please turn to slide five.

Speaker 3: We've been investing with purpose to establish ANICA as a global leader addressing unmet needs in early intervention orthopedics.

We've been investing with purpose to establish anika as a global leader addressing unmet needs in early intervention orthopedics.

Speaker 3: We are leveraging our core expertise in polyronic acid and portfolio across OAP management, regenerative sports medicine, and Arthur Surface Joint Solutions.

We are leveraging our core expertise in Colorado asset and portfolio across the OA pain management regenerative sports medicine, and Arthur surface joint solutions.

Speaker 3: The investments we've made over the past three years are now beginning to bear fruit. In fact, most of the products on this slide are either launched or are launching in the first quarter of 2024. Into larger markets than Annika has entered before in our direct business. Setting up 2024 as an exciting year.

The investments we've made over the past three years are now beginning to bear fruit in fact, most of the products on this slide are either launched or are launching in the first quarter of 2024.

Into larger markets than Anika has entered before in our direct business setting up 'twenty 'twenty four is an exciting year.

Speaker 3: In addition to those products, our value driving single and high-leaf-fast products have now advanced and are closer than they have ever been with line of sight to US regulatory filings for both products. We expect the next generation OAPN market served by single adds an additional $1 billion plus to our existing $1 billion market opportunity served by Monovisc and Orthovisc. And single is particularly-

In addition to those products our value driving cingal in hydro test products have now advanced and are closer than they have ever been with line of sight to U S regulatory filings for both products. We expect the next generation OA pain markets served by Cingal adds an additional $1 billion plus to our existing 1 billion.

Market opportunity served by Monovisc north of it.

And cingal is perfectly positioned to win.

Speaker 3: HALFAST addresses the $1 billion plus Carlyd repair market with a single stage off the shelf for generative products.

How fast addresses the $1 billion plus cartilage repair market with a single stage off the shelf regenerative product <unk>.

Speaker 3: Now that we are fully enrolled in our pivotal trial, this breakthrough device has a well-defined pathway to launch a US market by 2026. We are fully enrolled in our pivotal trial, this breakthrough device has a well-defined pathway to launch a US market by 2026.

Now that were fully enrolled in our pivotal trial. This breakthrough device has a well defined pathway to launch in the U S market by 2026.

Speaker 3: In short, our highly differentiated new product pipeline is being realized.

In short our highly differentiated new product pipeline is being realized.

Speaker 3: On slide six, I'll discuss our focus on commercial execution and profitability.

On slide six I'll discuss our focus on commercial execution and profitability.

Speaker 3: ANICA has a long history of generating strong profitability and cash flows. We've used these cash flows in recent years to significantly expand ANICA's market and growth opportunities with key new products and critical internal investments to support sustainable long-term growth and our commitment to growing profitability.

Anika has a long history of generating strong profitability and cash flows. We would use these cash flows in recent years to significantly expand and cause market and growth opportunities with key new products and critical internal investments to support sustainable long term growth and our commitment to growing profitability.

Speaker 3: With the 2023 full market launches of Reego Motion and X-TWIS peak and the 2024 launch of integrity and X-TWIS biocomposite, we're expecting sustained double digit growth and joint preservation in 2024 and beyond. We are also confident in the continued above market growth of our core OAP management products led by Monovist globally and single outside the US.

With a 2023 full market launches of Regal motion and ex twist peak and the 'twenty 'twenty four launch of integrity and extra its bio composite we're expecting sustained double digit growth in joint preservation in 2024 and beyond.

We are also confident in the continued above market growth of our core OA pain management products led by Monovisc globally, and Cingal outside the U S.

Speaker 3: With the investments we've made in R&D, scaling the business and addressing MDR, we're now focused on actively managing our op-ex while still supporting the significant growth and profitability acceleration in the coming years.

The investments we've made in R&D scaling the business and addressing M. D are now focused on actively managing our opex, while still supporting the significant growth and profitability acceleration in the coming years.

Speaker 3: As spending stabilizes, we are shifting the investments we do make toward commercial execution. As we begin to establish a very targeted direct sales force going into 2024.

Spending stabilizes, we are shifting the investments we do make towards commercial execution as we begin to establish a very targeted direct sales force going into 2020 for.

Speaker 3: These hires will be focused on regenerative solutions and sports medicine products to augment our hybrid sales channel and penetrate underperforming accounts in geography.

These hires will be focused on regenerative solutions and sports medicine products to augment our hybrid sales channel and penetrate underperforming accounts in geographies.

Speaker 3: The hybrid channel is a cost-effective model and works very well where distributors are focused on our product.

The hybrid channel is a cost effective model and it works very well where distributors are focused on our products.

Speaker 3: The direct reps will strengthen the areas where we can drive better focus and commercial execution to deliver on the significant growth opportunity in front of us.

Direct reps will strengthen the areas, where we can drive better focus and commercial execution to deliver on the significant growth opportunity in front of us.

Speaker 3: These investments to augment our hybrid sales force with targeted direct sales reps are thoughtfully timed with the launch of our newest products such as Integrity, X-Twist, and Tax Asset Expansion.

These investments to augment our hybrid sales force with targeted direct sales reps are thoughtfully timed with the launch of our newest products such as integrity ex twist and taxes that expansion.

Speaker 3: At the same time, and to be clear, we are committed to keeping total company costs stable as we leverage the investments we've already made to develop and launch these exciting new products.

At the same time and to be clear, we are committed to keeping total company costs stable as we leverage the investments we've already made to develop and launch these exciting new products.

Speaker 3: In summary, we continue to have a strong balance sheet with a healthy cash position and no debt. And with our meaningful accomplishments this year, our confident as we move forward to realize the significant opportunity in front of us.

In summary, we continue to have a strong balance sheet with a healthy cash position and no debt and with our meaningful accomplishments. This year are confident as we move forward to realize the significant opportunity in front of us.

Speaker 3: Now I'd like to turn the call over to Mike to review the third quarter results and our outlook for the remainder of the year. Mike.

Now I'd like to turn the call over to Mike to review, the third quarter results and our outlook for the remainder of the year Mike.

Speaker 2: Thank you, Cheryl. Please turn to slide 7. I'll now walk you through our financial results for the third quarter of 2023.

Thank you Cheryl please turn to slide seven.

I'll now walk you through our financial results for the third quarter of 2023.

Speaker 2: On place to report total revenue for the quarter grew to $41.5 million, exceeding our expectations, driven by accelerated double-digit growth, enjoying preservation and restoration, and better than expected growth in OAP management.

I'm pleased to report total revenue for the quarter grew to $41 $5 million exceeding our expectations driven by accelerated double digit growth in joint preservation and restoration and better than expected growth in OA pain management.

Speaker 2: Our results also reflected the lower non-arphopedic revenue we discussed in prior quarters following our planned exit from the product lines that did not fit our profitability of JAP.

Our results also reflected the lower non orthopedic revenue we discussed in prior quarters. Following our planned exit from product lines that did not fit our profitability objectives.

Speaker 4: The lower non-orthopedic revenues reduce total company growth in the quarter by approximately three percentage points.

The lower non orthopedic revenues reduced total company growth in the quarter by approximately three percentage points.

Speaker 4: Our joint preservation and restoration revenue increased 14% in the third quarter to $13.5 million.

Our joint preservation and restoration revenue increased 14% in the third quarter to $13 $5 million.

Speaker 4: This accelerated growth was driven by our recent product launches in the United States with X-Twist and ReboMotion and by strong international growth, some of which reflected favorable order time.

This accelerated growth was driven by our recent product launches in the United States with X twist every of emotion and by strong international growth some of which reflect a favorable order timing.

Speaker 4: Through the first nine months of this year, joint preservation revenues have grown 10% compared to the same period of 2022, a nice acceleration from historic growth rates as we see the early benefit of our recently launched products in the United States as well as continued international growth.

Through the first nine months of this year joint preservation revenues have grown 10% compared to the same period of 2022, a nice acceleration from historic growth rates as we see the early benefits of our recently launched products in the United States as well as continued international growth.

Speaker 4: Revenue in our largest product family, OAP Management, increased 2% to $24.9 million by increasing above-market global customer demand, offset by lower transfer units in the quarter on order timing following a high second quarter.

Revenue in our largest product family OA pain management increased 2% to $24 $9 million or increasing above market global customer demand offset by lower transfer units in the quarter on order timing following a high second quarter.

Speaker 4: Through the first nine months of the year, our OAP management revenues have grown 11% compared to the same period of 2022 on rising global demand led by MonoVisk in the United States and both MonoVisk and Syngal outside the United States.

Through the first nine months of the year, our OA pain management revenues have grown 11% compared to the same period of 2022 on rising global demand led by Monovisc in the United States, and both Monovisc and Cingal outside the United States.

Speaker 4: As expected, our non-orca-pidic revenue declined 22% to $3.1 million, and is down 34% year to date, reflecting the continued impact of our exit from legacy product lines that do not support our growth and profitability objectives.

As expected our non orthopedic revenue declined 22% to $3 $1 million and is down 34% year to date, reflecting the continued impact of our exit from legacy product lines that do not support our growth and profitability objectives.

Speaker 4: Our gross margin in third quarter increased to 60%, and includes the non-cash impact of $1.6 million of acquisition-related amortization expense from acquisitions made in 2020, as well as product rationalization reserves of approximately $750,000 associated with legacy, non-orathopedic products. We no longer expect to sell.

Our gross margin in the third quarter increased to 60% and includes the noncash impact of $1 $6 million of acquisition related amortization expense from acquisitions made in 2020 as.

As well as product rationalization reserves of approximately $750000 associated with legacy non orthopedic products, we no longer expect yourself.

Speaker 4: are adjusted gross margin, which excludes the non-cash acquisition related amortization and product rationalization reserves, with 66% in the core. Down from 67% in the think quarter last year, its higher costs were largely offset by favorable product mix and improved operating efficiency.

Our adjusted gross margin, which excludes the noncash acquisition related amortization and product rationalization reserves was 66% in the quarter down from 67% in the same quarter last year as higher costs were largely offset by favorable product mix and improved operating efficiency.

Speaker 4: From a spending standpoint, our operating expenses total $32.6 million in the third quarter, up from $28.6 million in the same period of 2022, primarily due to a $4.5 million non-returned charge in the quarter associated with the discontinuation of a software development project.

From a spending standpoint, our operating expenses totaled $32 $6 million in the third quarter up from $28 $6 million in the same period of 2022, primarily due to a $4 $5 million nonrecurring charge in the quarter associated with the discontinuation of a software development project.

Speaker 4: Excluding this charge, our operating defenses were lower than last year. I'll continue to expense management as we approach the completion of the development and launch readiness of our new FDA-Cleared products in support of their plan launched in the first quarter of 2024.

Excluding this charge our operating expenses were lower than last year.

Expense management as we approach the completion of the development and launch readiness of our new FDA cleared products and supported their planned launch in the first quarter of 2024.

Speaker 4: Are net loss for the quarter with $6.6 million or 45 cents per share compared to a net loss of $4.2 million or $29 cents per share in the third quarter of last year?

Our net loss for the quarter was $6 $6 million or <unk> 45 per share compared to a net loss of $4 $2 million or 29 cents per share in the third quarter of last year.

Speaker 4: On the adjusted basis, net income improved the break either.

On an adjusted basis net income improved to breakeven.

Speaker 4: Uptum and adjusting that loss of $725,000 or $5 cents per share in the prior year. Reflecting growth in the business and spending men.

From an adjusted net loss of $725000 or five cents per share in the prior year, reflecting growth in the business and spending management.

Speaker 4: Anika generated adjusted EBITDA in the quarter of $4.7 million, up from $4.1 million in the third quarter of last year, and our adjusted EBITDA margin in the quarter was 11% up from 10% in the same period last year. Lastly, with regards to-

Anika generated adjusted EBITDA in the quarter of $407 million up from $4 $1 million in the third quarter of last year.

And our adjusted EBITDA margin in the quarter was 11% up from 10% in the same period last year.

Lastly, with regards to our cash flow and capital structure.

Speaker 4: We generated operating cash flows of $6.5 million during the third quarter, up from $2.7 million in the same period last year on growth in the business and spending minutes.

We generated operating cash flows of $6 $5 million during the third quarter up from $2 $7 million in the same period last year on growth in the business and spending management.

Speaker 4: Our capital expenditures in the quarter were approximately $700,000, and primarily reflected investments and instruments in support of our keen product launches, such as RevoMotion.

Our capital expenditures in the quarter were approximately $700000 and primarily reflected investments in instruments in support of our key product launches such as Riva motion.

Speaker 4: We ended the third quarter with $70.7 million in cash and no outstanding debt.

We ended the third quarter with $77 million in cash and no outstanding debt.

Speaker 4: Annika maintains a healthy balance sheet and is well positioned to continue the self-fund or grows initiatives to drive shareholder value.

Anika maintains a healthy balance sheet and is well positioned to continue to self fund our growth initiatives to drive shareholder value.

Please turn to slide eight.

Speaker 4: Now I would like to review our updated financial outlook for fiscal year 2020.

Now I would like to review our updated financial outlook for fiscal year 2023.

Speaker 4: Based on our results to date, in current momentum, we are raising our full year guidance with an updated total company revenue outlook for fiscal year 2023 of $164 million to $166 million. Representing growth of five to six percent over 2022. On above market growth in OAP management, and accelerated growth in joint preservation and restoration. Offset and part by lower non-orbitic revenue.

Based on our results to date and current momentum we are raising our full year guidance with an updated total company revenue outlook for fiscal year, 2023 of 164 million to $166 million representing growth of 5% to 6% over 2022.

On above market growth in OA pain management and accelerated growth in joint preservation and restoration.

Offset in part by lower non orthopedic revenues.

Speaker 4: The lower non-orthopedic revenues are expected to reduce total growth this year by approximately 4%

The lower non orthopedic revenues are expected to reduce total growth this year by approximately four percentage points.

Speaker 4: I have such excluding non-orcapedic. Anacas revenues are expected to increase 9% to 10% this year over 2020.

As such excluding non orthopedic and because revenues are expected to increase 9% to 10% this year over 2022.

Speaker 4: In OASAing Management, we now expect revenue of $99.75 to $101 million of 8 to 10 percent over 2022. As our market-leading products continue to gain adoption globally.

In OA pain management, we now expect revenue of $99 $75 million to $101 million up 8% to 10% over 2022, as our market leading products continue to gain adoption globally.

Speaker 4: This outlook is up over $3 million from our previous range of $96 to $97.5 million on the strong progress year to date and positive momentum globally. And positions is core part of our business to reach a key milestone of $100 million this year.

This outlook is up over $3 million from our previous range of <unk> 96 to $97 $5 million on the strong progress year to date and positive momentum globally.

Physicians is core part of our business to reach a key milestone of $100 million this year.

Speaker 4: In joint preservation and restoration, we now expect revenue of $54.75 to $55.5 million, of nine to 10% over last year. An acceleration due primarily to our new product launches in the United States, as well as continued growth international.

And joint preservation and restoration, we now expect revenue of $54 75 to $55 $5 million up 9% to 10% over last year and acceleration due primarily to our new product launches in the United States as well as continued growth internationally.

Speaker 4: Our previous range was 54 to 55.5 million.

Our previous range was 54 to $55 $5 million.

Speaker 4: We continue to expect non-Orthopedic revenue of approximately $9.5 million. That's a decrease of just over 30% from last year, primarily due to last-time buys of legacy products and veterinary order timing in 2022.

We continue to expect non orthopedic revenue of approximately $9 $5 million. That's a decrease of just over 30% from last year, primarily due to last time buys of legacy products and veterinary order timing in 2022.

Speaker 4: We continue to expect adjusted gross margin for the year to be roughly in line with the 65.9% we reported last.

We continue to expect adjusted gross margin for the year to be roughly in line with the 65, 9% we reported last year.

Speaker 4: And based on the higher revenue guidance, we are also raising our adjusted even a margin guidance for the year to 6 to 8%. Up from our previous guidance.

And based on the higher revenue guidance, we're also raising our adjusted EBITDA margin guidance for the year to 6% to 8%.

From our previous guidance of low single digits.

Speaker 4: We continue to manage operating expenses prudently as we've expired some non-recurring costs in the first three quarters, primarily associated with the settlement of Parkest Medical Arvitation, shareholder activism and discontinuation of the software development project.

We continue to manage operating expenses prudently as you would have expired some nonrecurring costs in the first three quarters, primarily associated with the settlement of park its medical arbitration shareholder activism and discontinuation of a software development project.

Speaker 4: As we look ahead to 2024, based on our recent and upcoming product launches, and with the momentum we saw in the third quarter, and are seeing as we move now into the fourth quarter, we expect 2024 to be a year of above market revenue growth led by double-digit growth and joint preservation, and continue to above market growth in OAPA management.

As we look ahead to 2024 based on our recent and upcoming product launches and with the momentum we saw in the third quarter and are seeing as we move now into the fourth quarter. We expect 2024 to be a year of above market revenue growth led by double digit growth enjoying preservation and continued above market growth in OA pain management.

Speaker 4: With the growth in revenue and fabilized spending, now that X-twist to revomotion and integrity are all at the clear and on or coming to the market.

With the growth in revenue and stabilized spending now that ex switched real emotion and integrity are all FDA cleared and on or coming to the market.

Speaker 4: We also expect to increase our adjusted EBITDA margin and bottom line in 2024. Approaching break even a Justin Net income was transpositive on excluding non-cash stock base confidence.

We also expect to increase our adjusted EBITDA margin and bottom line in 2024 approaching breakeven adjusted net income, which turns positive when excluding noncash stock based compensation.

Speaker 4: We look forward to providing additional details on our normal schedule as part of our year end earnings.

We look forward to providing additional details on our normal schedule as part of our year end earnings call.

Speaker 4: In summary, as we head into the fourth quarter, we are pleased with our growing momentum, which is reflected in our increased revenue and EBITDA margin outlook for the year. We remain focused on delivering growth and operational execution to position Anika for long-term success. I will now turn the call back over to...

In summary, as we head into the fourth quarter, we were pleased with our growing momentum, which is reflected in our increased revenue and EBITDA margin outlook for the year, we remain focused on delivering growth and operational execution to position Anika for long term success I will now turn the call back over to Sharon.

Speaker 3: Thanks Mike. Please turn to slide nine before we open up the call for Q&A.

Thanks, Mike Please turn to slide nine before we open up the call for Q&A.

Speaker 3: We're excited about the acceleration and growth of our joint preservation and restoration portfolio as our new products gain market traction and we see our strategy in action. We are also pleased with the expansion of our market leading OAP management products both in the US and OUS.

We're excited about the acceleration in growth of our joint preservation and restoration portfolio as our new products gain market traction and we see our strategy in action. We were also pleased with the expansion of our market, leading OA pain management products. Both in the U S and O U S with the strength of our growing differentiated H eight based regenerative portfolio.

Speaker 3: With the strength of our growing differentiated HAP based regenerative portfolio, as well as our value creation opportunities with single and high-level fast, ANICA is very well positioned for and committed to continued top and bottom line growth in the years to come.

As well as our value creation opportunities with Cingal inhale a fast.

Anika is very well positioned for and committed to continued top and bottom line growth in the years to come in.

Speaker 3: Importantly, we have self-funded this transformation and continue to maintain a healthy balance sheet with a solid cash position with no debt.

Importantly, we have self funded this transformation and continue to maintain a healthy balance sheet with a solid cash position with no debt.

Speaker 3: I'd like to take a moment to thank all of our employees for their continued hard work and dedication to supporting our efforts as we build ANICA into a leader in joint preservation and restoration.

I'd like to take a moment to thank all of our employees for their continued hard work and dedication to supporting our efforts as we build anika into a leader in joint preservation and restoration.

Speaker 3: Together we are driving real momentum as we work to achieve our mission of restoring active living for people around the world. And with that we'll open up the line for questions.

Together, we are driving real momentum as we work to achieve our mission of restoring active living for people around the world.

And with that we'll open up the line for questions.

Speaker 1: Thank you. If you'd like to ask a question, please press star with a one on your telephone keypad. If you'd like to remove yourself from Q, please press star them too.

Thank you if you'd like to ask a question. Please press star one on your telephone keypad.

If you'd like to remove yourself from queue. Please press Star then two.

Speaker 5: Today's first question comes from Mike Futuski with Barrington Research. Please go ahead. Good evening. Congratulations on some of this progress. I guess, Cheryl, I wanted to...

Today's first question comes from Mike with Husky Barrington Research. Please go ahead.

Good evening and congratulations on some of this progress.

I guess, Cheryl I wanted to ask.

On the last quarter's call you guys talked about you know maybe some.

Appointment around some distributors, maybe not driving as hard to the hoop.

I'm, just curious sort of what what's the status of.

Of sort of your distributor base relative to where it was 90 days ago and end and could you just talk maybe in whatever level of detail you can about the investments you're planning on making in sort of the timing of all that.

Absolutely. Thanks, Mike I appreciate the question.

Speaker 3: Yeah, we've done a lot of work around really understanding the hybrid model that we've...

We've done we've done a lot of work around really understanding the hybrid model that we've.

Speaker 3: Chosen to deploy for obvious reasons. It addresses not signing up for the full fixed cost of a fully direct sales force for a business besides we are. At the same time, there are.

Chosen to deploy for obvious reasons it addresses not signing up for the full fixed cost of our fully direct sales force for a business. The size. We are at the same time you know there are compromises that you make in doing that because you go to 10 99 distributors that are not necessarily fully.

Speaker 3: Compromises that you make in doing that because you go to 1099 distributors that are not necessarily fully focused on you. I'll tell you what we do see.

Focused on you I'll tell you what we do see is we have a very large number of distributors that are very focused on us and they are growing the business very nicely as we would expect them to and really.

Speaker 3: is we have a very large number of distributors that are very focused on us and they are growing the business very nicely as we would expect them to and really driving those opportunities as we see the possibilities to do.

Driving those opportunities as we see the possibilities to do what we have seen though are some other distributors that are really not taking advantage of.

Speaker 3: What we have seen though are some other distributors that are really not taking advantage of

Speaker 3: getting these great products out, we know that the surgeons love them when they see them. And so we've taken the approach using some pretty careful data analytics to understand.

Getting these great products out we know that the surgeons love them when they see them and so we've taken the approach using some some pretty careful data analytics to understand that.

Speaker 3: those situations and specific geographies to make sure that we kind of use...

Situations and specific geographies to make sure that we kind of use Oh, a very focused approach to hiring some truly direct sales reps and those folks are going to be focused on sports medicine, and regenerative solutions. So a portion of our portfolio.

Speaker 3: a very focused approach to hiring some truly direct sales reps. And those folks are going to be focused on sports medicine and regenerate.

Speaker 3: So a portion of our portfolio and

And again I you know I want to highlight that this is a oh limited move that we're making to really make sure that we take advantage of specific geographies, where we're just not seeing the kind of growth that we're seeing everywhere else.

Speaker 3: Again, I want to highlight that this is a limited move that we're making to really make sure that we take advantage of specific geographies where we're just not seeing the kind of growth that we're seeing everywhere else.

Speaker 3: We started the hiring process and we see ourselves moving into next year before we're sort of fully up and running with that. I'm not gonna speak to the specific numbers, but it is a very focused effort and we feel like it's something we're really excited to be able to get that focus with sports med and regenerative solutions. We'll let you know.

We started the hiring process and we see ourselves moving into next year before we're sort of fully up and running with that I'm not going to speak to the specific numbers, but it is a very focused effort and we feel like it's it's something we're really excited to be able to to get that focus with.

Sports Med and regenerative solutions.

Will that change the number of I.

I guess I don't know if you call them sales managers, but essentially the folks that currently manage the distribution relationships does that does this.

It all changed those numbers.

Have you sort of look out.

Speaker 3: No, it doesn't. And, you know, the reason for that is those folks are managing across the distribution network, including the Arthur Surface Joint Solutions. And we have a lot going on with that, with the recent product launch of ReveMotion. So, you know, we'll continue to work to drive the current hybrid sales force that we have while we take this opportunity to have some very focused additions in driving those additional geographies in sports and regenerative solutions.

Now it doesn't and you know the reason for that is those folks are managing across the distribution network, including the Arthur surface joint solutions, and we have a lot going on with that with the.

The recent product launch of Riva motion so.

We'll continue to work to.

Drive the current hybrid sales force that we have while we take this opportunity to have some very focused additions in driving those as additional geographies in sports and regenerative solutions.

Speaker 3: And we are, I will comment that we're, you know, we've committed that we won't be, we're really shifting our focus now in terms of the investments we are making to commercial execution, so we're not adding to OPEX by doing this.

And we are I will comment that we're you know we've we've committed that we won't be where we're really shifting our focus now in terms of the investments we are making to commercial execution. So we're not adding to opex by doing this.

Speaker 5: I appreciated when you said that in the prepare, prepare remarks, but I think it was a good reminder.

I.

Later, when he said that in the prepared remarks.

Speaker 5: So I did want to ask real quick, Cheryl, on the integrity patch, obviously, I know you guys are excited about all the new products, but essentially saying, hey, confident this could be standard of care. I mean, kid, kid.

Remind you for everyone.

So I did want to ask real quick Cheryl.

The integrity patch.

Obviously I know I know you guys are excited about all the new products, but.

Essentially saying hey, confident this can be standard of care I mean could you just talk about are you now.

I guess.

Why you have that confidence and.

Is this the kind of product that you know could actually make a material impact as early as you know full year 'twenty four.

Speaker 3: Yeah, I'll tell you the confidence comes from a number of things. We really put some significant...

Yeah, I'll tell you that the confidence comes from a number of things, we really put some significant <unk>.

Speaker 3: energy toward ensuring that we were coming up with a product that addresses true unmet clinical needs. And one of the big pieces of feedback we heard from clinicians was the existing first generation collagen patches that are in the market today just don't provide the kind of

Energy toward ensuring that we were coming up with a product that addresses true unmet clinical needs and one of the big pieces of feedback we heard from clinicians was the existing first generation college and patches that are in the market today, just don't provide the kind of strength or suture retention strength, especially when.

Speaker 3: or suture retention strength, especially when it gets wet, which it does immediately, interoperatively. So we address that. We also hear that.

It gets wet which it doesn't mediately inter operatively. So we address that we are we also hear that.

Speaker 3: There's obviously always a greater need for increasing the regenerative capacity. We've addressed that.

There's obviously always a greater need for increasing the regenerative capacity. We've addressed that there was also a lot of feedback around simplifying surgical technique and instrumentation and fixation to get the surgeon the ability to be efficient and confident in the repair and so we've really.

Speaker 3: There was also a lot of feedback around simplifying surgical technique and instrumentation and succession to give the surgeon the ability to be efficient and confident in the repair. And so we've really come at it from all directions. We've done a number of labs with already a number of surgeons and the labs have gone incredibly well and we're really feeling a pull from the surgeon community to...

<unk> come at it from all directions, we've done a number of labs with already a number of surgeons and the labs has gone incredibly well and we're really feeling a pull from the surgeon community to to get this into their practice. So that's really what our confidence is based on.

Speaker 3: to get this into their practice. So that's really what our confidence is based on.

Speaker 4: And Mike, I'll speak to the other part of your question around the impact in 2024.

And Mike I'll I'll speak to the your the other part of your question around the impact in 2024.

Speaker 4: and we'll give more direction on 2024 and our normal schedule, but as Cheryl said, and I said, we expect double digit growth to be continuing here in 2024 and integrity plays a real solid role in that. We're excited that that product remains on track to launch in the first quarter. We were very pleased to be able to get the clearance when we did so that we could get everything set to launch here in the first quarter.

And we will give more direction on 2024, and our normal schedule, but as Sheryl said and I said, we expect double digit growth to be.

See you in here in 2024 and integrity plays a real solid role in that and we're excited that that product remains on track to launch in the first quarter.

Very pleased to be able to get the clearance. When we did so that we could we could get everything set to launch here in the first quarter.

Speaker 4: We're cognizant it's a new product and it's going to take a normal ramp that you would expect for a new product. But the team is very excited as Cheryl said in her comment.

We're cognizant of its a new product and it's going to take a normal ramp that you would expect for a new product, but the team is very excited as Sheryl said in her comments.

Speaker 5: We really are seeing the pool from the search and community and we're seeing it from our distributors. And so we'll be very thoughtful about how we're going to roll that out, but we do expect it to be a meaningful driver of the double digit growth next year. Okay, and then Mike, I guess just a last one for me for now. So your commentary...

We really are seeing the pool from the surgeon community and we're seeing it from our distributors and so we're being very thoughtful about how we're going to roll that out, but we do expect it to be a meaningful driver of the double digit growth next year.

And then Mike I guess, just a last one for me for now so your commentary on adjusted EBITDA I think I think I heard you say, 6% to 8%.

This year and then some number higher than that range next year or was that what you actually meant to say or.

Follow that right.

Speaker 4: Yes, Mike, you have that correct. I said that our expectation was low single digit this year. We have raised it now with our progress to date.

Yes, Mike do you have that correct I said that our expectation was low single digits. This year, we've raised it now with our progress to date.

Speaker 4: to 6% to 8% is the range for this year. And we expect it to increase next year. You know, we need to see as we go into next year, we'll hopefully get that feedback from the FDA. We may have some things that we wanna focus on here to drive St. Gall.

Two 6% to 8% is the range for this year.

And we expect it to increase next year.

We need to see as we go into next year.

Hopefully get that feedback from the FDA, we may have some things that we want to focus on here to drive Cingal.

Speaker 4: But even with all of the different things we're doing next year, now that we are stabilizing the spending and driving the growth from the products that we have now launched, and are launching earlier in the year, we feel confident to say that we'll be expanding up there, even in March and next year, even as we drive the revenue growth. I want one quick housekeeping.

Even with all of the different things. We're doing next year now that we are stabilizing the spending and driving the growth from the products that we have now launched and are launching earlier in the year, we feel confident to say that we will be expanding our EBIT margin next year, even as we drive the revenue growth.

Hey, one quick housekeeping if you have it in front of me is there any chance you have.

The cap ex beyond that at this point 7 million like 728000 do you by any chance have that exact figure.

Speaker 5: 728,000 you do by any chance have that that exact figure

The exact figure was $680000.

Perfect. Thanks, guys.

Speaker 1: Thank you. Thank you. Thank you. And our next question comes from George Sellers. Let's be in the tank. Please go ahead.

Thanks, Mike.

Thank you and our next question comes from George Sellers with Stephens, Inc. Please go ahead.

Speaker 6: Hey, thanks for taking the question and congrats on a good quarter.

Hey, Thanks for taking the question congrats on a good quarter.

Speaker 6: Maybe to start with the joint preservation restoration segment in the quarter. Can you just give some additional details on the contribution from X to X? Then you noted rib emotions contributed as well in the quarter. Just curious how material that contribution is. And then as a follow on to that for the raised guidance, how much of that is related to the launch of rev emotion. Thank you.

Maybe to start with the joint preservation and restoration segment in the quarter could you just give some additional details on the.

The contribution from ex twist and you you noted roof emotion contributed as well in the quarter I'm just curious how material that contribution is and then.

As a follow on to that for the raised guidance how much of that is related to the launch of rapid motion.

Thank you.

Hi, George this is Mike.

No.

Speaker 4: First, you're the first part of your question around the contribution from X-Twist and Reveal Motion. That was the primary driver of the growth in the quarter.

First your the first part of your question around the contribution from ex twist and real emotion.

That was the primary driver of the growth in the quarter.

Speaker 4: I would say that that's what drove us to double digit growth.

And.

I would say that that's what drove us to double digit growth. We also saw a really strong international.

Speaker 4: We also saw a really strong international revenues in joint preservation in the quarter. Now, I will say that some of that is timing. We've talked about this in previous quarters. That part of our business is through distributors. And so sometimes you can get lumpy quarters. And so we have a strong first quarter and then a lower second quarter or strong third quarter here. And so that is a lumpy part of our business, but that is a nice growth part of our business for the full year. So that is what the primary driver of the growth was ex-twist and re-bomotion together. You know, it's nice to now we've been on the market since the first quarter with ex-twist P.

Revenues in joint preservation in the quarter.

Now I will say that some of that is timing you know we've talked about this in previous quarters that part of our business is through distributors and so sometimes you can get lumpy quarters.

And so we had a strong first quarter and then a lower second quarter with strong third quarter here and.

And so.

So that is a lumpy part of their business, but that is a nice growth part of our business for the full year. So that is what the primary driver of the growth was ex Wisden repo motion together.

It's nice to know we've been on the market since the first quarter with extra with peak and are excited to see extra bio composite coming on in the in the first part of next year a brief emotion as we said moved into full market release in September and we're seeing growing momentum there.

Speaker 4: And I'm excited to see X-TRISBILLE composite coming on in the first part of next year. Reval motion, as we said, moved into the market release in September . And we're seeing growing momentum there. Can you remind me?

Can you remind me the second part of your question.

Speaker 6: Yeah, just curious on the increase in the guidance, how much of that is related to the full commercial launch of Reef Emotions.

Yeah, just curious on the increase in the guidance how much of that is related to.

The full commercial launch of of reef emotion.

Speaker 4: Okay, so we increased the guidance across the business. So the increase in the guidance on OAP management, which we increased over $3 million was driven by the performance, year-to-date, and the expectations in the United States, led by Monovisk and internationally led by Monovisk but mostly by Singal, where we continue to see double-digit growth. So that was the biggest driver of the increase.

Okay. So we increased the guidance across the business. So the increase in the guidance on OA pain management.

Which we increased over $3 million was driven by the performance year to date and the expectations in the United States led by Monovisc and internationally led by Monovisc, but mostly by Cingal wound, where we continue to see double digit growth so that was.

That was the biggest driver of the increase but we also raised the low end of our range enjoy preservation now that those products are like real emotions that launched in the market and you know we've retired risk associated with those with those are those new products. So we're seeing growing momentum for the ex list and.

Speaker 4: But we also raised the low end of our range in joint preservation. Now that those products are like real emotions that launched and on the market, and we've retired risk associated with those with those.

Speaker 4: those new products. So we're seeing Glenn momentum for the X-Wrest and again we just launched the Reveal Motion for Market Release here in

We just launched the Riva motion full market release here in September.

Speaker 6: Yep, okay, that's really helpful. Thank you for that color. And then maybe a question on the integrity patch system. How many of your current surgeon customers are already using a rotator cuff patch system? Obviously a different one. But how many are already using that device? And I guess I'm really trying to figure out what the cadence of that growth and revenue contribution might be in 2024.

Yep, Okay that that's really helpful. Thank you for that color.

And then maybe a question on the integrity patch system. How many of your current surgeon customers are already using a rotator cuff patch system, obviously, a different one but how many are already using that device and I guess I'm really trying to figure out what the cadence of that.

Both and revenue contribution might be in 2024.

Speaker 3: Yeah, it's a, George, it's a fairly significant number that are currently using some patch. I mean, there is one patch that is the market leader and that's frankly primarily what anybody is using right now. In terms of our ramp, I mean,

Yeah, It's a Georgia, it's a fairly significant number that are currently using some patch I mean, there is one path is the market leader and that's frankly, primarily what anybody is using right now.

In terms of our our ramp I mean.

Speaker 3: And we are having very good meetings with surgeons right now who are very excited to get this into their practice. It's not uncommon for a product like

We are having very good meetings with surgeons right now who are very excited to get this into their practice. It is not uncommon for a product like this for surgeons, who wanted to do a couple see how their patients do I wait a few months before they fully adopted kind of you know learn goes through.

Speaker 3: for surgeons to want to do a couple, see how their patients do, wait a few months before they fully adopt it, kind of learn, go to some training and education, make sure they're serving their patients well.

Training and education and make sure they're serving their patients well, they're very familiar with the system. So I think we're expecting to see adoption over the next year as we get this launched in Q1, but again I think there's a real understanding at this product addressing some pretty significant unmet needs that they have.

Speaker 3: They're very familiar with the system. So I think we're expecting to see adoption over the next year as we get this launched into one. But again, I think there's a real understanding of this product.

Speaker 3: Addresses some pretty significant unmet needs that they all have and they're very excited to get going with it.

I'll have and they are very excited to get going with it.

Speaker 6: Okay, that's really helpful. And Mike maybe won on op-backs.

Okay that that's really helpful and Mike maybe one on an opex clearly some some good.

Speaker 6: Clearly some good cost controls going on from YALS perspective. I'm curious as we look ahead, is the third quarter a good run rate going forward on both the SG&A line and also the R&D line? As you sort of maybe switch out some MDR related costs for some direct sales rep costs.

Cost controls going on from from your Alls perspective, I'm curious as we look ahead is the third quarter, a good sort of run rate going forward on both the SG&A line and also the R&D line as you sort of maybe switch out some MTR related costs for some.

Our direct sales rep costs.

Okay.

Speaker 4: Well, first I say, yeah, we are pleased to be able to drive savings on the op-x side. And we are expecting our op-x to stabilize here as we look into 2024 and that's what's going to drive the bottom line as we go to the business. In terms of the quarterly phases.

Well first of all I'd say, yeah, we are pleased to be able to drive savings on the Opex side, and we are expecting our opex to stabilize here as we look into 2024, and that's what's going to drive the bottom line as we grow the business in terms of the quarterly phasing.

Speaker 4: There were a couple things in the third quarter that were not normal phasing within OPEX. One was we took a charge, there was no cash in the quarter, but we took a charge for a software project that we discontinued. And that was that project had stalled and we have the opportunity to make other process improvements and system improvements to be able to...

There were a couple of things in the third quarter.

That were not normal phasing within Opex. One was we took a charge there was no cash in the quarter, but we took a charge for a.

Software project that we discontinued.

And that was that project had stalled and we had the opportunity to make other process improvements in system improvements to be able to.

Speaker 4: drives some savings by making that decision.

Drive some savings by making that decision.

Speaker 4: So that was in the quarter, that was $4.5 million. And then the other thing in the quarter is, we had been making some changes around the business. We had some forfeitures on the stock compensation side of about $400,000 in the quarter. And so that was reflected in Q3. In terms of the specific,

So that was in the quarter that was for $5 million and then the other thing in the quarter is.

We have been making some changes.

Changes around the business, we had some forfeitures on the stock compensation side, its about $400000 in the quarter and so that was reflected in Q3.

In terms of the.

Specific.

Speaker 4: Quarterly phasing of R&B. That can be lumpy from a quarter of order basis, just depending upon some of the work. We are pleased with how we've been wrapping up the MDR and having real success in getting through that process to date. So we expected MDR is going to continue to be less of a part of our story from an investment standpoint because of the successes we've had so far in retiring that.

Quarterly phasing of RMB.

That can be lumpy from a quarter to quarter basis, just depending upon some of the work. We are pleased with how we've been.

Wrapping up the MTR and having real success in getting through that process to date. So we expected MTR is going to continue to be less of a part of our story from an investment standpoint, because of the successes we've had so far in retiring that.

Speaker 4: But integrity is not yet finished and launched. That's going to launch here in the first quarter. And so those kind of wrap up costs and whatnot will continue through the end of the year. And then we'll start to see that coming down next year. So I hope.

But integrity is not yet finished did not launch that's going to launch here in the in the first quarter and so those kind of wrap up costs and whatnot will continue through the end of the year and then we'll start to see that coming down next year. So I hope that's helpful Directionally.

Speaker 6: Yep, that's really helpful. Thank you all for the questions. I'll hop back in the queue.

Yeah, that's really helpful.

Thank you all for the questions I'll hop back in the queue.

Okay.

Speaker 1: Thank you and our next portion comes from Jim Siddherty with Siddherty and Company. Please go ahead.

Thank you and our next question comes from Jim Sidoti with Sidoti <unk> Company. Please go ahead.

Hi, Jim your line might be muted Sir.

Speaker 7: Mr. Sardin, are you there? Hi. Sorry about that. Can you hear me now?

Mr Sidoti are either right.

Sorry about that can you hear me now.

Speaker 7: We can. I.J.M. Okay. Great. So I was just following up on that comment about the software charges. Is that primarily an SGNA?

Okay.

We can I can okay great.

So I was just following up on that comment about the software charge is that primarily in SG&A.

Yes. It is.

And.

Speaker 7: Can you just give me a little detail? What was the software that you were developing that you stopped?

Can you just give us a little detail what what was the software, but you were developing that you stop.

Speaker 4: It was a support software on the commercial side. And it was a multi-year project and the project had stalled and we made the decision as we look. We're constantly looking across the business at where we're.

It was it was the support software on the commercial side.

And it was a multiyear project and.

The project had stalled and we made the decision as we get you know look we're constantly looking across the business at where we're allocating our resources and it made sense to not spend more money to pursue that because we found that we were able to drive operational process improvements.

Speaker 4: allocating our resources and it made sense to not spend more money to pursue that because we found that we were able to drive operational process improvement

Speaker 4: and also use the system that we already have in place.

And also use the systems that we already have in place to have a more cost effective solution and so that's why we made the decision this quarter.

Speaker 4: to have a more cost effective solution. And so that's why we made the decision this quarter to discontinue that software process.

To discontinue that that software project.

Speaker 7: Okay, and then the sales team, can you give us some sense on how many folks you would expect to bring on and how quickly you think, or how long it'll take for them to ramp up?

Okay and then the sales the sales team can you give it to.

Samsung on how many.

We expect to bring on and how quickly you think or.

Or how long it'll take for them to ramp up.

Speaker 3: Yeah, Jim, I'll tell you we've already started hiring. This is very, very focused and targeted.

Yeah, Jim I'll tell you we've already started hiring.

This is very very focused and targeted it's it's really going to be to augment the hybrid sales force. It's gonna be focused just on regenerative and sports and just in a few geographies, where we're just not seeing the kind of performance that we're seeing everywhere else in the country. So I think.

Speaker 3: It's really going to be to augment the hybrid Salesforce. It's going to be focused just on regenerative and sports.

Speaker 3: and just in a few geographies where we're just not seeing the kind of performance that we're seeing everywhere else in the country. So I think we'll be providing more updates on that as we go forward, but the process has begun and it'll continue into next year.

Well you know, we'll be providing more updates on that as we go forward, but the process has begun and it'll continue into next year.

Speaker 7: All right. And then, you know, if you look at the quarter, you reported 14% growth for joint preservation. And that's without any contribution from the new sales folks. And you're very early in the launch cycle for integrity and regional motion and x-twist. So it's fair to say that

Alright, and then you know if you look at the quarter you reported four.

14% growth for joint preservation, and that's without any contribution from the from the new sales folks and.

You're very early in the launch cycle for <unk>.

For integrity and week promotion that X rays. So is it fair to say that.

Speaker 7: I know you said double digit growth, but that's a pretty general term. Would you be disappointed if joint preservation didn't accelerate from this 14%.

You would you I know you said double digit growth, but that that's a pretty general term would you be disappointed.

If joint preservation didn't accelerate from the 14%.

Speaker 4: Jim's mic, I'll take that question. We're very pleased given, as you said, how early we are with these new product launches to see that 14% growth number. And that growth was the double digit nature of that growth was driven by the new product.

Jim It's Mike I'll take that question.

We're very pleased given as you said how early we are with these with these new product launches to see that 14% growth number.

And that growth was the double digit nature of that growth was driven by the new products.

Speaker 4: That being said, we also benefited in the quarter from strong international sales and some of that is timing because of the lumpiness of that business. And so that's why that's reflected in our guidance for the year of nine to 10% growth for the year in joint preservation. So we'll get more.

That being said, we also benefited in the quarter from strong international sales and some of that is timing because of the lumpiness of that business and so that's why that's reflected in our guidance for the year of 9% to 10% growth for the year and joint preservation. So we'll give more more.

Speaker 4: clarity around the full year guidance in terms of specifics next year, but I think the key takeaway from our perspective is, it's great to now have these products on the market. It's great to see the initial feedback that we're getting. It is still early, but we're excited for what that can ramp. And we do expect that to be in double digit growth here in 2024, in to our preservation.

Clarity around the full year guidance in terms of specifics next year, but I think the key takeaway from our perspective is it's great to now have these products on the market. It's great to see the initial feedback that we're getting it is still early but we're excited for what that can ramp and we do expect that to be.

And double digit growth here in 2024 and joint preservation.

Okay alright, thank you.

Thanks, Ken.

Speaker 1: Thank you. And our next question today is a follow up from George Sellers. Please go ahead.

Thank you.

And our next question today is a follow up from George Sellers. Please go ahead.

Speaker 6: Thanks for the additional question. I'm just curious as we think about 2024 and nearing that break even, that income point, how much of that margin improvement is related to positive mix associated with some of these new product launches versus just maintaining the cost controls that you mentioned earlier.

Thanks for the additional question I'm, just curious as we think about 'twenty 'twenty four and near that that breakeven net income point, how much of that margin improvement is related to positive mix associated with some of these new product launches versus just maintaining the.

Cost controls that you.

You mentioned earlier.

Yeah.

That's a great question.

Speaker 4: You know, if you look at where we're trending right now, and we hit break even this quarter. So, you know, I think we've demonstrated, you know, that we have line of sight to doing that. I think we have a lot of...

If you look at where we're trending right now and we hit breakeven this quarter. So.

You know I think we need we've demonstrated.

You know that we have line of sight to doing that I think.

We have a lot of.

Speaker 4: One of the exciting things happening in 2024 and we're expecting that revenue growth to be healthy as we said.

A lot of exciting things happening in it in 2024, and we're expecting that revenue growth to be to be healthy as we said.

Okay.

Speaker 4: I think, you know, it's a good question. The new products are all within that higher gross margin level in line with our multi-year targets. And so as those new products continue to ramp, that is very helpful to us from a mixed perspective. The new products are all within that higher gross margin level in line with our multi-year targets.

I think it's a.

Good question, the new products are.

Are all within that higher gross margin level in line with our multiyear targets and so as those new products continue to ramp that is very helpful to us from a mix perspective.

Speaker 6: You know, I think that that managing the cost side also matters too. So I think, you know, it's just, it's, we're not that far, frankly, from doing that right now, I think it's a combination of the growth, having finished what we needed to finish and driving these new products, we can now manage the spending. And so I think it's within our control to deliver on those results now that we've done the work that we did here in 2023. Okay, great.

You know I think that that managing the cost side also matters too. So I think it's just.

We're not that far and frankly from from doing that right now I think it's a combination of the growth having finished what we needed to finish in driving these new products. We can now manage the spending and so.

I think it's within our control to deliver on those results.

Now that we've done the work that we did here in 2023.

Okay, Great and thank you again for taking the additional question.

Speaker 1: Thank you and our next question is a follow-up for Mike Patusky, you're bearing to research. Please go ahead.

Thanks George.

Thank you and our next question is a follow up for Mike Pitofsky Barrington Research. Please go ahead.

Thanks.

Couple of quick ones I guess.

Speaker 5: Sort of cool mic to see the cash balance go up and the free cash generated in the quarter and I'm just

Sort of cool Mike to see the cash balance go up and the free cash generated in the quarter and I'm just wondering as you sort of look out.

Seemingly a bunch of positive things that are are converging here I mean would your would your hope be that positive free cash is going to be sort of a regular part of the story going forward.

Speaker 4: Well, first of all, I'll say, yeah, we were very pleased with the growth and cash in the quarter. And I think it reflects the health of the business.

Well first of all I'll say, yeah, we were very pleased with the growth in cash in the quarter.

And I think it reflects the health of the business.

Speaker 4: In terms of specific cash guidance, I think what I wanna say is a couple of things. I think first of all, we talked about the improving profitability next year. That will definitely help on the cash side. Again, we're in a good, well, a place this year, if we didn't have the non-recurring charges we had this year in the spend on the associated with that, you know, we're in a good place already, and we believe we're improving next year from that.

In terms of specific cash guidance.

I think what I, what I want to say is a couple of things I think first of all we talked about the improving profitability next year that will definitely help.

On the cash side again, we're in a good solid place. This year. If we didn't have the nonrecurring charges. We had this year and the spend on associated with that.

We were in a good place already and we believe we're improving next year from that.

Speaker 4: The other things that will impact cash next year, in part some of it depends upon single and what that timeline is going to be because we may need to make some investments to be able to support the manufacturing of that. Again, we'll need to see how that timeline comes out in our interactions with the FDA. But apart from catbacks, I think

Other things that will impact cash next year.

Part some of it depends upon cingal and what that timeline is going to be because we.

We may need to make some investments.

To be able to support the manufacturing of that again, we'll need to see how that timeline comes out in our interactions with the FDA, but apart from Capex you know I think.

Speaker 5: The guidance that we've already given would suggest that the cash flows should be moving in the right direction next year. But I just, so I feel more comfortable giving qualitative guidance at this point as opposed to quantitative. But it's all moving in the right direction. Great. Just one more. Obviously, you're getting some questions on. Honda.

The guidance that we've already given it would suggest that the cash flows should be.

Moving in the right direction next year, but I, just so I feel more comfortable giving qualitative guidance at this point.

As opposed to quantitative, but it's all moving in the right direction.

Great.

Just one more obviously youre getting some questions on on.

Integrity, and and you know how quickly that can ramp and I'm sure everybody's sort of curious about the what was the.

You know the actual contribution.

Moshe next twist et cetera in the quarter. It is have you guys given any thought as you look at 'twenty, four and and how you guys are going to sort of report all that out and communicate to in some way trying to quantify or give greater detail on some of these new products. Since it seems to me are so critical.

In terms of just the overall thesis here.

Speaker 3: Yeah, I appreciate the question. I mean, our business is still small enough that we're obviously reporting the way we are just to make sure that we provide valuable information that we'll trend. As we continue to grow and as we see a lot of these products, making contributions that we think are worthwhile reporting out, then we'll definitely consider that going forward, Mike.

Yeah I appreciate the question.

I mean, our business is still small enough that we're we're obviously reporting the way we are just to make sure that we provide valuable information that that will trend as we continue to grow and as we see a lot of these products.

Making contributions that we think are worthwhile reporting out then we will definitely consider that going forward Mike.

Very good thanks, guys.

You're welcome thank you.

Speaker 1: And ladies and gentlemen, this concludes today's question and answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your guidelines and have a wonderful evening.

Ladies and gentlemen. This concludes today's question answer session and today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.