Q4 2024 Sanara MedTech Inc Earnings Call - Q&A
Speaker Change: Good day and welcome to you the Sanara Medtech fourth quarter and full year 2024 earnings conference call
Speaker Change: The company issued its earnings release earlier today and before we begin I would like to remind everyone that certain statements on today's call include forward looking statements within the meaning of the private securities litigation reform act of 1995.
Speaker Change: 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 the forward-looking statements, please see the risk factors set forth in the company's most recent annual report on form 10K.
Speaker Change: Today's call will be hosted by Ron Nixon, Executive Chairman and CEO O.
Speaker Change: and feature additional remarks from Elizabeth Taylor, Chief Financial Officer, Seth Yon, President of Commercial, Tyler Palmer, Chief Corporate Development and Strategy Officer, and Samma Paula, who leads Tissue Health Plus.
Speaker Change: I would now like to turn the call over to Mr. Nixon. Please go ahead, sir.
Nixon: Thanks, operator, and welcome everyone to our fourth quarter in full year 2024 earnings call.
Nixon: Let me provide a quick agenda for today's call. I'll start with a high level overview our full year financial results and key operational highlights in 2024. Seth will review our fourth quarter revenue performance and the commercial progress made in our Sanara's surgical segment in 2024.
Nixon: Sam will discuss the progress made in our tissue health plus segment in 2024 and our priorities for 2025. Tyler will then provide an overview of our recent announcement agreement with biomomatic
Nixon: In a Elizabeth we'll cover our fourth quarter financial results at full further detail before opening the calls for questions
Elizabeth Taylor: Company generated net revenue of $86 7 million for the full year of 2024, representing growth of 33% year over year. Our net revenue growth in 2024 was largely driven by strong sales of our soft tissue products, which increased 39% year over year to $76 1 million.
Elizabeth Taylor: Along with contributions from our sale of bone fusion products, which increased 6% year over year to $10 million.
Elizabeth Taylor: We generated positive adjusted EBITDA in 2024, generating $2 7 million of adjusted EBITDA, an increase of $2 6 million compared to 2023 importantly, this performance reflected significant profitability improvements within our scenario surgical segment.
Elizabeth Taylor: So narrow surgical generated segment adjusted EBITDA of $9 1 million in 2024, an increase of $3 9 million or 73% year over year. This performance was offset partially by our tissue health plus segment as we continued to invest in our THP platform and infrastructure to prepare for <unk>.
Elizabeth Taylor: <unk>.
Elizabeth Taylor: Lastly, we were essentially breakeven in terms of net cash used in operating activities in 2024 with approximately 24000 of cash used compared to $3 2 million of cash used in 2023.
Elizabeth Taylor: As of December 31, 2024, there was $15 9 million of cash on hand, and $24 5 million available for future borrowings under the facility.
Elizabeth Taylor: In addition to our strong financial performance. This past year, we made significant progress across multiple areas of our strategy and our scenarios surgical segment. Our team delivered impressive execution with respect to our commercial strategy expanding our sales coverage in penetrating hospitals across the U S and facility.
Elizabeth Taylor: Surgeon awareness and adoption of our products and our tissue help bus segment, we continued to establish our team and develop the technology capabilities and infrastructure required to bring this innovative value based wound care program to market with.
Elizabeth Taylor: We continue to evaluate pursue new partnerships and acquisitions, culminating in two exclusive distribution agreements in minority investments or innovative products, including the chemo mouthpiece and uptick.
Elizabeth Taylor: We also made progress in developing our intellectual property portfolio submitting 11, provisional patent applications in 2024, covering innovations and proprietary antimicrobial technologies and hydrolyzed collagen.
Elizabeth Taylor: Lastly, we secured a new debt facility for up to $55 million of potential borrowings to enhance our balance sheet.
Elizabeth Taylor: It provides increased financial flexibility in the form of non dilutive capital as we pursue our growth strategy.
Elizabeth Taylor: In summary, we are proud of our financial results and the operational progress made possible by our team in 2024.
Elizabeth Taylor: As we continue to advance our strategy and surgical chronic wound and skin markets I wanted to deliver a special thanks to our customers and investors for their support.
Elizabeth Taylor: Looking ahead to 2025, we expect to further enhance our sales coverage and increase our penetration of the market driving greater surgeon adoption of our sitting here surgical segment products in both new and existing accounts. We also expect to see a variety of new clinical manuscripts submitted for publication and further strengthening our portfolio of clinical evidence.
Elizabeth Taylor: In our tissue health plus segment, we will continue to invest in preparation for the planned launch of our first pilot where the wound care provider group during the second quarter. Additionally, we continue to evaluate pursue partnerships and other opportunities to enhance our capabilities and further our long term strategy in each of our two segments.
Elizabeth Taylor: As our recent performance demonstrates we remain focused on empowering physicians and clinicians to improve patient outcomes at a lower cost to the health care system, while positioning scenario to deliver long term growth and value to our shareholders.
Elizabeth Taylor: I'll now turn it over to Seth to discuss our fourth quarter revenue performance and commercial execution.
Seth Yon: Thanks, Ron.
Seth Yon: Our team delivered strong commercial execution in the fourth quarter, culminating in net revenue growth of 49% year over year to $26 3 million.
Seth Yon: Our net revenue performance was largely fueled by sales of our soft tissue repair products, which increased 56% year over year to $23 5 million, reflecting strong sales of our accelerate RF surgical and biosurgery products.
Seth Yon: Sales of our bone fusion products increased 8% year over year to $2 8 million driven by balanced growth across multiple products.
Seth Yon: As discussed in our preliminary results press release on January 20 <unk>.
Seth Yon: Fourth quarter Biosurgery sales were driven in part by increased demand following the disruption caused by hurricane Helene last fall, which cause industry shortages of IV fluids in saline solutions setting aside the approximate 1.8 million we saw related to this unique dynamic we remain pleased with our net revenue performance in the quarter.
Seth Yon: Turning to an update on commercial strategy and execution in the scenario surgical segment.
Seth Yon: At year end, our commercial team included 40 field sales reps compared to 39 at the end of 2023.
Seth Yon: Our sales performance in 2024, primarily reflected strong commercial execution in three key areas.
Seth Yon: First we continue to increase our sales coverage and presence in the U S by selectively expanding our distributor network.
Seth Yon: <unk> made significant progress on this core element of our commercial strategy identifying and securing new selling agreements with additional distributor partners in key areas.
Seth Yon: We ultimately increased our distributor network to include selling or agreements with over 350 distributor partners by year end up for more than 250 at the end of 2023, demonstrating our continued momentum in strengthening our sales coverage.
Seth Yon: As a reminder, our distributors do not stock inventory beyond some limited trunk stock in the event that additional product as needed during a procedure.
Seth Yon: Our field sales reps are responsible for managing the relationship with our distributor partners inside their respective territories, providing them with training assistance and technical support needed to educate prospective surgeon customers about our products.
Seth Yon: Second we increased our surgeon customer base by driving adoption of our technologies in both existing and new facilities.
Seth Yon: Third we continue to grow our number of approved facilities, adding new accounts for our team to sell into each year at year end. Our products were sold in over 1300 facilities up for more than 1000 at the end of 2023.
Seth Yon: This growth was primarily driven by gaining vac approvals at new hospitals, where we had not previously sold our products.
Seth Yon: Despite our progress in recent years, we remain in the early innings of our commercialization efforts with a significant greenfield opportunity to expand our customer base.
Seth Yon: In 2025, we aim to build on our recent commercial traction by leveraging and expanding our independent sales coverage of the U S market and raising awareness of our products with surgeon customers in both existing and new facilities, we look forward to getting our products into the hands of new surgeon customers, who remain unaware of the benefits that they bring.
Seth Yon: With that I'll turn it over to Sam Devry and update on tissue health plus.
Speaker Change: Banks at 2024 was a significant year of golf on for PHP.
Speaker Change: Ford was carried out by our coordinated multi disciplinary global team and divided in three main initiatives. Our first initiative was to develop a clinical model of holistic wound care that Leverages science to integrate wound prevention treatment and maintenance simply put this clinical model.
Speaker Change: And intervention playbook for many types of wounds phases and complexity level each intervention playbook implement a team based approach across multiple medical disciplines and care settings rehab and validated over 35 of these playbooks to cover all chronic wound.
Speaker Change: If your allergies.
Speaker Change: Our second initiative was focused on building the technology platform that uses our integrated care model to scale the delivery of transformative wound care by our provider partners. Our Tech platform is also building to enable tissue health plus to design contract and implement.
Speaker Change: Savings generating programs for our payer customers.
Speaker Change: Our third initiative was focused on enabling a 2025 market launch. This includes the development of our pears things model and its validation by a third party actuarial song using a study of $1 million insurance claims. We have also designed a value based pricing approaches for.
Speaker Change: Both provider and payer programs, we believe our progress across these three initiatives has put us on track launch our first pilot program with a wound care group during the second quarter of 2025.
Speaker Change: We are initially targeting wound provider groups and podiatric practices with 10 or more practices lastly, with respect to payers, we intend to launch our first pilot program with a pair during the second half of this year.
Speaker Change: I'd now like to turn it over to Tyler to discuss our recently announced partnership with Biomimetic and innovations.
Tyler Palmer: Thanks Sam.
Speaker Change: January 21, we announced a strategic relationship with biomimetic innovations or BMI, a privately held medical device company based in Ireland. This relationship includes both an exclusive license and distribution agreement and also our minority investment in BMI.
Speaker Change: The licensing agreement provides us with the exclusive rights to market and sell to innovative products in the U S. Both of which are designed to manage peri articulate fractures or fractures that occur inside or around the joint.
Speaker Change: The first product is a synthetic injectable biodiesel bone void filler known as <unk>. The second product is a hardware agnostic adjunctive internal fixation technology, which is designed to promote the targeted application of optic.
Speaker Change: <unk> has been granted breakthrough device designation by the FDA occur.
Speaker Change: According to the FDA. This designation is granted to devices that provides for more effective treatment or diagnosis of life, threatening or irreversibly debilitating diseases or conditions.
Speaker Change: We believe receiving this designation underscores the incremental clinical value that <unk> brings to the treatment of Perry articulate fractures.
Speaker Change: Perry articulate fracture repair procedures require surgeons to address the fragmented bone and ultimately restored the surface, where the patient's bones meet in order to allow the joint to function properly again.
Speaker Change: With this in mind I'll stick is designed to enhance the process of preparing Perry articulate fractures by enabling surgeons to address three important clinical needs.
Speaker Change: Number one reducing Perry articulate fractures in and around the patient has joined number two achieving provisional bone fixation and <unk>.
Speaker Change: Three billing bone voids.
Speaker Change: <unk> is specifically formulated to allow the product to more readily slow and dispersed into a patient's bone defects and then interlock and adhere firmly with the surrounding porous tissue of the boat.
Speaker Change: We believe these properties allow I'll stick to deliver exceptional structural integrity and mechanically enhanced bio adhesion, making it uniquely suited to address the three clinical need as I mentioned earlier.
Speaker Change: Ultimately, we believe Arctic will provide surgeons with a unique and compelling solution to enhance fracture repair and the more than 100000, Perry articulate fracture procedures that occur in the U S annually.
Speaker Change: In terms of the path ahead, BMI is engaging with the F. D. A to respect discussions one of the many benefits afforded to breakthrough device designated products and is working to secure regulatory clearance of.
Speaker Change: Our timeline continues to assume having cleared technology to introduce to the U S market in the first quarter of 2027.
Speaker Change: Once cleared we expect Austin to enhance and complement our current bone fusion portfolio in our scenarios surgical segment, leveraging both our existing call points and our commercial infrastructure.
Speaker Change: Before turning the call over to Elizabeth Let me share a quick introduction.
Speaker Change: Elizabeth joined our executive leadership team in January as Chief Financial Officer, following a more than 25 year career in the financial services and healthcare industries. During this time. She has served as CFO of a med Tech company focused on the treatment of wounds.
Speaker Change: Hello of multiple hedge funds and as a member of the investment team at a leading private equity firm.
Speaker Change: I'd like to take the opportunity on today's call to formally welcome her to our team on behalf of everyone. Here at scenario Med Tech Elizabeth will now review, our fourth quarter financial results in more detail.
Elizabeth Taylor: Thanks, Tyler I'm excited to join scenario during the pivotal time in the company's history and had strong financial performance to outline on my first earnings call with the company.
Speaker Change: As Seth covered our fourth quarter revenue performance I will begin my discussion at the gross profit line unless otherwise noted all references to fourth quarter financial results will be on a year over year basis.
Speaker Change: Fourth quarter gross profit increased $8 2 million or 51% to $24 1 million.
Speaker Change: Gross margin increased approximately 160 basis points to 91, 4% net revenue driven by increased sales of our soft tissue repair products.
Speaker Change: Fourth quarter operating expenses increased $8 3 million or 51% to $24 4 million.
Speaker Change: The change in operating expenses was driven by a $6 1 million or 37% increase in selling general and administrative expenses.
Speaker Change: One 8 million or 270% increase in research and development expenses.
Speaker Change: And a <unk> 5 million or 47% increase in noncash depreciation and amortization expenses.
Speaker Change: The increase in depreciation and amortization expenses was due to a point 5 million noncash charge to write off the remaining net book value of certain internally used software assets and our tissue health plan segment.
Speaker Change: Operating loss in the fourth quarter was <unk> 4 million compared to a loss of point 2 million last year.
Speaker Change: Other expense was $1 3 million compared to 36000 of expense last year.
Speaker Change: The increase in other expense was primarily due to higher interest expense related to our C or G turmoil and to a lesser extent the absence of the gain on disposal of investment, which lowered total other expense in the prior year period.
Speaker Change: Net loss for the fourth quarter with $1 7 million or 20 cents per diluted share compared to net loss of <unk> 3 million or three cents per diluted share last year.
Speaker Change: By segment, our scenario surgical segment generated net income of <unk> 9 million compared to a net loss of <unk> seven.
Speaker Change: Our teachers have quest segment generated a net loss of $2 6 million compared to net income of <unk> 5 million.
Speaker Change: Adjusted EBITDA for the fourth quarter of 2024, with <unk> 9 million or three 6% of $26 3 million of net revenue compared to 2.4 million or $2 five per cent of $17 7 million of net revenue.
By segment. So neurosurgical segment, adjusted EBITDA was $4 1 million or 15, 4% of $26 3 million absentee Arab surgical segment net revenue compared to one 5 million or eight 6% of $17 7 million absent neurosurgical affect net revenue last year.
Speaker Change: And our tissue health class generated segment adjusted EBITDA loss of $3 1 million compared to a loss of $1 1 million last year.
Speaker Change: Lastly, with respect to our balance sheet.
Speaker Change: At December 31, 2024, we had $15 9 million of cash $30 5 million of principal debt obligations outstanding and $24 five.
Speaker Change: $5 million of available borrowing capacity. This compares to $5 1 million of cash and $9 8 million of principal debt obligations outstanding and $2 3 million of available borrowing capacity as of December 31st 2023.
Speaker Change: Subsequent to year end, we amended the terms of our CRD term loan to provide more flexibility in terms of both the timing and amounts of potential future borrowings.
Speaker Change: As a reminder, our <unk> term loan initially provided for one additional borrowing of up to $24 5 million, which was required to be made on or before June 32025.
Speaker Change: We amended the terms of our loan agreement to provide for up to two additional borrowings totaling $24 5 million in aggregate. These.
Speaker Change: These additional borrowings are now permanent to be made on or before December 31st 2025.
Speaker Change: Lastly, while scenario does not provide formal financial guidance, we would like to share a few considerations to bear in mind.
Speaker Change: This year our team remains focused on building on the progress made in 'twenty 'twenty four.
Speaker Change: And another year of growth driven by the performance of our senior surgical segment. We are pleased with our start to 2025, which continues to track with our expectations.
Speaker Change: In 2025, we remain focused on improving the profitability and our scenario surgical segment, while continuing to invest in our tissue help class segment in preparation for the planned launch of our first pilot program with the wound care provider during the second quarter.
Speaker Change: Specifically, we expect our continued investment in tissue help class of the first half of 2025 to be between $7.5 million to $10 million Importantly, we are pursuing financial partners to invest in the execution of our tissue help quest strategy with.
Speaker Change: With our existing cash on hand expected incremental borrowing on our existing facility and expected cash generation in our surgical segment. In 2025, we believe we have the requisite capital to pursue our strategic growth initiatives.
Speaker Change: With that I'll turn it back to the operator to open the call for questions.
Speaker Change: Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: If you're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: We do ask that you limit yourself to one question and one follow up.
Speaker Change: If you would like to ask additional questions. We invite you to rods yourself into the queue again by pressing star one.
Speaker Change: Thank you.
Speaker Change: Our first question today is.
Ross Osborne: Coming from Ross Osborne with Cantor Fitzgerald Your line is life.
Ross Osborne: Hey, guys good morning, and congrats on the progress and thank you for taking our questions.
Speaker Change: Starting off a would you just run through chemo mouth piece and the game plan for 2025 there.
Ross Osborne: Sure happy to Ross.
Ross Osborne: Chemo mouth piece is being introduced into the market as we speak and there you have the following events that have to do that.
Ross Osborne: One they are waiting on their health economic study that will be published and out very shortly secondly, the clinical.
Ross Osborne: The study that was done.
Ross Osborne: For the chemo mouth piece that involve numerous patients in that trial.
Ross Osborne: And those both will be coming out in the very near term.
Ross Osborne: And then lastly.
Ross Osborne: They've got a very nice code, that's that's associated with this but they need to get that onto the commercial pay contracts. So they're making their effort now to go back to their existing customer base, which you may recall they have a very large population of commercial contracts and there'll be continuing to go to that.
Ross Osborne: To get approvals to add chemo mouth piece to a treatment for oral mucositis.
Ross Osborne: All of that will be happening as we speak and as that goes so will go it came out about peace.
Speaker Change: Understood. Thank you and then turning to THP.
Speaker Change: How would you guys judge a successful pilot launch during that <unk>.
Speaker Change: Yes, Sam would you mind taking that.
Speaker Change: Sure.
Ross Osborne: Great question, Ross I think the best way to think about it.
Ross Osborne: You should really understand why the pilot customer actually signed on with us.
Ross Osborne: If you take a step back there are a wound provider group and about six states in 11 different locations and there are three strategic objectives, one is to become lean and fee for service, where they want to achieve clinical standardization and reduced their reimbursement risk exposure second they wanted to.
Ross Osborne: Innovate on their services.
Ross Osborne: And add to the portfolio of services.
Ross Osborne: They want to actually.
Ross Osborne: Transition to advance payment models. So when we think about the success of the pilot. We are really focused on the first piece is can we integrate with their citizens standardized critical clinical.
Ross Osborne: Clinical workflows and can we help them.
Ross Osborne: Standardized their reimbursement posture by increasing their documentation quality.
Ross Osborne: How we would measure success, but a simpler way of looking at it as growing life and which should happen.
Ross Osborne: Sharply.
Ross Osborne: Yes.
Speaker Change: Thanks for taking my questions and congrats on the progress.
Speaker Change: Thank you very much Ross.
Ross Osborne: Okay.
Ross Osborne: Thank you.
Speaker Change: Ladies and gentlemen, if you do wish to ask a question you May press star one on your telephone keypad.
Speaker Change: Thank you. Our next question is coming from Tom Johnston, who is a private investor Your line is life.
Speaker Change: Hey, Ron and team congratulations on another amazing quarter and year. My questions are also around THB.
Speaker Change: Number one I just wanted to confirm that the pilot is in U two not the second half I think there may have been a miss statement there.
Speaker Change: The second I'm really curious it seems like most of the investment thus far has gone into developing the clinical model and the tech platform I'm curious as to any business development efforts beyond the initial pilot system that you've identified that have signed on.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Sorry.
Speaker Change: Oh, yes.
Speaker Change: Thank you for the question Tom Yes.
Speaker Change: Difficult. Therefore, it has a plus it is in Q T. The pilot districts.
Speaker Change: Just to kind of confirm that.
Speaker Change: While signature.
Speaker Change: Significant effort has gone into the clinical on the tech side.
Speaker Change: We have actually put a significant amount into the commercial side as well.
Speaker Change: When we think about the commercial side, we really looked at two things.
Speaker Change: Can we create the right pricing model and does it fit the value proposition.
Speaker Change: For our customers. So we have designed our value based pricing for both the provider and payer markets that's been market tested.
Speaker Change: Other piece, we really looked at is how do you generate the leads and put the business development efforts in.
Speaker Change: In place and Thats. The point you were hinting at and in order to do that we have recruited a sales team and then we're also in the process of finishing off recruiting additional BD team, which will feed into that sales team.
Speaker Change: And we have started tracking of pipeline.
Speaker Change: And while you are not giving revenue guidance. We are very pleased with the initial interest in it.
Speaker Change: That's great. Thank you Sam.
Speaker Change: Thank you Tom.
Speaker Change: Thank you we do have a question via webcast.
Speaker Change: In the tissue health plus segment, how should we expect a third party investments to potentially offset the spending in this segment.
Sam: Sam you want to take that.
Speaker Change: Okay.
Speaker Change: As we've been talking about in the last couple of calls we're looking for financial partners.
Speaker Change: That was about the indicated that is and just kind of call out as well.
Speaker Change: What we are really looking for a partner to both offset somewhat for board our investment, but really are also looking for giving us a strategic advantage. So finding the right balance is really the key.
Speaker Change: Our goal for us.
Speaker Change: Yes.
Speaker Change: Just.
Speaker Change: Go ahead I was just because those discussions are underway with several parties.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: We are currently seeing no remaining questions at this time this will conclude our conference for today, we thank you for your participation.