Q1 2025 MiMedx Group Inc Earnings Call

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Matthew Notarianni: © BF-WATCH TV 2021 Good afternoon. Thank you for standing by. Welcome to the MiMedx First Quarter 2025 Operating and Financial Results At this time, all participants are in a listen-only mode.

Speaker Change: Good afternoon, and thank you for standing by.

Welcome to the <unk> first quarter 2025, operating and financial results Conference call.

Speaker Change: At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Matthew Notarianni: The question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Speaker Change: Yeah.

Speaker Change: As a reminder, this conference is being recorded.

Matthew Notarianni: I would now like to turn the conference over to your host, Mr. Matt Notarianni, Head of Investor Relations for MiMedx. Thank you, Operator, and good afternoon, everyone. Welcome to the MiMedx First Quarter 2025 Operating and Financial Results Conference Call. With me on today's call are Chief Executive Officer Joe Capper and Chief Financial Officer Doug Rice. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at MiMedx.com. Joe will kick us off with some opening remarks and a summary of our operating highlights, and Doug will provide a review of our financial results for the quarter.

Speaker Change: I would now like to turn the conference over to your host Mr. Matt Notarianni head of Investor Relations for my medics. Thank you you may begin.

Speaker Change: Thank you operator, and good afternoon, everyone.

Speaker Change: Welcome to the <unk> first quarter 2025, operating and financial results Conference call with me on today's call are Chief Executive Officer, Joe Capper, and Chief Financial Officer, Doug Rice.

Speaker Change: As part of today's webcast. We are simultaneously displaying slides that you can follow you can access the slides from the Investor Relations website at <unk> Dot com.

Speaker Change: Joe will kick us off with some opening remarks, and a summary of our operating highlights and Doug will provide a review of our financial results for the quarter and then Joe will conclude with some additional updates including a discussion of our goals. We will then be available for your questions.

Matthew Notarianni: And then Joe will conclude with some additional updates, including a discussion of our financial goals. We will then be available for your questions.

Matthew Notarianni: Before we begin, I would like to remind you that our comments today will include forward-looking statements, including statements regarding future sales, operating results, and cash balance growth, future margins and expenses, our product portfolios, and expected market sizes for our products. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances, and delays. Additional factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K and our quarterly report on Form 10-Q.

Speaker Change: Before we begin I would like to remind you that our comments today will include forward looking statements, including statements regarding future sales and operating results and cash balanced growth future margins and expenses, our product portfolios and expected market sizes for our products. These expectations are subject to risks and uncertainties.

Speaker Change: Actual results may differ materially from those anticipated due to many factors, including competition and access to customers the reimbursement environment unforeseen circumstances and delays.

Speaker Change: Factors that could impact outcomes and our results include those described in the risk factors section of our annual report on Form 10-K, and our quarterly report on Form 10-Q.

Matthew Notarianni: Also, our comments today include non-GAAP financial measures, and we provide a reconciliation to the most comparable GAAP measures in our press release, which is available on our website at MiMedx.com.

Speaker Change: Also our comments today include non-GAAP financial measures and we've provided reconciliations to the most comparable GAAP measures.

Speaker Change: Yes release, which is available on our website at <unk> Dot com.

Joseph Capper: With that, I'm now pleased to turn the call over to Joe Capper. Joe? Thanks, Matt. Good afternoon, everyone. Thank you for joining us on today's call. I am pleased to report that we had a very good start to the year, growing the top line by 4% against what should be our toughest comparison from Q1 last year when we posted 18% growth. And this was with one less business day in this year's quarter. Importantly, you will hear today that we are well-positioned to accelerate our growth as we advance through the remainder of 2025 and beyond. Our efforts in our surgical business continue to pay dividends, producing double-digit growth in the quarter.

Joe Capper: With that I'm now pleased to turn the call over to Joe Capper Joseph.

Thanks, Matt Good afternoon, everyone. Thank you for joining us on today's call I am pleased to report that we had a very good start to the year growing the top line by 4% I guess, what should be our toughest comparison Q1 last year when.

Joe Capper: One we posted 18% growth and this with one less business day in this year's quarter importantly, you'll hear today that we are well position accelerate our growth as we advance through the remainder of 2025 and beyond.

Joe Capper: Our efforts in our surgical business continued to pay dividends producing double digit growth in the quarter. We also held our own can be private office and associated care setting notwithstanding the continued disruption.

Joseph Capper: We also held our own in the private office and associated care settings, notwithstanding the continued disruption caused by the current Medicare reimbursement system that lacks any rational fiscal accountability. As you may know, on the eve of their scheduled implementation of the proposed LCDs, the federal government once again announced a delay, this time until January 1, 2026. It goes without saying another day, another delay was a head-scratcher as the private office setting is in tremendous need of Medicare reform. This action, without any other immediate step to slow down the out-of-control spend, represents another blow to Medicare beneficiaries, the Trust Fund, and U.S.

Joe Capper: And by the current Medicare reimbursement systems that lacks any rational fiscal accountability.

As you May know on the eve of their scheduled implementation of the proposed LCD that federal government once again announced a delay this time until January one 2026.

Joe Capper: It goes without saying another day another delay on the head scratcher as private off the setting is in tremendous need Medicare reform.

Joe Capper: This action without any other immediate steps oh down the out of control spend represents another blow to Medicare beneficiaries.

Joe Capper: Trust Fund and U S taxpayers.

Joseph Capper: taxpayers. I am proud of MiMedx's rich history of developing products based on clinical needs and backed by robust, peer-reviewed evidence, which are tenets of any high-quality medical technology company. We firmly believe this is the right approach to all aspects of medicine and certainly welcome the reform which would have made basic evidence a requirement to commercialize products in the wound care market. That said, we must adapt to the current environment. Naturally, we had contingency plans in place in the event of another such delay. And we have modified our approach to ensure we remain competitive in these affected care settings as we bridge to a period of reform for which we will continue to actively advocate.

Joe Capper: I am proud of my <unk> rich history of developing products based on clinical need and backed by robust peer reviewed evidence, which our tenants of any high quality medical technology company.

Joe Capper: We firmly believe this is the right approach to all aspects of medicine, and certainly welcome to reform, which would have made basic evidenced a requirement to commercialize products in the wound care market.

Joe Capper: That said, we must adapt to the current environment naturally we had contingency plans in place in the event of another such delay.

Joe Capper: And we have modified our approach to ensure we remain competitive in these affected care settings, as we bridge to what period of reform for which we will continue to actively advocate.

Joseph Capper: I will discuss our plans in more detail, but first let me touch on some of the highlights of the quarter. Q1 net sales grew year-over-year by 4% to $88 million, representing another solid quarter, especially given that Q1 2024 is our strongest quarterly growth comparison. Adjusted gross profit margin was 84% in the quarter. adjusted EBITDA with $17 million or 20% of net sales. We ended the quarter with $106 million in cash, an increase of $2 million during the quarter. This is an excellent result, as we typically burn more cash in Q1 compared to the remainder of the year due to certain front-end loaded expenses and other cash requirements.

Joe Capper: We'll discuss our plans in more detail, but first let me touch on some of the highlights of the quarter.

Joe Capper: Q1, net sales grew year over year by 4% to $88 million, representing representing another solid quarter, especially given that Q1 'twenty 'twenty four is our strongest quarterly growth comparison.

Joe Capper: Adjusted gross profit margin was 84% in the quarter adjusted.

Joe Capper: Adjusted EBITDA was $17 million or 20% of net sales.

Joe Capper: We ended the quarter with $106 million in cash an increase of $2 million during the quarter.

Joe Capper: <unk> is an excellent result, as we typically burn more cash for Q1 compared to the remainder of the year due to certain front end loaded expenses and other cash requirements.

Joseph Capper: Our surgical business grew by 16% with contributions across the portfolio, including an uptick in heliogen sales as adoption gains traction. We continued enrollment in our randomized controlled trial for epi effect, and we advanced conversations on a few complementary business development opportunities for both our wound and surgical market.

Joe Capper: Our surgical business grew by 16% with contributions across the portfolio, including an uptick in helio Gen sales and adoption gains traction.

Joe Capper: Continued enrollment in our randomized controlled trial for <unk> effect, and we advanced conversations on a few calls from battery business development opportunities for both our wound and surgical markets.

Joseph Capper: I would also like to address a central topic of the day, and that is tariffs. I am pleased to report that MiMedx currently has no direct exposure to tariffs and we do not expect them to affect our results.

Joe Capper: I would also like to address a central topic of the day and that is tariffs I am pleased to report that my metrics. Currently has no direct exposure to tariffs and we do not expect them to affect our results.

Joseph Capper: Turning now to our strategic priority. As articulated on prior calls, we have our team's collective efforts organized and focused around three primary objectives. Our top strategic priority is to continue to innovate and diversify our product portfolio. Over the years, the company has built a tremendous core competency in its ability to develop and commercialize unique product configurations designed to meet explicit customer needs. We have successfully introduced multiple new products in the last few years in both our surgical and wound care businesses. Our Amnio-branded products continue to do well, led again by Amniolithinic, which grew by 22% in Q1.

Joe Capper: Turning now to our strategic priorities.

Joe Capper: As articulated on prior calls we have our team's collective efforts organized and focused around three primary objectives.

Joe Capper: Our top strategic priority is to continue to innovate and diversify our product portfolio.

Joe Capper: Over the years the company has built a tremendous core competency and its ability to develop and commercialize unique product configuration is designed to meet explicit customer needs. We have successfully introduced multiple new products in the last few years in both our surgical and wound care businesses.

Joe Capper: Our amnio branded products continued to do well then again by amnio effect, which grew by 22% in Q1.

Joseph Capper: These products are now complemented by Heliogen, our first xenograft, which grew nicely on a sequential basis, albeit off of a low base. we are receiving excellent real-world feedback on the clinical effectiveness of Heliogen and remain bullish on its ability to continue gaining traction in a variety of surgical applications.

Joe Capper: These products are now complemented by Healy with Gen. <unk>, our first graph, which grew nicely on a sequential basis, albeit off a low base.

Joe Capper: We are receiving excellent real world feedback on the clinical effect that this appealing with Jen and remain bullish on its ability to continue gaining traction in a variety of surgical applications.

Joseph Capper: In our wound care business, the story is a bit more complex. While our Epi-branded products, led by our flagship EpiFix, remain unchallenged from a clinical perspective, a portion of these sales are within the private office and associated care settings, which is where we are experiencing the Medicare reimbursement-related disruption. Put simply, our product price points are far lower than most of those currently on the ASP list. making them less attractive to many providers. While lower prices are certainly helpful for Medicare beneficiaries given the inexplicable set of incentives that persist in this market, the higher a product is priced, the more money practitioners make.

Joe Capper: And our wound care business. The story is a bit more complex, while RFP branded products led by our flagship epic remain challenged from a clinical perspective, a portion of these sales are within the private office and associated care settings, which is where we are experiencing the Medicare reimbursement related to this.

Joe Capper: Hum.

Joe Capper: Put simply our product price points are far lower than most of those currently on the E. S. P list.

Joe Capper: Making them less attractive to many providers.

Joe Capper: While lower prices are certainly helpful for Medicare beneficiaries, given the inexplicable set of incentives that persist in this market are higher a product just price the more money practitioners Mike.

Joseph Capper: Therefore, are comparatively lower priced products in which there resulted in us having essentially flat revenue in the quarter, which was actually an incredible feat by our sales team given the environment. Additionally, we are now complementing our organic portfolio with allografts manufactured and priced by a third party in order to retain as many customers as possible. And yes, they are priced higher than our organic portfolio. As part of our contingency planning, in the event of further LCD delays, we added a third-party manufactured Ammion Chorion Allograft, branded Celera, to our offering, which contributed to our recent results.

Joe Capper: Therefore, our comparatively lower priced products in wound care resulted in us having essentially flat revenue in the quarter, which was actually an incredible feat by our sales team given the environment.

Joe Capper: Additionally, we are now complementing our organic portfolio with Allographs manufactured and priced by a third party in order to retain as many customers as possible.

Joe Capper: Yes, they are priced higher than our organic portfolio.

Joe Capper: As part of our contingency planning in the event of further LCD delays, we added a third party manufactured amnion chorion aircraft.

Joe Capper: Solaris to our offering was contributed to our recent results. We are in discussions to potentially distribute other third party manufactured allograft as well.

Joseph Capper: We are in discussions to potentially distribute other third-party manufactured allografts as well. I expect these products to be helpful in retaining business. However, I would caution against expecting this pivot in our approach to create a windfall for MiMedx for a few reasons. First, only approximately 25% of our overall business has ASP exposure. Second, while priced higher than our current Epi brands, they remain well below the eye-popping prices of some of the newer products or recently repriced products on the market. Third, MiMedx will not engage in the aggressive selling practices that have become more common and which we believe cross the line of appropriate marketing behavior.

Joe Capper: I expect these products to be helpful. In retaining business. However, I would caution against expecting this pivot in our approach to create a windfall for my metrics for a few reasons.

Joe Capper: Only approximately 25% of our overall business has ASP exposure.

Joe Capper: While price higher than our current at B brands, they remain well below the eye popping prices of some of the newer products or recently re priced products on the market.

Joe Capper: Third <unk> will not engage and the aggressive selling practices that have become more common and which we believe cross the line of appropriate marketing behavior.

Joseph Capper: I credit our strong management team for being well prepared to pivot and take steps to protect our business. However, make no mistake, we will continue to advocate for much-needed reform in this market. It is certainly very frustrating to see our tax dollars wasted.

Joe Capper: I credit our strong management team for being well prepared to pivot and take steps to protect our business.

Joe Capper: Never make no mistake, we will continue to advocate for much needed reform in this market.

Joe Capper: It is certainly very frustrating to see our tax dollars wasted.

Joseph Capper: The second priority is to develop and deploy programs intended to expand our footprint in the surgical market. As we've discussed, this objective calls for a significant commitment to the production of real-world clinical evidence and scientific research. We have studies in several publications and others underway, all designed to support use of our placental allografts in a variety of surgical procedures. Our technology has demonstrated the potential for reduced scarring or adhesion formation, which could enable accelerated and improved quality of healing, leading to enhanced surgical and economic outcomes. In addition to research and awareness, it is critical that we continue to expand our product and service offering to build a stronger presence in the surgical setting.

Joe Capper: The second priority is to develop and deploy programs intended to expand our footprint in the surgical market.

Joe Capper: As we've discussed this objective calls for a significant commitment to the production of real world clinical evidence and scientific research.

Joe Capper: We have studies in several publications and others underway all designed to support use of our placental derived allographs and a variety of surgical procedures.

Joe Capper: Our technology has demonstrated the potential for reduced scarring or adhesion formation, which could enable accelerated and improved quality of healing leading to enhanced surgical and economic outcomes.

Joe Capper: In addition to research and awareness. It is critical that we continue to expand our product and service offering to build a stronger presence in the surgical setting as.

Joseph Capper: As I mentioned, Heliogen is gaining traction, and we are actively developing and evaluating additional products to help expand our surgical footprint. Over the past few years, we have grown our commercial team in surgery, increased funding for targeted research, and expanded our product portfolio. And we will continue to do so as we believe this is a winning formula. We're in the early market development phase for placental-derived products in many surgical applications. The development of these markets will take time and perseverance, but the potential clinical benefits for patients healthcare economic payoff and the immense business opportunity for years to come certainly make it a worthwhile pursuit.

Joe Capper: As I mentioned, Chile, allergen is gaining traction and we are actively developing and evaluating additional products to help expand surgical footprint.

Joe Capper: Over the past few years, you know pro and our commercial team is surgery increased funding for targeted research and expanded our product portfolio and we will continue to do so as we believe this is a winning formula.

Joe Capper: We are in the early market development phase, 4% to drive products and many surgical applications. The development of these markets will take time and perseverance.

Joe Capper: Central clinical benefits for patients health care economic payoff and the immense business opportunity for years to come certainly make it a worthwhile pursuit.

Joseph Capper: Our third initiative is to introduce programs designed to enhance customer intimacy. As a reminder, the primary focus of this initiative is to develop programs which improve relationships and ultimately lower our customer turnover. We have several initiatives underway aimed at institutionalized, customer-centric behavior throughout the organization. We continue to experience excellent adoption of MiMedx Connect, our proprietary customer portal, and we are actively developing additional features designed to improve workflow and strengthen the bond between MiMedx and our customers. We believe our commitment to this approach will lead to enhanced customer relationships, improved net promoter scores, higher margins, and ultimately an increase in the average lifetime value of a customer.

Joe Capper: Our third initiative is to introduce programs designed to enhance customer intimacy as a reminder, the primary focus of this initiative is to develop programs.

Joe Capper: Which improve relationships and ultimately lower our customer turnover, we have several initiatives underway aimed at institutionalized customer centric Pedro throughout the organization.

Joe Capper: Continued to experience excellent adoption of my medics connect our proprietary customer portal and we are actively developing additional features designed to improve workflow and strengthen the bond between my medics and our customers.

Joe Capper: We believe our commitment to this approach will lead to enhanced customer relationships improved net promoter scores higher marches and ultimately an increase in the average lifetime value of a customer.

Douglas Rice: Now let me turn the call over to Doug for a more detailed review of our financial results. Doug? Thank you, Joe, and good afternoon to everyone on today's call. I'm pleased to review our results with you all today. As Matt mentioned, many of the financial measures covered in today's call are on a non-GAAP basis, so please refer to our earnings release for further information regarding our non-GAAP reconciliations and disclosures, including the reconciliation tables in the back of our press release that provide more detail regarding the adjustments made to calculate our non-GAAP metrics. Moving on to the results, as Joe mentioned, our first quarter 2025 net sales of $88 million represented 4% growth compared to the prior year.

Doug Rice: Now, let me turn the call over to Doug or a more detailed review of our financial results Doug.

Doug Rice: Thank you Joe and good afternoon to everyone on today's call I'm pleased to review our results with you all today as Brad mentioned many of the financial measures covered in today's call are on a non-GAAP basis. So please refer to our earnings release for further information regarding our non-GAAP reconciliations and disclosures, including the reconciliation tables in the back of our press release.

Doug Rice: To provide more detail regarding the adjustments made to calculate our non-GAAP metrics.

Doug Rice: Moving on to the results as Joe mentioned, our first quarter 2025, net sales of $88 million, representing 4% growth compared to the prior year period.

Douglas Rice: By product category, first quarter wound sales of $56 million declined 2% versus the prior year period, while surgical sales of $32 million were up 16%. We saw significant contributions from many parts of our business in the first quarter, including another solid double-digit year-over-year growth quarter from AmnioEffect, a continued rampant sales of our Xenograft Heliogen, which combined with strong sales of AmnioEffects to drive the performance in surgical. Our wind business was up against a tough comparable following the strong sales of EpiEffect in the first quarter last year. Additionally, the ongoing behavior in the private office and the turnover in sales reps that we experienced in the middle of last year have created some challenges for our wind franchise.

Doug Rice: By product category first quarter wound sales of $56 million declined 2% versus the prior year period, while surgical sales of $32 million were up 16%. We saw significant contributions from many parts of our business in the first quarter, including another solid double digit year over year growth quarter from amnio effect.

Doug Rice: The continued ramp in sales of our xenograft Healy adjourn, which combined with strong sales of amnio fix to drive the performance in surgical.

Doug Rice: Our wind business was up against the tough comparable following the strong sales of that'd be effect in the first quarter last year.

Doug Rice: Additionally, the ongoing behavior and the private office and the turnover in sales reps that we experienced in the middle of last year have created some challenges for our wind franchise. These declines were partially offset with contributions from our newest wound care product solera.

Douglas Rice: These declines were partially offset with contributions from our newest wind care product, Solera. Our first quarter 2025 GAAP gross profit was about $72 million, flat compared to the prior year period. Our GAAP gross margin was 81% in the first quarter 2025 compared to 85% last year. Excluding the incremental acquisition-related amortization expense of roughly $3 million in the quarter, our non-GAAP adjusted gross margin was 84%, down modestly compared to the first quarter of 2024. We continue to expect our full-year non-GAAP adjusted gross margin to be around 82-83%. Turning to our operating expenses, sales and marketing expenses were $47 million in the first quarter, compared to $44 million in the prior year period.

Doug Rice: Our first quarter 2025, GAAP gross profit was about $72 million flat compared to the prior year period.

Doug Rice: Our GAAP gross margin was 81% in the first quarter 2025, compared to 85% last year, excluding the incremental acquisition related amortization expense of roughly $3 million in the quarter. Our non-GAAP adjusted gross margin was 84% down modestly compared to the first quarter of 2024, we continue to.

Doug Rice: We expect our full year non-GAAP adjusted gross margin to be around 82% to 83%.

Doug Rice: Turning to our operating expenses sales and marketing expenses were $47 million in the first quarter compared to $44 million in the prior year period.

Douglas Rice: The increase was due to a combination of higher commissions associated with higher sales, as well as increases that we made to our sales comp plans in the middle of 2024. Looking ahead, we continue to expect our full year 2025 sales and marketing expense to be approximately 51% to 52% of net sales, would be flat on a percent of sales basis to 2024 and up in absolute dollars. General and administrative expenses, or G&A, were $13 million in the first quarter, compared to $11 million in the prior year period. The increase was driven, in part, by higher legal expenses specifically related to actions that we initiated against Surgenix and in defense of our intellectual property portfolio.

Doug Rice: The increase was due to a combination of higher commissions associated with higher sales as well as increases that we made to our sales comp plans in the middle of 2024.

Doug Rice: Looking ahead, we continue to expect our full year 2025 sales and marketing expense to be approximately 51% to 52% of net sales.

Doug Rice: Would be flat on a percent of sales basis, the 'twenty 'twenty four and up in absolute dollars general and administrative expenses or G&A for $13 million in the first quarter compared to $11 million in the prior year period. The increase was driven in part by higher legal expenses specifically related.

Doug Rice: The actions that we initiated against your genetics and in defense of our intellectual property portfolio.

Douglas Rice: Over the balance of the year, we continue to expect G&A expense to be 12 to 13% of net sales, which would be roughly flat on a percent of sales basis to 2024 and up an absolute dollar. Our first quarter R&D expenses were $3 million, or about 4% of net sales, up 17% compared to the prior year period. It's driven primarily by increased costs associated with our ongoing EpiEffect RCT, as well as additional spend related to future products in our pipeline, and is consistent with our expected R&D spend ramp, which we detailed during our last call.

Doug Rice: Over the balance of the year, we continue to expect G&A expense to be 12% to 13% of net sales, which would be roughly flat on a percent of sales basis, the 'twenty 'twenty four and up in absolute dollars.

Doug Rice: Our first quarter R&D expenses were $3 million or about 4% of net sales.

Doug Rice: 17% compared to the prior year period, driven primarily by increased cost associated with our ongoing that'd be effect RCT as well as additional spend related to future products in our pipeline and is consistent with our expected R&D spend ramp, which we detailed during our last call.

Douglas Rice: As we continue to ramp enrollment in the trial this year, we continue to expect our full year R&D expense to be about 5% of net sales. Gap income tax expense for Q1 2025 was around $2 million reflecting an effective tax rate of 18%. Our effective tax rate was favorably impacted by vestings of certain equity awards during the period. We continue to expect our long-term non-gap effective tax rate to be approximately 25%. Our first quarter gap net income was $7 million, or $0.05 per share, compared to gap net income of $9 million, or $0.06 per share in the prior year period.

Doug Rice: We continue to ramp enrollment in the trial. This year, we continue to expect our full year R&D expense to be about 5% of net sales.

Doug Rice: GAAP income tax expense for Q1, 2025 was around $2 million, reflecting an effective tax rate of 18% our effective tax rate was favorably impacted by the vesting of certain equity awards during the period we.

Doug Rice: We continue to expect our long term non-GAAP effective tax rate to be approximately 25%.

Doug Rice: Our first quarter GAAP net income was $7 million or <unk> per share compared to GAAP net income of $9 million or six cents per share in the prior year period.

Douglas Rice: Adjusted net income for the first quarter was $10 million, or $0.06 per share. compared to $10 million or $0.07 per share in the prior year period. First quarter 2025 adjusted EBITDA was $17 million or 20% of net sales compared to $19 million or 22% of net sales in the prior year period. Turning to our liquidity, we had $106 million of cash and cash equivalents as of March 31. 2025, a sequential increase of $2 million. During the first quarter, we generated free cash flow of $5 million, essentially flat compared to the same period in 2024. In turn, our net cash balance is now at about $88 million, up from $86 million just last quarter, and $29 million a year ago, marking a nearly $60 million improvement over the last year.

Doug Rice: Adjusted net income for the first quarter was $10 million or <unk> <unk> per share.

Doug Rice: Compared to $10 million or seven cents per share in the prior year period.

Doug Rice: First quarter 'twenty twenty-five adjusted EBITDA was $17 million or 40% of net sales compared to $19 million or 22% of net sales in the prior year period.

Doug Rice: Turning to our liquidity, we had $106 million of cash and cash equivalents as of March 31, two.

Doug Rice: 2025, a sequential increase of $2 million during the first quarter, we generated free cash flow of $5 million essentially flat compared to the same period in 2024.

Doug Rice: In turn our net cash balance is now at about $88 million up from $86 million, just last quarter and $29 million a year ago, marking a nearly $60 million improvement over the last year, the dramatic strengthening and simplification of our balance sheet has unlocked our ability to preferred to pursue several opportunities.

Douglas Rice: The dramatic strengthening and simplification of our balance sheet has unlocked our ability to pursue several opportunities, organic and inorganic, in support of growing and also diversifying our business, and we look forward to updating you on these initiatives as appropriate.

Organic and inorganic in support of growing is also diversifying our business and we look forward to updating you on these initiatives as appropriate.

Joseph Capper: I will now turn the call back to Joe. Thanks, Doug. As you have just heard, we had another solid quarter, and MiMedx is well-positioned to have a successful year. once again grew revenue and recorded a 20% adjusted EBITDA margin. I'm particularly pleased that we added another $2 million to our cash balance in spite of high Q1 cash requirements compared to the remainder of the year. Cash generation is a key measure of any success by the project.

Joe Capper: I'll now turn the call back to Joe Joe.

Joe Capper: Thanks, Doug.

Speaker Change: As you've just heard we had another solid quarter and my medics is well positioned to have a successful year.

Speaker Change: Once again grew revenue and recorded a 20% adjusted EBITDA margin I'm, particularly pleased that we added another $2 million to our cash balance in spite of high Q1 cash requirements compared to the remainder of the year cash generation is a key measure of any success by enterprise.

Joseph Capper: Before I move to the Q&A part of the call, I'll share some final thoughts about the proposed changes to the Medicare Reimbursement System for Skin Substitutes, and then touch on guidance. On our last call, in reference to the scheduled LCD implementation, I said the following, based on feedback from our outside advisors and activity within the new administration, we deem any further delay as highly unlikely. We now know that another delay did, in fact, happen. Over the past few weeks, we've heard from many stakeholders that they were just as frustrated as us that no action was taken to bring down costs.

Speaker Change: Before I move to the Q&A part of the call I'll share. Some final thoughts about the proposed changes to the Medicare reimbursement system for skin substitutes and then touch on guidance.

Speaker Change: On our last call in reference to the scheduled LCD implementation I said the following.

Speaker Change: Just on feedback from our outside advisers and activity within the New administration, we deem any further delay as highly unlikely. We now know that another delay did in fact happen.

Speaker Change: Over the past few weeks, we've heard from many stakeholders that there were just as frustrated as us that Doe action was taken to bring down costs.

Joseph Capper: With the spend escalating at such an alarming rate, the new administration's stated intent to reduce fraud, waste, and abuse, media coverage on the issue, and increase activity on the part of OIG and DOJ, it seemed logical that the administration would step in and direct CMS to impose corrective action. But that is exactly what did not happen, at least for now. We spoke to many of you since the latest delay, and know you share our disappointment. However, we will not let this setback deter us from achieving our long-term goals. We will continue to make the necessary adjustments to remain competitive, and we will continue to advocate for much-needed reform.

Speaker Change: With the spend escalating at such an alarming rate the new administration's stated intent to reduce fraud waste and abuse media coverage on the issue.

Speaker Change: And increased activity on the part of O I G N D O J.

Speaker Change: Logical that the administration would step in and directs CMS imposed corrective action.

Speaker Change: But that is exactly what did not happen at least for now.

Speaker Change: We spoke to many of you since the latest delay and know you share our disappointment. However, we will not let this setback deter us from achieving our long term goals. We will continue to make the necessary adjustments to remain competitive and we will continue to advocate for much needed reform stay tuned.

Joseph Capper: Stay tuned.

Joseph Capper: Let me get a question of guidance. After our last call, some of you asked if we would expect to be lowering guidance in the event of another delay. Our answer at the time was, not necessarily. While we did anticipate an LCD implementation to provide a short-term tailwind for our business, We also do... We have other levers to pull, like augmenting our portfolio by distributing additional third-party allographs. As such, we are reiterating our full-year revenue growth rate outlook to be at least in the high single digits, with higher growth rates in the back half of the year.

Speaker Change: Turning to the question of guidance after our last call. Some of you asked if we would expect to be lowering guidance in the event of another delay.

Speaker Change: Answer at the time was not necessarily.

Speaker Change: While we did anticipate LCD implementation to provide a short term tailwind for our business.

Speaker Change: Also new.

Speaker Change: We have other levers to pull like augmented our portfolio by distributing additional third party allographs.

Speaker Change: As such we are reiterating our full year revenue growth rate outlook should be at least in the high single digits with higher growth rates in the back half of the year.

Joseph Capper: We also expect our full-year adjusted EBITDA margin to be above 20%. We will continue to revisit expectations as we learn more. Importantly, our expectations about the long-term prospects for the business are incredibly high. Post some level of reform, LCDs or otherwise, we anticipate resetting top-line growth to the low double digits.

Speaker Change: We also expect our full year adjusted EBITDA margin to be above 20%.

Speaker Change: We'll continue to revisit expectations as we learn more.

Speaker Change: Importantly, our expectations about the long term prospects for the business are incredibly high.

Speaker Change: Most some level of reform lcd's or otherwise, we anticipate resetting topline growth to the low double digits.

Joseph Capper: Finally, I want to once again reiterate that we remain hopeful that our industry will soon evolve to incorporate regulatory structure and fiscal accountability, at which point no company will be better positioned than MiMedx to excel. We will continue to advocate for such improvements, and as I've mentioned, in the meantime, we will make the necessary adjustments to ensure we remain competitive.

Speaker Change: Finally, I want to once again reiterate that we remain hopeful that our industry will soon evolved to incorporate any regulatory structure and fiscal accountability at which point no company will be better positioned than by medics to XL. We will continue to advocate for such improvements and as I've mentioned in the meantime, we will make the necessary adjustment.

Speaker Change: To ensure we remain competitive.

Joseph Capper: In closing, I would like to sincerely thank the MiMedx team for another solid quarter and for your unwavering commitment to the company and the many individuals who rely on our products each and every day.

Speaker Change: Closing I would like to sincerely. Thank the <unk> team for another solid quarter and for your unwavering commitment to the company and the many individuals who rely on our products each and every day with that I would like to open the call to questions. Operator, we are now ready for our first question. Please proceed.

Operator: With that, I would like to open the call to questions. Operator, we are now ready for our first question. Please proceed.

Andrew: Thank you Andrew.

Operator: And just to give out the instructions to the audience, to ask a question, press star 1 on your telephone keypad, a confirmation tone will indicate your line is in a You may press star 2 if you would like to remove your question. It may be necessary to pick up your handset.

Speaker Change: And he said I can't give out the instructions to the audience to ask a question press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Carl Byrnes: Our first question comes from Carl Byrnes. and Capital Markets, please stay where you are. Congratulations on the results. And thanks for the question. I think in your prepared comments, you were looking for adjusted gross profit margin in the 82 to 83% range. I think it was like 84.1% in the first quarter. Do you expect that to be related to mix throughout the course of the year? That's it, Carl.

Speaker Change: And our first question comes from Carl Byrnes with Northland Capital markets. Please state your question.

Speaker Change: Yes.

Speaker Change: Congratulations on the results and thanks for the question I think in your prepared comments you were looking for adjusted gross profit margin in the 82% to 83% range I think it was like 84, 1% in the first quarter.

Speaker Change: Do you expect there to be related to mix.

Of course of the year.

Douglas Rice: This is Doug. Yeah, you're spot on. With regards to mix, we know some ASPs on some of our products did decrease throughout the year. And so we've got pressure there. And we've also got, you know, some higher ASP products that offset some of that, but it's mostly a mixed thing with regards to manufacturing, sort of COGS and gross margin.

Doug Rice: Carl This is Doug.

Speaker Change: Yes, you are spot on.

Speaker Change: With regards to mix, we know some isps on some of our products decreased throughout the year and so we've got pressure there and we've also got.

Speaker Change: Some higher ASP products that offset some of that but it's mostly <unk>.

Speaker Change: A mixed thing with regards to manufacturing.

Speaker Change: Cogs and gross margin.

Douglas Rice: And then also, if you can provide us with a bit of a progress report on epifex in Japan, that would be helpful. Yeah, it's still relatively small in terms of overall contribution. But we're right where we thought we would be. It's growing nicely, takes a bit of time to open up a new market, new product category, especially in a country like Japan. But it's pretty much on track. It's just not material enough to break out.

Speaker Change: Got it and then also if you can provide us with a bit of a progress report on after effects in Japan that would be helpful. Thanks.

Speaker Change: Yeah, it's still relatively small in terms of overall.

Speaker Change: Overall contribution.

Speaker Change: But we're right where we thought we would be its growing nicely takes a bit of time.

Speaker Change: So you open up a new market, new product category, especially in a country like Japan, but it's pretty much on track, it's just not material enough to breakout.

Carl Byrnes: Fair enough. Congrats again. Thanks. Thank you.

Speaker Change: Fair enough congrats again thanks.

Speaker Change: Thank you.

Chase Knickerbocker: Your next question comes from Chase Knickerbocker with Craig Hallam, Capital Group, please stay Good afternoon. Thanks for taking the questions. Joe, maybe just first for me, a bigger picture question kind of over on the overall reimbursement landscape. Just in your conversations, you know, with regulators and policymakers recently, can you give us an idea of kind of, I guess, a percentage chance of kind of your confidence level that, you know, when it comes to mid-January in 2026, that we do see reimbursement change in this market, in the private office market, you know, whether that be, you know, price reform or the LCD going into place or both?

Speaker Change: Your next question comes from Chase Knickerbocker with Craig Hallum Capital Group. Please state your question.

Speaker Change: Good afternoon, Thanks for taking the questions Joe maybe just first for me a bigger picture question kind of overrun on the overall reimbursement landscape.

Speaker Change: Just in your conversations with regulators and policymakers recently can you give us an idea of kind of I guess the percentage chance of the kind of your confidence level that you know when it comes to mid January in 2026 that we do see reimbursement change in this market.

Speaker Change: Private office market, you know whether that be you know price reform or the L. C D going into place or both and then can you just kind of give us your updated thoughts on what you think is most likely to occur from a you know from a specific perspective on those kind of items.

Joseph Capper: And then can you just kind of give us your updated thoughts on what you think is most likely to occur from a, you know, from a specifics perspective on those kind of items? Yeah, Chase. First of all, as we stated, the LCDs would have been a good first step to kind of slow down this wildly out-of-control spend in the category. As you know, it would have required clinical evidence around efficacy and safety for the first time, which is a good basic standard, right? So while we were originally advocating for something to be done with pricing methodology, once that did not happen within the physician fee schedule last summer, we got behind and the LCDs as kind of our last best chance to rein in the spend and the behavior in the marketplace.

Speaker Change: Yes.

Speaker Change: Yeah Chase first of all as we stated the Lcd's one has been a good first step to kind of slow down this wildly out of control spending the category as you know would it require clinical evidence around efficacy and safety for the first time.

Speaker Change: It is a good basic standard so while we were originally advocating for something to be done with pricing methodology launch that did not happen within the physician fee schedule last summer.

Speaker Change: We got behind the implementation of the LCD use as kind of our last best chance to rein in.

Speaker Change: The spec and the behavior in the marketplace.

Joseph Capper: Again, we've heard either directly or indirectly to our advisors from many stakeholders that are involved in the process, and everyone was kind of just as frustrated as we were that there was not some change implemented. The real answer has always been CMS has to do something with the pricing methodology, again, which is typically done through the position fee schedule. And we have, and we will continue to advocate for that change. And we've not stopped doing that throughout the entire process. I personally was in Baltimore two days ago meeting with CMS on this topic once again.

Speaker Change: Again, we've heard either directly or indirectly.

Speaker Change: Our advisors from many stakeholders are involved in that process and everyone kind of just as frustrated as we work that there was not some change implemented.

Speaker Change: With the real answer is always been CMS has to do something with the pricing methodology again, which is typically done through the physician fee schedule and we have and we will continue to advocate for.

Speaker Change: For that change and we have not stopped doing that throughout the entire process.

Speaker Change: I personally was in Baltimore, two days ago meeting with CMS on this topic once again.

Joseph Capper: While they can't say much, obviously, during the rulemaking phase, it was clear to me that they understand the situation at a crisis level. So, if there is a change in the position fee schedule, that is kind of a structured process. Typically, you get the proposed rule right around July 4th, and then there's a comment period. It lasts later into the year. Final rules are used to publish sometime in November. Implementation January 1st, in this case, January 1st, 2026. We do, however, believe that CMS has statutory authority to take action outside of the position fee schedule.

Speaker Change: While they can't say much obviously doing rulemaking phase it was clear to me that they understand the situation is at a crisis level.

Speaker Change: If there is a change in the physician fee schedule that is.

Speaker Change: Kind of a structured process typically you get the proposed rule right around July 4th.

Speaker Change: And then there's a comment period.

Speaker Change: Last later into the year final rules are used to publish sometime in November implementation January 1st Best case January one 'twenty 'twenty six we do however believe that CMS has statutory authority to take action outside of the physician fee schedule I can't handicap, whether or not it will take but that kind of a.

Joseph Capper: So, I can't handicap whether or not they will take that kind of a step. So, the natural next step for some sort of change would be within the position fee schedule. New team at CMS is all in place, including the administrator who has made the elimination of fraud, waste, and abuse a centerpiece of not only his confirmation, but his mission moving forward. This could be a poster child for that effort. In his initial presentation, he talked about examples that are nowhere near the level of waste that's taking place in this category. But again, I think it's important to remind everyone that only 25% of our business has ASP exposure.

Speaker Change: So the natural next step.

Speaker Change: Step firm for some sort of change would be within the physician fee schedule.

Speaker Change: New team at CMS is all in place, including the administrator, who has made the elimination of fraud waste and abuse, a centerpiece of not only his confirmation.

Speaker Change: Michigan moving forward this could be a poster child for that effort.

Speaker Change: In his initial presentation. He talked about examples that are nowhere near the level of waste that's taking place in this category, but again I think it's important to remind everyone that all.

Speaker Change: 25% of our business as ASP exposure makes it difficult.

Joseph Capper: Makes it difficult, but it is manageable. We feel very confident that once there's some semblance of law and order back in the category, we're in a great position to continue to grow the company at double digits. And, you know, again, we'll continue to advocate on behalf of patients, Medicare, trust fund, and the taxpayers that some sort of reform takes place. But again, importantly, the company is in tremendous position to grow right through this kind of bridge period. We've been growing revenue every quarter. We have growing profitability, and as we've stated several times in our comments, we're continuing to generate cash even in a period where we have a heavy cash burden.

But it is manageable.

Speaker Change: We feel very confident that once there is some samples of law and order back in the category or in great position to continue to grow the company at double digits.

Speaker Change: Again, we will continue to advocate on behalf of patients Medicare Trust fund and the taxpayers, it's some sort of reform takes.

Speaker Change: <unk> takes place.

Speaker Change: Again importantly, the company is in tremendous position to grow right through this kind of bridge period.

Speaker Change: We've been growing revenue at every quarter, we have grown.

Speaker Change: Growing profitability in Alabama.

Speaker Change: Stated several times on our comments are continuing to generate cash even in a period, where we have a heavy cash burn. So it is an incredibly healthy business. We've taken some steps we talked about so protected in the meantime.

Joseph Capper: So it is an incredibly healthy business. We've taken some steps we talked about to protect it in the meantime, but we'll continue to advocate for some level of reform.

Speaker Change: But we'll continue to advocate for some level of reform.

Chase Knickerbocker: Thanks for those thoughts, Joe.

Joe Capper: Thanks for those thoughts Joe maybe.

Chase Knickerbocker: Maybe on the kind of new product side, you know, people are getting pretty aggressive out there on the price, obviously, now that the LCD has been pushed. Can you just, you know, cue us in on kind of to what extent you expect to kind of shift your private office volumes over to Solera or these new product offerings? I mean, how successful do you think you can be in kind of shifting those volumes, you know, from kind of a percentage of that business? And then just kind of your general thoughts on, you know, you're taking kind of a middle ground here.

Joe Capper: Maybe on the kind of new product side, you know people are getting pretty aggressive out there on the price. Obviously now that the LCD has been pushed them can you just you know Q us in on kind of to what extent you expect to kind of shift your private office volumes over to selector or are these new product offerings. I mean, how successful do you think you can be and kind of shifting those volumes.

Joe Capper: As you know from kind of a percentage of that business and then just kind of your general thoughts on you know.

Joe Capper: You're taking kind of a middle ground here.

Joseph Capper: Can you help us out with kind of how physicians are thinking about at least what you're hearing from them in the near term, how they're thinking about, you know, even these higher priced offerings versus kind of where you will be in the marketplace, how they're thinking about kind of the differences of those and how they're willing to utilize them in their practice? Yeah, I'm going to stay away from forecasting how much of our business might convert to a higher-priced product. Look, this was not our first choice. This was a step we felt it was necessary to take to protect some portion of our business.

Joe Capper: Can you help us out with kind of how physicians are thinking about at least what you're hearing from them in the near term from them in the near term how theyre thinking about you know even is the higher priced offerings versus kind of where you will be in the marketplace. How theyre thinking about kind of the differences of those and how they're willing to utilize them in their practices.

Joe Capper: Yeah, I'm going to stay away from forecasting how much of our business might convert to a higher priced product look this was not our first choice. This was a step we felt it was necessary to take to protect protect some portion of our business, it's a little bit more niche for us again, 25% exposure.

Joseph Capper: It's a little bit more niche-y for us. Again, 25% exposure in that category. And within our current customer mix, you don't have, you know, the majority of them are probably not moving in that direction. Let's just put it that way. And to the extent that they do, because there's some fear of missing out, they're looking for products that are priced higher than our existing portfolio, but more moderately priced as compared to what we're seeing out there in the marketplace today. What we're seeing out there is rather obscene. And remember, when a doctor decides to use a product that's several thousand dollars, they still have exposure and risk around audit.

Joe Capper: In that category and within our.

Joe Capper: Customer mix yeah.

Joe Capper: Don't have you know.

Joe Capper: The majority of them are probably not moving in that direction, let's just put it that way.

Joe Capper: And to the extent that they do because theres some fear of missing out there looking for products that are priced higher than our existing portfolio, but more moderately price as compared to what we're seeing out there in the marketplace today, what we're seeing out there.

Joe Capper: Rather obscene.

Joe Capper: Remember when.

Speaker Change: When a doctor decides to use our product is several thousand dollars and it does there they still have exposure or risk around audit and we know the audits are increasing.

Joseph Capper: And we know that audits are increasing at quite a high rate, right? So the higher the bill that charges, the higher the potential callback in the event of an unsuccessful audit outcome. So I think for us, it's a little bit more niche-y. That's why in my prior remarks, I cautioned against looking at this as some sort of a windfall. I would look at it as just a tactic or a step that we're taking to protect as much business as we can until reform takes place.

Speaker Change: At quite a high rate so the higher the billed charges are higher the potential claw back in the advent of an unsuccessful audit outcome. So I think for us it's a little bit more niche that's why in my prepared remarks, I cautioned against law.

Speaker Change: Looking at this as some sort of a windfall I would look at it as just a tactic or step that we're taking to protect as much business as we can until reform takes place.

Joseph Capper: And just last for me, you know, strong surgical growth in the in the quarter. You know, can you cue us in on what portion of growth was driven by Heliogen? And then is there any specific surgical indication that is having an outsized impact on the growth? And then kind of what's driving that? Is it just better sales execution or was there a recent data set that's kind of really driving volumes in the surgical set? I think it's just better execution. We had growth across the category and the effect, obviously, is growing nicely, and FIX continues to grow nicely.

Speaker Change: And then just last for me strong surgical growth in the in the quarter can you give us on what portion of growth was driven by Helio. Gen. And then is there any specific surgical indications that is having an outsized impact on the growth and then kind of what's driving that is it just better sales execution or was there a recent dataset that's.

Speaker Change: It kind of really driving volumes in the surgical side.

Speaker Change: I think it's just better execution, we had growth across category.

Speaker Change: The effect, obviously is growing nicely and fixed continues to grow nicely he'll lead Gen. As you mentioned is new to them off of a base of zero last year. So any growth is good there actually still continue to retain a good portion of our actual fill business waiting for an outcome there.

Joseph Capper: Heliogen, as you mentioned, is new to the off of a base of zero last year, so any growth is good there. We actually still continue to retain a good portion of our axial fill business, waiting for an outcome there. So really across the portfolio, and I would just say more use in areas where the product had already been used. It wasn't some new revelation and some new data set, but I do appreciate you pointed it out because, again, that's a portion of our business that has no ASP exposure, and you see the kind of execution we're getting there.

Speaker Change: So really across the portfolio and I would just say more use in areas where.

Speaker Change: Products that have already been used was it some new revelation of some new data say dataset.

Speaker Change: Do appreciate you pointed it out because again, that's a portion of our business that has no ASP exposure and you see the kind of execution. We're getting there. If you go back a few years to prior to when we had this flood of new products entered the category or even a private office business was growing at a very nice clip. So look we again, we feel really good about the biz.

Joseph Capper: If you go back a few years prior to when we had this flood of new products under the category, even our private office business was growing at a very nice clip. So again, we feel really good about the business at large and our ability to grow the entire business at double digits once we get through this phase, but obviously, the surgical business is a bright spot for us.

Speaker Change: At large and.

Speaker Change: Our ability to grow the entire business at double digits once we get through this phase but.

Speaker Change: Obviously, the search business is bright spot for us.

Jeff: Thanks, Jeff.

Speaker Change: Thank you and just a reminder to the audience to ask a question of Trust Star one on your telephone keypad sure move yourself from the queue Press Star two on your telephone keypad.

Ross Osborn: A reminder to the audience, to ask a question press star 1 on your telephone keypad. To remove yourself from the queue, press star 2 on your telephone keypad. Ross Osborn Yeah, I think, you know, Salesforce turnover, you mentioned, that was relatively high about a year ago. That's come way down. Once we got through sort of that late second quarter, third quarter surge last year with folks chasing dollars, we got through that, I would say, at a more normalized rate. In terms of growth for the rest of this year and into next year, it's just executing our plan, right?

Jeff: Yeah.

Speaker Change: Our next question comes from Ross Osborne with Cantor Fitzgerald. Please state your question.

Ross Osborne: Hey, guys. Thanks for taking our question maybe just one for me I just wanted to call would you walk through you know what efforts you guys are putting in place now.

Ross Osborne: Get ready for what is hopefully a better market environment next year I think you called out some sales turnover. So I was curious on you know what the bench looks like they are in terms of hiring any manufacturing initiatives that are planned to support incremental demand next year when already much better marketplace.

Ross Osborne: Yeah.

Ross Osborne: Yeah, I think you know Salesforce turnover you mentioned that was relatively was relatively high in about a year ago Thats come way down once we got through sort of that late second quarter third quarter surge last year.

Ross Osborne: Folks chasing dollars, we got to that.

Ross Osborne: I guess I would say at a more normalized rate in terms of growth for the rest of this year and into next year.

Ross Osborne: Just executing our plan right you talked about the continued to expand our product portfolio and service offerings.

Ross Osborn: We talked about the need to continue to expand our product portfolio and service offerings within the wound care business and in the surgical market. That's really important for us. We know we need to continue to invest in the commercial strand, the clinical. and Scientific Research to support additional surgical applications or use of the product. So we'll continue to do those things. You know, we're Peter and around from a corp dev standpoint, a couple of new assets we might be able to bring into the portfolio in some format. And that could help augment growth next year as well, as long as it fits within our strategic plan.

Ross Osborne: Home care business in <unk>.

Ross Osborne: Our triple markets, that's really important for us.

Ross Osborne: We know we need to continue to invest in the commercial strategy.

Ross Osborne: Clinical.

Ross Osborne: Scientific research to support additional surgical applications or use the products will continue to do those things.

Ross Osborne: You know were teetering around from our Corp. Dev standpoint, a couple of new assets, we might be able to bring into the portfolio in some format and that could help augment growth next year as well as long as it fits within our strategic plan. So we have a lot going on and feel really good about it once it's kind of distract.

Ross Osborn: So we have a lot going on, I feel really good about it. Once this kind of distraction settles down, and we can stop talking about it so much, we get some advancement, and the industry gets cleaned up and becomes much more investable, we think the business is going to be in great shape.

Ross Osborne: Extraction settles down and we can stop talking about it so much.

Ross Osborne: We get some advancement.

Ross Osborne: And the industry gets cleaned up and becomes much more investable, we think the business is going to be in great shape.

Ross Osborn: Yeah, maybe, Ross, just to add to that real quick, I mean, and you see it with SAWC later this week, as well as DDW next week, I mean, the commitment to generating and publishing all the various proof points that we can to, you know, show the breadth of the utilization of our portfolio, I think is meaningful. You know, DDW in particular is a show that you wouldn't normally think of as a skin substitute, you know, showcase. And yet, you know, we've got normal presentation there. And I think that's the sort of the tip of the spear as it relates to various surgical applications for the products.

Yes, maybe Ross just to add to that real quick I mean, and you see it with the CWC later this week as well as CDW next week, I mean, the commitment to generating and publishing all the various proof points that we can.

Ross Osborne: So the breadth of the utilization of our portfolio I.

Speaker Change: I think its meaningful DPW and particular show that you wouldn't normally think of as a skin substitute.

Ross Osborne: Okay.

Ross Osborne: And yet we've gotten all presentation, there and I think that's the sort of the tip of the spirit as it relates to various surgical applications for the products.

Ross Osborn: Great. Thanks, guys.

Ross Osborne: Great. Thanks, guys.

Ross Osborn: Thank you.

Ross Osborne: Thank you.

Anthony Petrone: Our next question comes from Anthony Petrone with.

Speaker Change: Our next question comes from Anthony Petrone with Mizuho Group. Please state your question.

Anthony Petrone: Thank you and hope everyone's having a good afternoon, hope everyone's well. Jumping back to obviously the LCDs, I know, you know, not a topic that obviously the team wants to continue to focus on here, but two-parter here for you on this topic. You know, one is, in prior announcements on LCD changes as this has evolved, the primary channel kind of shifted their purchasing patterns. So, do you think this latest iteration will drive any changes in purchasing pattern shifts near-term, so that would be the first part. The second part is, this seems like ripe for doge.

Ross Osborne: Thank you and.

Ross Osborne: Hope everyone is having a good afternoon hope everyone's well.

Ross Osborne: Jody.

Ross Osborne: Yes.

Ross Osborne: Jumping back to obviously the L. C. DS I know you know not a topic that obviously the team wants to continue to focus on here, but but two parter here for you on this topic.

Ross Osborne: One is in prior announcements on LCD changes as this has evolved.

The primary care channel kind of shifted their purchasing patterns.

Ross Osborne: So do you think this latest iteration will will drive any changes in purchasing pattern shifts near term so that would be the first part the second part is it seems like for dose.

Joseph Capper: You know, looking at fraud and waste, the company has previously put out a billion, up to a billion of billable claims here that potentially are fraudulent. And so how do you look at this under the lens of Doge and sort of tackling waste? I'll go backwards. So, you know, DOJ is, we're led to believe, or told, that DOJ is well aware of the issue, and that it's on the work list. I sincerely believe that folks were able to convince the new administration that a postponement was necessary because the LCDs weren't necessarily the right way to address a pricing and spending issue.

Ross Osborne: So looking at fraud and waste the company has previously put out $1 billion.

Ross Osborne: Up to $1 billion of billable claims here that potentially are fraudulent and so how do you look at this under the lens of doujin in sort of tackling waste. Thanks.

Ross Osborne: Okay.

Ross Osborne: I'll go back or so.

Ross Osborne: This work led to believe are told that those is well aware of the issue.

Ross Osborne: And then it is on the watch list.

Ross Osborne: Surely believe that.

Ross Osborne: Folks were able to convince the new administration that a postponement was necessary because the LCD support that's required necessarily the way right way to address our pricing in a spending issue and there is some merit to that argument I get it right.

Joseph Capper: And there's some merit to that argument. I get it, right? It was the last best option, and I think the MACs were put in a position that they had to do something. This is a project that they worked on for some time. So, yeah, I think it's a DOJ issue. But again, if you take Dr. Oz for his word, he's said that eradicating fraud, waste, and abuse within CMS, which has, I don't know, a trillion and a half dollar budget out of the nearly $7 trillion total U.S. budget, he's got a big portion of it.

Ross Osborne: It was the last best option and I think the Max were put in a position that they had to do something.

Ross Osborne: Project that they worked on for some time so.

Ross Osborne: Yeah, I think it's a it's a doze issue, but again, if you take Dr. Raj for his word.

Ross Osborne: <unk> said that.

Ross Osborne: Eradicating fraud waste and abuse with CMS, which has a I don't know a trillion five dollar budget out of the nearly $700 million total U S budget.

Joseph Capper: If you take him at his word, that this is going to be a focus area for him. And again, this is kind of low-hanging fruit for him, right? So, your number that you stated of $1 billion, we started stating that number last year as a run rate. We know the total spent prior year was close to $4 billion. We had gotten that number directly from the MACs, that the run rate by mid-year was closer to $1 billion a month. And more recently, we've heard numbers that are much higher than that, right? I won't quote him because I'm not 100% sure of the sourcing on it, but it would make sense that The issue continued to escalate, so.

Ross Osborne: He's got a big portion of it if you take him at his word that this is going to be.

Ross Osborne: Be a focus area for them and again. This is a this is kind of low hanging fruit for them right. So your number that you stated the $1 billion, we started stating that number last year as a run rate we know the total spend.

Ross Osborne: Prior year was close to $4 billion we.

Ross Osborne: We had gotten that number directly from the Max that the run rate by mid year was closer to $1 billion a month.

Ross Osborne: More recently, we've heard numbers that are much higher than that alright, I won't quote them because.

Ross Osborne: I'm not 100% sure sourcing on it.

Ross Osborne: But it would it would make sense that yes.

Ross Osborne: The issue continues to escalate so.

Joseph Capper: And all that makes it very difficult to answer the first part of your question, ordering patterns with delays. Do I think there's going to be some shift in ordering pattern? Probably, because folks can make more money for a longer period of time and more people hear about it. There's more and more folks out there talking about these products and selling them. So I think it just makes that much more difficult to predict. And again, calls on, I think, CMS to take steps possibly sooner rather than later. I mentioned that we believe they have statutory authority to take those steps sooner rather than later.

Ross Osborne: And all of that makes it very difficult to answer the first part of your question ordering patterns with delays.

Ross Osborne: There's going to be some shift in ordering pattern, probably because folks can make more money for a longer period of time and.

Ross Osborne: More people hear about it theres more and more folks out there talking about these products and selling them. So I think it just makes that much more difficult to predict and again.

Ross Osborne: Calls on I think CMS to take steps, possibly sooner rather than later I mentioned that we believe they have statutory authority to take those steps sooner rather than later, whether or not they do that I don't know we'll.

Joseph Capper: Whether or not they do that, I don't know. We'll see. But look, we haven't spoken to anybody within MIMEX, within CMS, congressional staffers for all of the oversight committees. Senate Finance, Ways and Means, Energy and Commerce. Everybody is aware of this issue. Nobody thinks that this is something that does not need to be addressed. It's escalated at such an alarming rate. So, again, logic would tell you that something is going to happen. We felt like, based on feedback from everyone we were hearing in the community, that the LCDs had a high probability of being implemented.

Ross Osborne: Okay.

Speaker Change: Look we haven't spoken to anybody within the Max within CMS.

Speaker Change: <unk> staffers for all of the oversight committees.

Speaker Change: Senate finance ways and means energy and commerce.

Speaker Change: Everybody is aware of this issue.

Speaker Change: Nobody thinks that this is something that does not need to be addressed it's escalated at such an alarming rate. So again logic would tell you that something is going to happen.

Speaker Change: We felt like based on feedback from everyone. We were here in the community that are there.

Speaker Change: L Cds at a high probability of being implemented and obviously, we know now that the administration postpone them.

Joseph Capper: And, obviously, we know now that the administration postponed them. So, hopefully, that means, anyway, and again, the right answer was for CMS to do something on this issue, right? This is really a pricing issue. So, hopefully, they take action sooner rather than later.

So hopefully that means anyway and again the right answer was for CMS to do something on this issue right. This is really a pricing issue.

Speaker Change: Hopefully they take action sooner rather than later.

Anthony Petrone: I appreciate that, and good luck as this proceeds. We'll get back in queue. Thanks. Thank you.

Speaker Change: I appreciate that and good luck as this proceeds will get back in queue.

Speaker Change: Yeah.

Speaker Change: Thanks.

Speaker Change: Yeah.

Joseph Capper: And ladies and gentlemen, there are no further questions at this time, so I'll hand the floor back to Joe Capper, CEO, for any closing remarks. Thank you.

Speaker Change: Thank you.

Speaker Change: Ladies and gentlemen, there are no further questions at this time, so I'll hand, the floor back to Joe Capper CEO for any closing remarks. Thank you.

Joseph Capper: Thank you everybody for your attendance and your continuous interest in the company.

Speaker Change: Thank you. Thank you everybody for your attendance and your continuous interest in the company.

Joseph Capper: We will talk to you all after our next quarter.

Speaker Change: We will talk to you all after our next quarter.

Operator: Operator, that concludes today's call. Thank you and all parties may disconnect, have a good day.

Speaker Change: That concludes today's call.

Speaker Change: Thank you and all parties may disconnect have a good day.