Q1 2025 Sanara MedTech Inc Earnings Call

Operator: Welcome to the Sanara MedTech first quarter of 2025 earnings conference. Please note that this conference call is being recorded and a replay will be available on the Investor Relations page of the company's website. Company issued its earnings release earlier today.

Welcome to the scenario of Med Tech first quarter of 2025 earnings Conference call. Please note that this conference call is being recorded and a replay will be available on the Investor Relations page of the company's website shortly.

The company issued its earnings release earlier today.

Unknown Executive: 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. for more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements. Please see the risk factors set forth in the company's most recent annual report on Form 10-K.

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.

For more information about the risks and uncertainties involving forward looking statements and factors that could cause actual results to differ materially from those projected or implied by forward looking statements. Please see the risk factors set forth in the company's most recent annual report on Form 10-K.

Unknown Executive: This call will also include references to certain non-GAP Associations of those Non-GAAP Financial Measures to the Most Comparable Measures Calculated and Presented in with GAP are available in the earnings materials available on the investor relations portion Today's call will be hosted by Ron Nixon. Executive Chairman and CEO, and feature additional remarks from Seth Yon, President and Chief Commercial Officer.

This call will also include references to certain non-GAAP measures reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings materials available on the Investor relations portion of our website.

Speaker Change: This call will be hosted by Ron Nixon Executive Chairman and CEO and feature additional remarks from Sheffield President and Chief Commercial Officer, Sam O Paula President and CEO of tissue Health, plus and Elizabeth Taylor, Chief Financial Officer, I would now like to turn the call over to me.

Unknown Executive: Sam Muppalla, President and CEO of Tissue Health. and Elizabeth Taylor, Chief Financial Officer.

Ronald Nixon: I would now like to turn the call over to Mr. Nixon, please go ahead. Thanks, operator and welcome everyone to our first quarter of 2025 earnings call. Let me provide a quick agenda for today's call.

Ron Nixon: Mr. Nixon. Please go ahead.

Ron Nixon: Thanks, Operator, and welcome everyone to our first quarter of 2025 earnings call.

Ron Nixon: Let me provide a quick agenda for today's call I'll start by discussing a few of our financial and operational highlights from the first quarter. Seth will then discuss the commercial execution and progress made in our scenarios surgical segment and outlined the multiple growth opportunities we're focused on pursuing.

Ronald Nixon: I'll start by discussing a few of our financial and operational highlights from the first quarter. Seth will then discuss the commercial execution and progress made in our Sanara surgical segment and outline the multiple growth opportunities we're focused on pursuing.

Ronald Nixon: Next, Sam will provide an update on our Tissue Health Plus segment.

Sam: Sam will provide an update on our tissue help plus segment.

Ronald Nixon: And finally, Elizabeth will review our quarterly financial results in further detail before opening the calls for questions. Beginning with our first quarter highlights, our Sanara surgical team delivered net revenue of $23.4 million representing 26% growth year over year. This performance was consistent with our expectations for the quarter and represents a strong start to 2025. Our net revenue growth was driven primarily by sales of our soft tissue repair products, which increased 28% year over year to $20.5 million. Specifically, we saw strong growth in sales of both our Celerate RX surgical and biosurge products, which continue to fuel our performance.

Sam: Finally, I will review our quarterly financial results in further detail before opening the call for questions.

Sam: Beginning with our first quarter highlights our scenario surgical team delivered net revenue of $23 4 million, representing 26% growth year over year. This performance was consistent with our expectations for the quarter and represents a strong start to 2025.

Sam: Our net revenue growth was driven primarily by sales of our soft tissue repair products, which increased 28% year over year to $25 million specifically, we saw strong growth in sales of both our celebrate Rx surgical added by search products, which continued to fuel our performance.

Ronald Nixon: We were also pleased to see contributions from sales of our bone fusion products, which increased 18% year over year to 2.9 million with growth across multiple products in this portfolio.

Sam: We were also pleased to see contributions from sales of our bone fusion products, which increased 18% year over year to $2 9 million with growth across multiple products in this portfolio.

Ronald Nixon: As Seth will discuss in detail, our sales performance reflects impressive execution by our Sanara Surgical Commercial team on our growth strategy.

Sam: As Jeff will discuss in detail our sales performance reflects impressive execution by our scenario surgical commercial team on our growth strategy. We remain excited by the large greenfield opportunity that remains ahead of us.

Ronald Nixon: We remain excited by the large greenfield opportunity that remains ahead of In addition to our Sanara surgical segment revenue performance, we also enhanced our gross margins. Net loss for Sanara surgical segment increased by $200,000 year over year to $600,000. And importantly, we were pleased to see Sanara surgical segment adjusted EBITDA increased by $1.5 million year over year to $2.7 million.

Sam: In addition to our scenario surgical segment revenue performance, we also enhanced our gross margins.

Loss per so narrow surgical segment increased by 200000.

Sam: Dollars year over year to $600000 and importantly, we were pleased to see so narrow surgical segment adjusted EBITDA increased by $1 $5 million year over year to $2 7 million.

Ronald Nixon: In our Tissue Health Plus segment, we continue to invest in the development of this value-based wound care strategy as we prepare to launch our pilot program with a wound care provider later in the second quarter. We are in active discussions with multiple potential financial partners to invest in the execution of our Tissue Health Plus strategy and remain focused on allocating capital strategically and thoughtfully between our two business segments.

Sam: And our tissue help plus segment, we continued to invest in the development of this value based wound care strategy as we prepare to launch our pilot program with the wound care provider later in the second quarter. We are in active discussions with multiple potential financial partners.

Sam: Just in the execution of our tissue health plus strategy and Ryan focused on allocating capital strategically and thoughtfully between our two business segments.

Ronald Nixon: In terms of our other operational highlights in the first quarter, as discussed in detail on our last earnings call, we enhanced our new product pipeline by securing the distribution rights to two additional technologies and expanded our senior leadership team with key appointments. We also amended the terms of our debt facility to provide increased financial flexibility as we execute our growth strategy. Lastly, our team has continued their work to strengthen our clinical evidence. We look forward to having multiple clinical manuscripts submitted for publication in key medical journals in 2025.

Sam: In terms of our other operational highlights in the first quarter.

Sam: As discussed in detail on our last earnings call, we enhanced our new product pipeline by securing the distribution rights to two additional technologies and expanded our senior leadership team with key appointments. We also amended the terms of our debt facility to provide increased financial flexibility as we execute our growth strategy.

Sam: Lastly, our team has continued their work to strengthen our portfolio of clinical evidence, we look forward to having multiple clinical manuscripts submitted for publication in key medical journals in 2025.

I am proud of our entire team's performance this past quarter across multiple fronts and look forward to continuing our momentum over the balance of 2025.

Ronald Nixon: I'm proud of our entire team's performance this past quarter across multiple fronts and look forward to continuing our momentum over the balance of 2025.

Seth Yon: I'll now turn it over to Seth to discuss the commercial execution and growth opportunities in our Sanara surgical segment. Thanks, Ron. As Ron mentioned, our Sanara Surgical Segment commercial team delivered net revenue growth of 26% year over year.

Sam: I'll now turn it over to Seth to discuss the commercial execution and growth opportunities in our scenario surgical segment.

Seth: Thanks, Ron and as Ron mentioned, our scenario surgical segment commercial team delivered net revenue growth of 26% year over year.

Seth Yon: This growth was driven by our team's execution with respect to the following three initiatives related to our commercial strategy. One advancing and deepening our distributor relationships.

Seth: This growth was driven by our team's execution with respect to the following three initiatives related to our commercial strategy.

Seth: One advancing in a deepening our distributor relationships.

Seth Yon: 2. Selling into new healthcare facilities, and 3. Further penetrating the existing healthcare facilities we serve.

Seth: To selling into new health care facilities, and three further penetrating the existing health care facilities, we serve.

Seth Yon: Beginning with the first of the three commercial initiatives, we significantly expanded our network of distributor partners. Specifically, at the end of the first quarter, our team had engaged and secured selling agreements with over 400 distributor partners, compared to over 250 of the first quarter of 2024 and over 350 at the end of 2024. As a reminder, our expanded distributor network provides us with increased sales coverage and presence in key markets across the U.S. Turning to our second commercial initiative, we continue to add new healthcare facilities to our customer base by securing value analysis committee approvals and commencing sales to surgeons at these facilities.

Seth: Beginning with the first of the three commercial initiatives, we significantly expanded our network of distributor partners.

Seth: Specifically at the end of the first quarter. Our team is engaged and secured selling agreements with over 400 distributor partners compared to over 250 of the first quarter of 2024 and over $3 50 at the end of 2024.

Seth: As a reminder, our expanded distributor network provides us with increased sales coverage and presence in key markets across the U S.

Seth: Turning to our second commercial initiative, we continue to add new health care facilities to our customer base by securing value analysis committee approvals and commencing sales to surgeons at these facilities.

Seth Yon: Over the last 12 months, our products were sold in over 1,300 facilities compared to over 1,080 facilities in the prior year period. With respect to our third commercial initiative, we increased our penetration of the existing healthcare facilities we serve by increasing the number of surgeons using our products within these facilities. While it's not our practice to disclose specifics related to our active surgeon user base, I'm pleased to share that we saw solid growth in the number of surgeon users on a year-over-year basis in Q1.

Seth: Over the last 12 months.

Seth: Our products were sold in over 1300 facilities compared to over 1080 facilities in the prior year period.

Seth: With respect to our third commercial initiative, we increased our penetration of the existing health care facilities, we serve by increasing the number of surgeons using our products within these facilities.

Seth: Well, it's not our practice to disclose specifics related to our active surgeon user base I'm pleased to share that we saw solid growth in a number of surgeon users on a year over year basis in Q1.

Seth Yon: With this as a backdrop, we're pleased with the execution of our team and the progress we're seeing on our commercial strategy. We believe our commercial performance speaks to the durability of our customer base, as well as the value that our Sanara surgical products provide. As surgeons gain first-hand experience with the use of our key products like Celery RX Surgical and Biosurge, the value they bring to their procedures often leads them to become dedicated long-term users.

Seth: With this as a backdrop, we're pleased with the execution of our team and the progress we're seeing on our commercial strategy.

Seth: We believe our commercial performance speaks to the durability of our customer base as well as the value that our scenario surgical products provide.

Seth: As surgeons gained firsthand experience with the use of our key products like celery, RF surgical and biosurgery, but.

Seth: Value they bring to their procedures often leads them to become dedicated long term users.

Seth Yon: Looking ahead, we remain focused in 2025 on pursuing these three commercial initiatives to capitalize on the multiple growth opportunities ahead of us. I'll now take a minute to outline some of these growth opportunities and our specific plans to pursue them over the balance of the year. While we will continue to add new distributor partners selectively, given our progress on the front over the last 18 months, we are increasingly focused this year on onboarding our recently added distributors and positioning their reps for success in selling our products. Our existing distributor network represents thousands of third-party sales reps.

Seth: Looking ahead, we remain focused in 2025 on pursuing these three commercial initiatives to capitalize on the multiple growth opportunities ahead of us.

Seth: I will now take a minute to outline some of these growth opportunities and our specific plans to pursue them over the balance of the year.

Seth: While we will continue to add new distributor partners selectively given our progress on that front over the last 18 months. We are increasingly focused this year on onboarding, our recently added distributors and positioning their reps for success in selling our products.

Seth: Our existing distributor network represents thousands of third party sales reps importantly, only a percentage of these reps are currently selling our products. This is especially true for our larger distributor partners and our distributor partners engaged in recent quarters.

Seth Yon: Importantly, only a percentage of these reps are currently selling our product. This is especially true for our larger distributor partners and our distributor partners engaged in recent quarters. With this in mind, increasing the number of distributor reps selling our products within existing distributor relationships represents a significant growth opportunity for our organization. In 2025, our team is focused on onboarding, training, and providing the requisite technical support needed to help additional reps within each distributor to begin selling our product. In parallel, we will continue to focus on adding new surgeon users within the more than 1,300 facilities that we currently serve.

Seth: With this in mind increase.

Seth: Increasing the number of distributor reps selling our products with an existing distributor relationships represents a significant growth opportunity for our organization.

Seth: In 2025, our team is focused on Onboarding.

Seth: Training and providing the requisite technical support needed to help additional reps within each distributor to begin selling our products.

Seth: In parallel we will continue to focus on adding new surgeon users within the more than 1300 facilities that we currently serve the.

Seth Yon: The vast majority of these facilities are hospitals, and importantly, our surge in penetration within these facilities remains low. Adding new surge in customers within our existing facilities continues to represent one of the largest untapped areas of growth for our organization.

Seth: The vast majority of these facilities are hospitals and importantly, our surgeon penetration within these facilities remains low.

Seth: Adding new surgeon customers within our existing facilities continues to represent one of the largest untapped areas of growth for our organization.

Seth Yon: Lastly, we will focus on continuing to add new healthcare facilities to our customer base with the goal of selling into more than 1,450 facilities by the end of 2025. As a reminder, we have contracts or approvals with over 4000 facilities. This represents a significant opportunity for our commercial team and distributor partners to begin selling into new facilities.

Seth: Lastly, we will focus on continuing to add new health care facilities to our customer base with a goal of selling into more than 1400 50 facilities by the end of 2025.

Seth: As a reminder, we have contracts or approvals with over 4000 facilities. This represents a significant opportunity for our commercial team and distributor partners to begin selling into new facilities.

Seth Yon: For all these reasons, we continue to believe we're in the early innings of our commercialization effort. We look forward to capitalizing on the multiple growth opportunities ahead of us as we educate prospective surgeon customers about the benefits of our products.

Seth: For all these reasons, we continue to believe we're in the early innings of our commercialization effort. We look forward to capitalizing on the multiple growth opportunities ahead of us as we educate prospective surgeon customers about the benefits of our products.

Sam Muppalla: With that, I'll turn it over to Sam to provide an update on Tissue Health Plus. Thanks, Seth. 2025 has been a period of focused execution for tissue health. Thanks to the hard work of the team, we announced the availability of the first release of THP's technology platform on May 1st as planned. This is a pivotal milestone in our journey to disrupt non-acute wounds. The THP technology platform release included THP Copilot, our software offering which is designed to standardize wound care and reduce the administrative burden for wound care clinicians across all sets. THP Copilot consists of a mobile app designed for use by clinicians, which integrates both our software as a medical device and clinical decision support.

Seth: With that I'll turn it over to Sam to provide an update on tissue health plus.

Sam: Thanks, Ed.

Sam: 2025 has been a period of focused execution for tissue health plus.

Sam: Thanks to the hard work of the team we announced the availability of the first release of THB technology platform on May 1st half plans. This is a pivotal milestone in our journey to disrupt non acute wound care.

Sam: The THB technology platform release included PHP co pilot, our software offering which is designed to standardize wound care and reduce the administrative burden for wound care clinicians across all settings.

Sam: THP Copilot consists also mobile app designed for use by commissions, which integrates both our software has a medical device and clinical decision support systems.

Sam Muppalla: These tools aid clinicians' ability to deliver precise and personalized wound care while not replacing their professional judgment. Additionally, THP Copilot includes an administrative autopilot, which for clinicians automates the process of enforcing reimbursement guardrails, optimizing billing codes, ordering medical supplies from durable medical equipment companies, and tracking the delivery of those supplies. THP CoPILOT is also designed to integrate with the clinician's existing electronic medical record systems, which eliminates the need for charting after a clinician's encounter with a THP Co-Pilot was developed on the top of CareFix technology stack, which we acquired on April 1. In advance of this acquisition, our team had been previously partnered with CarePix over the past year to leverage both the functionality and the technology frameworks which form the foundation of our THP technology.

Sam: These tools eight permissions ability to deliver precise and parcel lies to wound care, while not replacing their professional judgment.

Sam: Additionally, THB copilot includes administrative autopilot rich footprint issues automates the process of enforcing reimbursement guardrails, optimizing billing codes, Oregon medical supplies from durable medical equipment companies and tracking the delivery of those supplies.

Sam: <unk>.

Sam: THP Copilot is also designed to integrate to the clinicians existing electronic medical record systems, which eliminates the need for chartering after explanations and conquer with a patient.

Sam: THP co pilot was dialogue on the top of care fixed technology stack, which we acquired on April flows in advance of this acquisition.

Sam: Our team had been previously partnered with Capex for the past year to leverage both the functionality and technology frameworks, which form the foundation of our THP technology platform.

Sam Muppalla: Specifically, we use the mobile app functionality to accelerate the development of our THP co-pilot. Our PHP technology platform release is being implemented with the wound care provider group in preparation for the launch of our first pilot program. The implementation process involves configuring the wound care providers clinical and administrative workflows to support an integrated wound care operating system aligned with their growth strategy. With this as a backdrop, we remain on track to launch our first pilot program with a wound care provider group later during the second quarter, as previously done. Our team is also focused on raising the awareness of our THP offering in the provider market.

Sam: Specifically, we use their mobile app <unk> to accelerate the development of our THP copilot huh.

Sam: Our TSP technology platform release is being implemented with the wound care provider group in preparation for the launch of our first pilot program.

Sam: The implementation process involves configuring the wound care providers clinical and administrative workflows.

Sam: Quote and integrated wound care operating system aligned with their growth strategy.

Sam: With this as a backdrop, we remain on track to launch our first pilot program with the wound care provider group later during the second quarter as previously discussed.

Sam: Our team is also focused on raising the awareness of our THP offering in the provider market.

Sam Muppalla: Our THP solution was very well received last week at the Symposium of Advanced Wound Care Spring Meeting, one of the premier annual conferences for healthcare professionals and companies in the wound care industry. And we're building a strong pipeline of interested providers.

Our THB solution was very well received last week at the symposium on advanced wound care spring meeting one of the Premier annual conferences for health care professionals and companies in the wound care industry and we are building a strong pipeline of interested providers.

Elizabeth Taylor: In addition to these efforts, we continue to focus on launching a pilot program with the payer during the second half of the I would like to now turn this over to Elizabeth to review our first quarter financial results in more detail. Thanks, Sam. I will begin my remarks at the gross profit line. Since Ron discussed our quarterly revenue performance, unless otherwise specified, all growth rates referenced during my prepared remarks are on a year over year basis. First quarter gross profit increased 5 million or 30% to 21.6 million gross margin increased approximately 240 basis points to 92% of net revenue, driven primarily by lower manufacturing costs related to accelerate Rx surgical.

Sam: In addition to these efforts we continue to focus on launching a pilot program with the payer during the second half of the year.

Elizabeth: I would like to now turn this over to Elizabeth to review, our first quarter financial results in more detail.

Elizabeth: Thanks Sam.

Elizabeth: I'll begin my remarks at the gross profit line since Ron discussed our quarterly revenue performance unless otherwise specified all growth rates referenced during my prepared remarks are on a year over year basis.

Elizabeth: First quarter gross profit increased $5 million or 30% to $21 6 million gross margin increased approximately 240 basis points to 92% net revenue driven primarily by lower manufacturing costs related to salary arent surgical.

Elizabeth Taylor: First quarter operating expenses increased 5.5 million or 30% to $23.7 million. The change in operating expenses was largely driven by a 5.2 million or 32% increase in selling general and administrative expenses, and to a lesser extent, a 0.2 million or 18% increase in research and development expenses. The $5.2 million increase in SG&A expenses primarily reflects $2.4 million of direct sales and marketing expenses in our Sanara surgical segment, $1.7 million of SG&A expenses in our Tissue Health Plus segment, and approximately $0.7 million of costs related to the build out of our corporate infrastructure. Note, the Tissue Health Plus segment SG&A expenses are primarily related to the build out of certain aspects of the THP platform and infrastructure, which accelerated beginning in the second quarter of 2024.

Elizabeth: First quarter operating expenses increased $5 5 million or 30% to $23 7 million.

Elizabeth: The change in operating expenses was largely driven by a $5 2 million or 32% increase in selling general and administrative expenses and to a lesser extent.

Elizabeth: <unk> 2 million or 18% increase in research and development expenses.

Elizabeth: The $5 2 million increase in SG&A expenses, primarily reflects $2 4 million of direct sales and marketing expenses and accident in our surgical segment $1 7 million of SG&A expenses, and our tissue helps plus segment and approximately <unk> 7 million of costs related to the build out of our corporate infrastructure.

Elizabeth: Sure note the tissue Health bus segment SG&A expenses are primarily related to the build out of certain aspects of the THP platform and infrastructure, which accelerated beginning in the second quarter of 2024.

Elizabeth Taylor: Operating loss in the first quarter was 2.1 million compared to a loss of 1.5 million last year. Importantly, our Sanara surgical segment generated operating income of $0.8 million in the first quarter of 2025, an increase of $1 million year over year. Other expense for the first quarter was $1.4 million compared to $0.3 million of expense last year. The increase in the other expense was primarily due to higher interest expense and fees related to our CRG term loan. Net loss for the first quarter was 3.5 million or 41 cents per diluted share compared to a net loss of 1.8 million or 21 cents per diluted share last year.

Elizabeth: Operating loss in the first quarter was $2 1 million compared to a loss of $1 5 million last year.

Elizabeth: Importantly, our senior surgical segment generated operating income of <unk> 8 million in the first quarter of 2025, an increase of $1 million year over year.

Elizabeth: Other expense for the first quarter with $1 4 million compared to <unk> 3 million of expense last year.

Elizabeth: The increase in the other expense was primarily due to higher interest expense and fees related to our <unk> term loan.

Elizabeth: Net loss for the first quarter was $3 5 million or <unk> 41 per diluted share compared to a net loss of $1 8 million or 21 cents per diluted share last year.

Elizabeth Taylor: by segment, our Sanara surgical segment generated a net loss of 0.6 million compared to a net loss of 0.4 million last year and our tissue health class segment generated a net loss of 2.9 million compared to a net loss of 1.4 million last year. Adjusted EBITDA for the first quarter of 2025 was $0.7 million, an increase of 111% year over year. By segment, Sanara Surgical generated segment-adjusted EBITDA of $2.7 million, compared to $1.2 million last year.

Elizabeth: By segment, our scenario surgical segment generated a net loss of <unk> 6 million compared to a net loss of <unk> 4 million last year and our tissue health plans that we have generated a net loss of $2 9 million compared to a net loss of $1 4 million last year.

Elizabeth: Adjusted EBITDA for the first quarter of 2025, with <unk> 7 million, an increase of 111% year over year by segment. So narrow surgical generated segment adjusted EBITDA of $2 7 million compared to $1 2 million last year and tissue health plus generated segment is.

Elizabeth Taylor: And Tissue Health Plus generated segment-adjusted EBITDA loss of $2.0 million, compared to a segment-adjusted EBITDA loss of $0.9 million last With respect to our balance sheet, as of March 31, 2025, we had $20.7 million of cash, $42.8 million of principal debt obligations outstanding, and $12.25 million of available borrowing capacity. This compares to $15.9 million of cash, $30.5 million of principal debt obligations outstanding, and $24.5 million of available borrowing capacity as of December 31, 2024. During the first quarter, we amended the terms of our CRG term loan agreement to provide more flexibility with respect to the timing and amount of potential future borrowings and borrowed an additional $12.25 million.

Elizabeth: Adjusted EBITDA loss of $2 1 million compared to the segment adjusted EBITA loss of <unk> 9 million last year.

Elizabeth: With respect to our balance sheet as of March 31, 2020, we had $27 million of cash $42 8 million of principal debt obligations outstanding and $12 5 million of available borrowing capacity.

Elizabeth: This compares to $15 9 million of cash $35 million of principal debt obligations outstanding and $24 5 million of available borrowing capacity as of December 31 2024.

Elizabeth: During the first quarter, we amended the terms of our CRT term loan agreement to provide more flexibility with respect to the timing and amount of potential future borrowings and borrowed an additional $12 two 5 million.

Elizabeth Taylor: As a reminder, our loan agreement provides for one additional borrowing of up to $12.25 million on or before December 31, 2025.

Elizabeth: As a reminder, our loan agreement provides for one additional borrowing of up to $12 $5 million on or before December 31 2025.

Elizabeth Taylor: Lastly, a few considerations to bear in mind for the remainder of the year. As Ron mentioned earlier, our net revenue performance in the first quarter was consistent with our expectations, and we remain pleased with our start to 2025. Our team remains focused this year on delivering net revenue growth, driven by our Sanara surgical segment. We continue to expect improvements in our Sanara surgical segment profitability in 2025. With respect to our Tissue Health Plus segment, we expect our cash investment in the first half of 2025 to be approximately $7.5 million to $8.5 million, compared to our prior expectation of $7.5 million to $10 million, excluding the acquisition of CarePix.

Elizabeth: Lastly, a few considerations to bear in mind for the remainder of the here and.

Elizabeth: As Ron mentioned earlier, our net revenue performance in the first quarter was consistent with our expectations and we remain pleased with our start to 2025.

Elizabeth: Our team remains focused this year on delivering net revenue growth driven by our senior surgical segment.

We continue to expect improvements in our scenario surgical segment profitability in 2020 pounds.

Elizabeth: With respect to our tissue health plus segment, we expect our cash investment in the first half of 2025 to be approximately $7 5 million to $8 5 million compared to our prior expectation of $7 5 million to $10 million, excluding the acquisition of Capex. This.

Elizabeth Taylor: This implies cash investment in the second quarter of 2025 of approximately $4 million to $5 million. Note, this expectation does not include the CAREfix acquisition, which Sam mentioned we completed on April 1 for a total of $3.65 million upon closing. We also remain focused on pursuing financial partners to invest in the execution of our Tissue Health Plus strategy. With our existing cash on hand, the expected cash generation in our Sanara surgical segment in 2025, and the available borrowing on our existing facility, we believe we have the requisite capital to continue to pursue our strategic growth initiative.

Elizabeth: This implies cash investment in the second quarter of 2025 of approximately 4 million to $5 million note. This expectation does not include the carefree acquisition, which as Sam mentioned, we completed on April one for a total of 365 million upon closing.

Elizabeth: We also remain focused on pursuing financial partners to invest in the execution of our tissue health plus strategy.

Elizabeth: With our existing cash on hand.

Elizabeth: <unk> cash generation in our scenario surgical segment in 2025 and the available borrowing on our existing facility. We believe we have the requisite capital to continue to pursue our strategic growth initiatives.

Elizabeth Taylor: Lastly, with respect to tariffs, it is important to note that with the exception of Biosurge, all of our commercial products are manufactured in the United States. With this in mind, we do not anticipate a material impact from tariffs on our results of operations in 2025.

Elizabeth: Lastly, with respect to tariffs it is important to note that with the exception of buying search all of our commercial products are manufactured in the United States with this in mind, we do not anticipate a material impact from tariffs on our results of operations in 2025.

Operator: With that, I'll turn it back to the operator to open the call for questions. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone.

Elizabeth: With that I'll turn it back to the operator to open the call for questions.

Elizabeth: Okay.

Elizabeth: Thank you.

Speaker Change: You'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up if you would like to ask additional questions.

Operator: If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star 1.

Invite you to add yourself to the queue again by pressing star one please hold a moment, while we poll for questions.

Yichen: Please hold a moment while we pull for Your first question for today is from Yichen with HC Wayne. Good morning, Eduardo. Just a little bit more color on your rates of penetration and understanding.

Speaker Change: Your first question for today is from Yi Chen.

Ken: Ken with H C Wainwright.

Speaker Change: Okay.

Speaker Change: Good morning Eduardo.

Speaker Change: Just a little bit more color on your basic penetration understanding intuitively that seems like the area where you.

Seth Yon: Intuitively, that seems like the area where you'd probably get the most benefit and ROI approaching profitability. It's kind of your vision for how you're going to improve penetration at existing facilities and your strategy there.

Speaker Change: You'd probably get but most benno.

Speaker Change: Benefiting rois approaching profitability.

Speaker Change: Your vision for how youre going to improve penetration at existing facilities.

Speaker Change: And your strategy there.

Seth Yon: Seth, would you mind taking that please? Sure, of course.

Speaker Change: Would you mind, taking that please sure.

Seth Yon: Good morning. We do it with really a coupled approach between our RSMs, which we've talked a lot about in the past, territory managers as well, and then our distributor expansion. So our distributor expansion has jumped significantly over the last 18 months, and that's been done intentionally for that very reason. It's to get us access into new accounts, but also to penetrate existing accounts deeper and further. So it's really a coupled approach between both the RSM and our distributor partners. Got it.

Speaker Change: Of course, good morning, we do it with really a couple of the approach between our RSM, which we've talked a lot about in the past our territory managers as well and then our distributor expansion.

Speaker Change: So our distributor expansion has jumped significantly over the last 18 months and that's that's.

Speaker Change: <unk> been done intentionally for that very reason.

Speaker Change: To get us access into new accounts, but also to penetrate existing accounts deeper and further so it is really a couple of approach between both the RSM and our distributor partners.

Speaker Change: Got it and is there any kind of signal on reorder rates that you could provide that.

Seth Yon: And is there any kind of signal on reorder rates that you could provide that, you know, you mentioned that people who use the product really, really like it, you have any numbers on on the reorder rate? We haven't provided that in the past. I will say this, our business tends to stick, both on the sell rate side and by a surge alike. Once surgeons gain comfort with those two products, and that takes some time to do that, oftentimes they'll start with high risk cases to see how products perform. And then as they do perform highly and with highly successful rates, they continue to use that and expand that across more procedures.

Speaker Change: You mentioned that people, who use the product to be maybe like you do you have any numbers on the reorder rates.

Speaker Change: We haven't provided that in the past I will say this our business tends to stick.

Speaker Change: Both on the salary side in biosurgery alike.

Speaker Change: Once surgeons gain comfort comfort with those two products and that takes some time to do that oftentimes they'll start with high risk cases, just see how products perform and then as they do perform highly.

Speaker Change: And with highly successful rates, they continue to use that and expand that across more procedures.

Yichen: Okay, that's really helpful. Thanks for taking the question.

Okay got it that's really helpful. Thanks for taking the questions.

Unknown Executive: Uventra. Thank you.

Speaker Change: Venture.

As a reminder, if you would like to ask a question. Please press star one.

Operator: As a reminder, if you would like to ask a question, please press star 1.

Speaker Change: Your next question for today is from Ross Osborne with cancer Fitzgerald.

Ross Osborn: Your next question for today is from Ross Osborn with Cancer Fitzgerald. Hey guys, this is Matt Park on for Ross today. Thanks for taking the questions. I guess starting off with gross margin came in very strong in the quarter. Can you help us frame how we should think about gross margin cadence for the remainder of 2025? And any areas for further leverage as volumes go?

Ross Osborne: Hey, guys. This is not park on for Ross today. Thanks for taking my questions I guess, starting off with gross margin.

Speaker Change: Came in very strong in the quarter can you help.

Speaker Change: Help us frame, how we should think about gross margin cadence for the remainder of 2025 and any areas for further leverages volume scales.

Speaker Change: Yes.

Ronald Nixon: So how, Ross, this is Ron. So how I think about it is when we bought, when we bought the technology from the original designer or developer of the product and last year that actually gave. some advantage on the manufacturing side, because there was some additional margin there to be had. So I would say that it's, you know, you never can tell what external other costs could come about. So I just think modeling it in your, just kind of consistent with how you've done it in the past is probably good to go forward. I can't see us achieving a lot more leverage than what we have today on the gross margin.

Ron Nixon: So Ross this is Ron so how I think about it is when we bought when we bought the <unk>.

Ron Nixon: The technology from the original designer developer of the product.

Ron Nixon: Last year that actually gave us some advantage on the manufacturing side.

Ron Nixon: There was some additional margin there to be had so I would say that it's you know.

Ron Nixon: You never can tell what external other costs could come about so I just think.

Ron Nixon: Modeling it then you're.

Ron Nixon: Just kind of consistent with how you've done it in the past is probably going to go forward.

Ron Nixon: I can't see us achieving a lot more leverage than what we have today on the gross margin side.

Ross Osborn: Got it. That's helpful.

Ron Nixon: Got it that's helpful. And then just one more for me on <unk>.

Ross Osborn: And then just one more for me on Tissue Health Plus. Given that you remain on track for a pilot program launch in the second quarter, can you help walk us through what success will look like in this initial phase, whether that's clinical outcomes, patient volume, or economic validation, and how quickly you anticipate scaling beyond the first site? Thanks.

Ron Nixon: She helped plus.

Ron Nixon: Given that you remain on track for a pilot program launched in the second quarter can you help.

Ron Nixon: Walk us through what success will look like in this initial phase, whether thats clinical outcomes patient volume or economic validation and how quickly you anticipate scaling beyond the first site. Thanks.

Sam Muppalla: Yeah, that sounds good.

Ron Nixon: Yes that sounds good.

Sam Muppalla: Sorry, Ron, I jumped the gun there. Yeah, of course.

Ron Nixon: I'm, sorry, Ron I jumped the gun there.

Ron Nixon: Macquarie So Ross to this.

Sam Muppalla: So, Ross, to just answer your question, we're really looking at the success of the pilot being measured in three sets of metrics. First is the clinician-facing metrics. These include things like protocol and formulary adherence. So, to just remind you, one of the key things we are actually implementing as part of our platform is the clinical decision support, which guides the clinicians. So, how well they adhere to the protocols and the formulary, that's a key metric there. The second metric facing the clinician, again, is helping them decrease their post-encounter time. So, for every minute a clinician spends in front of a patient, they could be spending up to two to three minutes after the patient encounter completing the documentation.

Ron Nixon: Just to answer your question, we're really looking at the success of the pilot being measured in three sets of metrics.

Ron Nixon: The commission facing metrics. These include things like protocol and familiar adherents. So to just remind you one of the key things we are actually implementing as part of our platform is a clinical decision support which guides.

Ron Nixon: The commission, so how well they adhere to the protocol and the formulary that's a key metric there.

Ron Nixon: Second metric.

Ron Nixon: Facing the condition again is helping them to create their posting a counter type. So for every minute as a clinician spend in front of a patient they could be spending up to two to three minutes. After the patient encounter completing the documentation.

Sam Muppalla: So, that is a key metric we are trying to influence. And the last clinician metric is around completion of documentation, how well-documented is the encounter.

Ron Nixon: That is a key metric we are trying to influence.

And the losses permission metric is around completion of documentation.

Ron Nixon: Well documented there's been counter.

Sam Muppalla: On the operating side, which is the second category of metrics, we look at things like an increase in staff productivity. And the way we do that is before we started the implementation, we have actually done time and motion studies of their practice end-to-end. So we have baseline timings, and we look at improvements based on our workflow technology, how we are helping them with that. We also look at increased capture in billing services per visit. And we also look to decreasing inventory, wound care-related inventory costs and wastage.

Ron Nixon: The operating side because the second category of metrics, we look at things like a is increase in staff productivity and the way. We do that is before we started the implementation we have actually done time and motion studies of their.

Ron Nixon: Of their practice and to and so we have baseline timings.

Ron Nixon: Look at improvements based on our workflow technology.

Ron Nixon: We are helping them with that we also look at increased capture in billing services.

Ron Nixon: Was it.

Ron Nixon: We also look to decreasing inventory it won't care related inventory costs and wastage.

Sam Muppalla: So some high-level operational metrics.

Ron Nixon: High level operational metrics, the third bucket of metrics, we look at our adoption metrics, which is.

Sam Muppalla: The third bucket of metrics we look at are adoption metrics, which is, for example, the percentage of clinicians using our THP copilot, what's the user satisfaction surveys, MPS, so on and so forth. Got it. That's helpful.

Ron Nixon: For example, the person to their clinicians using our THP copilot.

Ron Nixon: What's the user satisfaction surveys NPS solta and so forth.

Ron Nixon: Got it that's helpful. Thanks for taking the questions guys.

Ross Osborn: Thanks for taking the questions, guys.

Ron Nixon: No.

Ron Nixon: We currently are seeing no remaining questions at this time that does conclude our conference for today. Thank you for your participation.

Operator: We currently are seeing no remaining questions at this time.

Operator: That does conclude our conference for today. Thank you for your participation.

Ron Nixon: Yeah.