Q3 2025 Sanara MedTech Inc Earnings Call
Welcome to the sinara Medtech, third 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.
Before we begin, I would like to remind everyone that certain statements on today's call may 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. Attempt k, a supplemented by the risk factors in the company's most recent quarterly reports on form 10q.
This call will also include references to certain non-gaap Financial measures. Reconciliations of these non-gaap measures to the most comparable measures calculated and presented in accordance, with gaap are available in the earnings release available on the investor relations section of our website.
Today's call will include remarks from Seth Yan, president and chief executive officer.
And Elizabeth Taylor Chief Financial Officer, I would now like to turn the call over to Mr. Yan, please go ahead. Thanks operator. And welcome everyone to our third quarter of 2025 earnings call. Let me outline the agenda for today's call as the recently appointed president and CEO. I'll begin with a brief introduction and provide some opening thoughts on scenario Medtech.
I'll then discuss the announcement we made yesterday regarding Tissue Health, Plus.
Following her remarks, I'll share some additional thoughts on our near- and long-term strategic priorities before we open the call for questions.
With this agenda, as our backdrop, I'd like to take a moment to introduce myself from provide some context on my background with the company.
I joined Saara in March of 2018 as one of our first Regional Sales Managers.
Over the next 7 years, I served in a variety of leadership roles on our commercial team.
Including as national sales director, vice president and president of commercial and most recently as our president and chief commercial officer while developing our commercial strategy and leading our sales organization of gained a comprehensive view of our business operations. Our customer relationships, and how our products perform in clinical settings,
Our portfolio is built around two key products, Accelerate Rx and Buy a Surge, which have established their utility in clinical practice, helping to improve patient outcomes while reducing overall costs to the healthcare system. Through my experience leading the scenarios commercial team, I've observed firsthand the benefits of adopting these key products across hundreds of cases, as well as their impact on surgical outcomes.
Second scenarios, go-to-market strategy, and commercial distribution model have demonstrated their effectiveness over the better part of a decade and enabled us to rapidly grow. Our key products.
We've secured over 4,000 Healthcare facilities. Identified surgeons, who would benefit from their use and established a network of regional sales managers and independent Distributors to engage educate and address the needs of these surgeons.
This has enabled us to develop a track record of strong growth. In recent years, we've positioned ourselves to achieve significant operating leverage.
Though we've made impressive progress, I believe we have opportunities to continue evolving as an organization.
Now, I'd like to address the announcement we made yesterday regarding tissue Health, Plus, and provide some additional context on this important strategic decision.
Sara has been focused over the last 2 years on identifying and engaging with potential strategic and Financial Partners to invest in and assist in the execution of this business.
At the beginning of the third quarter, we initiated a formal process of evaluating strategic alternatives for thp which we announced on our second quarter. Call in August.
We engaged an external strategic adviser to assist in this process. As we explore the range of options with a goal of maximizing shareholder value.
Together with our external strategic adviser. We performed a market check, and explored a range of strategic Alternatives. During the third quarter, this formal process ultimately did not result in finding a partner to assume significant responsibility for this investment or Surface, a viable option to monetize our thp asset
After concluding this process, our management team and board of directors. Determined that the most appropriate course of action was to cease operations of TP, which we announced via press release yesterday after market closed.
Let me walk you through the rationale behind this decision will our thp team achieve significant progress in developing this platform over recent years, the next stage of preparing thp for commercialization and a scale necessary for THB to be accretive to our adjusted. Evida would have required considerable investment over a multiple year period.
Ultimately, this decision allows us to enhance our operational efficiency and focus our resources on our core surgical business.
We believe this Focus will enable scenario to capitalize on our greatest opportunities and deliver sustained long-term growth and value creation over time.
After reaching this decision, we acted promptly to discontinue thp and have made considerable progress in winding down as operation in recent months.
from an accounting and financial reporting perspective, we have classified the operations of thp's which were previously reported as the thp segment as discontinued operations for the 3 and 9 months and it's September 30th 2025 and 2024
Elizabeth will discuss the financial implications of this decision, further. However, I want to emphasize that we continue to anticipate total cash. Investment related to thp will range from 5.5 million to 6.5 million. In the second half of 2025. This is consistent with the expectation. We shared on a last earnings, call in August,
We also continue to anticipate no material cash spend in THP after 2025.
In summary, this strategic realignment of our business is designed to enhance Scenarios' ability to capitalize on our strengths, capabilities, and opportunities in the surgical market. This will facilitate a leaner and more efficient organization. After careful consideration, both the board of directors and management believe that this represents an important proactive step forward for the long-term benefit of Sanara MedTech and our stakeholders.
now, let's review our third quarter, net revenue performance,
In the third quarter, our surgical team achieved net revenue of $26.3 million, representing growth of 22% year-over-year. Our net revenue growth was driven almost exclusively by our sales of soft tissue repair products.
Soft tissue repair, product sales, increased 24% year-over-year to 23.4 million led by strong sales of our key products. Accelerate RX Surgical and buy a surge
importantly, we complemented our net revenue performance with year-over-year improvements in our gross margins and demonstrated significant operating Leverage.
As a result, we achieved notable year-over-year improvements in our profitability profile with a million dollar Improvement in net income from continuing operations and a 2.3 million Improvement in adjusted ibida. A net revenue growth of 4.7 million
All in all, we were pleased with our third quarter, financial performance, the focus, and dedication of our team, and the level of demand for our surgical products in the market.
With respect to the key drivers of our net revenue growth, our performance in the third quarter reflects on our commercial team's strong execution across the following three key initiatives.
1 developing our relationships with independent distributors.
2 selling into new healthcare facilities and 3 penetrating the existing Healthcare facilities. We serve
On now, take a minute to touch on each of these 3 initiatives related to our commercial strategy beginning, with our efforts to develop our independent distributor Network. Our team has made considerable progress in identifying and partnering with new independent distributors in key geographies across the US.
Specifically during the last 12 months, ended September 30th, we expanded our Network for more than 300 contracted Distributors to more than 400 in tandem, we have increasingly focused on onboarding. Our recently contracted Distributors and training their reps to position them for success in selling our products.
Truly partnering with our distributors for shared long-term growth versus simply contracting with them is a core component of our approach that we believe differentiates our scenario. This philosophy will continue to guide our approach as we focus on optimizing our relationships with existing distributors, while expanding our network selectively going forward.
Turning to our second commercial initiative. Our team continued to leverage our network of distributor Partners whose reps possess strong local relationships across the US.
To begin selling into new healthcare facilities where our products have been contracted or approved.
As a result, we significantly expanded our base of healthcare facility customers over the last 12 months.
Specifically, our products were sold into more than 1400 Healthcare facilities during the trailing 12 months and its September 30th compared to more than 12200 facilities in the prior year period.
As a reminder, our products are approved or contracted for sale and over 4,000 facilities. So we see considerable runway for future expansion on this front.
And in terms of our third commercial initiative across the more than 1400 Healthcare facilities, we currently serve our penetration of these facilities remains very low. This represents 1 of our most significant opportunities for future growth. With this, in mind, we are focused on increasing the number of surgeon, using our products within the existing Healthcare facilities, by targeting practitioners, both within and outside of our traditional Specialties of spine and Orthopedics.
Our team continued to deliver impressive progress on this front. Significantly expanding the number of surgeon users on a year-over-year basis in the third quarter.
Lastly, we remain pleased with the performance of Bio surge in the third quarter and the progress made during its second year of commercialization.
Our team continues to facilitate its future growth by securing new facility approvals and introducing it to our existing Accelerate RX customers.
Turning to our other operational highlights.
In addition to executing our commercial plan and navigating the path forward regarding thp. We continue to make progress in expanding our portfolio of clinical evidence and advancing our new product initiatives.
With respect to clinical evidence, we are focused on demonstrating the clinical efficacy and cost-effectiveness of our key products across a variety of surgical procedures, including some of the most challenging cases.
To this end. We are pleased to see the publication of 2 studies in peer-reviewed medical journals that are worth highlighting this quarter.
Both Publications discussed retrospective case series, which examined the use of accelerate RX in challenging procedures.
The first was published in the Journal of foot and ankle surgery, the official publication of the American College of foot and ankle surgeons. It was focused on the use of accelerate RX in treating high-risk patients with multiple comorbidities.
These patients underwent complex orthopedic and plastic reconstructive surgery to preserve their limbs.
The researchers concluded that cellerate RX demonstrated significant value in assisting these complex procedures helping to support the healing of soft tissue and extremely compromised patients. The second was published in the annals of case reports and Open Access multidisciplinary Journal. It was focused on the use of accelerate RX in treating surgical wounds following Volvo procedures, which tend to involve High complication rates
based on the findings, the researcher concluded that cellerate RX may serve as a valuable adjunct and enhancing post-operative wound healing for VCT patients.
To the treatment of some of the most challenging surgical wounds.
Helping us to educate the medical community and raise awareness of their benefits.
With respect to our new product initiatives. I'm pleased to report continued progress under our strategic partnership with biomimetic, Innovations limited or BMI.
By way of background, we have an exclusive U.S. license and distribution agreement with BMI for Astic as well, as an adjunctive fixation technology. Astic is an innovative and differentiated product designed to enhance the repair process for prior articular fractures.
We're not currently clear for sale. In the US. It's been granted breakthrough device designation by the FDA.
Throughout 2025, BMI has been focused on advancing through a series of key product development, clinical and Regulatory Milestones structured in our agreement.
After achieving the first of these milestones, during the second quarter, they have made significant progress in recent months, as of September 30th. They've completed all of our agreed-upon milestones. Based on the recent pace of progress, we continue to anticipate our commercial launch in the first quarter of 2027. We look forward to leveraging our sales and distribution team to help address the more than 100,000 periarticular fractures that occur annually in the U.S.
Elizabeth will now review our third quarter financial performance in greater detail.
Thanks, Seth.
I will Begin by reiterating.
Which were previously reported as the thp segments have been classified as discontinued operations for the 3 and 9 months ended. September. 30 2025 and 2024 as such unless otherwise noted all commentary that follows relates to our surgical business, on a continuing operations basis and our 8K filed with the FCC today. We have included tables, detailing, the historical results of our operations, on a quarterly basis, by business, for our Surgical and thp businesses and 2025 2024 and 2023.
These materials are also available on the events section of our investor website. Next to the webcast link. For today's earnings call, given that Seth covered our net revenue results for the quarter. I'll begin with gross profits, all percentage changes reference throughout my remarks compared to Prior year period unless otherwise specified.
Third quarter, gross profit, increased 4.8 million, or 24% to 24.5 million.
Gross margin increased approximately 200 basis points to 93% of net revenue driven primarily by increased sales of soft tissue repair products.
Third quarter, operating expenses increased 2.6 million or 14% to 21.5 million.
The change in operating expenses was driven by a 2.5 million or 14% increase in selling General and administrative expenses. And to a lesser extent, a 200,000 or 31% increase in research and development expenses. The 2.5 million increase in sgna, was driven primarily by a 1.4 million increase in compensation and Contract Services, and an 800,000 increase in direct sales and marketing expenses. Operating income for the third quarter, increased 2.2 million or 278% to 2.9 Million
Other expense for the third quarter was 2.1 million compared to 1 million of expense last year.
The increase in other expenses was primarily due to higher interest expense and fees related to our CRG Term Loan, as well as a higher share of losses related to equity method investments. Net income from continuing operations for the third quarter was $800,000 or $0.09 per diluted share, compared to a net loss from continuing operations of $200,000 or $0.02 per diluted share last year.
Adjusted. Eva de for the third quarter of 2025 increased 2.3 million to 4.9 million.
Turning to the balance sheet.
as of September 30th 2025, we had 14.9 million of cash, 45.1 million of long-term debt, and 12.25 million of available borrowing capacity, which is accessible through December 31st, 2025
This compares to 15.9 million of cash. 30.7 million of long-term debt and 24.5 million of available borrowing capacity as of December, 31st 2024,
if few considerations to bear in mind for the remainder of the year,
We remain focused on driving Strong, net, revenue growth for the full year, 2025 coupled with improvements. In our profitability, on a continuing operations basis, with respect to our net revenue over the balance of the year.
as a reminder, our net revenue in the fourth quarter of 2024 grew 49% year-over-year
Performance benefited in part from increased demand for buyers. Surged following the disruption caused by Hurricane Helen last fall, which caused industry shortages of IV fluids in sailing Solutions.
as we have shared previously of the 26.3 million of net revenue generated in the fourth quarter of 2024, We Believe approximately 1.8 million with attributable to this unique dynamic,
Excluding this $1.8 million headwind, we expect our revenue in the fourth quarter of 2025 will increase in the high single digits to low teens on a year-over-year basis, compared to strong year-over-year growth in the fourth quarter of 2024. With respect to anticipated cash utilization, as Seth mentioned, we continue to expect the total cash investment related to THP will range from $5.5 million to $6.5 million in the second half of 2025.
Specifically, our total cash investment in THP was $4 million in the third quarter of 2025, implying approximately $1.5 million to $2.5 million of cash investments in the fourth quarter, as we continue to wind down THB.
We continue to anticipate. No material cash. Spend in thp after 2025.
Lastly, we continue to expect the tariffs will not materially impact our results of operations in 2025.
With that, I will now turn it back to sets for closing remarks. Thanks Elizabeth stepping back.
Over the trailing. 12 months, ended September 30th, 2025 our surgical business is generated nearly 102 million of net revenue,
Representing growth of 31% over prior year period and the third quarter of 2025 alone, we generated higher net revenues and over the entirety of 2021. Our ability to achieve the significant commercial scale in a relatively short time speaks to the strength of our key, surgical products, our go to market strategy, and our team.
It also represents a validation of our large addressable opportunity. We continue to pursue in the surgical Market.
With Clarity on thp, we are moving forward with a leaner organization and renewed, commitment to building on the progress made in our surgical business.
As we close out 2025, our team is focused on executing our commercial plan, including the 3 initial outlined earlier while improving our efficiency and investing prudently and strategically in our surgical business.
Longer term, we are focused on supporting the future development and evolution of our surgical business by improving our systems and processes, deepening our competitive moat, and enhancing our commercial strategy through these efforts. We will position Sanara to continue driving strong, sustainable growth both in 2025 and over the coming years.
as we progress to our next phase, as an organization,
I'd like to close by congratulating the entire scenario Medtech team on their progress made this past quarter, which is a testament to our Collective Vision, grit and execution.
Thank you as well to our shareholders and customers for their support and to those on today's call for their interest in scenario Medtech.
With that operator, you may now open the call for questions.
Certainly the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone. At this time, we ask that while posing your question, you please pick up your handset of listing on a speakerphone to provide Optimum sound quality. Please hold just a moment while we pull for questions. Your first question is coming from Ross Osborne with caner Fitzgerald,
You are live. Please pose your question.
Hi, good morning and you're off from the progress.
Clinical and even economic evidence that supports, um, the value that our products provide. So it's really a culmination of all those things to continue to expand into new users and also into new facilities at the same time. So, you know, we've talked a lot about this in the past, you know, we've grown, uh, considerably in the number of facilities, but we know we've got a lot of room to grow there as well. Uh, and same is true with our distributor Network and surgeon base as well. So, you know, we've liked the formula that we have, uh, we'll continue to take that and and replicate that where we can and then get creative as we go into 2026 and Beyond.
Okay. Great. And then, when thinking about operating profitability, are there areas outside of THC where we should expect cash savings? Or should we begin to expect leverage on sales and marketing going forward?
Hey, Ross, how are you?
um, you know
I'm good. I think um you know, we've tested our headcount with sales flat um with 40 reps and 400 Distributors, and it's evidence that the models working um and you're seeing the operating leverage on the ibid doll line.
Um we're focused on sustainable and profitable growth and and you know, the balance of which we're going to invest in our product portfolio and growing the top line going forward and like all Medtech companies, we need to invest in our current product portfolio and from an IP perspective invest there as well.
um so we see leverage in our sales Channel and we'll continue to invest and no longer be spending some of our cash flow and the and the thp segment
Okay. Perfect. Thanks for taking our questions.
Thanks Ross.
Here. Next question is coming from Daniel Journey with unrivaled investing. Please post your question. Your line is live. Also, if you do have any remaining questions, please press star 1 at this time. Great. Thanks so much for taking my call.
A little disappointed with the thp result, but uh, thanks for coming to that conclusion. Uh, trying to rationally manage your your Capital. So based on, you know, your outlook for the next quarter, you you mentioned that, you know, excluding 1-time benefits from last last year. Uh growth is going to be, you know, High single digits low. Teens. Is that the right sort of expectation for this business going forward? Are you still, you know, because it is a significant sort of deceleration from where you've been. And so I'm curious on on how you think about the Cadence that you're expecting, you know, your internal threshold that you're expecting and the same thing along with the margins where you know I noticed your ibida margin was effectively flat, um sequentially. And so I'm curious, you know, do you have any sort of Benchmark or Target you know. So that way investors can understand, okay? This is a 10%. Grower, is this a 20% grower and what's the sort of, you know, operating margin
That you should. We should be thinking about long term ballpark. Thank you so much, Daniel. Thanks for the question. We'll, we'll kind of divide and conquer on this, if you don't mind. So I'll take part of the questions. I'll let Elizabeth do the same, um, as far as Q4 performance and looking at that, you know, as Elizabeth had mentioned, you know, we grew 49% in Q4 of 2024, uh, if you take out that adjusted 1.8 million, it's still about 38%. Um, which obviously was just a very very significant growth quarter for us and even inside that 38%. You know, when you you think about the 1.8 million that we grew, as a result of the sailing shortage that was solely on just new accounts. So, we had other growth as well, coming from bio surge, uh, in existing accounts as well that's not captured in that 1.8 million. So, we know we had a really significant number. Um, we still believe in a very strong quarter, this coming quarter as well. Uh, and, and again, I I don't think that the, you know, the expectation going into the fourth quarter should be concerned.
Concerning to anybody. Uh, we still feel very confident in our ability to perform at a high level going into the new year, given the opportunities that we have. And the number of facilities that we have approved, uh, the distributor Partnerships that we have currently in place and those where we'll expand. And again, there's great opportunity to continue to reach more surgeons so we remain very confident as we go into the new year and how we'll perform. I'll let uh Elizabeth answer the Eva question as well. Great. Thank you, you know if you look at our trailing 12 months, even
Um, well, the business requires additional head count. Yes. At some point but the point is is that you're seeing the, you know, we sort of built and then are growing from what we built. So
We feel strongly about our performance and feel good about it. Got it. So, is there a sense that there is a lot of room still to expand margins, though?
Yes, I believe we feel good about where the business is going and what we've shown in the past we don't you know, we don't get forward looking guidance. So okay, thank you, thanks, Danielle.
And before we take any additional audio questions in our queue, we have a question coming from the webcast.
The question is, it is my understanding a strategic partner was always expected to be required to bring to the market. Is this correct with this in mind? Why was the Strategic partner not considered as an integral part?
Before the costs were incurred.
Sure, looking back, um, you know, over the last 18 to 24 months or so I think it was the beginning of March. If I remember correctly of 2024 that thp really started to pursue uh, some form of strategic partner and thought that we could do that along the way. Um, again the team had done a nice job of developing that software and our hopes with that coupled with, um, some of the beta sites that we were also in, would start to encourage that activity and again, unfortunately, that didn't happen. Uh, and that
Put us in a position going into the third quarter and certainly into the end of the year that we needed to make that decision.
We did that with confidence both at the board level on the managerial group as well. Uh going into the future, we knew that those resources needed to be put back into the surgical space and that was a decision that we made uh back into September as we went forward.
Okay, thank you. Your next question from the audio. Lines is coming from yechon with HC rain, right? Please. Put your question. Your line is live.
All right, good morning. Thank you for taking my question. Uh, now that the tsp is going to be discontinued. Could you comment on the trend of total operating expenses? Uh, should we project to see a meaningful decrease in the operating expenses?
Uh you thanks for the question. Um you know we don't get forward-looking guidance but I would remind everyone that we have put a supplemental disclosure on our website that examines the surgical business as a standalone business historically. And I think you'll using that information can see good Trends in that business and be able to model it from there. All right, thank you. Thank you. There appear to be no further questions in queue. I would now like to turn it back to sethian for his closing, remarks
Just like to say, again, congratulations to the entire scenario Medtech team and all our Distributors as well for an excellent quarter. Uh really a testament again to the vision and the grit uh and and ultimately delivering on our go to market plan. Uh in addition again just thank you to all of our shareholders and our customers that c value in us as a company in our Technologies as well. And for those joining, maybe the call for the very first time as well. Thank you for your time and uh, and have a great day.