Good evening, everyone, and welcome to Anika's First Quarter 2022 Earnings Conference Call. I will now hand the call over to Mark Namaroff, Vice President of Investor Relations, ESG and Corporate Communications. Please go ahead.

Thank you, Sarah. Good evening, everyone, and thank you for joining us for Anika's first quarter conference call and webcast. Our first quarter earnings press release was issued after the close of the market today, and is available on our Investor Relations website located at www.anika.com as are the supplementary PowerPoint slides that will be used for the discussion today. With me on the call today are Dr. Cheryl Blanchard, President and Chief Executive Officer; and Mike Levitz, Executive Vice President, Chief Financial Officer and Treasurer. Please take a moment to open the slide presentation and refer to Slide 2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which include adjusted gross margin, adjusted EBITDA, adjusted net income and adjusted earnings per share, which are used in addition to results presented in accordance with GAAP financial measures. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements is available at the end of the available presentation slide deck and in our first quarter 2022 press release. And now I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Mark. Good evening, everyone, and thanks for joining us. Please turn to Slide 3. 2022 is a pivotal year and an exciting time for Anika as we celebrate our 30th year in business on our journey to becoming a leading provider of early intervention, joint preservation solutions, and we're off to a strong start. Since our last call, we've continued to make great progress with our product development and commercial efforts, which I'll review in more detail shortly. I'd like to start by covering our first quarter highlights, and then I'll review updates to our new product development pipeline and turn the call over to Mike for his review of our Q1 financials and guidance for 2022. We ended the quarter with revenue up 7% over the first quarter of 2021, mainly driven by OAP management, which was up 18%, primarily on favorable order timing. Our joint preservation and restoration business was essentially flat with the first quarter of last year. We were initially hampered in January due to Omicron, but as procedures lifted in February, we saw some positive recovery through the rest of the quarter. While the downstream macroeconomic effects of staffing shortages and supply chain issues could remain as headwinds for the industry for some time, we were encouraged to see COVID-related impacts abate during the quarter and are cautiously optimistic for market improvement through the year. Our nonorthopedic business was down 34% due to a tougher comparison to last year as there were last time buys for certain legacy products which elevated our prior year's first quarter revenues. Our focus in Q1 with some in-person meetings resuming was on ramping up our sales and marketing efforts to drive awareness of Anika and our full joint preservation product offering. In March, we showcased our full early intervention product portfolio at the American Academy of Orthopedic Surgeons meeting with strong engagement in our booth and events despite lower general show attendance. We were very pleased to see strong surgeon interest in TACTOSET, our HA-enhanced Bone Regrowth device, WristMotion, our Total Wrist Arthroplasty system, and OboMotion within Lake Lenoid, our bone-preserving anatomic total shoulder arthroplasty system. Also during the quarter, we ramped up our medical education efforts to train surgeons on the safe and effective use of our products. Since the acquisitions of Arthur Surface and Parcus, Medical education has been a growing focus area for Anika as we've been building our organizational capabilities. Until recently, restrictions had been preventing many in-person events from taking place. I'm pleased that since the beginning of 2022, we have held several U.S. in-person medical education events with over 140 surgeons trained to date. This will continue to be a strategic focus area for Anika as we introduce new products to new and existing customers. Lastly, as we continue to build commercial strength, I am very pleased to announce that Rob Delp joined Anika in April as Vice President of U.S. Sales, reporting directly to me. Rob comes to Anika with over 26 years of orthopedic industry experience. He was previously with Zimmer Biomet as President of the Americas leading their sales teams where he had responsibility for sales of biologics, regenerative solutions, sports medicine, and upper and lower extremity products, which aligns perfectly with Anika's portfolio. He also had responsibility for sales of reconstructive products. Rob has successfully built and managed direct and hybrid sales organizations focused both in ASC and hospital settings and led the Zimmer Biomet U.S. sales integration. Rob will be instrumental in executing our commercial strategy as we launch key new products in the shoulder and foot and ankle spaces within the next six to 24 months, especially with his strong surgeon and distributor relationships. In addition, Ben Joseph, who many of you have met, will continue focusing on upstream and downstream marketing as well as business development and working with Rob's team to grow Anika into a leader in joint preservation. I'm very excited to have Rob as part of the Anika team. He's a great cultural fit and is excited to work with our team to build a great growth company. Please now turn to Slide 4, so I can provide some updates to our product pipeline. Within the next six to 24 months, a number of new product launches are planned in the shoulder and foot and ankle spaces that will further give Anika the right to win in joint preservation that will result in revenue acceleration in the 2023 to '24 timeframe. We continue to make significant progress and are on track with these product launches. While I believe many of you are familiar with this slide, we have updated it to include respective addressable markets. I'd like to provide a few progress updates on recent launches and more details on the expansion of our shoulder product offering. In the fourth quarter of last year, we launched a new indication for our regenerative product, TACTOSET, for the augmentation of suture anchor fixation in sports medicine procedures. This expanded the available TACTOSET market to beyond $100 million by allowing us to create a new market for hardware augmentation while continuing to expand our existing insufficiency fracture at TACTOSET franchise. Progress with TACTOSET is going very well, capturing about four points of market share in only two years since its introduction in late 2019, and we expect continued growth throughout this year. New indications in addition to that franchise are now in development with the start of a preclinical study last quarter and another one on track to start this year. Now I'd like to give a notable update on our shoulder development efforts. We highlighted high opportunity spaces within the shoulder market, which is already our largest concentration of business in joint preservation as a $1 billion market opportunity for Anika, and we're assembling a product portfolio uniquely suited for the ASC setting. As you'll recall, we previously discussed three shoulder product imperatives that are driving our NPD focus and new products for soft tissue fixation, bone-preserving implants, and rotator cuff repair. I am pleased to provide an update for the first of those three. Our shoulder fixation product in development is a family of knotless suture anchors that is planned to launch in the second half of this year, enabling Anika to provide a cornerstone sports medicine product commonly used for performing double row repairs of the rotator cuff and other areas like foot and ankle procedures where the convenience of knotless anchors is desired. The first family to launch will be peak anchors. With rotator cuff repair procedures approaching 700,000 annually in the U.S., they represent one of the highest volume soft tissue procedures in the ASC setting, allowing us to access even more of this exciting market. This new suture anchor offering, in combination with the recently launched indication for augmenting suture anchor fixation for using TACTOSET, is building strength and synergy in our joint preservation portfolio providing additional growth opportunities in the shoulder and specifically focused on the ASC call point. We also continue to make great progress on a rotator repair system that includes a regenerative component for augmentation for which we are currently performing preclinical studies and have 510(k) submissions planned for later this year. This system will further build and establish Anika's shoulder portfolio as an innovative and winning offering in the ASC, driving the growth we are so excited about in the 2023 to '24 timeframe. All three pillars of our joint preservation product portfolio, including sports medicine, regenerative solutions, and bone-preserving joint solutions, have key new product releases within the next six to 24 months that will build to a very strong shoulder product portfolio designed to work well in the ASC. We also continue to be excited about our longer-term opportunities to bring to the U.S. our HYLAS cartilage repair solution and CINGAL for short- and long-term joint pain relief in line with what we have stated previously. Please turn to Slide 5. 2022 is a building year for Anika as we continue to invest in our commercial capabilities and lead a great commercial team. Third, we'll continue to advance our pipeline with several new 510(k) to be filed in 2022 and new product introductions within the next six to 24 months, targeting TACTOSET expansion, multiple shoulder solutions, and implants for the foot and ankle, with products launching in the second half of 2022 and 2023. We'll report out on the CINGAL pilot trial in the fall. We've been very pleased with the success of this product in the 30-plus countries outside the United States and look forward to next steps in the process to ultimately bring it to the U.S. market. Finally, we have now fully launched our in-person medical education programs to train on the safe and effective use of our products, and we look forward to training many more surgeons in hands-on labs this year. Now I'll turn the call over to Mike for a review of our first quarter, along with our outlook for 2022, and then I'll wrap things up, and we'll take questions.

Thank you, Cheryl. Please turn to Slide 6. I will now walk you through our financial results for the first quarter of 2022. Total revenue for the quarter was $36.7 million, an increase of 7% over the prior year. The increase was primarily in OA pain management, where revenues rose 18% to $22.7 million due to both continued COVID recovery and favorable order timing in international and veterinary. As a reminder, revenues in OA pain management can vary significantly on a quarterly basis based on ordering patterns by our partners and distributors in the United States and internationally, more so over the last couple of years due to the global impact of COVID, but that quarterly volatility generally stabilizes on an annual basis. Our joint preservation and restoration revenue decreased 1% from $12.2 million to $12.1 million, as the business saw some recovery after early quarter COVID headwinds. Our nonorthopedic revenue was $1.8 million, down 34% from last year, reflecting higher revenues from significant end-of-life purchases during the first quarter of last year. Our gross margin in the first quarter was 59% and includes the impact of $1.6 million of noncash acquisition-related expenses from the 2020 acquisitions of Arthur Surface and Parcus. Our adjusted gross margin, which excludes the acquisition-related expenses, was 64% and reflects unfavorable volume and reserves driven by supply chain and staffing challenges. From a spending standpoint, our research and development and SG&A expenses together totaled $25.4 million in the first quarter, up from $24.5 million in the same period of 2021 as we expanded medical education and are continuing to strengthen Anika's internal capabilities in support of our global commercial growth objectives. Our net loss for the quarter was $2.9 million or $0.20 per share compared to net income of $2.8 million or $0.20 per diluted share in the first quarter of last year. The decrease was largely due to a noncash tax effective benefit of $5.5 million or $0.38 per share in the first quarter of last year associated with the change in fair value of contingent consideration. Our adjusted net loss was $1.6 million or $0.11 per share, down compared to adjusted net income of $800,000 or $0.06 per diluted share in the prior year. Our adjusted EBITDA in the quarter was $2.6 million, down from $4.8 million in the first quarter of last year. The year-over-year decrease is primarily due to the lower adjusted gross margin in the quarter from supply chain and staffing challenges and, to a lesser extent, from our incremental investments to support growth acceleration initiatives. Lastly, with regards to our cash flow and capital structure, we had operating cash outflows of $1.9 million for the quarter, compared to outflows of $2.4 million in the first quarter of last year. Our capital expenditures in the quarter totaled $1.3 million, up from $400,000 last year, as we invest in commercial infrastructure to support our growth strategy. Our balance sheet remains strong with $90.3 million in cash at the end of the first quarter. Please turn to Slide 7. Now I'd like to review our financial outlook for fiscal year 2022. Based on our progress to date, we are reiterating our full year 2022 total revenue outlook of low to mid-single-digit percentage growth over 2021. We are pleased that the direct impact of COVID has been lifted. And now we expect our results to be toward the upper end of our full year guidance range while acknowledging ongoing supply chain staffing and other ongoing macroeconomic challenges. In line with our previous guidance, we expect joint preservation and restoration to continue to be our fastest-growing product family with full year revenue growth in the mid-single to low double-digit percentage range over last year. We expect growth to accelerate in the second half of this year, reflecting the expansion of our product portfolio as well as our continued focus on sales force execution. In OA Pain Management, we continue to expect above-market low single-digit percentage growth over 2021 in this more mature part of our business, and we are encouraged by the favorable performance to start the year. In our much smaller nonorthopedic product family, we expect revenues to decrease approximately 20% as compared to 2021, down from last year primarily due to higher results in 2021 from last time buys of legacy products and order timing. This guidance is an improvement from our previous expectations of a decrease of 30% from last year. With regards to gross margin, given ongoing supply chain and staffing challenges, we continue to expect adjusted gross margin for the year to be in the low to mid-60% range. We remain focused on driving margin expansion on a multiyear basis but expect these macro headwinds to limit progress this year. With regards to spending, as we've discussed previously, in 2022, we are investing ahead of growth in support of our longer-term growth and profitability targets with increased spending over last year on key research and development programs consistent with the product pipeline Cheryl outlined as well as on capabilities that support our commercial transformation, including increased spending in medical education, industry events that enable us to expand our brand and product portfolio awareness, and system and process enhancements. As a result of the targeted spending investments as well as the near-term supply chain and staffing challenges impacting our gross margin, we continue to expect adjusted EBITDA margin for the year to be in the low to mid-single digits. Please turn to Slide 8. We remain laser-focused on building the foundation that supports acceleration coming out of this year to achieve our multiyear growth and profitability targets, as well as healthy revenue diversification. The investments we are making in new product development and commercial execution initiatives in our faster-growing joint preservation and restoration business support our stated multiyear targets of accelerating to an overall mid-teens revenue growth rate, as well as an adjusted gross margin of 70% and adjusted EBITDA margin of 20%. While due to the extended impact of COVID over the last couple of years, we are approximately three to four quarters behind the original 5-year target from 2019 of doubling revenue by 2024. We are executing on the areas within our control with multiple new products launching within the next six to 24 months, targeting our large and growing addressable market, as well as putting in place the people, processes, and tools necessary to scale the business. In summary, as we continue to execute on our transformation, we are excited about the significant opportunities in front of us to achieve our mission and drive value creation for our stakeholders.

Thanks, Mike. Please turn to Slide 9, where I'll wrap up, and then we'll take questions. We remain excited as we transform the business, and we're focused on executing our growth story in joint preservation, where we believe we have a unique market opportunity and right to win. We continue to make significant progress on our new product development pipeline, including a new suture anchor to launch in the second half of this year, fully launching our in-person medical education programs, and commercial execution with the recent addition of Rob Delp to lead that effort. We view the shift of procedures to the ASC setting as a tailwind for Anika with our focus in that space. The unique product portfolio that we have built differentiates Anika as the company focused on the joint preservation customer and the early intervention orthopedic continuum of care, delivering value in the ASC and to our shareholders. As always, I'd like to thank the Anika employees for their hard work as we continue our transformation. We're happy to take your questions now.

We'll take our first question from Chris Cooley with Stephens.

Congratulations on a great start to the new year. I have a couple of quick questions this afternoon. I'm interested in the updated guidance you provided for the calendar year 2022, particularly regarding the low single-digit growth in the OA pain franchise. Could you share your thoughts on this in terms of volume and pricing? There has been a lot of discussion in the sector over the last few months as we approach the second half of the year. I want to ensure I fully understand the underlying assumptions that lead to this low single-digit growth projection for the full year. I also have a follow-up question.

Chris, it's Mike. I'm happy to speak to that on the number side, and Cheryl, feel free to jump in, obviously. So our view of the market in 2022 is about a 1% growth in that market, and we expect to grow ahead of the market. Our U.S. franchise that we sell through J&J Mitek is the market leader. This is a mature market, and we're pleased to be the market leader in that space. The guidance is consistent with what we've been saying and what I think we've been delivering. We did have faster growth in the first quarter, and that was driven by favorable order timing and some recovery in the non-U.S. parts of our business like our international business as well as, to a smaller extent, our veterinary business or veterinary products that we sell. But we are right in line. Our J&J Mitek business grew right in line with our full year guidance of low single-digit growth. There were not any dynamics that were unusual relative to pricing. And again, we have a strong market position in that mature market.

I appreciate the additional color there. Also just wanted to touch base, in particular on the CINGAL pilot trial. I'm assuming that would be in terms of just putting that report out, that would be done at a major medical meeting, but just kind of thoughts there that would be presented and you'd have, I guess, continued discussions with the agencies. Just want to kind of make sure I'm thinking about that timeline correctly.

Yes. Thanks, Chris. It's Cheryl. Thanks for your question. So the CINGAL pilot trial, as we've discussed, completed enrollment, and we expect to have data readout and report on that in the fall. So we will provide an update to the market on that once we kind of get to that point in the year. But we're looking forward to it, and things are on track for us to be able to do that. Nothing has changed there.

Next, we'll move on to Jim Sidoti for Sidoti & Company.

It sounded like you indicated that the OA pain management business was unusually strong in the quarter. Can you give us a little more color on that? And is that going to impact the second quarter?

Jim, it's Mike. Yes, it was stronger in the quarter, largely due to favorable timing in areas outside the United States as well as we also have veterinary products that we sell. And so we did not change our expectation for the full-year guidance of low single-digit growth in that space, and that's in line with how J&J Mitek grew our revenue in the first quarter. In terms of guidance for the second quarter, we're not giving specific guidance for on a quarterly basis. But historically, what we've seen is the second quarter generally is a stronger quarter for the J&J Mitek business. But given that we've got the favorability and timing that we saw in the first quarter, there will be an offset in the second quarter because we just think some people probably accelerated some of their purchases. So that's why we're not changing our guidance for the year. We're pleased with the solid start. We are raising our view that we expect to finish towards the upper end of our guidance on a total company basis. And that's driven by the favorable performance in the OA Pain Management and retiring some risk there just as we work our way through the year as well as a little bit as well in nonorthopedic. It's a much smaller part of our business, but we're pleased with the orders that we have there, and we updated that guidance a little bit as well.

You continue to anticipate mid-single to low double-digit growth in joint preservation, although there was a decline in the first quarter. Can you explain why it dropped and whether the first quarter of 2021 was unusually high due to Omicron? Also, could you elaborate on why you believe it will recover in the next two quarters?

Jim, it's Cheryl. Thanks for the question. Yes. I think we, along with the rest of the industry, saw a pretty tough January because of Omicron and then recovery throughout the quarter. That's exactly what we saw. If you look at our numbers, you'll see we were essentially flat to last year. And we're excited about the rest of this year and then moving through the rest of our strategic planning period into '23 and '24 because of the growth catalysts that we've got; we expect to see the market improving. That's the general healthcare environment seems to be improving. We've got a number of new product launches planned in the next six to 24 months. We're back in person doing medical education, training on the safe and effective use of our products. We just brought, we think, a really great talent on in Rob Delp, who used to run the Americas U.S. sales for all of Zimmer Biomet, and he's ready to roll up his sleeves and dig in and really bring a level of sales force execution to the organization and commercial execution. And we look to have those growth catalysts really drive us to that acceleration that we're expecting to see in 2023 and 2024.

Okay. Now I know Rob has only been there probably a few weeks, but initial impressions since you've gotten there about specific to the size of the sales force. Do you think you have the right number now? Or do you think you'll be adding in 2022?

Well, I won't speak for Rob yet because you're right. He joined us in April, and I don't want to put any definitive statements out there yet about his thoughts around the size of the sales force. But I think in general, and I've said this before and I’ll just reiterate it, I don't think from a size of sales force perspective because we have a hybrid sales force. We've got a strong number of folks from an internal perspective. And then a very large number of independent distributors that we work through in that hybrid model that we have in the United States. We'll continue to drive excellence around that structure and optimization around that structure and look forward as we move forward with our product launches, our medical education, and driving sales execution to continue to really look to that acceleration in the '23 to '24 timeframe.

And there are no further questions. I'd like to turn the conference back over to Cheryl Blanchard for any additional or closing remarks.

Thanks, Sarah, and thank you all very much for your attention and your interest in Anika. We look forward to speaking next on our second quarter call in August, and I wish everyone a good night. Thank you.

Thank you. That does conclude today's teleconference. We do appreciate your participation. You may now disconnect.