Greetings and welcome to the AxoGen First Quarter 2020 Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Pete Mariani, Chief Financial Officer.

Thank you, Jerry and good afternoon everyone. Joining me on today's call is Karen Zaderej, AxoGen's Chairman, Chief Executive Officer and President. Karen will begin our call with an overview of our Q1 performance, our response to the COVID-19 pandemic, and provide an outlook on the developing recovery. I'll provide an analysis of our first quarter financial performance and the impact of our cost mitigation initiatives. Today's call is being broadcast live via webcast, which is available on the Investors section of the AxoGen website. Within an hour following the end of the live call, a replay will be available in the Investors section of the website at www.axogeninc.com. Before we get started, I'd like to remind you that during this conference call, the company will make projections and forward-looking statements regarding future events. We encourage you to review the company's past and future filings with the SEC including, without limitation, the company's forms 10-K and 10-Q, which identify the specific factors that may cause actual results or events to differ materially from those described in these forward-looking statements. These factors may include, without limitation, statements related to the expected impact of COVID-19 on our business, statements regarding product acquisition or development, product potential, the regulatory environment, sales and marketing strategies, capital resources or operating performance. And with that, I'd like to turn the call over to Karen. Karen?

Thank you, Pete and good afternoon everyone. I'd like to start the call by expressing our admiration and appreciation for the healthcare professionals who are working tirelessly on the front lines to care for people suffering with COVID-19. We are confident in the global community's ability to overcome the challenges of this pandemic. I would also like to offer a sincere thank you to the entire AxoGen team. The past several weeks have been a significant adjustment for us all, including our employees and their families. Our team is working diligently under challenging circumstances to ensure that patients and surgeons have uninterrupted access to our nerve repair products and support, and for that I'm deeply grateful. In the first quarter of 2020, our total revenue grew 4.2% to $24.3 million. Although revenue exiting February was trending toward our annual guidance, the reallocation of hospital resources and deferment of elective procedures had a material negative impact on our revenue in March. Additionally, we believe that demand for our nerve repair products has been temporarily reduced as nationwide stay-at-home orders have lowered the incidence of traumatic injuries. A steep decline in our daily sales volumes began the first week of March and continued to drop through early April when our weekly sales ran as low as 70% below our Q4 average. Since that time, our daily sales have demonstrated steady improvement, suggesting we're in the early stages of a recovery. We are also encouraged that hospitals and clinics are now beginning to open their elective surgery schedules, which will drive recovery of surgical volumes. In response to the current restrictions in hospital and community activity as well as the anticipated reduction of revenue caused by these factors, on April 23rd we announced a cost mitigation initiative designed to defer and reduce certain expenses and capital expenditures during this time. Pete will review this in more detail in his comments. Our top priority throughout the COVID-19 pandemic has been the health and safety of those we serve, including healthcare professionals and their patients as well as our employees, communities, and suppliers. And we've adapted to this new environment to continue to support our customers and their patients. To achieve these objectives, we took the following steps; established an executive level COVID-19 core team that meets daily to review and implement and communicate state and CDC guidelines and other important safety and operational protocols across the organization; instructed all field-based teams to support customers remotely, entering hospitals or clinics only at the request of a surgeon or hospital staff to support patient care, and to complete all tasks in a manner that minimizes human contact and maintain social distancing. Converted office-based staff to work-from-home arrangements; divided our Texas distribution organization into two independent teams working on rotational weekly schedules to create separation in the event an employee was exposed to the virus. Temporarily suspended the collection and processing of tissue, allowing utilization of existing inventory and preserving PPE; established a backup distribution center in our Alachua headquarters facility; and established new safety protocols and training at each of our facilities that include social distancing, mask wearing, daily cleaning, and disinfecting. As a result of these and other measures, I'm very happy to say that our team is healthy and has effectively adapted to this new environment. Our sales representatives remain in frequent contact with our customers to support their needs. We've also used this time with our sales reps to provide additional product and skills training in multiple sessions each week that we branded as spring training. These sessions have been highly interactive and included guest surgeon speakers, best practice sharing for remote case coverage, and provided the opportunity to plan new protocols on how to safely reengage with accounts as they reopen their surgery schedules. I would now like to spend a few minutes detailing the impact of this pandemic on the nerve repair market, along with our preliminary thoughts on how it could evolve as surgical procedures continue coming back online at hospitals and surgery centers. While elective procedures including nerve repairs declined significantly as healthcare resources and supplies were devoted to COVID-19 patient care, we believe the American College of Surgeons COVID-19 guidelines are favorable for meaningful segments of the nerve repair market as we move forward. These guidelines recommend that acute nerve injuries and acute hand extremity trauma should be addressed and managed emergently if the facility has resources available. In addition, head and neck procedures are recommended to be addressed urgently. If the facility needed to defer trauma cases, many nerve injuries can be repaired in a delayed fashion. While early nerve repair is typically associated with optimal outcomes, data from our RANGER study demonstrates that nerve injuries repaired up to 6 to 12 months post-injury still report meaningful recovery rates. While COVID-19 has delayed or deferred many of our breast neurotization procedures, our ReSensation technique allows surgeons to neurotize an autologous breast reconstruction in both delayed and delayed-immediate breast reconstruction cases. We believe chronic pain and neuroma procedures were triaged based on the severity of patient symptoms, with severe and intolerable nerve pain treated when resources were available. If the nerve pain was manageable with conservative therapy, the case was typically deferred. We anticipate that many patients with injuries whose repair has been deferred or delayed will seek treatment based on the severity of their symptoms as restrictions on surgery schedules are lifted. Additionally, we believe the incidence of nerve injuries will increase as states lift shelter-in-place orders and community activities return. For these reasons and despite the current uncertainties related to COVID-19, we believe the nerve repair market can experience a steady recovery. I would now like to quickly touch upon areas of progress we made with our five pillars of growth during the quarter, including any updates on how these initiatives have been impacted by COVID-19. In the area of sales execution, we elected to hold our number of direct sales representatives flat during the quarter, ending with 109. As a result, the average tenure of our direct sales reps has continued to increase with greater than 60% of our team exceeding 12 months with the company as of quarter end. Our direct sales channel is supplemented by 19 independent sales agencies that cover target accounts primarily in remote geographies. Direct sales represented approximately 90% of our first quarter revenue compared to 85% a year ago. During the quarter, we continued to strategically focus our sales representatives on our largest market opportunity of extremity trauma and on driving deeper penetration with our existing surgeon customers. Within these accounts, our sales reps are also continuing to selectively and efficiently grow the adoption of our nerve repair products for oral and maxillofacial applications, and we deploy a team of eight sales specialists focused exclusively on breast reconstruction neurotization. We believe we're making good progress with this focused strategy as evidenced by our continued development of active accounts. Our number of active accounts increased 13% in the quarter to 825. Additionally, active account revenue increased by 7% over the prior year. This growth was driven by an increase in the number of surgeons who have used AxoGen products with greater frequency and in additional accounts. We are encouraged by the early results of our commercial improvements despite the COVID-19 disruption, and we remain firmly focused on execution as we anticipate restrictions on elective procedures being carefully lifted geographically during the second quarter. It is important that we continue to build awareness of AxoGen and our products despite restrictions on surgeon travel to scientific conferences. Our surgeons' customers are increasingly using online platforms to stay abreast of the latest developments in nerve repair, especially in today's environment, and we are therefore expanding our digital capabilities. For example, our AxoGen Nerve Matters surgeon community continues to grow with more than 3,000 clinician members at quarter end and more than 29,000 peer-to-peer engagements during the quarter. Our efforts to educate surgeons and develop advocates continued in the first quarter as we held the first two national education programs scheduled for 2020, including a program focused on the repair of mixed and motor nerve injuries and a program for OMF fellows. We have canceled or postponed our programs scheduled from mid-March through July due to restrictions on travel and social distancing measures. We remain committed to surgeon education, including hand and microsurgery fellows, and are developing alternative education programs, including webinars. These virtual events will be surgeon-led with a focus on advances and best practices in nerve repair. We are hopeful that we can resume our national programs later in the year. We previously discussed our plans to introduce new products and expand the application of our portfolio into the surgical treatment of pain, focused on symptomatic neuromas. At our national sales meeting in February, we provided extensive neuroma management training for our sales team and launched AxoGuard Nerve Cap, an important addition to our solutions portfolio designed to protect a peripheral nerve end and separate the nerve from the surrounding environment to reduce the development of symptomatic or painful neuroma. With the addition of Nerve Cap, we now have a full portfolio of products for nerve connection, nerve protection, and now nerve termination. Increasing surgeon adoption of our product portfolio continues to be supported by a large and expanding body of clinical data. Our RANGER Registry now has over 2,100 injuries enrolled, and in February the RANGER investigator team published a paper in the journal Microsurgery entitled, PERIPHERAL nerve repair throughout the body with processed nerve allografts: Results from a large multicenter study. The paper includes the largest data set reported from the registry, with quantitative outcomes from 385 subjects and 475 nerve repairs. The study included injuries from head to toe and includes sensory, mixed and motor nerves, and findings show an overall 82% meaningful recovery rate in gaps of up to 70 millimeters. These results were consistent with prior reported data for Avance and comparable to historical literature for nerve autograft without the known complications of donor site morbidity and exceed that of conduits. This comprehensive publication includes more than 10 years of effort and is the largest body of evidence available on the role and impact of Avance Nerve Graft in contemporary nerve surgery. This publication provides important real-world data that can help guide healthcare decisions and strengthen our value proposition with payers and providers. COVID-19 has impacted our clinical study programs, and we've implemented strategies to help manage these disruptions. Our RECON study remains open to enrollment at a few select centers. The RECON enrollment is very near completion with only a few subjects remaining. We'll continue to work with our research sites in an effort to reach the targeted enrollment of 220 subjects. We believe any enrollment delay will not negatively impact the trial or the enforcement discretion provided by the U.S. Food and Drug Administration. We've also increased our efforts to support completion of subject follow-up visits during the COVID-19 crisis. We've implemented an expanded home health visit program to allow follow-up visits to be conducted by a trained healthcare professional outside of the clinic environment and with the appropriate safety precautions. We are working closely with our research centers to monitor follow-up visit windows and minimize any potential disruption. We are confident that these measures will support our efforts to complete the RECON study. RANGER and MATCH will continue to enroll. However, we anticipate the enrollment rate will be slowed as centers reassign resources and reduce personnel to manage their individual COVID-19 response needs. Fortunately, the study design allows for qualified subjects to be enrolled retrospectively following their actual nerve repair. We also intend to continue enrollment in our REPOSE study, which is a prospective, randomized controlled study evaluating the use of AxoGuard Nerve Cap in the management of painful neuroma as compared to a standard neurectomy procedure. Outcomes from the REPOSE study pilot phase were presented at this year's American Society for Peripheral Nerve. The study found that at six months, pain and quality of life scales reported improvements that were two to five times greater than the established minimally important clinical difference for these scales. While this is a small pilot study, we remain encouraged by the positive impact reported to date and intend to continue enrollment of the comparative phase of the study when the study centers reopen to research subjects. With regard to our Sensation-NOW clinical registry, we are pleased with the enrollment of 600 subjects to date and believe this will create a significant body of evidence around this important technique. With COVID-19 related restrictions on research staff at study centers, we've made the decision to pause enrollment for the remainder of 2020. Similarly, we've decided to pause enrollment for our RETHINK PAIN Registry and our ASSIST study. We will continue to monitor the recovery of activities at study centers and prioritize the potential restart of these clinical programs to best fit our business needs. We remain committed to providing meaningful and impactful clinical evidence on the utility of our nerve repair portfolio. COVID-19 has had a significant impact on healthcare in general and certainly on our business. We've taken significant steps to protect the health and safety of those we serve, and we have adapted our business to this new environment to continue to support our customers and their patients through the crisis as the recovery develops. We're encouraged by the trend and expect continued improvement as states begin to lift restrictions on hospital procedures and community activities. As of this week, we've released our field teams to begin reentering healthcare facilities, following local, regional and national guidelines and using contact tracing. We are beginning the return to our offices and labs and planning to research tissue processing in the second quarter. We believe that the underlying fundamentals of our business in the nerve repair market remain intact. And we continue to focus on our mission to restore nerve function and quality of life to patients with peripheral nerve injuries. Now I'll turn the call over to Pete for a review of financial highlights.

Thanks, Karen. First quarter revenue grew 4.2% to $24.3 million. As Karen mentioned, although revenue exiting February was trending towards our annual guidance, our first quarter revenue was negatively impacted in the month of March as our customers reallocated resources to prepare for and treat COVID-19 patients. And as shelter-in-place orders reduced the incidence of traumatic injuries, our revenue growth for the quarter was a result of the increases in unit volume as well as the net impact of price increases and changes in product mix. Gross profit for the first quarter was $19.4 million, a slight decrease compared to $19.6 million in Q1 of 2019. Gross margin was 80.1% for Q1 compared to 84% in the prior year first quarter. Gross margin was negatively impacted in Q1 as a result of increased period and variance costs recognized in the quarter resulting from our temporary suspension of tissue processing for most of the month of March and increases in reserves for estimated excess and obsolete inventory to account for expected lower product demand during the period of recovery. Total operating expenses in the first quarter was $28 million compared to $29.8 million in the prior year. Increases to salaries and benefits from increased head count and project expenses in the current quarter were more than offset by a $1.2 million reduction in litigation fees and $1.8 million in lower noncash stock compensation expenses. The decrease in stock compensation in the first quarter is primarily related to forfeitures of performance stock awards. Sales and marketing expenses in the first quarter was $17.8 million compared to $16.4 million in the prior year. This increase includes the impact of our expanded direct sales footprint and increased market development activities. As a percentage of total revenue, sales and marketing expenses increased to 73.5% for the three months ended March 31st compared to 70.6% for the prior year. Research and development spending in the first quarter was $4.6 million compared to $4.1 million in the prior year. Research and development costs include clinical research and product development, including expenses in support of our BLA for the Avance Nerve Graft. Product development expenses represented approximately 50% of total R&D in the first quarter compared to 55% in the prior year, while clinical expenses represented the other 50% in Q1 of 2020 compared to 45% in the prior year. The increase in our clinical spend reflects the expanded breadth of our clinical portfolio. Our clinical trial activities decreased toward the end of the quarter due to the COVID-19 related restrictions at clinical sites. And as a percentage of total revenues, research and development expenses were 19% in Q1 compared to 17.8% in the prior year. General and administrative expenses in the first quarter was $5.5 million or 22.7% of revenue compared to $9.2 million or 39.5% of revenue in the prior year. The decrease in G&A included $1.8 million of lower noncash stock compensation in the current quarter primarily related to forfeitures of performance stock awards as well as $600,000 of lower corporate expenses, including general legal, investor relations, and other services. Additionally, prior year G&A included $1.2 million of litigation costs associated with the class action suit filed January 9, 2019, that has since been successfully litigated and was dismissed on April 21st of this year. The United States District Court for the Middle District of Florida dismissed the case or dismissed the class action complaint without prejudice, finding that Neil Einhorn, the plaintiff, failed to state a claim upon which relief could be granted. The plaintiff has 60 days to file an amended complaint, or the action will be dismissed with prejudice. Net loss in the first quarter was $8.2 million or $0.21 per share compared to $9.5 million or $0.24 per share in the prior year. Excluding the impact of noncash stock compensation as well as litigation and related charges, adjusted net loss and net loss per share for Q1 was $7.6 million and $0.19 per share compared to $6 million and $0.15 per share in the prior year. Adjusted EBITDA loss in the quarter, which also excludes the impact of stock compensation, litigation, and related charges was $7.6 million compared to an adjusted EBITDA loss of $6.5 million in the prior year quarter. Turning to our balance sheet, the balance of cash, cash equivalents, and investments as of March 31st was $89 million compared to $102.5 million at the end of the fourth quarter. The $13.5 million change in cash in the quarter included $10.2 million of items unique to Q1, including construction payments for our Dayton and Tampa facilities, payment of our 2019 all-employee performance bonus, annual sales awards and related costs, prepaid insurance payments and our annual sales meeting. On April 23, we announced that we had received a $7.8 million Paycheck Protection Program loan from the Small Business Administration. We obtained a loan pursuant to the original guidance of the SBA to preserve positions in the company by providing necessary economic relief during this period of reduced surgical volumes because of the negative business effects of COVID-19. However, in today's release, we noted that we believe that the subsequent guidance issued by the Treasury Department changed the original intent of the program by stating that it would be unlikely that public companies would be able to meet the standards for receiving the loan. As a result of this change, the company returned the loan on May 5th. On April 23rd, we also announced a cost mitigation initiative designed to defer and reduce certain expenses and capital expenditures in response to the anticipated reduction of revenue caused by the ongoing COVID-19 pandemic. This initiative included reduced executive compensation and Board fees by 20% and reduced cash compensation for all other exempt salary employees by 10% to 15%; completed an employee layoff of approximately 10% of our workforce, and implemented a hiring freeze. Deferred completion of our new biologics processing center in Dayton, Ohio by up to one year and reduced certain discretionary spending. We took the salary reductions in recognition of the need for lower spend while preserving capability across the company for the recovery. The layoff and other cost reductions primarily occurred in areas that are most directly impacted by the current restrictions including travel, conferences, tissue collection and processing, clinical, surgeon education, and certain projects and programs not critical to patient care. As Karen noted, we're continuing to fully fund certain clinical trials or clinical studies, including RECON, RANGER, MATCH, and REPOSE. But we'll see reduced spending in Sensation-NOW and RETHINK PAIN Registry as well as other developing clinical programs. The deferred construction of the Dayton facility will allow us to defer $25 million of CAPEX from 2020 to 2021. We also extended the lease at our existing facility to provide adequate tissue processing capacity until the new building is complete and validated. We believe we've taken a balanced approach with this cost mitigation initiative that demonstrates the flexibility of our business model while allowing us to maintain a focus on the commercial execution required as surgical volumes return. Although we anticipate higher cash burn in Q2 due primarily to the impact of lower revenue and payments for work completed on the Dayton facility prior to the suspension of construction, this cost mitigation initiative will preserve cash over the next several quarters and will allow us to reset the business on a more efficient run rate. The PPP loan would have provided additional flexibility as we monitor the impact of the COVID-19 on our business but because we returned the loan, we may take additional cost reduction measures based upon the recovery of surgical volumes and explore other non-dilutive financing alternatives. While the path and pace of the recovery may be uncertain, we are encouraged by indications that we are in the early stages of the recovery, and we're confident that we will emerge from this downturn a stronger, leaner, more resilient organization and believe we will be on a path to profitability. And with that, I'd like to hand the call back over to Karen.

Thanks, Pete. We are encouraged by the momentum we were seeing in our commercial strategy prior to the downturn. We are highly confident that we have the right strategy in place for the current environment and to support demand once it returns to more normalized levels. At this point, I'd like to open up the line for questions. Jerry?

Thank you. The first question is from Richard Newitter at SVB Leerink. Please proceed.

Hi, this is Jaime filling in for Rich. To start, it's encouraging to see some improvements since a low point in early April. I'm curious, from your discussions with customers, are they rescheduling procedures for later dates? Can you share some of the challenges you might be hearing from them regarding capacity as we progress through the year? Additionally, we've heard that ASCs could play a larger role in expanding capacity, so could you talk about the number of procedures performed in ASCs, how many active ASCs accounts you have, and your strategy for increasing your presence in that area going forward?

Yes, thank you, Jaime. The recovery we are observing varies significantly by location. There are notable differences between cities like New York City and Baltimore, which experienced a severe impact from COVID-19, and other regions that have seen fewer cases. We began to see an uptick from our low in April, and recently, with the resumption of elective procedures, we are noticing an increase in volume across all types of procedures, not just urgent trauma cases. We believe that many patients are beginning to return. However, a significant portion of what we are experiencing are regular patients or procedures. We expect that most patients who deferred their care will eventually return. The scheduling process is complex, involving both availability in the surgical operating room and patients’ readiness to come back. This became apparent in early March when there was a notable drop in patient attendance, even for trauma repairs. Patients scheduled for procedures after a recent injury didn’t show up, particularly in areas heavily affected during the early stages of the pandemic. Currently, patients are returning for their procedures, attendance is improving, and we are witnessing a growing number of procedures. Regarding ambulatory surgery centers, there was no noticeable shift towards them in the first quarter as the situation with the disease escalated. However, surgeons and hospitals are becoming increasingly adaptable, extending scheduling to evenings and weekends to optimize operating room time, and they are considering various care sites that suit patients. We recognize the advantages of recent payment schedule changes. Initially, only Medicare was considered, but some of our active centers that focus on nerve repair are now engaging with private payers as well. Although we are not specifically targeting ambulatory surgery centers, we are supporting our surgeons and following them in their practice, which positions us well to assist them in these centers for simpler nerve repairs.

Helpful, Karen. And then just, Pete, I guess, from a modeling standpoint on the gross margins. Obviously, it was down year-over-year and below Street expectations. So just help calibrate us a little bit, if you could, how should we be thinking about that cadence for the remainder of the year, given that revenues are obviously going to see some pressure due to the COVID-19 situation.

Yes, now I think we had unique items here in the first quarter that impacted margins, and we'll see that again, I believe, in Q2, more so from the inefficiency of not producing and then the lower revenue numbers that we would all expect in Q2. But once we see more volume coming into the recovery in the back half of the year, I think we'll see a normalization of margins.

Thank you.

The next question is from Raj Denhoy, Jefferies. Please go ahead, sir.

Yeah, hi, good afternoon. I wonder if maybe I could start with the sales force. I know you guys have talked about a hiring freeze, I'm assuming we should assume that the sales force stays about 109 people for the balance of the year. One, I'm curious if that's correct? And second, I'm curious how you're thinking about the sales organization at this point, given the lack of access into hospitals now, given the high restrictions around COVID and things, how do you think about how that might impact the business going forward?

We will continue to focus on improving and maximizing the productivity of our sales team. While we may identify some territories that require adjustments, our primary goal is to enhance productivity. Access to hospitals varies significantly; our representatives have recently begun returning to healthcare facilities, and the level of access ranges from no changes to stringent requirements such as presenting a negative COVID-19 test and wearing an N95 mask to enter. This variability in direct access is significant. That's why we conducted extensive spring training with our sales team, emphasizing a revised approach to selling. We encouraged team members to consider how they can still provide value and support even when not face-to-face with surgeons and their staff. Our training has been informed by real-life experiences in supporting cases and engaging with surgeons to help them expand their treatment approaches, and we will keep implementing these strategies.

Okay. I think he is gone.

Thanks Raj.

We have a question from Danny Turkaly, JMP Securities. Please go ahead, sir.

It's actually Dave Turkaly. Danny may have queued in as well, but how are you?

I was wondering about that if you changed your name.

Not yet. So you mentioned the slowdown in trauma from shelter-in-place. I just wondered, do you have any way to quantify that or any data to look at that kind of points to that or how much of an impact that could have been?

Yes, I don't have specific data to refer you to. We've engaged with surgeons to understand their observations and thoughts regarding the marketplace. When I reflect on the incidence of trauma, the primary occurrences are related to power tool injuries, lacerations from knives and sharp objects, and glass. These are the top three categories contributing to nerve injuries. The shelter-at-home situation affects these incidents, as there are fewer people using power tools at work, potentially leading to a decline in job-related injuries. Conversely, we have observed an increase in accidents, such as individuals using chainsaws at home. There's a balance of these different types of injuries. Additionally, with the closure and slowdown of restaurants, we've seen a reduction in lacerations. We believe the overall incidence has decreased, possibly in the range of 10% to 20%, but not to that half range. We think most patients who were still injured will likely return for treatment.

Got it, and then maybe one for Pete, $89 million in cash and $7.5 million EBITDA loss. Looking at all the announcements you made prior to the quarter regarding cuts and savings, including the 10% workforce reduction, it seems like you're in a good position. Maybe you are being overly cautious. I'd like to hear your thoughts on this because it seems like you have plenty of capital.

You're right, we do have a strong balance sheet. The approach we’ve taken is balanced, allowing us to maintain broad capabilities in sales execution while positioning ourselves for a more efficient run rate. As we move forward, the key question is how quickly we can return to the $28 million revenue level we achieved in the second half of last year. We're confident that our team and structure are capable of getting us back to that level, and we believe we will do so more efficiently than before. Once we have a clearer timeline, we will discuss what the additional investment strategy will look like after we reach that revenue point.

And last one if I could just sneak it in, you talked about the suspended recovery and processing of tissue. And I think your inventory, I have always kind of thought you guys have sufficient amounts. But I imagine that means you must have over a year or something to that magnitude that you can access without having to process anything new, would that be fair?

Yes, you're correct. Our standard contingency planning ensures we maintain adequate inventory, allowing us to pause processing temporarily without affecting customer supply. As mentioned, we plan to gradually resume tissue processing in the second quarter. We'll take a measured approach rather than rushing back to full speed immediately. There's no need for that; we'll increase production over time as recovery rates normalize.

Great, thanks a lot.

Mr. Denhoy from Jefferies has re-registered. Please go ahead, sir.

Sorry, Raj. Did we lose you?

Yes, I apologize for the delay; I was on mute. It's one of the challenges of working from home. My questions are primarily focused on the sales force activity. I was asking about the 825 accounts you had in the quarter, which represented an increase of about 13%. As you transition into April and now that you are in March, have you observed any new accounts or activity from physicians looking to get trained? I'm interested in any indications that growth might be accelerating as you approach the latter part of the year.

I believe it's early to discuss active accounts since they are primarily focused on reopening and getting started again. However, we do believe that collaborating with our active surgeons will lead them to expand into additional care sites to secure operating room time. We are supporting them in this effort to help them deepen their penetration. This has been our strategy since the beginning of the year; we have a solid base of surgeon users, and we see a significant opportunity to engage more deeply with them. This strategy remains our focus.

Understood, and then just the last one on the sales force. When you think about turnover, right, how are you mitigating that and are you sort of making your sales reps relatively cold during this period in terms of commissions and other things that you can limit that turnover?

Yeah, we did some mitigation plans on compensation. Salespeople have predominantly a variable compensation. And especially when we ask salespeople to shelter at home and not go into account, we protected them on their income so that they were not suffering from something that was entirely not their issue.

Okay. So we should use that number of about 109 then for the balance of the year, do you think?

Yes.

Great, okay, thank you.

We now have a question from Kyle Rose at Canaccord. Please go ahead.

Hi, this is Ian on for Kyle. Just to piggyback off of Raj's comments a little bit. Right on the numbers here, I think the active accounts went from 791 in Q3 to 798 in Q4 and then 825 this quarter. So it seems like a little bit of a step-up in Q-over-Q growth. Was there kind of anything interesting you saw in January, February because it seems like a step-up, and you were also kind of missing that month of March as well, right?

Right. Yes. No. There definitely was a step-up. And the thing that we were excited about is that it was really, again, predominantly existing surgeon users who wanted to make sure that they expanded their usage across all the places that they did surgery. And so we're continuing to drive deeper and gain more depth with our existing surgeon users that allow us to continue to drive that growth. And of course, that gives us access then to continue to work with additional people that work at those same sites of care. So we thought it was a substantial step-up, and it was based on our focused strategy of driving penetration.

Makes sense, and then kind of in terms of rep access, is there any difference in terms of like what an existing heavy user customer needs versus kind of new customer in terms of training and education?

Yes, on any conversion of a surgical technique, we believe that a new user is going to need more support than an existing user does, or at least an established existing user, somebody who's used the product a number of times in that type of setting. So remember, nerve repair is really many different types of repair. A carpal tunnel repair is very different than a chainsaw injury. So those would be considered separate types of repair, and the surgeon will want assistance when they're really trying the first few cases of every different type of repair. What we're finding in the new environment, working with surgeons virtually, is that you can really use a lot of the digital tools that we have in place, FaceTime people during the case, talk to them about the clinical setting that they have and what the issues are, working with the coordinators, both before and during the surgery, doing what typically would have been a scrub sink discussion with the surgeon before the case. All of those are tools that we've implemented, and we found actually quite welcomed by the surgical staff and the surgeons. So we've continued to implement that as well as now supplementing it with the direct face-to-face contact, where appropriate, in centers that are allowing that.

Perfect, thank you.

Ladies and gentlemen, we reached the end of the question-and-answer session. And I would like to turn the call back over to Karen Zaderej for closing remarks. Ms. Zaderej?

Thank you, Jerry. I want to thank everyone for joining us on today's call. We look forward to speaking with many of you at the upcoming Jefferies Virtual Healthcare Conference in June. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.