Good afternoon, and thank you for being here. Welcome to the MIMEDX First Quarter 2025 Operating and Financial Results Conference Call. This conference is being recorded. I would now like to hand it over to your host, Mr. Matt Notarianni, Head of Investor Relations for MIMEDX. Thank you. You may begin.

Thank you, operator, and good afternoon, everyone. Welcome to the MIMEDX first quarter 2025 operating and financial results conference call. With me on today's call are Chief Executive Officer, Joe Capper; and Chief Financial Officer, Doug Rice. As part of today's webcast, we are simultaneously displaying slides that you can follow. You can access the slides from the Investor Relations website at mimedx.com. Joe will kick us off with some opening remarks and a summary of our operating highlights, and Doug will provide a review of our financial results for the quarter. And then Joe will conclude with some additional updates, including a discussion of our financial goals. We will then be available for your questions. Before we begin, I would like to remind you that our comments today will include forward-looking statements, including statements regarding future sales, operating results and cash balance growth, future margins and expenses, our product portfolios and expected market sizes for our products. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances and delays. Additional factors that could impact outcomes and our results include those described in the Risk Factors section of our annual report on Form 10-K and our quarterly report on Form 10-Q. Also, our comments today include non-GAAP financial measures, and we provide a reconciliation to the most comparable GAAP measures in our press release, which is available on our website at mimedx.com. With that, I'm now pleased to turn the call over to Joe Capper. Joe?

Thanks, Matt, and good afternoon, everyone. Thank you for joining us on today's call. I am pleased to report that we had a very good start to the year, growing the top line by 4% against what should be our toughest comparison from Q1 last year when we posted 18% growth. And this was with one less business day in this year's quarter. Importantly, you will hear today that we are well positioned to accelerate our growth as we advance through the remainder of 2025 and beyond. Our efforts in our surgical business continue to pay dividends, producing double-digit growth in the quarter. We also held our own in the private office and associated care settings, notwithstanding the continued disruption caused by the current Medicare reimbursement system that lacks any rational fiscal accountability. As you may know, on the eve of their scheduled implementation of the proposed LCDs, the federal government once again announced a delay, this time until January 1, 2026. It goes without saying another day, another delay was a head scratcher as the private office setting is in tremendous need of Medicare reform. This action without any other immediate step to slow down the out-of-control spend represents another blow to Medicare beneficiaries, the trust fund and U.S. taxpayers.

Naturally, we had contingency plans in place in the event of another such delay, and we have modified our approach to ensure we remain competitive in these affected care settings as we bridge to a period of reform for which we will continue to actively advocate. I will discuss our plans in more detail, but first, let me touch on some of the highlights of the quarter. Q1 net sales grew year-over-year by 4% to $88 million, representing another solid quarter, especially given that Q1 2024 is our strongest quarterly growth comparison. Adjusted gross profit margin was 84% in the quarter. Adjusted EBITDA was $17 million or 20% of net sales. We ended the quarter with $106 million in cash, an increase of $2 million during the quarter. This is an excellent result as we typically burn more cash in Q1 compared to the remainder of the year due to certain front-end loaded expenses and other cash requirements. Our surgical business grew by 16% with contributions across the portfolio, including an uptick in HELIOGEN sales as adoption gains traction. We continued enrollment in our randomized controlled trial for EPIEFFECT, and we advanced conversations on a few complementary business development opportunities for both our wound and surgical markets. I would also like to address a central topic of the day, and that is tariffs. I am pleased to report that MIMEDX currently has no direct exposure to tariffs, and we do not expect them to affect our results.

Turning now to our strategic priorities. As articulated on prior calls, we have our team's collective efforts organized and focused around three primary objectives. Our top strategic priority is to continue to innovate and diversify our product portfolio. Over the years, the company has built a tremendous core competency in its ability to develop and commercialize unique product configurations designed to meet explicit customer needs. We have successfully introduced multiple new products in the last few years in both our surgical and wound care businesses. Our AMNIO branded products continue to do well, led again by AMNIOEFFECT, which grew by 22% in Q1. These products are now complemented by HELIOGEN, our first xenograft, which grew nicely on a sequential basis, albeit off of a low base. We are receiving excellent real-world feedback on the clinical effectiveness of HELIOGEN and remain bullish on its ability to continue gaining traction in a variety of surgical applications. In our wound care business, the story is a bit more complex. While our EPI branded products led by our flagship EPIEFFECT remain unchallenged from a clinical perspective, a portion of these sales are within the private office and associated care settings, which is where we are experiencing the Medicare reimbursement-related disruption. Put simply, our product price points are far lower than most of those currently on the ASP list, making them less attractive to many providers. While lower prices are certainly helpful for Medicare beneficiaries, given the inexplicable set of incentives that persist in this market, the higher a product is priced, the more money practitioners make. Therefore, our comparatively lower-priced products in wound care resulted in us having essentially flat revenue in the quarter, which was actually an incredible feat by our sales team given the environment. Additionally, we are now complementing our organic portfolio with allografts manufactured and priced by a third party in order to retain as many customers as possible. And yes, they are priced higher than our organic portfolio. As part of our contingency planning in the event of further LCD delays, we added a third-party manufactured AMNIOCORD allograft branded CELERA through our offering, which contributed to our recent results. We are in discussions to potentially distribute other third-party manufactured allografts as well. I expect these products to be helpful in retaining business. However, I would caution against expecting this pivot in our approach to create a windfall for MIMEDX for a few reasons. First, only approximately 25% of our overall business has ASP exposure. Second, while priced higher than our current EPI brands, they remain well below the eye-popping prices of some of the newer products or recently repriced products on the market. Third, MIMEDX will not engage in the aggressive selling practices that have become more common and which we believe cross the line of appropriate marketing behavior. I credit our strong management team for being well prepared to pivot and take steps to protect our business. However, make no mistake, we will continue to advocate for much needed reform in this market. It is certainly very frustrating to see our tax dollars wasted. The second priority is to develop and deploy programs intended to expand our footprint in the surgical market. As we've discussed, this objective calls for a significant commitment to the production of real-world clinical evidence and scientific research. We have studies in several publications and others underway, all designed to support use of our placental-derived allografts in a variety of surgical procedures. Our technology has demonstrated the potential for reduced scarring or adhesion formation, which could enable accelerated and improved quality of healing, leading to enhanced surgical and economic outcomes. In addition to research and awareness, it is critical that we continue to expand our product and service offering to build a stronger presence in the surgical setting. As I mentioned, HELIOGEN is gaining traction, and we are actively developing and evaluating additional products to help expand our surgical footprint. Over the past few years, we have grown our commercial team in surgery, increased funding for targeted research and expanded our product portfolio, and we will continue to do so as we believe this is a winning formula. We are in the early market development phase for placenta-derived products in many surgical applications. The development of these markets will take time and perseverance, but the potential clinical benefits for patients, the healthcare economic payoff and the immense business opportunity for years to come certainly make it a worthwhile pursuit. Our third initiative is to introduce programs designed to enhance customer intimacy. As a reminder, the primary focus of this initiative is to develop programs which improve relationships and ultimately lower our customer turnover. We have several initiatives underway aimed at institutionalizing customer-centric behavior throughout the organization. We continue to experience excellent adoption of MIMEDX Connect, our proprietary customer portal, and we are actively developing additional features designed to improve workflow and strengthen the bond between MIMEDX and our customers. We believe our commitment to this approach will lead to enhanced customer relationships, improved Net Promoter Scores, higher margins and ultimately, an increase in the average lifetime value of a customer. Now let me turn the call over to Doug for a more detailed review of our financial results. Doug?

Thank you, Joe, and good afternoon to everyone on today's call. I'm pleased to review our results with you all today. As Matt mentioned, many of the financial measures covered in today's call are on a non-GAAP basis, so please refer to our earnings release for further information regarding our non-GAAP reconciliations and disclosures, including the reconciliation tables in the back of our press release that provide more detail regarding the adjustments made to calculate our non-GAAP metrics. Moving on to the results. As Joe mentioned, our first quarter 2025 net sales of $88 million represented 4% growth compared to the prior year period. By product category, first quarter wound sales of $56 million declined 2% versus the prior year period, while surgical sales of $32 million were up 16%. We saw significant contributions from many parts of our business in the first quarter, including another solid double-digit year-over-year growth quarter from AMNIOEFFECT, a continued ramp in sales of our xenograft HELIOGEN, which combined with strong sales of AMNIOEFFECT to drive the performance in surgical. Our wound business was up against a tough comparable following the strong sales of EPIEFFECT in the first quarter last year. Additionally, the ongoing behavior in the private office and the turnover in sales reps that we experienced in the middle of last year have created some challenges for our wound franchise. These declines were partially offset with contributions from our newest wound care product CELERA. Our first quarter 2025 GAAP gross profit was about $72 million, flat compared to the prior year period. Our GAAP gross margin was 81% in the first quarter of 2025 compared to 85% last year. Excluding the incremental acquisition-related amortization expense of roughly $3 million in the quarter, our non-GAAP adjusted gross margin was 84%, down modestly compared to the first quarter of 2024. We continue to expect our full year non-GAAP adjusted gross margin to be around 82% to 83%. Turning to our operating expenses. Sales and marketing expenses were $47 million in the first quarter compared to $44 million in the prior year period. The increase was due to a combination of higher commissions associated with higher sales as well as increases that we made to our sales compensation plans in the middle of 2024. Looking ahead, we continue to expect our full year 2025 sales and marketing expense to be approximately 51% to 52% of net sales, which would be flat on a percent of sales basis to 2024 and up in absolute dollars. General and administrative expenses, or G&A, were $13 million in the first quarter compared to $11 million in the prior year period. The increase was driven in part by higher legal expenses, specifically related to actions that we initiated against Surgenex and in defense of our intellectual property portfolio. Over the balance of the year, we continue to expect G&A expense to be 12% to 13% of net sales, which would be roughly flat on a percent of sales basis to 2024 and up in absolute dollars. Our first quarter R&D expenses were $3 million or about 4% of net sales, up 17% compared to the prior year period, driven primarily by increased costs associated with our ongoing EPIEFFECT RCT as well as additional spend related to future products in our pipeline and is consistent with our expected R&D spend ramp, which we detailed during our last call. As we continue to ramp enrollment in the trial this year, we continue to expect our full year R&D expense to be about 5% of net sales. GAAP income tax expense for Q1 2025 was around $2 million, reflecting an effective tax rate of 18%. Our effective tax rate was favorably impacted by the vesting of certain equity awards during the period. We continue to expect our long-term non-GAAP effective tax rate to be approximately 25%. Our first quarter GAAP net income was $7 million or $0.05 per share compared to GAAP net income of $9 million or $0.06 per share in the prior year period. Adjusted net income for the first quarter was $10 million or $0.06 per share compared to $10 million or $0.07 per share in the prior year period. First quarter 2025 adjusted EBITDA was $17 million or 20% of net sales compared to $19 million or 22% of net sales in the prior year period. Turning to our liquidity. We had $106 million of cash and cash equivalents as of March 31, 2025, a sequential increase of $2 million. During the first quarter, we generated free cash flow of $5 million, essentially flat compared to the same period in 2024. In turn, our net cash balance is now at about $88 million, up from $86 million just last quarter and $29 million a year ago, marking a nearly $60 million improvement over the last year. The dramatic strengthening and simplification of our balance sheet has unlocked our ability to pursue several opportunities, both organic and inorganic in support of growing and diversifying our business, and we look forward to updating you on these initiatives as appropriate.

I will now turn the call back to Joe. Joe? Thanks, Doug. As you have just heard, we had another solid quarter, and MIMEDX is well positioned to have a successful year. Once again we grew revenue and recorded a 20% adjusted EBITDA margin. I'm particularly pleased that we added another $2 million to our cash balance in spite of high Q1 cash requirements compared to the remainder of the year. Cash generation is a key measure of any successful enterprise. Before I move to the Q&A part of the call, I'll share some final thoughts about the proposed changes to the Medicare reimbursement system for skin substitutes and then touch on guidance. On our last call in reference to the scheduled LCD implementation, I said the following: based on feedback from our outside advisers and activity within the new administration, we deem any further delay as highly unlikely. We now know that another delay did, in fact, happen. Over the past few weeks, we've heard from many stakeholders that they were just as frustrated as us that no action was taken to bring down costs. With the spend escalating at such an alarming rate, the new administration's stated intent to reduce fraud, waste, and abuse, media coverage on the issue and increased activity on the part of OIG and DOJ, it seemed logical that the administration would step in and direct CMS to impose corrective action. But that is exactly what did not happen, at least for now. We spoke to many of you since the latest delay and know you share our disappointment. However, we will not let this setback deter us from achieving our long-term goals. We will continue to make the necessary adjustments to remain competitive, and we will continue to advocate for much needed reform. Stay tuned. Turning to the question of guidance. After our last call, some of you asked if we would expect to be lowering guidance in the event of another delay. Our answer at the time was, 'not necessarily'. While we did anticipate LCD implementation to provide a short-term tailwind for our business, we also knew we had other levers to pull, like augmenting our portfolio by distributing additional third-party allografts. As such, we are reiterating our full year revenue growth rate outlook to be at least in the high single digits with higher growth rates in the back half of the year. We also expect our full year adjusted EBITDA margin to be above 20%. We will continue to revisit expectations as we learn more. Importantly, our expectations about the long-term prospects for the business are incredibly high. Post some level of reform, LCDs or otherwise, we anticipate resetting top line growth to the low double digits. Finally, I want to once again reiterate that we remain hopeful that our industry will soon evolve to incorporate an improved regulatory structure and fiscal accountability, at which point, no company will be better positioned than MIMEDX to excel. We will continue to advocate for such improvements. And as I've mentioned, in the meantime, we will make the necessary adjustments to ensure we remain competitive. In closing, I would like to sincerely thank the MIMEDX team for another solid quarter and for your unwavering commitment to the company and the many individuals who rely on our products each and every day. With that, I would like to open the call to questions. Operator, we are now ready for our first question. Please proceed.

And our first question comes from Carl Byrnes with Northland Capital Markets.

Congratulations on the results. I think in your prepared comments; you were looking for adjusted gross profit margin in the 82% to 83% range. I think it was like 84.1% in the first quarter. Do you expect that to be related to mix throughout the course of the year? That's it.

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

Got it. And then also, if you can provide us with a bit of a progress report on EPIFIX in Japan, that would be helpful.

Yes, it's still relatively small in terms of overall contribution, but we're right where we thought we would be. It's growing nicely. It takes a bit of time to open up a new market, new product category, especially in a country like Japan, but it's pretty much on track. It's just not material enough to break out.

Your next question comes from Chase Knickerbocker with Craig-Hallum Capital Group.

Joe, maybe just first for me, a bigger picture question kind of on the overall reimbursement landscape. Just in your conversations with regulators and policymakers recently, can you give us an idea of kind of, I guess, a percentage chance of kind of your confidence level that when it comes to mid-January and 2026 that we do see reimbursement change in this market, in the private office market, whether that be price reform or the LCD going into place or both? And then can you just kind of give us your updated thoughts on what you think is most likely to occur from a specific perspective on those kinds of items?

Yes, Chase, first of all, as we stated, the LCDs would have been a good first step to kind of slow down this wildly out of control spend in the category. As you know, it would have required clinical evidence around efficacy and safety for the first time, which is a good basic standard, right? So, while we were originally advocating for something to be done with pricing methodology, once that did not happen within the physician fee schedule last summer, we got behind implementation of the LCDs as kind of our last best chance to rein in the spend and the behavior in the marketplace. Again, we've heard either directly or indirectly through our advisors from many stakeholders that are involved in the process and everyone was kind of just as frustrated as we were that there was not some change implemented. The real answer has always been CMS has to do something with the pricing methodology; again, which is typically done through the physician fee schedule. And we have and we will continue to advocate for that change. And we've not stopped doing that throughout the entire process. I personally was in Baltimore 2 days ago, meeting with CMS on this topic once again. While they can't say much, obviously, during rule-making phase, it was clear to me that they understand the situation is at a crisis level. So, if there is a change in the physician fee schedule, that is kind of a structured process. Typically, you get the proposed rule right around July 4. And then there's a comment period, last, later into the year. Final rules are used to publish sometime in November, implementation January 1, in this case, January 1, 2026. We do, however, believe that CMS has statutory authority to take action outside of the physician fee schedule. I can't handicap whether or not they will take that kind of a step. So, the natural next step for some sort of change would be within the physician fee schedule. The new team at CMS is all in place, including the administrator who has made the elimination of fraud waste and abuse centerpiece of not only his confirmation, but his mission moving forward. This could be a poster child for that effort. In his initial presentation, he talked about examples that are nowhere near the level of waste that's taking place in this category. But again, I think it's important to remind everyone that only 25% of our business has ASP exposure makes it difficult, but it is manageable. We feel very confident that once there's some semblance of law and order back in the category, we're in a great position to continue to grow the company at double digits. And again, we'll continue to advocate on behalf of patients, Medicare trust fund, and the taxpayers at some sort of reform takes place. But again, importantly, the company is in a tremendous position to grow right through this kind of bridge period. We've been growing revenue every quarter. We have growing profitability. And as we've stated several times in our comments, we're continuing to generate cash even in a period where we have a heavy cash burn. So, it is an incredibly healthy business. We've taken some steps that we talked about to protect it in the meantime, but we'll continue to advocate for some level of reform.

Maybe on the kind of new product side, people are getting pretty aggressive out there on the price. Obviously, now that the LCD has been pushed. Can you just queue us in on kind of to what extent you expect to kind of shift your private office volumes over to CELERA or these new product offerings? I mean how successful do you think you can be in kind of shifting those volumes from kind of a percentage of that business? And then just kind of your general thoughts on you're taking kind of a middle ground here. Can you help us out with kind of how physicians are thinking about at least what you're hearing from them in the near term, how they're thinking about even these higher-priced offerings versus kind of where you will be in the marketplace, how they're thinking about kind of the differences of those and how they're willing to utilize them in their practices?

Yes. I'm going to stay away from forecasting how much of our business might convert to a higher-priced product. Look, this was not our first choice. This was a step we felt it was necessary to take to protect some portion of our business. It's a little bit more niche for us. Again, 25% exposure in that category. And within our current customer mix, you don't have the majority of them probably not moving in that direction. Let's just put it that way. And to the extent that they do because there's some fear of missing out, they're looking for products that are priced higher than our existing portfolio, but more moderately priced compared to what we're seeing out there in the marketplace today. What we're seeing out there is rather upsetting. And remember, when a doctor decides to use a product that's several thousand dollars, they still have exposure and risk around audit. And we know that audits are increasing at quite a high rate, right? So, the higher the build charges, the higher the potential clawback in the event of an unsuccessful audit outcome. So I think for us, it's a little bit more niche. That's why in my prepared remarks, I cautioned against looking at this as some sort of a windfall. I would look at it as just a tactic or step that we're taking to protect as much business as we can until reform takes place.

And just last for me, strong surgical growth in the quarter. Can you queue us in on what portion of growth was driven by HELIOGEN? And then is there any specific surgical indication that is having an outsized impact on the growth? And then kind of what's driving that? Is it just better sales execution? Or was there a recent data set that's kind of really driving volumes in the surgical side?

I think it's just better execution. We had growth across the category. AMNIOEFFECT, obviously, is growing nicely. AMNIOFIX continues to grow nicely. HELIOGEN, as you mentioned, is new to the off of a base of 0 last year. So, any growth is good there. We actually still continue to retain a good portion of our AXIOFILL business waiting for an outcome there. So really across the portfolio. And I would just say more use in areas where the products have already been used. It wasn't some new revelation and some new data set. But I do appreciate you pointed it out because, again, that's a portion of our business that has no ASP exposure, and you see the kind of execution we're getting there. If you go back a few years prior to when we had this flood of new products entered the category, even our private office business was growing at a very nice clip. So, look, we again, we feel really good about the business at large. And our ability to grow the entire business at double digits once we get through this phase. But obviously, the surgical business is a bright spot for us.

Our next question comes from Ross Osborn with Cantor Fitzgerald.

Maybe just one for me at this point of the call. Would you walk through what efforts you guys are putting in place now to get ready for what is hopefully a better market environment next year? I think you called out some sales turnover. So just curious on what the bench looks like there in terms of hiring, any manufacturing initiatives that are planned to support incremental demand next year when we're in a much better marketplace.

Yes. I think sales force turnover, you mentioned that it was relatively high about a year ago, and that's come way down. Once we got through sort of that late second quarter, third quarter surge last year when we had folks chasing dollars. We got through that, I would say, at a more normalized rate. In terms of growth for the rest of this year and into next year, it's just executing our plan, right? We talked about the need to continue to expand our product portfolio and service offerings, both within the wound care business and within the surgical market. That's really important for us. We know we need to continue to invest in the commercial strength, the clinical and scientific research to support additional surgical applications for use in the products. So, we'll continue to do those things. Teetering around from a Corp Dev standpoint, a couple of new assets we might be able to bring into the portfolio in some format. And that could help augment growth next year as well as long as it fits within our strategic plan. So, we have a lot going on and feel really good about it. Once this kind of distraction settles down and we can stop talking about it so much, we get some advancement and the industry gets cleaned up and becomes much more investable, we think the business is going to be in great shape.

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

Our next question comes from Anthony Petrone with Mizuho Group.

Maybe, Joe, I'd like to return to the topic of LCDs. I understand this isn't something the team wants to focus on, but I have a couple of questions about it. Firstly, in previous announcements regarding changes to LCDs, the primary care channel shifted its purchasing patterns. Do you think this latest update will lead to any changes in purchasing patterns in the short term? Secondly, regarding DOGE, I've noticed that the company previously reported up to $1 billion in potentially fraudulent billable claims. How do you view this issue in the context of DOGE and addressing waste?

I'll start with the latter part of your question. DOGE is aware of the ongoing issue and it seems there was enough persuasion for the new administration to see that a delay was necessary because the existing LCDs might not effectively resolve the pricing and spending challenges. There’s validity to that perspective, as it was the best option available at the time. The MACs were compelled to take action on a project they've been working on for some time. So, indeed, this is a DOGE issue. Considering Dr. Oz's comments, he emphasizes the need to eliminate fraud, waste, and abuse within CMS, which manages a significant portion of the $7 trillion U.S. budget with its own budget of around $1.5 trillion. If we take him at his word, this focus area is a priority for them. This situation presents an opportunity for addressing straightforward issues. Regarding the $1 billion figure you mentioned, we have been discussing this as a run rate since last year, knowing that the total expenditure in the previous year was nearly $4 billion. We obtained this figure from the MACs, indicating that the run rate by midyear was around $1 billion per month. Recently, we have heard estimates suggesting even higher figures, although I won't specify them as I’m unsure of their accuracy. Nonetheless, it would be reasonable to assume the problem is worsening. Answering your first question about purchasing patterns, I suspect there will be some changes in ordering behaviors. This is likely because individuals can benefit financially for a prolonged period, leading to an increase in awareness and discussions about these products. This trend complicates predictions markedly. I believe CMS needs to take timely action on this matter. We assert they have the statutory authority to act sooner rather than later. Whether they will choose to act is uncertain. However, we have engaged with various stakeholders in oversight committees like Senate Finance and Energy and Commerce, all of whom recognize the urgency of this issue, as it is escalating at a concerning rate. Logic suggests some action will be taken. Feedback from our interactions indicated a strong likelihood of the LCDs being implemented, but the administration has now postponed them. We hope this means CMS will eventually address this pricing issue promptly.

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

Thank you, and thank you, everybody, for your attendance and your continuous interest in the company. We will talk to you all after our next quarter. Operator, that concludes today's call.

Thank you, and all parties may disconnect. Have a good day.