Earnings Call Transcript - MDXG Q1 2023

Operator, Operator

Good afternoon and thank you for standing by. Welcome to the MiMedx First Quarter 2023 Operating and 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. Matt Notarianni, Head of Investor Relations for MiMedx. Thank you. You may begin.

Matt Notarianni, Head of Investor Relations

Thank you, operator and good afternoon everyone. Welcome to the MiMedx first quarter 2023 operating and financial results conference call. With me on today's call are Chief Executive Officer, Joe Capper; and Chief Financial Officer, Pete Carlson. 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 Pete will provide a summary of our operating highlights and financial results for the quarter, and then Joe will conclude with some additional updates, including the 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 growth, future margin and expenses, expected market sizes for our products, and potential timelines for clinical trials and FDA submissions and reviews. These expectations are subject to risks and uncertainties, and actual results may differ materially from those anticipated due to many factors. Actual results, market sizes, timing and FDA review will depend on a number of factors, including competition, access to customers, the reimbursement environment, unforeseen circumstances and delays, the results of our clinical trials, our interpretation of those results, and other factors. 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 reports on Form 10-Q. Also, our comments today include non-GAAP financial measures and we provide a reconciliation to GAAP measures in our press release, which is available on our website at www.MiMedx.com. With that, I'm now pleased to turn the call over to Joe Capper. Joe?

Joe Capper, CEO

Thanks Matt. Good afternoon everyone. While it's only been two months since our last call, we have a lot of exciting news to share. Starting with our outstanding first quarter performance, setting the stage for what we anticipate will be an extremely successful 2023. I've been on board now for a full quarter and as I stated on our last call, this early assessment process continues to present the business that far surpasses my original expectations. During these first 90 days, I've spent time analyzing all parts of the business, formalizing our strategic planning process, meeting with customers, business partners, and several of you in the shareholder community, all in an effort to determine our best path forward. While still early on, it's becoming clear to me that we operate in a relatively less orderly area of the healthcare industry, which is abundant and untapped opportunity. I will discuss in more detail our plan to ensure the company capitalizes on these many opportunities, while continuing to optimize our operating platform. But first, I want to update you on some of the most noteworthy highlights from the first quarter. Q1 year-over-year net sales grew by nearly 22% to $71.7 million, the highest first quarter net sales performance we have delivered in five years. Gross profit margin was 82.7%, which was an improvement sequentially and adjusted EBITDA was $5.5 million, up from a loss of $1.7 million a year ago, a $7.2 million swing in the right direction. These positive results all reflect superb execution on the part of the entire company. Among these impressive numbers, adjusted EBITDA warrants special attention. To be able to generate $5.5 million of positive adjusted EBITDA so early in the year clearly shows that we are beginning to unlock leverage in the business, which will undoubtedly improve with scale. We have no interest in revenue just for the sake of growing. We must and will improve our profitability as we grow. Naturally, this will increase free cash flow generation, our balance sheet will improve, and we will create growth funding optionality. Our better-than-expected performance becomes much more impressive when you consider that our expense burn in Q1 is typically higher than other quarters during the year. Specifically, we had about $3 million of expense during the quarter due to payroll taxes, lease costs as of January 1st and the cost of our national sales meeting, both of which will not recur for the remainder of the year. These expenses and the annual bonus payout reduced our cash specific to the first quarter. As such, we expect to build cash as we move further into the year. Pete will impact the numbers in more detail, but suffice it to say, we could not be more excited about this great start to the year. Our best-in-class products, highly skilled team, and improving financial profile give me tremendous confidence in our ability to create significant value as we take MiMedx to new heights. It's my practice on earnings calls to report the company's progress as it relates to the key elements of our strategic focus. On our last call, I spoke about the three areas in which we are concentrating our time and resources in order to drive growth and sustain value creation. As a reminder, our first growth objective is to build on our leadership position in the Wound & Surgical markets by enhancing our product portfolio and expanding geographically. Success in achieving this objective will be dictated by how well our commercial organization performs over time. This first quarter was certainly an example of what commercial excellence looks like. To that end, during the quarter, we achieved year-over-year revenue growth across all sites of service. We had a welcome sales increase in the private office segment. You may recall that this has been a particularly challenging area for us given the current Medicare reimbursement environment, which creates an opportunity for certain companies to manipulate the system. During the quarter, the OIG published a report relating to the reimbursement practices we have repeatedly raised as a concern. While the OIG report is clearly aligned with our position, it is premature to determine if and when these practices will be reined in. We continue to stay close to the rulemaking process and remain optimistic it will result in a more level playing field. In the Surgical Recovery segment, we continue to build momentum particularly around our new products, which were launched in the second part of last year. We believe the future for growing our footprint across a variety of surgical procedures remains bright, particularly as a body of real-world evidence or wide range of applications continues to grow. And finally, we made more headway developing our business in Japan with initial sales starting to come from this important international market. We anticipate adoption to begin to ramp in the coming months and quarters. Our second growth objective is to develop opportunities in adjacent markets to create additional growth drivers for the company. We are formalizing the process for assessing and prioritizing various strategic opportunities as they arise. Additionally, we will look for ways to leverage our technology and commercial strength in order to develop adjacent opportunities, with the knee OA project representing our major investment. To that end, we were excited to get the knee OA study officially up and running at the beginning of the quarter, enrolling patients during this period. As a reminder, in this first of two required studies, we expect enrollment of approximately 470 patients with a three-month observation period and six additional months of monitoring. We will continue to report on the project as we achieve critical milestones or have news to share. Finally, our third objective is to build corporate discipline around expense management, rationalization, and continuous process improvement in order to ensure our growth becomes more profitable over time. As the Q1 results indicate, this approach is already beginning to take shape within the organization. Our efforts to enhance efficiencies and production yields in operations resulted in a sequential improvement in gross margin. I anticipate that the team will continue to execute on our plan, which will lead to further margin improvement and enhanced ability to scale over time. Additionally, the Wound & Surgical contribution margin improved to 28.5% in Q1. As you will recall, our goal is to get to 30% and we are well on our way. Another efficiency metric we've spoken about is to get corporate expenses as a percent of our net sales to 20% or below. For Q1, this number improved to 20.4% as a result of efforts to curb G&A across the enterprise. All in all, the team did an excellent job building on the momentum we had coming out of last year. Our formula for success lies in our ability to consistently identify and execute against the most relevant growth drivers for our business. As I mentioned on our last call, if we remain focused and execute on the plan I just outlined, I'm confident we will continue to build on this franchise, have the opportunity to create tremendous value, and once again, establish MiMedx as a world-class healthcare company. Now, let me turn the call over to Pete who will recap our first quarter results. Pete?

Pete Carlson, CFO

Thank you, Joe. Good afternoon everyone and thanks for joining us today. Before I begin my remarks about the first quarter, I want to reflect on my time with MiMedx as I prepare to move on to future opportunities. It has been a pleasure serving as MiMedx's CFO these last several years. I am proud of the team's progress since I joined and I'm honored to have helped lead an organization with products that impact the lives of a large and growing number of patients. In addition to continuing to expand access to our products over the last three years, we've also built a robust financing accounting organization that is positioned to deliver as the business scales in the future. I thank the team for all their efforts. Moving on now to our first quarter results. As a reminder, unless otherwise specified, all results referenced in my prepared remarks are on a first quarter 2023 versus first quarter 2022 comparison basis. First, as Joe mentioned, our first quarter 2023 net sales were $71.7 million compared to $58.9 million. Joe outlined many of the specific drivers of this performance in his remarks and I'm pleased to also report on the numerous areas of strength we saw at the start of the year. On a sequential basis, while our first quarter is historically the lowest revenue quarter of the year due to deductible resets and generally lower patient traffic, our first quarter net sales figure represents the smallest step down from the preceding fourth quarter that we have seen in recent years. You may recall that in the first quarter of 2022, we were faced with challenges associated with the Omicron wave of COVID-19, which we did not have to deal with in the first quarter of 2023. Also, our first quarter results benefited albeit modestly from one additional shipping day compared to the first quarter of 2022. Looking ahead over the next three quarters, we have one fewer shipping day in Q2, one fewer shipping day in Q3, and the same number of shipping days in Q4 compared to each of these periods in 2022. Moving to gross profit and gross margins, our first quarter gross profit was $59.3 million compared to $49 million and our gross margin was 82.7% compared to 83.1%, roughly flat on a year-over-year basis. On a sequential basis, the improvement in our gross margin reverses a several quarter trend that saw pressure from lower production yields impacting performance. While there are several factors impacting gross margin, including product mix, I want to highlight the efforts of our quality, operations, and regulatory team in improving our production efficiency. As you know, this has been a major focus for us in 2023 and we continue to think the business is capable of delivering gross margin percentages in the mid-80s over the long term. Selling, general, and administrative expenses or SG&A were $52.3 million compared to $49.6 million. The increase was primarily driven by higher commissions from sales along with higher travel expenses in the first quarter, both of which more than offset savings associated with actions taken in the fourth quarter of 2022 related to headcount. Our research and development expenses were $6.5 million compared to $6 million. The increase over the prior year period was driven primarily by costs associated with the start of our knee OA trial in the first quarter. Investigations, restatement, and related expenses were $3.7 million compared to $2.6 million. Based on a recent filing with the court, it appears the long-running SEC civil matter against the company's former CFO is nearing a resolution. Once this resolution is finalized, we anticipate the cost associated with that matter to cease and the cost included in this category to decrease materially in the near term. We may continue to incur legal expenses resulting from the investigation, but this matter with the SEC would conclude the sizable expense burden to the company's shoulder over the past several years. Net loss was $5 million compared to a net loss of $10.5 million. Adjusted EBITDA was income of $5.5 million or 7.7% of net sales compared to a loss of $1.7 million or negative 2.9% of net sales. On a segment basis, net sales in Wound & Surgical totaled $70.6 million compared to $58.3 million, reflecting growth of approximately 21%. The Wound & Surgical segment contribution margin was $20.1 million representing 28.5% of Wound & Surgical net sales compared to a segment contribution margin of $13.2 million, which represented 22.6% of Wound & Surgical net sales during the first quarter of 2022. Turning to Regenerative Medicine, operating expenses totaled $5 million compared to $4 million. This increase was driven by the commencement of our knee OA clinical trial, which began recruiting, screening, and enrolling patients during the quarter. We expect spending to continue to ramp through the year as additional sites come online and patient enrollment activity increases. Finally, our SG&A expenses in corporate and others totaled $14.6 million, representing 20.4% of our total net sales compared to $15.5 million, which represented 26.4% of total net sales. Excluding stock compensation, our corporate and other SG&A expenses totaled $12.1 million, representing 16.9% of our total net sales compared to $13.6 million, which represented 23% of total net sales in the first quarter of 2022. As of March 31st, 2023, the company had $61.2 million of cash and cash equivalents compared to $66 million as of December 31st, 2022. The sequential decline in our cash and cash equivalents was driven by several factors that typically hit in the first quarter, such as the payment of annual employee incentive compensation as well as investments in working capital, primarily accounts receivable and inventory that reflects increased sales activity. Based upon our current position and expectations for the business, I want to reemphasize that we remain well-capitalized and do not perceive a need for external financing. I will now turn the call back to Joe.

Joe Capper, CEO

Thanks Pete. As you know, Pete will be leaving MiMedx in the coming months. I would like to take this opportunity to recognize and thank Pete for the incredible work he has done during his time with MiMedx. Pete joined at a pivotal point in the company's history where he needed to make vital changes to strengthen our accounting and finance organization. He did an outstanding job and the company is on solid financial footing, thanks to his leadership and experience. He leaves behind a strong team and a lengthy list of accomplishments. We are grateful for all that Pete has contributed to MiMedx and wish him our sincere best in all future endeavors. The search for our next CFO is ongoing and we look forward to bringing in an individual of similar caliber in the coming months. Pete will continue to work with the company to ensure that a smooth and seamless transition takes place. In summary, as you have just heard, we started the year with an excellent first quarter, during which we recorded quarterly revenue of $71.7 million, up nearly 22% year-over-year, gross profit margin of 82.7%, adjusted EBITDA of $5.5 million, continued to roll out a new product in the US, began selling product in Japan, and continued to drive efficiency and expense rationalization throughout the organization. Pete just spoke about our cash position and the fact that we do not foresee the need for additional capital raise in order to fund our current business plan, short of any meaningful investment opportunities. To add a bit more color, two additional developments are worth mentioning. First, you will recall our previously announced $10 million commitment to Turn Therapeutics, contingent upon 510(k) FDA clearance with their FLeX product. However, this milestone was not met and we no longer expect to make a payment this year. Second, as Pete mentioned, we believe we are nearing the end of a portion of legal expense overhang related to past issues, which has not been insignificant. With the conclusion of such matters in our sights, we look forward to a more productive use of capital. Looking ahead, we expect to build cash from this point forward. I'll close by stating that while one quarter does not represent a trend, I believe our business is in an exciting phase of growth as we seek to combine commercial success with operational excellence in pursuit of sustainable profitable growth and, as a result, a very bright future. With all that I have learned since joining MiMedx, I'm confident we can do just that. Given our strong start to the year, I want to reiterate our expectation for low double-digit top-line growth for the foreseeable future. With that, we'd like to open the call to questions. Operator, we are now ready for our first question. Please proceed.

Operator, Operator

Thank you. We will now begin a question-and-answer session. Our first question comes from Anthony Petrone with Mizuho Group. Please go ahead with your question.

Anthony Petrone, Analyst

Great and congratulations on a strong quarter here. And Pete, good luck on the transition. It was great working together and hope to see you again soon. Maybe to start just on the top-line performance in the quarter, certainly ahead of our expectations. And Joe and Pete, we've been hearing a lot this earnings season so far about a procedure volume rebound on several of the earnings calls over the past two weeks that were showing up in our data earlier in the quarter. And then again in some of the results we've seen, it's pretty evident that things sort of changed this quarter when we think about throughput capacity and generally speaking patients coming back into the system. So, when we think of the surgical end channel first, how much of what we saw in the quarter was easy comps versus patients coming back into the system? And I would even second that for the physician office channel, how much of it was easy comps versus we're finally getting back to a more normalized patient flow dynamics in that channel as well? And then I'll have a couple of follow-ups. Thanks.

Joe Capper, CEO

Why don’t you start Pete?

Pete Carlson, CFO

Good afternoon, Anthony, and thank you for your comments and questions. Overall, I would estimate that around 5% of our growth can be attributed to the easier comparisons from last year due to the COVID impact and the extra day. Both of these factors are contributing to our growth. As you may have noticed in our 10-Q, we've seen growth in both channels you mentioned. In the hospital, growth is approximately 17%, and in private offices, it's over 30%. There are multiple factors at play beyond just the easier comparison from a year ago and the extra day. We have observed increased patient volumes. As Joe mentioned in his remarks, this trend is evident across all care settings. Our team has been executing well. We believe there is a trend not only of increased patient volume but also practices collaborating with us in ways they might not have recently due to the reimbursement landscape, leading to more economic decisions. Quantifying this effect is challenging. Additionally, we have seen this especially in the Surgical area, which contributes to hospital growth. Our new products have significantly contributed to overall growth. We are very pleased with their performance, and all these factors have driven the top-line growth, which surpassed both your expectations and some of our internal targets. Your observation regarding patient volume is indeed relevant. We've received similar reports indicating higher volumes. Joe, do you have anything to add?

Joe Capper, CEO

Yes, just a little bit more, Anthony. First of all, thanks for the question. In preparing for today's call, we spent a good bit of time on this trying to bifurcate how much of it was market-driven, how much of it was just pure execution, right? Because we want to get the right message across. So, what Pete just talked about were kind of the dynamics in the market and we did see upticks in all the sites of service. But I think it's important to kind of give a little bit of color about the quarter itself. Each month in the quarter was significantly better than each month in the prior year. And then each month in the quarter, while there's only three, built on the previous month. So, by March, we saw a sales number that frankly we didn't see until very late last year. So, the team is executing much, much better. So, a good portion of that growth did come from superior quarterly performance and superior execution. And I said one quarter doesn't make a trend, so time will tell. If you continue to see above-market growth rates for the rest of the year, it will tell you that the organization is just performing better than our comps.

Anthony Petrone, Analyst

No, very helpful color there. And I guess, a logical follow-up is just when you think about plus 21.7% performance in what appears like at least to some degree some sustainable drivers over the next few quarters, shows you reiterate the low double-digit sort of long-term growth rate but to push a little bit here. I mean, not to get ahead of ourselves, but is it possible that you certainly trend above that long-range target for the remainder of 2023?

Joe Capper, CEO

I'm glad you noticed that. Yes, part of it is due to the noise in the first quarter, especially since last year's Q1 was a bit different. We need more time to understand the true picture. I appreciate the momentum from the fourth quarter and what we observed in the first quarter, but it's still early for me. I've only been here for about 90 days, so I'm still getting used to the rhythm and dynamics of the business. It will take a bit longer to assess. I believe Q2 and Q3 will provide more clarity. I wouldn't want to get ahead of ourselves and start celebrating prematurely because there are always challenges, and we still need to see how things unfold in the private office before we fully understand the situation. I feel positive about the low double-digit growth area, and we are not trying to downplay our expectations; we just want to share a realistic outlook for the full year.

Anthony Petrone, Analyst

No. Understood. Last one for me and I'll get in queue here. Is the $5.5 million in adjusted EBITDA also well ahead of expectations? And maybe just to close out here, I mean, how much of that was purely the revenue beat versus some of the restructuring activities that are ongoing? Again, congratulations on the quarter and thanks for taking my question.

Pete Carlson, CFO

Thanks, Anthony. The adjusted EBITDA number has multiple components to it. Certainly, sales volume is positive with the high gross margins. But as we noted, the gross margins in the quarter were also up on a sequential basis, relatively flat to a year ago. But from getting our gross margins back up approaching the mid-80s and we think we can get to the mid-80s within the next 12 to 15 months or so, that's very helpful to our bottom-line performance. But we also did have efficiencies and leverage. We know there's leverage in the system here. We're very pleased to see the SG&A cost grow at such a much lower level than the revenue grew in the quarter. As we've always said, as we get our revenue growing, you would not need to model out expenses growing at the same level. Certainly, the activities and some of the actions we took in the fourth quarter contributed. Again, just in some of the personnel moves we made at that VP and higher level have a $5 million annual run rate. So, you're seeing a $1 million plus of that running through here in the first quarter. All of those factors are good. We are being cautious on expenses, both on the G&A level and in the selling level and then gross margin improvements. The team has done a great job with that. It is process and efficiency matters and there's more to come. And then obviously, at 80%-plus margins, a good bit of that falls to the bottom line when you have a strong quarter like we did in revenue.

Anthony Petrone, Analyst

Thank you again.

Operator, Operator

Our next question comes from the line of Carl Byrnes with Northland. Please proceed with your question.

Carl Byrnes, Analyst

Thanks for the question and congratulations on the strong quarter. And Pete, thanks for all your help. I think most of my questions have been addressed here, but I wanted to drill down a little bit more on the physician segment being up 30%. Obviously, there was pent-up demand, and you're seeing some of that work off mid-COVID and the extra day. But were there any other factors that you attribute to that 30% gain? More specifically, I mean, do you think the OIG recommendation to CMS would have had any effect in terms of private practices avoiding products that wouldn't fit the recommendation in your favor? Thanks.

Joe Capper, CEO

Yes, I think so. There are two things that really happened. One, there was a call that CMS hosted in January early in the quarter and that could have caused a slight change in behavior because it brought a lot more attention to it and they talked about potential areas that they can move. And then late in the quarter, we had the OIG letter, which certainly probably helped somewhat. How much? Again, we don't know yet. And that's why we're a little bit cautious about their expectations going forward. Because I think it's going to take a little bit of time for this to settle out. But yes, that probably had somewhat of an impact.

Operator, Operator

Our next question comes from the line of Swayampakula with H.C. Wainwright. Please proceed with your question.

Swayampakula Ramakanth, Analyst

Thank you for answering my questions. Pete, I wish you all the best as you leave on a high note. Good luck, and I look forward to speaking with you soon. To follow up on Anthony's inquiries, you've mentioned this afternoon how well execution has been going. A key part of that execution is having the salesforce on board for a longer duration. As their experience grows, their performance will improve. Can you elaborate on that? I recall that a couple of years ago, there were some additions to the salesforce, and I'm curious about how much that has been beneficial, as it could provide some ongoing support.

Joe Capper, CEO

I think it's helping a lot. I think the salesforce leadership that was put in place a few years back had made a lot of changes to bring order to the organization. And I think they did a great job with that. So, I'm extremely pleased with not just the leadership but the performance of the sales organization to your point. When you settle down turnover a little bit, you have a bit more stability. But when you have good clear direction, you have better performance as well. So, I think all of the above, RK, I think the team is doing a very good job. And I expect that as we grow this business, as Pete indicated, you will see more leverage out of the S in SG&A. Clearly, you're going to get more leverage out of G&A because we have more control over that. And I think the organization did a good job of streamlining and cleaning a bit of that up. As Pete indicated, we're starting to reap the benefit of that. But my expectation is we'll see EBITDA improvement along the way. And where it goes, I'm not quite sure yet, because we're not there, and we don't know what it's going to take to get there. But I fully anticipate EBITDA margin improvement as this business scales. And a good bit of it will come from the leverage of that sales organization.

Swayampakula Ramakanth, Analyst

Okay, fantastic. Thanks for that. And then talking about patient volumes, what are the metrics that you folks follow on patient volumes? And do you see that consistently increasing into the second quarter as well? Because we are about a month and a half into it now. And I'm trying to think about how we could think about at least for the second quarter, because that was also, when you compare it to, again, the second quarter of 2022, that is still a lighter quarter for you folks over the full year, last year?

Joe Capper, CEO

So regarding patient metrics, I'm not sure that's information we've typically shared. We're using similar metrics to what you are. As for the second part of your question about Q2, I'm sorry, I missed a bit of what you said. But you mentioned Q2, and currently, we're just... What's that?

Swayampakula Ramakanth, Analyst

You're correct. That was a question about Q2.

Joe Capper, CEO

Yeah. Right now we're really kind of sticking to kind of annual guidance of those double-digit growth rates and there will be some movement quarter-to-quarter. But, I'm going to cop out on that one and say I need more time to figure out the rhythm of this business, frankly. I'd say we're doing everything we can to grow this business. We have new products in the pipeline. It's not just salesforce execution, but we see that continuing to improve. We have Japan starting to come online. We have drivers in the business that will help us grow, but we're just not comfortable yet, saying that, you know, and we're certainly not comfortable giving quarterly guidance to this country.

Pete Carlson, CFO

And RK, it's Pete. Just going back to last year, and you mentioned some of the quarterly swings there, one of the things nobody really can put a handle on is this vacation impact that hit the third quarter harder than people expected last year. Is that now a recurring trend, just like so many of these other things? Are we in a new normal or not? And we have no idea. That's hard to predict from that standpoint.

Swayampakula Ramakanth, Analyst

Thank you. One last question from me. On the new product contribution, is there any additional color that you can provide on that? Obviously, as Japan matures, that will be a major contributor, as you just said.

Pete Carlson, CFO

Okay. It's Pete. The new products have been successful. We're really pleased with those. They were a good contributor in the fourth quarter and continued that contribution here in the first quarter. So they are a big driver of year-over-year growth. Remember, we've got two of them out there. One's a particulate, and one's a sheet product that has some unique characteristics different from other products we have in the portfolio. The other is that comparison year-over-year starts to run out as we get into September. So we're, it's a big driver here in the first and second quarter of year-over-year growth, but then it becomes less as you get to the third quarter and obviously the fourth quarter. We're very pleased. It's really helping our surgical recovery strategy, and it's a variety of procedures. And frankly, we see that expanding as time goes on, both the number of clinics or hospitals using and physicians using the product, as well as the nature of procedures being used. It's one of these things that, as we have more and more case studies from actual applications, we can share those stories, and it really builds on itself. And we've made an investment in medical education and a concentrated effort there. And that's one of the ways we get that information out. We get people, doctors, practitioners who have credibility and can share stories talking across the footprint, and that can really help the team. So we're very pleased with it. It's the two different types of products. It ties into the surgical recovery strategy. And the real-world evidence, the case evidence, is going to be a strong driver. Because surgeons are, that's an area that has a high bar for data, if you will, and this is the way we get data.

Joe Capper, CEO

Yeah, you're exactly right. It drove surgical recovery, it drove 70% growth, but you're right. In order to continue to see growth there, we're going to need to continue to invest in research because they want data.

Swayampakula Ramakanth, Analyst

Fantastic. Thank you both, and congratulations again on a great quarter.

Pete Carlson, CFO

Thanks, RK.

Operator, Operator

And we have reached the end of the question-and-answer session. I will now turn the call back over to Joe Capper for closing remarks.

Joe Capper, CEO

Thanks, operator. And thanks, everybody. We appreciate your continued support of the company. That concludes today's call.

Operator, Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.