[Part I Financial Information](index=3&type=section&id=Part%20I%20Financial%20Information) This section details the unaudited condensed consolidated financial statements and management's analysis of financial condition and operations [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) The unaudited condensed consolidated financial statements for the period ended September 30, 2022, show a net loss primarily due to increased operating expenses, despite modest revenue growth, resulting in decreased cash and cash equivalents [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2022, total assets marginally increased to $347.7 million, while cash and cash equivalents decreased, and total liabilities rose due to higher lease liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $87,777 | $94,386 | | Total current assets | $167,761 | $168,528 | | Total assets | $347,746 | $347,535 | | **Liabilities & Equity** | | | | Total current liabilities | $26,352 | $29,795 | | Total liabilities | $62,809 | $58,050 | | Total stockholders' equity | $284,937 | $287,085 | [Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) The company reported a net loss for both the third quarter and nine-month period of 2022, primarily due to increased operating expenses and the absence of a significant gain from contingent consideration recognized in the prior year Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $40,264 | $39,536 | $116,614 | $111,973 | | Gross Profit | $22,779 | $23,023 | $69,445 | $64,809 | | (Loss) income from operations | $(5,798) | $1,300 | $(12,733) | $11,738 | | Net (loss) income | $(4,175) | $558 | $(9,951) | $9,927 | | Diluted (loss) income per share | $(0.29) | $0.04 | $(0.68) | $0.68 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities remained stable, but increased investing activities and financing outflows led to an overall decrease in cash and cash equivalents for the nine-month period Consolidated Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,928 | $3,925 | | Net cash used in investing activities | $(4,957) | $(1,878) | | Net cash used in financing activities | $(5,519) | $(6,839) | | **Decrease in cash and cash equivalents** | **$(6,609)** | **$(4,841)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's business, acquisitions, and revenue recognition, highlighting the final contingent consideration payment, segment revenue contributions, and significant customer concentration - The company is a global joint preservation company that expanded its platform through the 2020 acquisitions of Parcus Medical and Arthrosurface[19](index=19&type=chunk)[20](index=20&type=chunk) - In Q3 2022, the company paid the final contingent consideration of **$4.3 million** related to the Parcus Medical acquisition. As of September 30, 2022, the contingent consideration liability for all acquisitions is **zero**[30](index=30&type=chunk)[48](index=48&type=chunk) Revenue by Product Family (in thousands) | Product Family | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | OA Pain Management | $25,665 | $26,153 | $74,139 | $69,790 | | Joint Preservation and Restoration | $11,821 | $11,193 | $36,055 | $35,296 | | Non-Orthopedics | $2,778 | $2,190 | $6,420 | $6,887 | | **Total** | **$40,264** | **$39,536** | **$116,614** | **$111,973** | - A single customer, DePuy Synthes Mitek Sports Medicine (Mitek), accounted for **45%** of total revenue for the three months ended September 30, 2022, down from **51%** in the prior-year period[63](index=63&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's transformation, ongoing COVID-19 challenges, and the Q3 2022 net loss driven by increased operating expenses and declining gross margin, alongside a decrease in non-GAAP adjusted EBITDA and net income [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q3 2022 revenue increased by 2%, but a decline in gross margin due to inventory reserves and a 22% rise in SG&A expenses, coupled with the absence of a prior-year gain, resulted in a net loss Revenue by Product Family - Q3 YoY Change (in thousands) | Product Family | Q3 2022 | Q3 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | OA Pain Management | $25,665 | $26,153 | $(488) | (2%) | | Joint Preservation and Restoration | $11,821 | $11,193 | $628 | 6% | | Non-Orthopedic | $2,778 | $2,190 | $588 | 27% | | **Total** | **$40,264** | **$39,536** | **$728** | **2%** | - Gross profit decreased slightly in Q3 2022, with gross margin falling to **57%** from **58%** in Q3 2021. The decline was primarily due to a **$2.6 million** inventory reserve for certain legacy Non-Orthopedic products[116](index=116&type=chunk)[117](index=117&type=chunk) - SG&A expenses increased by **$3.8 million (22%)** in Q3 2022 compared to Q3 2021, driven by the expansion of U.S. commercial capabilities, increased marketing activities, and higher stock-based compensation[119](index=119&type=chunk) - The company reported a net loss of **$4.2 million** in Q3 2022, a significant decrease from the **$0.6 million** net income in Q3 2021. This was primarily due to the absence of a **$3.5 million** gain from the change in fair value of contingent consideration recorded in Q3 2021 and higher operating expenses[120](index=120&type=chunk)[123](index=123&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP metrics show an increase in Adjusted Gross Margin but a decrease in Adjusted EBITDA and a shift to Adjusted Net Loss in Q3 2022, driven by higher manufacturing costs and increased commercial spending Reconciliation of Net (Loss) Income to Adjusted EBITDA (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(4,175) | $558 | $(9,951) | $9,927 | | Adjustments... | ... | ... | ... | ... | | **Adjusted EBITDA** | **$4,050** | **$5,747** | **$10,746** | **$16,631** | Reconciliation of Net (Loss) Income to Adjusted Net (Loss) Income (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income | $(4,175) | $558 | $(9,951) | $9,927 | | Adjustments... | ... | ... | ... | ... | | **Adjusted net (loss) income** | **$(725)** | **$774** | **$(4,044)** | **$2,889** | [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to $87.8 million, while working capital remained strong at $141.4 million, with an undrawn $75.0 million revolving line of credit available - Cash, cash equivalents, and investments totaled **$87.8 million** at September 30, 2022, a decrease from **$94.4 million** at December 31, 2021[140](index=140&type=chunk) - The company has a **$75.0 million** senior revolving line of credit with no outstanding borrowings as of September 30, 2022[142](index=142&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes to its market risks or the management of such risks since its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes in the first nine months of 2022 to the company's market risks or its management of such risks[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures are **effective**[155](index=155&type=chunk) - No material changes were made to the internal control over financial reporting during the quarter ended September 30, 2022[156](index=156&type=chunk) [Part II Other Information](index=35&type=section&id=Part%20II%20Other%20Information) This section presents other information including legal proceedings, risk factors, equity sales, and a list of exhibits [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material changes to the legal proceedings disclosed in its 2021 Annual Report - There have been no material changes to the information on legal proceedings since the 2021 Form 10-K[158](index=158&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) The company highlights key risk factors including inflation, reliance on limited suppliers, and ongoing supply chain disruptions, which have impacted revenue and are expected to continue - Inflation is identified as a risk that could increase overall costs and potentially curtail elective orthopedic procedures[160](index=160&type=chunk) - The company relies on a small number of suppliers for key raw materials, including a single third-party contract manufacturer for bone preserving joint technologies, creating a risk of supply interruption[161](index=161&type=chunk)[162](index=162&type=chunk) - Global supply chain challenges related to COVID-19 have caused disruptions and are expected to continue, potentially impacting the company's ability to generate revenue. These disruptions impacted revenue during the first nine months of 2022[163](index=163&type=chunk)[164](index=164&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a share repurchase program with $20.0 million remaining for open market repurchases - The company has a **$50.0 million** share repurchase program with **$20.0 million** remaining available for open market repurchases[167](index=167&type=chunk) - No open market repurchases were made during the nine-month period ended September 30, 2022[167](index=167&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and interactive data files (XBRL)

Anika Therapeutics, Inc. (NASDAQ:ANIK) Q2 2022 Earnings Conference Call August 3, 2022 5:00 PM ET Company Participants Mark Namaroff - Vice President, Investor Relations, ESG and Corporate Communications Cheryl Blanchard - President and Chief Executive Officer Michael Levitz - Executive Vice President, Chief Financial Officer and Treasurer Conference Call Participants James Sidoti - Sidoti & Company Michael Petusky - Barrington Research Operator Good evening, ladies and gentlemen, and welcome to Anika's Sec ...

Financial Performance - Total revenue increased by 4% to $39.7 million[29] - OA Pain Management revenue increased by 6% to $25.7 million[29] - Joint Preservation and Restoration revenue increased by 2% to $12.1 million[29] - Non-Orthopedic revenue decreased by 6% to $1.8 million[29] - Gross margin was 63%, including $1.6 million of non-cash acquisition-related expenses; adjusted gross margin was 67%[29] - Net loss was ($2.8) million, or ($0.20) per share; adjusted net loss was ($1.6) million, or ($0.12) per share[29] - Adjusted EBITDA was $4.4 million[29] - Cash balance as of June 30, 2022, was $91.4 million[29] Business Highlights - Received 510(k) clearance for X-Twist™ fixation system, with limited market release planned for 2H 2022[5] - Continuing to ramp up Joint Preservation medical education activities, with 270 surgeons trained YTD[5] - Tactoset® received an ACE award for innovation at the American Orthopaedic Society for Sports Medicine (AOSSM) meeting[5] - Completed last patient follow-up in Cingal® pilot study, with data read-out planned for Fall 2022[5]

Financial Data and Key Metrics Changes - Total revenue for Q1 2022 was $36.7 million, an increase of 7% compared to the prior year [21] - Gross margin was 59%, with an adjusted gross margin of 64% after excluding noncash acquisition-related expenses [22] - Net loss for the quarter was $2.9 million, or $0.20 per share, compared to net income of $2.8 million, or $0.20 per diluted share in Q1 2021 [23] - Adjusted EBITDA was $2.6 million, down from $4.8 million in the same quarter last year [24] Business Line Data and Key Metrics Changes - OA pain management revenue increased by 18% to $22.7 million, driven by favorable order timing [21] - Joint preservation and restoration revenue decreased by 1% from $12.2 million to $12.1 million, showing some recovery after early quarter COVID headwinds [22] - Nonorthopedic revenue was $1.8 million, down 34% from the previous year due to higher revenues from last time buys of legacy products [22] Market Data and Key Metrics Changes - The company noted that the macroeconomic effects of staffing shortages and supply chain issues could remain as headwinds for the industry [10] - The healthcare environment appears to be improving, which is expected to positively impact market conditions [42] Company Strategy and Development Direction - The company is focused on becoming a leading provider of early intervention and joint preservation solutions, with several new product launches planned in the shoulder and foot and ankle spaces within the next six to 24 months [14][20] - The addition of Rob Delp as Vice President of U.S. Sales is expected to enhance commercial strategy execution [13] - The company aims for mid-teens revenue growth and an adjusted gross margin of 70% over the long term, despite being behind its original five-year target due to COVID impacts [28] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for market improvement through the year as COVID-related impacts abate [10] - The company reiterated its full-year 2022 total revenue outlook of low to mid-single-digit percentage growth over 2021, with expectations for joint preservation and restoration to be the fastest-growing product family [25][26] - Adjusted EBITDA margin is expected to be in the low to mid-single digits due to targeted spending investments and ongoing supply chain challenges [28] Other Important Information - The company has ramped up medical education efforts, training over 140 surgeons to date [11] - The company is investing in commercial capabilities and product development to support growth objectives [27] Q&A Session Summary Question: Inquiry about OA pain management growth assumptions - Management indicated that the OA pain management market is expected to grow at about 1%, with the company aiming to grow ahead of the market [33] Question: Update on CINGAL pilot trial timeline - Management confirmed that data readout for the CINGAL pilot trial is expected in the fall, with updates to be provided at that time [36] Question: Clarification on OA pain management business strength - Management noted that the strong performance was due to favorable timing in international markets and veterinary products, but they did not change their full-year guidance [38] Question: Joint preservation revenue decline and future expectations - Management acknowledged a tough January due to Omicron but expects recovery and growth catalysts to drive improvement in the coming quarters [41]

Financial Performance - Total revenue increased by 7% to $36.7 million[32] - OA Pain Management revenue increased by 18% to $22.7 million, primarily due to favorable order timing[32] - Joint Preservation and Restoration revenue decreased by 1% to $12.1 million due to early quarter COVID headwinds[32] - Non-Orthopedic revenue decreased by 34% to $1.8 million due to last time buys in Q1'21[32] - Gross margin was 59%, including $1.6 million of non-cash acquisition related expenses; Adjusted gross margin was 64%[32] - Net loss was ($2.9) million, or ($0.20) per share; Adjusted net loss was ($1.6) million, or ($0.11) per share[32] - Adjusted EBITDA was $2.6 million[32] - The company's cash balance as of March 31, 2022, was $90.3 million[32] Strategic Focus - Anika is focused on becoming the leader in joint preservation[44] - 2022 is a foundational year for executing on the product pipeline and commercial strategy to deliver targeted value to Ambulatory Surgery Centers (ASC)[44] - The company aims to emerge with a broad, differentiated product portfolio and a commercial team focused on the joint preservation continuum of care[44] Future Growth - The company is positioning to accelerate revenue growth coming out of 2022, growing both EBITDA margin and cash flows[44] - The company is targeting adjusted gross margin of 70%+ and adjusted EBITDA margin of 20%+ with $230M+ revenue on mid-teens CAGR[42]