MiMedx(MDXG)2023-08-01 22:48Financial Data and Key Metrics Changes - Q2 2023 net sales grew by approximately 21.5% year-over-year to $81.3 million, marking the highest quarterly net sales performance in nearly four years [13][36] - Gross profit margin improved to 83.3%, up from 82.3% year-over-year, reflecting a 100 basis point increase [37] - Adjusted EBITDA was $14.1 million, a significant improvement from an adjusted EBITDA loss of almost $1 million a year ago, representing a $15 million improvement [13][42] - The company ended the quarter with $68.7 million in cash, an increase of $7.5 million from the end of Q1 [13][45] Business Line Data and Key Metrics Changes - Wound & Surgical segment net sales totaled $80.5 million, reflecting a growth of 21.7% compared to $66.1 million last year [42] - Contribution margin for the Wound & Surgical segment was $27.6 million, representing 34.3% of Wound & Surgical net sales, compared to 21.5% in the prior year [42] - Sales in the private office sector grew by 25% year-over-year, continuing a positive trend from Q1 [17] Market Data and Key Metrics Changes - The company noted that procedure volumes are continuing to rise, contributing to market growth alongside their market share gains [55][56] - The CMS proposed physician fee schedule for 2024 indicates no major modifications to skin substitute reimbursements, which is expected to be a net positive for the company [18] Company Strategy and Development Direction - The company is focusing on enhancing its Wound & Surgical businesses due to substantial market opportunities and competitive offerings [11] - Plans include expanding the product portfolio and geographic reach, with a specific focus on adjacent markets to create additional growth drivers [20][27] - The company announced the suspension of its Knee Osteoarthritis development project to concentrate on Wound & Surgical markets [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong momentum and the expectation of continued growth, anticipating a multi-year growth phase [12][49] - The adjusted EBITDA margin is expected to exceed 20% in the second half of the year, demonstrating excellent leverage as the business scales [48] - Management highlighted the positive ruling from the 11th Circuit Court of Appeals regarding a securities class action lawsuit, which is expected to alleviate one of the largest potential claims against the company [33] Other Important Information - The company achieved its efficiency goals ahead of schedule, with Wound & Surgical contribution margin above 30% and corporate G&A below 20% of sales [30][44] - The company is optimistic about the early market development phase in Japan, expecting adoption to ramp in the coming months [19][66] Q&A Session Summary Question: What is the underlying growth profile for Wound Care and how much is from market share gains? - Management indicated that the growth is primarily driven by volume rather than price increases, with both market growth and share gains contributing to performance [55][56] Question: What are the expectations for in-office sales growth into 2024? - Management believes the fundamentals are strengthening, indicating the potential for continued double-digit growth [64] Question: What is the outlook for investigation-related expenses and R&D normalization? - Management expects investigation costs to taper off and R&D expenses to drop into the low to mid-single digits in the second half of the year [77][79] Question: Can Japan serve as a stepping stone for other parts of Asia? - While it is early, management sees potential for Japan to lead in the region, but the primary focus remains on establishing a strong market presence there [88] Question: What is the status of the Series B preferred shares? - Management noted that conversion of Series B preferred shares could occur if the share price remains above $7.7 for a specified period, potentially adding approximately 31 million shares to the diluted share count [89]