MiMedx" Q1 2026 Earnings Call - Surgical Growth Offsets Wound Care Collapse Amid Medicare Reimbursement Chaos

Operator: Good afternoon, and thank you for standing by. Welcome to the MiMedx first quarter 2026 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.

Matt Notarianni, Head of Investor Relations, MiMedx: Thank you, operator. Good afternoon, everyone. Welcome to the MiMedx first quarter 2026 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. Doug will provide a review of our financial results for the quarter. Joe will conclude with some additional updates. 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. 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 www.mimedx.com.

With that, I am now pleased to turn the call over to Joe Capper. Joe.

Joe Capper, Chief Executive Officer, MiMedx: Thanks, Matt. Good afternoon, everyone. Thank you for joining us on today’s call. The start of the year has been an eventful one for MiMedx as we navigated the new reimbursement dynamics and continued to leverage growth opportunities for the company. I am extremely proud of our team as they are once again rising to the challenges of the day. In this case, the reset of Medicare pricing for skin substitutes. While our wound care franchise was negatively impacted, our surgical business continued to excel in Q1. For background, the January first implementation of the new Medicare reimbursement framework marked a significant change for the wound care market. Reform was necessary and inevitable given the massive amount of fraud, waste, and abuse that permeated the category.

However, the final rules were not well-defined and have created a whole new set of challenges for industry participants attempting to adapt to the changes. While we did expect to experience some disruption, especially for the first half of the year, none of us could have foreseen the obstacles we are experiencing, nor the magnitude of the market contraction. Unfortunately, the dislocation is resulting in patients not receiving the care they need, calling for additional modifications to the Medicare reimbursement program. Rest assured, MiMedx can navigate these choppy waters better than most, thanks to our strong balance sheet and diversified top line. Unlike many other industry participants, our business is buoyed by nearly $200 million of 2026 surgical and international revenue that has no exposure to the structural changes taking place in the wound care market, both of which grew by double digits in Q1.

It remains to be seen how many other companies will be able to financially withstand these disruptions. I will touch on some of the headlines of the quarter, then circle back for a deeper dive on the two businesses. For the first quarter, year-over-year net sales were $59 million. Our surgical business was up 13%, and our wound care business was down 60% from the prior year. Our adjusted gross profit margin was 72% in the quarter. We had an adjusted EBITDA loss of $12 million. We ended the quarter with $142 million in cash. We completed enrollment in our EPIEFFECT randomized controlled trial, drew full market release of our PRP product, and began selling a few of our newly licensed surgical products.

As a reminder, for the past few years, the company has been following a strategy that prioritizes the continued innovation and diversification of our product portfolio in support of both our wound care and surgical businesses. We also continue to seek opportunities to expand our surgical footprint in newer specialties. Our intent has been to drive comparatively higher growth with surgical-related products to achieve a more balanced business mix and take advantage of what we believe is an incredibly large and growing opportunity for our surgical portfolio. The plan has been working, and as a result, we have realized 50% top-line growth in our surgical business over the past three years. We will continue to make investments in support of this strategy. Let’s take a few minutes to unpack what’s happening in the wound care market, where it is clear the Medicare reimbursement reform is creating collateral damage.

On January 1, CMS changed from an ASP reimbursement methodology in favor of the new fixed-price system for skin substitutes. Also, at the very last minute, CMS, without explanation, decided not to implement the new LCDs, which would have required manufacturers to prove product efficacy to qualify for Medicare reimbursement, a customary requirement for other medical products. Finally, at the same time, they initiated the WISeR model in 6 states, which now requires prior authorization to qualify for reimbursement. As providers attempted to adjust, it quickly became clear the MACs were ill-prepared for the change. As a result, claims processing has slowed dramatically, with at least 1 of the MACs not processing any Medicare claims for most of the 1st quarter. In that MAC alone, our year-over-year 1st quarter wound revenue dropped by 72%. Making matters worse, the WISeR implementation has been an unmitigated failure.

It is apparent the tools they were using were not properly tested. In one of the WISeR states, our wound revenue was down 84% in Q1. The practical implications of a prolonged prior authorization due to these kludgy systems can be devastating for patients. To state the obvious, this model should not have been implemented at the same time as the reimbursement methodology change. Of course, without LCDs, no guardrails exist to prevent ineffective products from entering the market. The challenges have caused several providers to stop using skin substitutes altogether, at least temporarily. This cannot persist for long, or patients will suffer, amputations will increase, and people will die. To sum up the government’s efforts in a nutshell, good intent with poor execution. That said, this reform was bound to happen.

It’s just unfortunate so much attention was given to the pricing fix and very little to the payment process. The outsized economics, which have induced massive fraud, waste, and abuse in the skin substitute market, has been eliminated. Putting aside the near-term overreaction, this reform is a good thing for the healthcare system and taxpayers. We must now continue to encourage CMS and the MACs to course-correct, work out the kinks, and quickly stabilize the wound care market. While we are experiencing our own challenges with the sluggish transition, we have been told of other companies which have experienced 90% plus revenue drops in Q1, suggesting that on the other side of the reset, there will be fewer manufacturers in place to serve the market.

As we entered the year, we made the decision to keep the business resourced at least through the first quarter in the event of a more orderly transition. We started to see some, but not many, signs towards the end of the quarter of an uptick in volume in the care settings we expected to benefit from the reform. However, due to the magnitude and slow pace of the adjustment, we needed to act. A few weeks ago, we announced that we had taken steps to reduce our cost structure by approximately $40 million, which should put us on a pathway back to profitability. In summary, we believe the wound care market will normalize. Patients need care, and suppliers need a more orderly process sooner rather than later if they are going to stay in the business.

When it does, product performance will no longer be set aside in favor of outsized profit potential. Our market-leading technology with its unmatched collection of clinical evidence will continue to set the standard. We also expect that at some point, CMS will set basic requirements for proof of product safety and efficacy. There will be fewer participants, and MiMedx will again flourish in the wound care space. Let’s now turn to the surgical business, which continues to be an outstanding performer, delivering 13% growth in Q1 with contributions from the entire product portfolio. As stated on numerous occasions, one of the tenets of our strategic plan has been to expand our surgical footprint by investing in dedicated commercial resources, innovative products, and meaningful scientific research to validate the clinical and economic benefits derived from the use of our best-in-class technology.

As a reminder, we made the purposeful pivot to greater emphasis on the surgical market starting three years ago. Given the size of the market opportunity and the clear improvement in surgical outcomes when incorporating our products in a variety of procedures, we saw it as one of the best areas to concentrate our focus and investments. At the outset of this year, we realigned our commercial team to dedicate more sales professionals to the surgical business, and we continue to look for opportunities to augment this team even further. I mentioned on our last call that we had added a few products to the surgical portfolio. In the quarter, we launched AMNIOFIX Thyroid Shields, a new variant of our AmnioFix product, to be used as a protective barrier during thyroidectomy surgery, which is a procedure involving partial or complete removal of the thyroid gland.

As a reminder, this surge-surgery carries inherent risk due to the proximity of the recurrent laryngeal nerve and the parathyroid glands, which can be vulnerable to injury. AmnioFix Thyroid Shield is off to a terrific start and is another great example of how the application of our technology can significantly reduce or eliminate postoperative complications. During the quarter, we also began the limited market release of two of the 510(k) products we licensed. G4Derm Plus, which is a flowable peptide matrix engineered for rapid protected wound closure. Product forms a three-D scaffold that mimics the human extracellular matrix and serves as an antibacterial barrier that protects the wound and controls bioburden. Hydrelix Collagen Matrix, which is a sterile Type 1 collagen powder comprised of soluble modified bovine collagen.

In addition to deploying more direct selling resources and expanding our product portfolio, we have consistently prioritized the generation of rigorous scientific and clinical evidence as a crucial part of our growth plan. On our last call, I highlighted a recently published article in the Journal of Inflammation, which found that our dHACM and lHACM allografts exhibited immunomodularity properties that correspond with the beneficial outcomes we observe in the clinical setting. This piece, along with other important publications, like our 2025 article in Scientific Reports, are important reminders of the extraordinary healthcare benefits inherent in our technology. They indicate that dHACM and lHACM both appear to restore a balanced physiological inflammatory response and serve to interrupt pathological fibrosis, which could lead to reduced scarring and a more expeditious return to functionality.

I cannot overstress the importance of this type of work, especially during this early phase of surgical market development. We’ve amassed a library of data that allows us to confidently state that we have the number 1 most studied amniotic tissue. We’ve also been advocating for placental allografts to be upgraded from a 361 designation to 510(k) clearance, like xenografts and synthetic skin substitutes. We see this as part of the natural maturation of the sector. To that end, we expect to submit our first two 510(k) applications for placental-derived products in the next few months.

As you have just heard, we are continuing to work through the unforeseeable disruptions in the wound care market and have taken steps to right-size our cost structure to better enable a rapid return to profitability as the industry normalizes and our surgical business remains strong and poised for continued growth. One final topic before I turn the call over to Doug for a more detailed review of our financial results. As announced on our last earnings call, the board has authorized a share repurchase program of up to $100 million for the company’s common stock over a 2-year period. We intend to use the repurchase program periodically on a discretionary basis, subject to general business and market conditions and balanced against other investment opportunities.

Since that call in late February, we have been focused on various strategic and operational matters, including the restructuring activity that was announced earlier this month, which precluded us from repurchasing shares. With some of those activities behind us, we are now able to move forward with the share repurchase program. Accretive investments that meet our criteria will remain our highest priority, but we do intend to allocate some capital to invest in our own stock. With that, I’ll turn the call over to Doug. Doug?

Doug Rice, Chief Financial Officer, MiMedx: Thank you, Joe, and good afternoon to everyone on today’s call. I’m pleased to review our results with you all today. As a reminder, many of the financial measures covered in today’s call are on a non-GAAP basis. As Matt indicated earlier, please refer to our earnings release for further information regarding our non-GAAP reconciliations and disclosures, including the reconciliation tables that provide more detail regarding the adjustments made to calculate our non-GAAP metrics. Moving on to the results. First quarter 2026 consolidated net sales were $59 million, down 33% compared to the prior year period. By product category, first quarter surgical sales of $36 million grew 13% versus the prior year period, while wound sales of $23 million declined 60%. This marks the first quarter in recent company history where our surgical sales exceeded our wound sales.

Notwithstanding the expected sequential growth from both our wound and surgical product categories in each quarter this year, we believe that this trend of greater surgical sales relative to wound sales will continue over the balance of 2026. Within our surgical business, we are seeing contributions broadly across the portfolio, including strong double-digit growth year over year from 2 of our flagship products, AmnioFix and AMNIOEFFECT, as well as solid performance from our particulate lines. To a lesser extent, our surgical revenue also benefited from the late quarter launch and early customer adoption of the innovative surgical products that Joe just mentioned in G4Derm Plus and HydroLix.

As Joe mentioned, the 60% year-over-year decline in our wound net sales, which was a 24% decline on a volume basis, was pressured by significant disruption, confusion, and chaos in the marketplace, particularly among private office and associated care settings that previously were reimbursed by Medicare for skin substitutes under an ASP plus six percent methodology. To a lesser degree, changes to the Medicare reimbursement rules in the wound care center and hospital outpatient settings also resulted in some confusion and reluctance to utilize amniotic skin substitutes among customers. These declines were partially offset with net sales from the recent launch of our new PRP gel product.

Adding to this year’s market disruption were the new onerous reimbursement pre-authorization requirements imposed by Medicare’s WISeR model in Texas, Oklahoma, Ohio, and New Jersey, which may be good for our customers in the long run, but were clumsily implemented in Q1. Lastly, regional inconsistencies in reimbursement by certain MACs contributed to the slower ramp in volumes than we initially anticipated. Before commenting on the rest of the P&L, I wanted to remind you that earlier this month, we announced a restructuring and cost reduction initiative. This action, which is not reflected in our first quarter results, is expected to yield annualized savings of approximately $40 million, comprised of both a 15% reduction in force as well as the implementation of other cost reduction initiatives, including executive officer pay reductions. These initiatives will result in a one-time charge of about $4 million in the second quarter.

These actions were taken across the organization, and the resulting cost savings are reflected in my comments surrounding our expected results for the full year. Our first quarter 2026 GAAP gross profit was about $42 million, which compares to $72 million in the prior year period. Our GAAP gross margin was 71% in the first quarter of 2026, compared to 81% last year. This year-over-year decline in gross margins was caused by the top-line impact of our lower ASPs due to the wound care Medicare price cap of $127.14 per square centimeter, as well as higher production costs and product mix. Going forward, we expect our gross margin to be in the low 70s relative to full year net sales.

Based on our expected sequential sales growth and the impact of our cost reduction measures, we anticipate exiting the year with our gross margin in the mid-70s. Turning to our operating expenses, sales and marketing expenses were $44 million or 74% of our net sales in the first quarter, compared to $47 million or 53% of net sales in the prior year period. The dollar decrease was due to a combination of lower wound commissions associated with lower sales of that product category, partially offset by increases in surgical commissions. Looking ahead, we expect our full year 2026 sales and marketing expenses to be approximately 60% of net sales while exiting the back half of the year in the mid-50s.

GAAP general and administrative expenses, or G&A, were $9 million in the first quarter, compared to $13 million in the prior year period. This decrease primarily resulted from the reversal of previously recognized stock-based compensation expenses related to our performance stock units with vesting targets predicated on achievement of certain revenue levels. We expect full year non-GAAP G&A expenses to be 13%-15% of net sales. Our first quarter R&D expenses were $4 million or about 7% of net sales, up 24% compared to the prior year period, driven primarily by increased costs associated with the recently completed enrollment of our EPIEFFECT RCT and the start of the RCT enrollment for our new CHORIOFIX dual layer chorion product, as well as additional spend related to the development of future products.

We expect our full year R&D expenses to be about $3 million-$3.5 million per quarter for the remainder of 2026. GAAP income tax benefit of $4.5 million for Q1 2026 reflected an effective tax rate of 29% due to the timing and deductibility of certain compensation related expenses. We continue to expect our long-term non-GAAP effective tax rate to be approximately 25%. Our first quarter GAAP net loss was $11 million or $0.07 per share, compared to GAAP net income of $7 million or $0.05 per share in the prior year period. Adjusted net loss for the first quarter was $7 million or $0.05 per share, compared to adjusted net income of $10 million or $0.06 per share in the prior year period.

First quarter 2026 adjusted EBITDA was negative $12 million or 20% of net sales, compared to positive $17 million or 20% of net sales in the prior year period. Despite the anticipated continued wound market disruption in the first half of 2026, we expect our full year adjusted EBITDA to be roughly break even with sequential improvements in each quarter. Turning to our liquidity, we had $160 million of cash and cash equivalents on March 31st, 2026. Our first quarter free cash flow was $1 million, primarily due to the strength of our operating cash flow from working capital contributions, which was mostly offset by our first quarter operating loss. This compares to $5 million of free cash flow in the same period, 2025.

Our net cash balance now sits at about $142 million, down from $148 million last quarter. Despite the Q1 results, our balance sheet remains strong, and as Joe mentioned, we intend to deploy capital on a mix of M&A and share repurchases in the near term as we see these as very favorable opportunities to create incremental shareholder value. Before I turn the call back to Joe, I want to provide our latest thinking on guidance and capital allocation. As we mentioned earlier, now that we are nearly four full months into the year, it is clear that the broader wound care market recovery is much slower than everyone had hoped for at the beginning of the year.

It is therefore practical to modify top-line expectations to be in the range of $260 million-$290 million. We expect surgical to continue to deliver double-digit growth over the course of the year, driven by the continued momentum of our organic product portfolio as well as the new surgical products that we have added. In wound, despite the expected continued market disruption, we also anticipate a sequential volume recovery each quarter during the year for our business.

However, with the continued pressure on our wound care ASPs associated with the new Medicare rules, we believe the full year-over-year decline in wound will be in line with the decline that we saw during the first quarter on a relative basis. As I just mentioned, we expect to run at an adjusted EBITDA loss for the first half of the year, moving back to profitability beginning in Q3 as our sales improve and we realize the benefits of our cost reduction activities as the year progresses. We expect a stronger exit to 2026, and in 2027, we expect to snap back to double-digit above market top-line growth in both our wound and surgical franchises with solid flow-through to the bottom line. I will now turn the call back to Joe. Joe?

Joe Capper, Chief Executive Officer, MiMedx: Thanks, Doug. As you have just heard, our surgical business is incredibly well-positioned for continued above-market growth. Additionally, because of the decisions we made a few years ago to focus the business, redirect resources, and eliminate significant investments in a risky project, we are now in a much stronger position to work through the wound care market reset while continuing to expand in surgery. We expect to spend the first part of this year navigating the rough waters in the wound care market due to unforeseeable disruptions associated with the implementation of a new Medicare reimbursement system. Part of our response was to adjust our cost structure, which is now complete. As mentioned, we are starting to see early signs of the expected patient migration into other care settings, albeit at a lower level and slower pace, and we remain well-positioned to service this market as it improves over time.

Moreover, with our dramatically improved financial position, we have the option to deploy capital to accelerate our strategic plan and/or buy back our stock opportunistically. In closing, I would like to once again thank the MiMedx team for your resilience during this challenging time and for your unwavering commitment to our mission and to the many individuals we serve each day. Let’s now shift over to Q&A and open the call to questions. Operator, we are ready for our first question. Please proceed.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question is from Chase Knickerbocker from Craig-Hallum Capital Group. Please go ahead.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group: Good afternoon. Thanks for taking the questions. Joe, I just wanted to start on, so, you know, guidance implies kind of mid-teens quarterly recovery, you know, quarter-over-quarter for wound. Can you just maybe talk a little bit more about what you saw in Q1 on a, like, a monthly basis as far as how you saw things trend for wound? I mean, did you see kind of meaningful recovery in March? Then maybe talk about how April is and kind of how that business kind of trended month-by-month and the improvement that you saw kind of through the quarter and then in April as well, if you would.

Joe Capper, Chief Executive Officer, MiMedx: Yeah. Well, Chase, when we entered the year, we thought we would see more of a normal trend in terms of volume pickup month to month. Due to all the issues that we’re seeing in the marketplace, the fact that so many providers just stopped ordering skin subs altogether until they work through some of these challenges, additional challenges in WISeR state, et cetera, we didn’t see volume pick up throughout the quarter. It was pretty much the same month to month. When we got to March, we expected really to see. Number one, there’s typically a normal pickup in March in, you know, in any time, in any year. We expected to see possibly even a bigger pickup as we started to work out some of the issues in March. Didn’t see it.

March was basically flat to January and February. So far, April has looked about the same. We’re still dealing with a lot of these issues in the wound care market. If you look at our guidance for the rest of the year, we don’t anticipate a whole lot of pickup in the wound care sector. We haven’t programmed that in to our guidance. We took a pretty conservative approach.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group: If you look at it on a sequential basis, Joe, it looks like there’s some, obviously some recovery that’s implied. Can you just maybe talk about what you’re hearing from customers, as far as

Doug Rice, Chief Financial Officer, MiMedx: Sure.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group: Kind of specifically in wound?

Doug Rice, Chief Financial Officer, MiMedx: I’ll let Joe comment on the customer piece. You’re right, Chase. Sequentially, we do expect modest recovery in wound both on a dollar basis as well as a volume basis as we step through each quarter this year. Our overall guidance is, you know, for the full year. We’re thinking that directionally we’ll be in line with what we saw in Q1 on a relative basis.

Joe Capper, Chief Executive Officer, MiMedx: There could be some upside to this if we can get these arteries unclogged with some of this really poor implementation of these new systems that they have in place. You know, we’ve mentioned it several times. It’s really bad in these WISeR states that everything is ground to almost a halt or a trickle. One of the MACs has yet to process any Medicare claims in the first quarter. That can’t persist, right? That’s gonna get better. People are pinging them constantly on the need to get this thing streamlined, and that will happen. We should naturally see some sort of pickup as the year progresses. Again, being as prudent as we can, we just didn’t program a lot of that into the guidance.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group: Got it. Maybe just specifically on kind of the HOPD kind of side of things, I mean, can you maybe speak to how that business has trended and kind of what you’re hearing from those customers? I mean, obviously still seeing a volume impact there as well, but, I mean, any sense there could be a quicker recovery there?

Joe Capper, Chief Executive Officer, MiMedx: Yeah, yeah, we didn’t see much of a volume impairment in the wound care center. Frankly, we saw all the volume impairment we had was outpatient. It was private office, home, mobile, nursing home, et cetera. There was a little bit of impact early on, but we recovered quickly in the wound care centers. You know, we think that’s where patients will eventually migrate. We started to see some of that in March, April, but it’s real slow.

Matt Notarianni, Head of Investor Relations, MiMedx: Chase, this is Matt. I mean, one other thing, you know, that that’s swept up in part of this change, but it’s getting buried, is these wound care centers in the HOPD setting, treating bigger sized wounds.

Joe Capper, Chief Executive Officer, MiMedx: Yep.

Matt Notarianni, Head of Investor Relations, MiMedx: Wounds that they wouldn’t otherwise have been able to treat in the old days, you know, as recently as last year with the bundled rate. They were priced out, you know, from being able to do that. Again, there’s so much noise in this space, it’s kinda hard to tease that out from these numbers. You know, we are seeing that take place.

Chase Knickerbocker, Analyst, Craig-Hallum Capital Group: I’ll hop back into queue. Thanks, guys. Yep.

Operator: The next question is from Dave Turkaly from Citizens. Please go ahead.

Dave Turkaly, Analyst, Citizens: Hey, good evening. The WISeR comment that you made, you know, the pre-auth reimbursement, is that regardless-

Joe Capper, Chief Executive Officer, MiMedx: Yeah.

Dave Turkaly, Analyst, Citizens: of the setting?

Joe Capper, Chief Executive Officer, MiMedx: Yeah.

Dave Turkaly, Analyst, Citizens: If so, how do you, like, get that changed? I mean, I like to think the government might be on your side, but you know, I you know, is that something you think you can work through, you know, this year?

Joe Capper, Chief Executive Officer, MiMedx: Yeah. This is a whole new project that they implemented, again, in an attempt to curtail a lot of fraud that was taking place. I do think that will get better as these contractors figure out the systems. We understand that they tried to, or they attempted to apply some AI tools that were a failure, so they’ve gone back to sort of manual claims process, which has taken a lot of time. These are some pretty high volume Medicare states, so that really hurt us. I think that’ll get better, right? You’ll start to see that clean itself up over time. Look, Medicare is very aware of all the issues related to the WISeR model. We’d have to think that this is something that should cure itself sooner rather than later.

Dave Turkaly, Analyst, Citizens: I guess, is there any formal process that you can go through to make that happen quicker? I’m just trying to get a handle on, you know, the commentary that dollar volume, you know, improves as we go through the year, but not a lot. If this is still part of the, I guess, overhang, I would agree that you would think it would get better, but I’m not sure. Is there a process to help that happen more quickly?

Joe Capper, Chief Executive Officer, MiMedx: Yeah. There’s notification bodies that you can contact when you have issues like this. We’re dealing directly with the MACs. We’re dealing directly with CMS, frankly, where appropriate. You know, they’re the folks that need to remediate the issue. There’s ways that you can connect with them and contact them. Obviously, as soon as we started seeing it, we were all over it. It’s just taking some time to work through it. If you look at the impact to our wound care business, you know, we had about a 48% drop in price and about a 24% drop in overall wound care volume, and we know where that came from.

Our guess is there’s other folks that are being impacted a lot more than we are. That doesn’t make us feel better. It’s just a reality. The entire market seized up and contracted. It’s not like we’re losing share to somebody else. In fact, I wouldn’t be surprised if we actually gained share during the first quarter. It’s just that the pie got a whole lot smaller, at least for the time being.

Dave Turkaly, Analyst, Citizens: Thank you.

Joe Capper, Chief Executive Officer, MiMedx: Yeah.

Operator: The next question is from Anthony Petrone from Mizuho Group. Please go ahead.

Bradley Bowers, Analyst, Mizuho Group: Thanks. You have Bradley Bowers on for Anthony and the team. Thanks for taking our questions. So I wanna touch on that piece, maybe zooming out. You know, you talked about, you know, yourself down 24, on volume, 60% overall. Presumably the bad actors are worse. You know, the statistics that we were getting was that the market had ballooned to, like, $10 billion-$15 billion kind of run rate per year. Do you have any idea where that’s settling out based off of Q1?

Joe Capper, Chief Executive Officer, MiMedx: Well, there’s really no data that I could point to that can validate this, but my guess is that Medicare has probably experienced a 90%-95% reduction in payments during the first quarter.

Matt Notarianni, Head of Investor Relations, MiMedx: Brad, I think maybe one qualification that I think is important here. You know, CMS solved for the runaway spend, you know, that did balloon to $15 billion by changing the payment mechanism for both those care settings, the ASP plus six, but also the HOPD and wound care center, where it was a dramatically lower spend historically in the, you know, measured in the hundreds of millions of dollars. Across the board, all those care settings are now living with this new reality and the issues that we talked about.

Bradley Bowers, Analyst, Mizuho Group: Got it. That’s helpful. Maybe again, just keeping it kinda high level. Just wanted to hear about maybe the long-term mix outlook. You know, obviously reset from a lower base here on wound, but similar growth, you know, in the double digit outlook. You know, that would assume that the mix kind of holds here. Or do you think there’s kind of room to catch up in wound? How do you think about the long-term mix of the business and maybe margin implications in that? Thank you.

Joe Capper, Chief Executive Officer, MiMedx: Yeah, good question. We’ve spent a disproportionate amount of time, for obvious reasons, talking about the wound care business, and not the tremendous success that we continue to have in the surgical setting. We don’t see that changing. The reason we made that pivot three years ago was because of the opportunity in terms of size of the market and the benefits that are derived from use of our technology in a variety of different surgeries. We continue to lean into that. I’ve said this on our last call, if you just carved out our surgical business, it’s growing last year 15%-20%, in the teens% again this year in Q1, which is typically our slowest growth quarter. You slapped a typical med tech market multiple on that business, we’d have a...

Just on that business, you could get to a $7-$8 per share for our stock. We’re going to continue to lean into that. I think the wound care market will eventually find a new normal, and we’ll be a strong participant in that market. It’s gonna be a smaller market. We all know that now. There’s going to be less participants in that market, surely. You’re just not gonna have the type of fraud that we saw for the last few years. It’s gonna be, you know, a nicer neighborhood to be playing in. You know, we’ll have one of the nicest houses in that neighborhood.

I can’t stress enough the fact that where our science and technology prevails, and it’s so obvious, is in the surgical setting. That’s where we’re gonna lean. What the mix is, it will shake out over time, depending on what happens in the wound care market. I do, again, I do still think it’s gonna be attractive market. It’s profitable for us. It’s just gonna be a smaller market. We’re in it to win it, and we’re gonna still be around that market.

Bradley Bowers, Analyst, Mizuho Group: Thank you.

Operator: As a reminder, to ask a question, please press star one. The next question is from Frank Takkinen from Lake Street Capital Markets. Please go ahead.

Frank Takkinen, Analyst, Lake Street Capital Markets: Hey, guys. This is Ian on for Frank. I was wondering about the recently announced $40 million operating expense reduction, and how we should think about that relative to what’s required to remain profitable in 2026. Do you guys have a line of sight to additional cost levers if the recovery in wound continues to lag? Or do you believe that this initiative is sufficient to kind of bridge that gap to back to break even?

Joe Capper, Chief Executive Officer, MiMedx: Yeah. I’ll let Doug comment on some of the specifics, but I really wanted to stress the fact that when we came into the new year, everybody knew that we were gonna have some disruption. We telegraphed that plenty of times last year. None of us knew, and none of us could have foreseen these other related issues that we’re dealing with that has had a big impact on the market. Obviously we needed to take action. We made the decision throughout the first quarter to leave our cost structure in place, resource the business for a potentially more rapid rebound. As I said at the outset of the Q&A session here, we just didn’t see it, so we had to take action. We lost about $12 million in the first quarter. We run hotter on expenses in the first quarter.

As a reminder, we have a national sales meeting, and we have, you know, higher payroll tax, et cetera. You know, I think this gets us there, but Doug can comment on a little bit more.

Doug Rice, Chief Financial Officer, MiMedx: Just quantitatively, Ian, the $40 million, we’ve already affected most of that. We’ll get the rest of it over the next few weeks. We talked about a 15% reduction in our workforce. And I would say that overall, we’re in the 15%-20% range for in terms of reduction of addressable operating expenses.

Joe Capper, Chief Executive Officer, MiMedx: You asked if there was any other actions or levers that we can pull on if need be. We’re always looking to make the business as efficient as possible. It’s way too early to start talking about taking any other actions. We gotta see what happens in the wound care market. I think this’ll allow us to do what we needed to do to get back to break even, and we’ll move back into profitability as the business grows and scales. One thing we know for sure, at scale, this business becomes incredibly profitable. We saw it over the last few years. I think we’re in a better shape than most, and we’ll weather the storm.

Ian, Analyst, Lake Street Capital Markets: Okay. That was very helpful. Just one more from me. Recognizing it’s nearly impossible to quantify this with precision, but how are you guys thinking about the amount of competitor inventory still sitting in the channel that needs to clear at those discounted prices? Are you seeing the pace of dumping slow at all, or is it still a pretty meaningful headwind?

Joe Capper, Chief Executive Officer, MiMedx: It’s a meaningful headwind. I think it will be for the first half of the year, at least.

Ian, Analyst, Lake Street Capital Markets: Okay. Thank you, guys.

Doug Rice, Chief Financial Officer, MiMedx: Thanks, Ian.

Operator: This concludes the question and answer session. I would like to turn the floor back over to Joe Capper for closing comments.

Joe Capper, Chief Executive Officer, MiMedx: Thanks, operator. Thank you, everybody, for joining us on this afternoon’s call. We will speak to you after next quarter. Thank you very much.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.