Third Quarter 2026 Operating & Financial Results Conference Call - MIMEDX GROUP INC

Explicit Guidance:

• FY2026 Net Sales: Updated to $250–$260 million.
• Q4 2026 Growth Expectations: Expects high single-digit year-over-year growth in surgical revenue and mid-single-digit sequential growth in wound care.
• Q4 2026 Gross Margin: Expected to approximate Q3 levels (80%), driven by continued cost reduction and manufacturing throughput improvements.
• Q4 2026 SG&A Expense: Sales and marketing expenses expected to be 58–60% of net sales; GAAP General & Administrative (G&A) expenses expected at $18–$19 million.
• Q4 2026 R&D Expense: Expected to be $3–$3.5 million, consistent with Q3.
• Long-term Tax Rate: Non-GAAP effective tax rate expected to remain approximately 25%.
• Q4 Adjusted EBITDA: Expected to show modest sequential improvement.

Business-Segment Outlook:

• Surgical Segment: Anticipated to drive long-term competitiveness; volume growth previously in mid-teens is expected to continue, with no anticipated "noise" from one-time items in Q4.
• Wound Care Segment: Expected to stabilize gradually; volume in wound care centers grew 7% sequentially and >20% year-over-year, indicating a positive trend. Full market stabilization timing remains difficult to pinpoint, but the segment is expected to recover as the market establishes a predictable foundation post-Medicare reimbursement changes.
• Product Mix: Strategic shift ongoing; post-acquisition, approximately 75% of combined revenue will be derived from surgical procedures and 25% from wound care.
• Regulatory Litigation: Favorable court ruling regarding FDA classification of "Axiofil" (human placental particulate) has been achieved; litigation continues to protect patent portfolio validity.

Market and Competitive Outlook:

• Industry Dynamics: Surgical industry experiencing softer procedure volumes, but MiMedx's specific franchise showing mid-teens volume growth.
• Wound Care Market: Continued disruption from the 2026 Medicare reimbursement framework, resulting in lower overall market volume and pricing pressure. Patient migration to wound care centers is accelerating.
• Competitive Positioning: Confidence in maintaining a leading position due to an "unmatched body of clinical evidence" and technology innovation as the market settles.
• Reimbursement Environment: Optimism that CMS will establish baseline requirements for safety and efficacy evidence for reimbursement. Anticipates no significant changes in the final 2027 Medicare fee schedules compared to the proposed 2027 levels.
• Demand Trends: Accelerating demand for human placental and bovine-derived particulates across a variety of surgical procedures.

Macro / Industry Outlook:

• Medicare Reimbursement Changes: The industry is working through the "reset" initiated by changes effective January 1, 2026. Management views the impact as a temporary structural shift with a gradual recovery trajectory.
• Clinical Evidence: Continued funding of randomized controlled trials (RCTs) on recent product introductions with expected publications in the near future to support market recovery and reimbursement.

Strategic Initiatives:

• Sonara MedTech Acquisition: Transaction remains fully committed despite FTC second request.
  • Combined Entity Financials: Projected run-rate revenue of close to $400 million in the first full year post-closing.
  • Synergies: Anticipates >$20 million in annualized cost synergies.
  • Profitability: First full year of combined company expected to deliver adjusted EBITDA margin of >20%.
  • Deleveraging: Net leverage anticipated to fall below 3.0x by the end of the first full year post-closing.
  • Financing: Secured $300 million first-lien senior secured term loan commitment from Hafen Capital, contingent on closing.
  • Market Expansion: Sonara's 510K-cleared products open $4 billion in addressable markets where MiMedx does not currently compete.
• Product Development: Anticipates at least one 510K clearance for new surgical products (including one placental-derived product) before year-end 2026.
• Cost Restructuring: Right-sized cost structure to achieve return to positive adjusted EBITDA and cash flow (achieved in Q3 2026).

Risks and Headwinds to Outlook:

• Regulatory Approval: FTC Hart-Scott-Rodino (HSR) waiting period extended due to a second request; closing timeline is uncertain and dependent on satisfying the Commission's inquiry.
• Market Volatility: Wound care market stabilization timing and final settlement levels remain uncertain; industry-wide volume and pricing pressure persist.
• Litigation: Ongoing litigation regarding patent infringement and FDA classification carries risk of future court rulings or regulatory actions.
• External Factors: Reimbursement environment, access to customers, competition, and unforeseen circumstances may cause actual results to differ materially from guidance.

Management Tone on the Future:

• Confidence Level: High confidence in the long-term strategic rationale and the strength of the combined company post-acquisition. Management expresses optimism regarding the efficiency of the FTC review process and the durability of the 80% gross margin target.
• Caveats: Explicitly notes that wound care stabilization timing is "difficult to pinpoint" and that the acquisition closing date is outside management's control.
• Strategic Shift: Strong emphasis on the transition to a higher-margin surgical mix, viewing the current wound care reset as a temporary disruption rather than a permanent structural weakness.

Miscellaneous:

• FTC Interaction: Management describes interactions with the FTC as "very positive" and remains optimistic about an efficient resolution to the second request.
• Debt Status: Company is currently debt-free ($121 million in net cash) following repayment of the $17 million term loan balance.
• Intellectual Property: Recent $25 million settlement and licensing agreement reached with an infringing party; PTO affirmed validity of asserted patents against ex parte re-examination attempts.