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

Explicit Guidance:

• FY2026 Full-Year Revenue: Updated to $250–$260 million (previously implied lower growth due to reimbursement reset).
• Q4 2026 Surgical Growth: Expected high single-digit year-over-year growth.
• Q4 2026 Wound Care Growth: Expected mid-single-digit sequential growth.
• Q4 2026 Gross Margin: Expected to approximate Q3 levels (~80%).
• Q4 2026 Sales & Marketing Expense: Projected to be 58–60% of net sales.
• Q4 2026 GAAP G&A Expense: Expected at $18–$19 million.
• Q4 2026 R&D Expense: Expected at $3–$3.5 million.
• Long-Term Tax Rate: Expectation of an adjusted effective tax rate of approximately 25%.
• Q4 2026 Adjusted EBITDA: Expected modest sequential improvement.

Business-Segment Outlook:

• Surgical Franchise: Anticipated to shift the business mix to ~75% of revenue post-acquisition (from current ~66%). Driven by mid-teens volume growth and broad-based product demand; expected to deliver double-digit growth in the combined company's first full year.
• Wound Care: Market stabilization is anticipated once the Medicare reimbursement reset concludes; volume migration to wound care centers is expected to continue (Q3 growth of 20% YoY, 7% sequential) with a gradual recovery in overall market volume.
• Product Pipeline: Anticipated clearance of at least one of the two submitted 510K surgical products before year-end; publications from two active randomized controlled trials on recent skin substitutes expected in the near future.
• Acquisition (Sonera/Sonara MedTech): Combined entity expected to generate run-rate revenue of ~$400 million in the first full year post-closing. Target of >20% adjusted EBITDA margin and >$20 million in annual cost synergies expected to be achieved in the first full year of integration.

Market and Competitive Outlook:

• Reimbursement Environment: Continued disruption from 2026 Medicare reimbursement changes expected to persist through the remainder of the year; 2027 fee schedules (proposed in July) are not expected to yield meaningful changes in the final November publication, implying the 2026 market baseline will likely hold for 2027.
• Pricing: Continued pricing pressure in the wound care sector; expected to normalize as the market establishes a stable foundation.
• Share Shifts: Continued migration of patients from hospital inpatient/physician office settings to wound care centers, where MiMedx holds a competitive advantage.
• Addressable Market: Sonera's 510K-cleared products open an additional $4 billion in addressable markets where MiMedx currently does not compete.

Macro / Industry Outlook:

• Industry Reset: The broader wound care industry is proceeding through a reset phase more slowly than initially anticipated, driven by the new Medicare reimbursement framework effective January 1, 2026.
• Regulatory Impact: FDA regulatory classification of Axiofil remains a key variable; the recent U.S. District Court ruling vacating the FDA's classification is expected to address market concerns, though the matter is remanded to the FDA for further consideration.

Strategic Initiatives:

• Acquisition of Sonera/Sonara MedTech: Transaction remains a core strategic priority to expand the surgical portfolio. Deal is contingent on resolving the FTC Hart-Scott-Rodino (HSR) second request; expected to provide immediate accretion and profitability even prior to synergy realization.
• Debt Financing: Secured a commitment for a $300 million, six-year first-lien senior secured term loan from Hafen Capital, contingent on closing; funds will cover the cash portion of the transaction.
• Cost Structure: Right-sizing initiatives implemented to support positive adjusted EBITDA and cash flow; further operational efficiencies and manufacturing throughput improvements expected to sustain Q3 gross margin levels.
• Litigation Strategy: Continued vigorous protection of IP portfolio; two active patent infringement cases in litigation with favorable plain construction rulings and a recent unsuccessful attempt to invalidate patents by a defendant.

Risks and Headwinds to Outlook:

• Regulatory Delays: The FTC HSR second request extends the closing timeline for the Sonera acquisition; no specific timeline for resolution can be provided.
• Reimbursement Uncertainty: The timing and magnitude of the "floor" or stabilization for the wound care market (volume and price) remain difficult to pinpoint, with noise expected to persist until the market resets.
• Rebate Variability: Q3 included higher-than-typical rebate adjustments due to short-term promotional activities and catch-up on active programs; some volatility may remain in the near term.
• Market Demand: Q3 saw the absence of ~$1 million in opportunistic B2B placental tissue sales that occurred in Q3 2025 due to specific market demand shifts; such one-offs may not recur.
• Litigation Execution: Two other patent infringement cases remain in litigation; outcomes of these cases and final FDA rules could impact future financial performance.

Management Tone on the Future:

• Confidence: High confidence in the "surgical shift" strategy and the strategic fit of the Sonera acquisition; expressed optimism regarding the efficiency of resolving FTC inquiries.
• Resilience: Strong tone regarding the company's ability to navigate the reimbursement reset, having returned to positive adjusted EBITDA and cash flow in Q3 despite a 42% revenue loss in 2025.
• Forward-Looking: Management emphasizes that while the wound care stabilization timeline is unclear, the company is in a "very strong relative position" to benefit once the market normalizes.

Miscellaneous:

• Settlement: Reached a $25 million settlement and licensing agreement regarding a patent infringement case in Q3 2026.
• Debt Paydown: Fully repaid the remaining $17 million principal balance on the Citizens Bank term loan; net cash balance ended Q3 at $121 million with zero outstanding debt on credit facilities.
• FTC Process: Interaction with the FTC characterized as "very positive," with management optimistic about an efficient resolution despite the additional inquiry.