Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sanara MedTech Inc (SMTI, Financial) achieved its 11th consecutive record revenue quarter with $20.2 million in revenue.
- The company reported positive adjusted EBITDA of $600,000 for the second quarter.
- Sanara MedTech Inc (SMTI) expanded its product reach to over 1,100 hospitals and ASCs across 34 states and the District of Columbia.
- Sales of soft tissue products grew significantly from $13.2 million in Q2 2023 to $17.6 million in Q2 2024.
- The company signed a contract with a national GPO, adding over 1,000 new facilities where their products are contracted or approved to be sold.
Negative Points
- Sanara MedTech Inc (SMTI) reported a net loss of $3.5 million for the second quarter.
- SG&A expenses increased to $19 million in Q2 2024 from $13.8 million in Q2 2023, primarily due to higher direct sales and marketing expenses.
- The Surgical segment generated a net loss of $2.2 million in the second quarter.
- Interest expense was $0.6 million for the quarter, primarily related to a new term loan with CRG.
- The company plans to invest an additional $4 million to $5 million in the Tissue Health Plus strategy, which may impact short-term profitability.
Q & A Highlights
Q: There's been a lot of disruption in the chronic wound space with regards to reimbursement. Could you provide more color on the diagnostic front of THP, especially given that you're targeting the home care space?
A: Yes, the disruption around CTPs and their reimbursement is something we are factoring into our strategy. Our goal is to generate hospital-based savings, which aligns with the direction CMS and payers are moving. Our diagnostic devices are designed to be scalable and usable across multiple settings and clinician levels.
Q: Can you provide an update on the partnership with Tufts and the incorporation timeline of the peptides of CellerateRX?
A: We are currently selecting certain peptides from the 18 available, and you will hear more about this in the near term.
Q: What is the game plan for targeting new adjacent markets such as trauma? Do you need to generate more data or is it more about knocking on doors?
A: We will continue to expand with the right distribution partners and look at other partnership opportunities. We have also hired specialists focused specifically on the bone space to help build out these markets.
Q: With the new GPO deal, does that cause a shift in strategy to go after the 3,000 approved facilities that aren't sold into? Also, can you provide an update on BIASURGE progress since launch?
A: We will continue to expand both locally and nationally to gain access to these facilities. BIASURGE had a soft launch in late Q4 2023 and has gained momentum, becoming a top six product for us. Feedback from surgeons across multiple specialties has been very positive.
Q: Why has the growth of bone fusion products stagnated in the last couple of quarters?
A: The approval process for bone fusion products is more stringent compared to soft tissue products. We have recently hired bone specialists to focus on this area, which should help improve growth in the second half of the year.
Q: What are the key areas you need to solidify to get ready for the Tissue Health Plus pilot in Q1 of 2025?
A: We need to finish building our technology platform, validate our economic model with payers and network partners, and prepare education and onboarding assets for our staff and partners.
Q: What is preventing you from being more profitable in the Surgical segment at your current run rate?
A: We are focused on building a complete portfolio of products to support surgeons, which requires continued investment in infrastructure. We believe we can maximize profitability in the future through fixed cost leverage as we continue to grow.
Q: Was there anything one-time in Q2 that made the growth rate more robust than it would have been under a normal sales cadence?
A: No, the growth was steady and incremental throughout the quarter without any one-time orders or big stocking orders.
Q: When do you see a breakeven or do you foresee continuing to burn cash as you grow?
A: Once Tissue Health Plus crosses the profitability threshold, the Surgical segment will stand on its own and be profitable. We are building our infrastructure to support high growth and expect significant leverage off our SG&A in the future.
Q: Do you think the negative cash burn is a reason for the depressed stock price?
A: The stock market is unpredictable, but we believe in our growth strategy and the future success of the company. Most of our directors and I have not sold any shares, indicating our confidence in the company's potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
