MiMedx (MDXG) Q3 2025 Earnings Call Transcript

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Date

Wednesday, Oct. 29, 2025, at 4:30 p.m. ET

Call participants

• Chief Executive Officer — Joseph H. Capper
• Chief Financial Officer — Douglas C. Rice

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Takeaways

• Net Sales -- $114 million in net sales for Q3 2025, representing 35% year-over-year growth, reaching a new company high for the quarter.
• Wound Franchise Sales -- $77 million in wound sales for Q3 2025, up 40% year-over-year, with growth driven by new product introductions such as Solara and Emerge.
• Surgical Franchise Sales -- $37 million in surgical sales for Q3 2025, reflecting 26% year-over-year growth; Amniofix and Axiofill reported strong performance.
• Adjusted Gross Margin -- 88% adjusted gross margin, an increase of approximately 540 basis points from the third quarter of 2024 due to product mix and favorable production variances.
• GAAP Gross Margin -- 84%, compared to 82% in the third quarter of the prior year.
• Adjusted EBITDA -- $35 million, or 31% of net sales, compared to $18 million and 22% of net sales in the prior year period.
• Adjusted EBITDA Margin Guidance -- Raised to at least the mid-20% range for full-year 2025 adjusted EBITDA margin as a percentage of net sales.
• GAAP Net Income -- $17 million, or $0.11 per diluted share for Q3 2025, up from $8 million and $0.05 per share in the prior year period.
• Adjusted Net Income -- Adjusted net income for the third quarter was $23 million, or $0.15 per diluted share, compared to $10 million and $0.07 per share in the prior year period.
• Free Cash Flow -- $29 million in free cash flow generated, with $124 million in net cash at quarter end.
• Year-End Net Cash Guidance -- More than $150 million expected by December 31; gross cash may exceed $160 million by year-end 2025, accounting for $18 million in outstanding borrowings.
• Full-Year Revenue Growth Guidance -- Increased from the low teens to the mid-to-high teens percentage range for full-year 2025.
• Product Portfolio Expansion -- Full market launch initiated for Epi Express; clinical manuscript and presentation steps completed for EpiEffect, with positive interim trial data to support reimbursement requests.
• Customer Portal Penetration -- Nearly 60% sequential sales growth in orders managed via MyMedix Connect, with enhanced features such as online bill pay added.
• Regulatory Environment Update -- Centers for Medicare & Medicaid Services (CMS) issued proposed rules, including a fixed reimbursement of $125.38 per square centimeter for skin substitutes under both physician and outpatient settings, proposed for calendar year 2026, with final rules expected in November and implementation anticipated at the start of the new year.
• Operational Investments -- Allocation of resources to expand surgical offerings, generate real-world clinical evidence, and pursue both organic and inorganic growth opportunities; litigation-related expenses contributed to a G&A expense of $15 million for Q3 2025.

Summary

MiMedx Group (NASDAQ:MDXG) posted record financial results for Q3 2025, highlighted by significant revenue and profit expansion across both wound care and surgical segments. Management raised full-year 2025 revenue and non-GAAP adjusted EBITDA margin guidance, citing sustained commercial momentum and greater operating leverage. Recent product launches and favorable clinical data supported management’s confidence in meeting upcoming LCD evidence requirements and maintaining coverage under evolving reimbursement frameworks.

• CEO Capper stated, "We expect to end the year with a net cash balance of more than $150 million."
• Recent CMS proposals signify a shift to a unified reimbursement model for skin substitutes, which the company anticipates will benefit its performance-driven positioning as competitors with profit-driven models potentially exit the market.
• Capper noted, "we are well prepared for a range of potential scenarios," referencing ongoing scenario planning in anticipation of Medicare payment rule changes, though management refrained from providing granular detail pending publication of the final CMS rules.
• Product mix contributed to the company’s margin expansion, and new wound care and surgical launches provided incremental revenue streams within the quarter.
• Management reported sequential and year-over-year growth in the particulate allograft segment driven by both Axiofill and HelioGen, with evidence-building efforts underway for broader reimbursement and clinical adoption.
• Leadership confirmed active consideration of mergers, acquisitions, and licensing deals, particularly within the surgical segment, but signaled valuation challenges for wound-care assets due to reimbursement uncertainty.
• GAAP sales and marketing expenses grew in absolute dollars but improved as a percentage of net sales, reflecting adjusted commission plans and sales scaling dynamics.

Industry glossary

• LCD: Local Coverage Determination. This refers to regional Medicare administrative contractors’ published policies identifying which services and products are covered and under what conditions, impacting reimbursement of medical products.
• PFS: Physician Fee Schedule. The CMS reimbursement system specifying payment amounts for physicians’ services in outpatient and office settings.
• OPPS: Outpatient Prospective Payment System. A CMS reimbursement model governing payment for hospital outpatient services, including certain device and product payments.
• TRG Letter: Tissue Reference Group Letter. An FDA correspondence confirming a tissue product’s regulatory classification, which affects its marketability and compliance pathway.
• WISER Model: Wasteful and Inappropriate Service Reduction. A CMS initiative leveraging artificial intelligence and human review to reduce fraud and abuse in reimbursement, initially focused on skin substitutes.

Full Conference Call Transcript

Joseph H. Capper will kick us off with some opening remarks and a summary of our operating highlights, as well as a discussion of our financial goals, and Douglas C. Rice will provide a review of our financial results for the quarter. Then Joseph H. Capper will conclude before we make ourselves 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-Ks and our quarterly report on Form 10-Q. Also, 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 mimedx.com. With that, I'm now pleased to turn the call over to Joseph H. Capper. Joe?

Joseph H. Capper: Thanks, Matt. Good afternoon, everyone. Thank you all for joining us for today's call. I'm very pleased to report that our third quarter performance was outstanding across the enterprise. Generating strong top-line growth in both our wound and surgical franchises. We set new company highs for quarterly revenue, adjusted EBITDA, and adjusted EBITDA margin which added $23 million of cash in the quarter. I am extremely proud of the team's focus, which drove these superior results. We continue to prove we can adjust to challenges and advance on opportunities whenever they arise. As such, we are once again raising our full-year 2025 revenue growth guidance and our expectations for adjusted EBITDA margin.

Our goal for the remainder of the year is to maximize near-term opportunities to ensure a strong finish and usher in the pending Medicare reimbursement reforms from a position of strength. The final rules are likely to be implemented at the start of 2026 and we are well prepared for a range of potential scenarios, especially given the dramatic financial improvements we've made to the business over the last few years. I will touch on some of the highlights of the quarter and then provide an update on our strategic focus, which I'm confident will help you understand why we are so bullish about the future for MiMedx Group, Inc.

For the third quarter, year-over-year net sales growth was an exceptional 35%, finishing at a record $114 million. Our adjusted gross profit margin was 88% in the quarter, adjusted EBITDA was $35 million or 31% of net sales. We continue to build cash ending Q3 with $124 million in net cash, a sequential increase of $23 million for the quarter, and we expect to end the year with a net cash balance of more than $150 million. Our Surgical business was an important contributor, growing 26% this quarter driven by the continued growth across the portfolio.

We now have over half of the target patients enrolled in our EpiEffect randomized controlled trial, and we have recently completed an interim analysis with favorable results. We launched a few strategic collaborations with companies offering complementary solutions in the wound care market, and we continue to evaluate additional products to expand our portfolio for both our wound and surgical businesses. In terms of our strategic focus, we continue to make excellent progress in the three areas we have consistently highlighted as the most important for our long-term growth. Our top strategic priority is to continue to innovate and diversify our product portfolio.

As you have witnessed, one of the ways we have been able to maintain strong momentum in the business has been with the introduction of products designed to address the numerous unmet needs in both the wound care and surgical markets. In this year alone, continued with the full market release of EpiEffect, licensed and introduced HelioGen Solara, and EMERGE. And we have just begun the rollout of Epi Express. A randomized controlled trial for EpiFek continues to progress on schedule. As mentioned, we have over half of the target number of patients enrolled and randomized, which provided sufficient data for interim analysis and manuscript submission. These favorable results will be presented tomorrow at the Tissue Repair Evidence Summit.

This is excellent news, as we will then have completed all the necessary steps to request reimbursement coverage for EpiEffect as required by the pending LCDs. On our last call, I mentioned that we had received a TRG letter for Epi Express, which confirmed its status as an FDA Section 361 product. Epi Express is a fenestrated allograft designed to be used in post-acute cases where the flow or extraction of fluid is of critical importance to the healing process. The full market release of Epi Express is now underway and the early feedback is extremely positive.

Solara and Emerge, allografts we licensed to remain competitive in the private office marketplace until Medicare reform is enacted, both performed well in the quarter, contributing to our growth in wound care. We also continued executing on the previously announced co-pilot with Vaporox. As a reminder, the Vaprox system, named VHT, or Vaporous Hyperoxia Therapy is a 510(k) clear device that delivers ultrasonic mist and concentrated oxygen for the treatment of nine types of hard-to-heal chronic wounds, including diabetic foot ulcers, venous leg ulcers, and pressure ulcers. We are receiving excellent early feedback about this solution. Our second priority is to develop and deploy programs intended to expand our footprint in the surgical market.

To achieve our continued success in this area, exemplified by our 26% Surgical revenue growth in Q3, we have committed significant resources toward the introduction of products, like our Xenograft particulate Tiologen, additional commercial resources, and development of robust real-world evidence demonstrating the potential clinical benefits for patients, the healthcare economic payoff, and the immense business opportunity for MiMedx Group, Inc. By way of example, we've mentioned the use of our technology in anastomosis procedures a few times in the past. One of the most common complications from those procedures are leaks, which occur in upwards of 9% of patients who undergo colorectal surgery and are associated with statistically significant increases in morbidity, mortality, length of stay, and rehospitalization.

The costs associated with these complications are estimated to be approximately $28 million for 1,000 patients, making anastomotic leaks a nearly $14 billion challenge for the healthcare system. As we have demonstrated, peer-reviewed publications, the application of Amniofix as a protective barrier at the surgical closure site has proven to help reduce anastomotic leaks by nearly 50% and readmissions by approximately 40%, which would provide massive savings. Given there are over 500,000 colorectal surgeries per year in the U.S., our TAM is in excess of $500 million for AmnioFix just in colorectal procedures. We will continue to make these critical investments and expect to generate evidence across a variety of procedures.

Our third initiative is to introduce programs designed to enhance customer intimacy. As we have mentioned, we believe the way we interact with our customers and our company's comprehensive value offering will help drive engagement and retention, especially as we transition to a reimbursement environment where profit potential is no longer the primary driver in product selection. We continue to invest in ways to enhance these relationships, including increasing and improving customer interaction at various levels within the company. We also continue to experience excellent adoption of MyMedix Connect, our proprietary customer portal. In the third quarter, we saw sequential sales growth of nearly 60% of orders managed within MiMedx Connect.

We also recently added bill pay functionality within Connect for online payments and invoicing, and we are actively developing additional features to this system designed to improve workflow and strengthen the bond between MiMedx Group, Inc. and our customers. We believe our commitment to this approach will lead to enhanced customer relationships, improved Net Promoter Scores, higher margins, and ultimately an increase in the average lifetime value of a customer. On last quarter's call, we discussed the reforms CMS plans to implement to address the runaway fraud, waste, and abuse plaguing the skin substitute market.

As a reminder, CMS announced the following initiatives: First, at the June, CMS introduced the Wasteful and Inappropriate Service Reduction or WISER model, which is focused on leveraging artificial intelligence and machine learning in concert with human clinical review to curb fraud, waste, and abuse. Health care. This voluntary model, which aims to encourage safe and evidence-supported best practices for treating Medicare beneficiaries, will run on 01/01/2026, through 12/31/2031 in five states, and will examine several product categories including skin substitutes. Next, in July, CMS posted the proposed physician fee schedule, PFS, and the outpatient prospective payment system or OPPS for calendar year 2026.

These proposed rules move away from the ASP methodology in the private office and the bundle in wound care centers. In favor of a fixed payment for skin substitutes of $125.38 per square centimeter in all outpatient sites of care. Private offices and wound care centers alike. We submitted our comments to the proposed rules in September, recommending CMS consider setting a higher application fee for providers covered by the PFS, reimbursement of skin substitutes as pass-through items, setting the fixed price using other reasonable inputs we highlighted resulting in a relatively modest increase to the price per square centimeter. Applying an inflationary index moving forward, and phasing in a price change over time.

We believe these suggestions, taken together with compensate providers appropriately for the important work they do. Eliminate perverse incentives to overutilize skin substitutes and ensure product developers continue to invest in cutting-edge technologies and solutions. All while saving U.S. taxpayers the Medicare trust fund and beneficiaries billions of dollars. Final rules are expected to be published in November to take effect at the start of the New Year. Lastly, the much-discussed LCDs are scheduled to go into effect on January 1. It remains to be seen if they will be modified and or delayed once again. But as I said earlier, we are well-positioned for any scenario.

As we stated in the past, we are extremely confident of the company's position post-Medicare reimbursement reform. When product performance is once again the primary factor driving product selection, our best-in-class technology will carry the day. Let me offer three facts in support of this statement. First, in 2023, we grew our business by 20% with constant pricing. It was all volume-related growth driven in part by the introduction of a few new products and commercial execution. This was just about the time we started to see a rapid uptick of new high-priced skin substitutes entering the market, which subsequently caused our growth to slow.

Second, in the surgical market, profit potential does not so overwhelmingly drive product selection, we have been outperforming in the market. As evidenced by our 26% growth in the third quarter. And third, we've recently introduced a few Bloom products that are more competitively priced. These products are priced below the mean of other available products on the market, have been enough to stem the attrition of customers in search of these opportunities. These three points illustrate the profit potential is not such an outsized motivator in product selection, and performance and outcomes are of greater importance, MiMedx Group, Inc. grows faster than the market.

We also expect to see a number of competitors decrease in the wound care market when the reimbursement reform goes into effect. As certain business models will become significantly less attractive We, therefore, see this as an excellent opportunity to pick up market share. Before I turn the call over to Doug for a detailed financial review of the quarter, I'd like to share some of my thoughts on guidance. First, had a great third quarter. We expect to finish the year in similar fashion. As such, we are increasing our full-year 2025 revenue growth rate outlook from the low teens to the mid to high teens.

We also now expect our full-year adjusted EBITDA margin to be at least in the mid-20s as a percentage of net sales. Second, are no doubt trying to determine how to model the business for 2026 post the implementation of proposed reforms. Are somewhat in the same boat. However, it would not be prudent to project the base case from the proposed numbers and current volumes given the other factors, which will no doubt benefit our business. Until we have clarity on the CMS final rules for the PFS and OPPS, which have yet to be published, we do not want to over speculate.

At a higher level, we do expect some choppiness in the early part of the year as the industry navigates the changes. Still, we welcome these reforms and expect the change will bring much-needed stability and predictability to the market. We firmly believe that the change is an opportunity for MiMedx Group, Inc. to pick up share due to our numerous competitive advantages. We have a fully vertically integrated business from product development to manufacturing to commercialization. Including donor recovery. We have an excellent robust and defensible intellectual property portfolio. We have arguably the most comprehensive and effective commercial organization in the space. And over the past 2.5 years, we have dramatically improved our financial position.

To include an anticipated net cash balance of more than $150 million by year-end. I've been running medtech companies for decades. And I can tell you that these types of events have a way of shaking out the marginal players. Our fundamentals are solid and we are going to leverage our competitive advantages to ensure continued success in this new area. That is why I am incredibly bullish regarding the prospects for MiMedx Group, Inc. Now let me turn the call over to Doug. A more detailed review of our financial results. Doug?

Douglas C. Rice: 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 quick reminder, as Matt mentioned at the top, many of the financial measures covered in today's call are on a non-GAAP basis, so please refer to our earnings release for further information regarding our non-GAAP reconciliations and disclosures. Moving on to the results. Our third quarter 2025 net sales of $114 million represented 35% growth compared to the prior year period. By product category, third quarter wound sales of $77 million increased 40% versus the prior year period while surgical sales of $37 million were up 26% reflecting strong results across both of our franchises.

We saw significant contributions across our business in the third quarter. In Wound, our third quarter performance was driven by new product sales of Solara and Emerge. In our surgical franchise, Amniofix and Amniofix once again delivered strong double-digit year-over-year increases in sales. In our particulate products, also demonstrated strong growth on a year-over-year and sequential basis. Our third quarter 2025 GAAP gross profit was about $95 million a 38% increase compared to the prior year period. Our GAAP gross margin was 84% in the third quarter 2025 compared to 82% last year. Excluding the incremental acquisition-related amortization expense in the quarter, our non-GAAP adjusted gross margin was 88%, up about 540 basis points compared to the 2024.

This increase was primarily a result of product mix as well as the timing of positive production variances. In light of the strong year-to-date results, we now expect our full-year non-GAAP gross margin to be around 85%. Turning to our operating expenses. GAAP sales and marketing expenses were $54 million or 47% of net sales in the third quarter compared to $42 million or 50% of net sales in the prior year period. The dollar increase was due to a combination of increased sales costs including higher commissions, associated with both higher sales as well as the changes we made to our sales commission plans in the 2024.

As a result of our year-to-date results, we now expect full-year 2025 sales and marketing expenses to be between 49-50% of net sales which would be a modest improvement on a percentage of sales basis compared to 2024 albeit up in absolute dollars. GAAP general and administrative expenses, or G and A, were $15 million or 13% of net sales in the third quarter compared to $12 million or 14% of net sales in the prior year period. The dollar increase was driven by incremental spend from legal and regulatory disputes in the current period, including our ongoing litigation with certain competitors and former employees.

As with other OpEx lines, we expect GAAP G and A to grow in absolute dollars for the full year 2025 and to be about 14% to 15% of net sales. Our third quarter R and D expenses of $4 million or 3% of net sales was up $800,000 compared to the prior year period. Our R and D expenses are primarily comprised of the costs associated with our Epi effect RCT as well as additional spend related to the development of future products in our pipeline. As Joe mentioned, we have prepared an interim analysis of the Epi effect RCT and have submitted it for publication and presentation later this year support of any potential Medicare coverage requirements.

As we think about the full year, we expect R and D expenses to be about 3% of net sales. GAAP income tax expense for Q3 2025 was around $6 million reflecting an effective GAAP tax rate of 27%. Continue to expect our long-term non-GAAP effective tax rate to be 25%. Our third quarter GAAP net income was $17 million or $0.11 per share on a diluted basis compared to GAAP net income of $8 million or $0.05 per share in the prior year period. Adjusted net income for the third quarter was $23 million or $0.15 per share compared to $10 million or $0.07 per share in the prior year period.

Third quarter adjusted EBITDA was $35 million or 31% of net sales, compared to $18 million or 22% of net sales in the prior year period. Sequentially, our third quarter adjusted EBITDA grew by nearly $11 million as we focus on expense management that enables our sales increases to drop to the bottom line. Turning to our liquidity. We continue to bolster our balance sheet and position the company to make growth investments. In the third quarter, the business generated $29 million in free cash flow. A record for the company and our net cash position rose $124 million. The steady improvement in our balance sheet provides us with the ability to evaluate a range of organic and inorganic investments.

And we believe we have a healthy amount of combined firepower between cash on hand and borrowing capacity help continue to grow and diversify our business. I will now turn the call back to Joe. Joe?

Joseph H. Capper: Thanks, Doug. As you just heard, we had an outstanding quarter and expect a strong finish to the year. We set record highs for revenue and adjusted EBITDA, with strong growth in both the Wound Care and Surgical businesses. We continue to generate excellent cash flow. We launched EpiExpress, we advanced a few pilot programs to co-market complementary solutions in the wound care market, and we increased our 2025 guidance meaningfully to reflect our strong momentum. As far as the upcoming wound care reimbursement reform is concerned, it is a matter of when, not if this is going to happen. The current trends are not sustainable. We hope these much-needed reforms incorporate our recommendations.

We believe they would be beneficial to all stakeholders. And as I said, we are confident in our ability to excel the industry resets to the proposed guidelines. In closing, I would like to once again thank the MiMedx Group, Inc. team for a tremendous quarterly performance and for your unwavering commitment to our mission and the many individuals we have the good fortune to serve. Let's now shift to Q and A and open the call to questions. Operator, we are ready for our first question. Please proceed.

Operator: Thank you. At this time, we'll be conducting a question and answer session. Our first question comes from the line of Frank Takinen with Lake Street Capital Markets. Please proceed with your questions.

Frank Takinen: Great. Thanks for taking the questions. Congrats on a really nice quarter. I was hoping to start with the guide for the rest of the year. How should we be thinking about kind of contribution from wound versus surgical? Obviously, we still have the wound policy in place through year-end and that might change at the beginning or likely will change at the beginning. But should we continue to expect that, that grows really heavily? And then should we continue to expect that surgical business too as well? Just trying to kind of a little bit more of the variables behind the Q4 guide.

Douglas C. Rice: Thanks, Frank. This is Doug. Good question. We're obviously super happy with record revenue for the quarter led by 40% growth in our wound franchise and 26% in surgical. With regards to the guide and how that looks going forward, I would we continue to expect strong uptake in the surgical suite. And so I would think that momentum continues into Q4 and the wound business and franchise certainly going to continue to grow at a healthy clip. So I 40% is you have to also recall that Q3 last year was sort of the nadir of our impact from the sales turnover that we experienced in Q2.

And so the comps are going to get a little tougher there in Q4. And I'll leave it Yes. The only caveat to Q4, as Doug mentioned, It's gonna be a tougher comp in Q3. And as the rules once the rules are announced, and adjustments start to take place, there's probably some folks who make those adjustments a little bit earlier. So back up to December 10, it's probably a little bit more difficult to prepare. Right? You know, we've got great momentum going. Obviously, first month is So we know we're in good shape. Got it.

Frank Takinen: That's helpful. And then maybe just thinking a little bit about kinda post-January 1. I know you've mentioned you're doing a number of things to prepare for that. Maybe call out some of those things that you're doing today to prepare for different reform options and for your company, is it maybe if you can extend to what you feel like would be the best outcome kind of how your comments were structured and proposed? Or is there anything else you think would be kind of best outcome for MiMedx Group, Inc.?

Joseph H. Capper: Yes. I think how our comments with structuring proposed would be the best outcome for industry and for MiMedx Group, Inc. But what we have been advocating for some time is level the playing field and take this rice berry village out of the equation. It gets on health support. Right? Which we don't need it. The reasons of that It looks like that's going to happen. So clearly, welcome their reform. And given our experience in competing on a level playing field we're really comfortable that we're going to outperform the market. I don't want to go into details in terms of what types of scenario planning we have done.

But again, you can imagine an environment that's less attractive from a profitability perspective. Some participants are not are not going to be in the market. They're probably not gonna find this as attractive as it did over the last couple of years. So there's going to be ample opportunities for market share growth and a number of different ways. And look, we have plenty of evidence to that. Right? We've done it in the past. We see it today in our surgical market, how we're growing there. We're much more of a level playing field. Last thing I would leave you with is we have a great balance sheet.

So there's opportunities to do things to kind of aggregate a little bit of that way, we'll look at those opportunities. Got it. And then maybe if I can squeeze one more quick one in.

Frank Takinen: Cash ending at $1.42, I know you guided greater than $150 million of cash. That obviously leaves the door open above 150 how should we maybe think about cash generation if you just put up $20 million this quarter? That 150 million is out there?

Joseph H. Capper: Yes. We probably confuse people because sometimes we talk gross cash and net cash. We still have about $18 million drawn on our line. So when we say 150 million by year-end, think of that as net. So you're probably in the high 160s from a growth standpoint. And the question is, why haven't you paid that line down and it's just Doug yells at me every quarter, it's because we've frankly, we've been looking at so many different opportunities. We thought it made sense to do it all at the same time.

Frank Takinen: Got it. Okay, that's helpful. Thanks for taking the questions.

Operator: Our next questions are from the line of Chase Knickerbocker with Craig Hallum. Please proceed with your question.

Chase Knickerbocker: Good afternoon. Congrats on the quarter and thanks for taking the questions. Maybe just first Joe, I was hoping you'd be willing to share in your wound business on a square overall square centimeters basis what volume growth was either sequentially or year over year? Respect your comments on the uncertainties as it relates to '26, but just trying to get some sort of guidepost for us as we think about Q4 and then 2026 it relates to volumes?

Joseph H. Capper: Yes. As you know, we have not been public about that because 's puts and takes and ups and downs. And when you launch new products, some products need less tissue. And so your cost your volume per centimeter may go down, may go up. So there's so many so many factors that go into that. We tend to stay away from that. We certainly stay away from it by segment. I think the way I answered the previous question, we're we feel very comfortable about pending changes. We feel that we're in great. We're in a pole position pick up share. Depending on what the ultimate price is.

And the other thing too is depending on what other factors are associated with the new rules. Is there pass-through pricing? Is there opportunity to continue to discount? How much discount is gonna be permitted? There's several other kinda, like, mechanics, I would say, of how these rules are gonna go into effect. It could affect the way people market products. So it's just it's just too soon. We'll know the final rules in a couple of weeks. I'd say, I know we always want the answer today, so do we. But it's right around the corner.

And I have to stress, I don't see another company that is a better position than us to compete once these rules are in effect.

Chase Knickerbocker: Understood. Maybe just on that, have you had a chance to get any feedback on the Hill or from any sort of constituents on some of those suggestions that you made I think particularly around kind of the potential pass-through mechanism or like a CPI adjustment for example instead of a recalculation. Annually? I mean have you gotten any feedback from that?

Joseph H. Capper: Nothing that we could publicly comment on. We work through third-party advisers who communicate directly with as much as possible. Obviously, we're in a shutdown, but as much as possible, directly with CMS and the MACs, and we try to put together as much information on it as we can. But there's nothing that we can share publicly that we can stand by eyeing a 100% at this point today.

Chase Knickerbocker: And then just last, maybe just on the LCDs. You know, that submission as far as the when the clinical data was is supposed to be submitted? It's obviously coming up here very quickly. Have you heard from the MAC as far as get your data in as in LCDs could likely be moving forward? And then on that front, I know you mentioned that presentation tomorrow. But just kind of can you speak any more additional detail to that data or I guess your confidence that it will be sufficient to support inclusion on the LCD as it relates to Epi effect?

Joseph H. Capper: So I'm gonna frustrate you for the third time, Chase. I apologize. There's really not a whole lot more I can offer in terms of LCD, go no go whether going to be implemented, they're going to be modified. And all that's kind of rumor in the industry. Everybody's got their opinion. The second part of your question is whether or not we feel that we've got sufficient evidence relative to EpiEffect to justify reimbursement. The answer to that is yes. The analysis was very strong. And then there's steps we have to go through. There has to be a presentation and there has to be a manuscript submission and then you can apply for reimbursement.

And we have those steps completed as of tomorrow. So we feel comfortable that our submission is in good shape. Whether or not they stick to that protocol is yet to be seen or that I would say requirement is yet to be seen. Will tie back to whether or not the LCDs are once again postponed or and or modified. But we're in pretty good shape with that product.

Chase Knickerbocker: Got it. Thanks, Jeff.

Joseph H. Capper: Thank you.

Operator: Our next question is from the line of Carl Byrnes with Northland Capital. Please proceed with your question.

Carl Byrnes: Congratulations on the quarter and thanks for the questions. Considering the foreseeable shake obviously, from reimbursement changes, which are long overdue, your cash build-up. Are you seeing any compelling so far low-hanging fruit with respect to M and A prospects or business development opportunities that would fit nicely? Thanks.

Joseph H. Capper: Yeah. I would the answer is yes. There are compelling assets. We have leaned a little bit more into the surgical side of our business. In terms of scouring the landscape for opportunities to license and or acquire technologies or products or companies. That does not mean that we're dismissive of wound care business, just that if assets have any exposure to the pending changes, they're much more difficult to value. At this juncture. But I think there's ample opportunity to leverage or use our balance sheet to accelerate the strategic growth plan.

So we're not we've said this in the past, we're not buying for the sake of buying but if it fits our strategic plan, if it augments our current product portfolio, in the wound care business, if it adds assets that are a strategic fit for us in the surgical business, they're the kind of the types of assets that we're looking at.

Carl Byrnes: Great. Thanks so much, and congrats again.

Douglas C. Rice: Thank you.

Operator: Our next question is coming from the line of Ross Osborn with Cantor Fitzgerald. Please proceed with your question.

Ross Osborn: Hey guys, congrats on the strong quarter. Starting off, would you walk through where you're seeing adoption of HelioGen and where you stand on evidence generation there?

Joseph H. Capper: We haven't put out a number on that, but you know, it's increasing quarter to quarter sequentially. Increasing month to month, quarter to quarter. But it takes a while. Right? So you have to get product on contract. You have to get it through batch. You have to through value analysis. Committee just should say. And then you have to prove efficacy at the surgical level. Feedback is great. We are building evidence. Around it in various cases. So, you know, I would expect it to be don't we haven't put out a growth number on that, but let's just say it's becoming a meaningful contributor to our surgical business.

And I can't stress enough how important it is for us to point out the fact that the surgical business continues to grow well. When we decided this to shut down the business about two years ago, did that with the intention of pivoting more and focusing more on the surgical business. And we've done that. We've added human resources to that group. We've added products, as you know, launched a few new products including Heliogen, which we just started talking about. And we spent a lot of time on the evidence. I walked through one example of that. In our comments. That's about a third of our business today.

So the surgical business is about one-third of our total business. You could do the math on that. And it's growing at 15%, 20% plus all year long. If that was a stand-alone surgical company with that kind of growth rate, it would be I think we would all agree it would be traded in a much higher multiple than MiMedx Group, Inc. is trading at today. So we're super excited about continuing to invest in that business.

Ross Osborn: Great. And then turning to Axiophil, what's the path forward there following the September court ruling?

Joseph H. Capper: We have to kind of resubmit our arguments and likely have another hearing with the judge. So sort of back to the beginning. Which is in the meantime Axiophil continues to do well in the marketplace. You remember, when we brought a HelioGen, into the portfolio, that was part of that was mitigation in the event that AxialFill went away. So we have not overtly tried to change out that product. And it has stabilized even in some cases grown. So we looked at our particulate business, which would be Axofil and HelioGen together. That's a really strong business. It continues to grow. So we'll see. We'll get through that.

But we have we have some mitigation plans in place, including Axiafila for some reason that does not go our way. But we think our case is really strong. Arguments are really, really strong. And I wouldn't read anything into that delay other than it was a little bit long in the tooth. From a scheduling standpoint, and that may have motivated the judge to kind of do a reset.

Ross Osborn: Okay, got it. Thanks for taking our questions.

Operator: Sure. Thank you. The next question is from the line of Anthony Petrone with Mizuho Group. Proceed with your question. Congrats here on a great quarter. Very, very bullish results all around.

Anthony Petrone: Maybe on the 40% wound growth in the quarter, and obviously you mentioned the final CMS LCD outcome here coming in November. Do you think there was pull forward of demand in the physician channel, specifically just ahead of that ruling? Did you notice any of that taking place? And then just when you think of underlying volumes on the surgical side, we've heard from others and in the medical device space that there's some pull forward of just surgeries generally on the notion that potentially ACA policies may not renew just with the government shutdown happening here. Did you notice any pull through on the surgical side from any Medicaid or ACA dynamics? And I'll have one quick follow-up.

Joseph H. Capper: We didn't notice pull through on either side of the business. We certainly notice pull forward, I should say, on the surgical side of the business. Frankly, I expect it in the types of procedures where our product is being utilized. These are not elective surgeries. So I doubt we would be impacted by that. You might see it more in orthopedic space or something like that, but you're not gonna you're not gonna see it really where our products are being used for the most part.

Anthony Petrone: Okay, great. And then just a follow-up again on looking at the final rule here and there's just a debate out there on potentially how skin substitute products could settle on a per centimeter square basis, but also on the allotment for how many applications could be decided on in the LCD. Is there any way to just set expectations on what the range of scenarios could be on a per centimeter square basis, but as well as a total application basis? Thanks again. Yes. Think it's a good point you bring up.

Joseph H. Capper: About limitations because there are things that we still need clarity on, but is one of the reasons why I'm staying away from speculating. And I'm going to frustrate you as much as I frustrated Chase I just can't give you that range right now. I certainly am not going to speculate on what the final price is going to be because there's all kinds of rumors running around in the marketplace and they are just that. We're really close to this thing being public. If I were a betting person, I'd say we're going to see it sooner in November rather than later in November. So we're going to know real soon, Anthony.

And then we'll be able to kind of plug these inputs into the way we've been modeling potential scenarios and we'll have more clarity. But, again, I have to stress that regardless of the rules, the industry will be more stable. It will be more predictable. If it resets somewhat that's okay because this company will outperform the market as it has done in the past when the playing field is even. When everybody is playing by the same rules, especially relative to price and profitability, we will outperform the market. So we welcome it.

Anthony Petrone: Appreciate that. Thank you.

Joseph H. Capper: Thank you.

Operator: This time, this concludes our question and answer session. I'll hand the floor back to Joseph H. Capper for closing comments.

Joseph H. Capper: Thanks, operator, and appreciate you guys being on the call today and the in the company. That concludes today's call and we will speak to you after our next quarter. Thanks everybody.

Operator: Thank you. Today's conference has concluded. You may now disconnect your lines at this time and have a wonderful day.

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