Sanara MedTech (NASDAQ:SMTI) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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<h2>Summary</h2>
Sanara MedTech reported a 19% increase in revenue for Q1 2026 compared to Q1 2025, driven by strong sales of soft tissue repair products.

The company achieved GAAP net profitability with a net income of $0.4 million and improved gross margin to 93%.

Sanara MedTech expanded its sales team to 43 reps and increased its market presence in over 4,000 hospitals and 1,400 facilities.

The company expects Q2 2026 revenue to be between $28.5 million and $29.5 million, maintaining its full-year guidance of $116 million to $121 million.

Management highlighted their strategic focus on the surgical market and plans for organic growth, including the launch of a new product in 2027.

<h2>Full Transcript</h2>
OPERATOR
Good morning everyone and thank you for participating in today's conference call to discuss Sanara MedTech's financial results for the first quarter ended March 31st. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. Please note that this conference call is being recorded and a replay will be available on the investor Relations page of the Company's website shortly. The Company issued its earnings release yesterday evening. On today's call are Seth Yahn, President and Chief Executive Officer, and Elizabeth Taylor, Chief Financial Officer. Before we begin, I would like to remind everyone that certain statements on today's call include forward looking statements within the meaning of the Private Securities Litigation Reform act of 1995. For more information about the risks and uncertainties involving forward looking statements, statements and factors that could cause actual results to differ materially from those projected or implied by forward looking statements, please see the risk factors set forth in the Company's most recent Annual report on Form 10-K. This call will also include references to certain non-GAAP financial measures. Reconciliations of those non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are provided in the Earnings release available on the Investor Relations section of the Company's website. I would now like to turn the call over to Mr. Yahn. Please go ahead sir.

Seth Yahn (President and Chief Executive Officer)
Thank you operator and welcome everyone to our first quarter 2026 earnings conference call. This was a strong quarter for us which exceeded our expectations. Q1 2026 was the first full quarter in which we were entirely focused on the surgical market and the results reflect our sharpened focus and enhanced financial model. We delivered 19% revenue growth compared to the first quarter of 2025 margin improvement and broke through to GAAP net profitability with net income from continuing operations of $0.4 million or $0.04 per diluted share. Our first quarter revenue growth was largely supported by increased sales of our soft tissue repair products, including Celerate RX and Biosurg. Demand for our products is strong and we're particularly pleased with our first quarter results given that our first quarter is historically our seasonally slowest sales period of the year. The quarter was also impacted by a three day weather related shutdown in January which caused us to lose three days of shipping during this period. Despite these challenges, we closed out the first quarter with the strongest sales month in company history in March, excluding October 2024, which benefited from approximately 1.8 million of Biosurg sales due to the industry disruption caused by Hurricane Helene. During the end of 2025 and continuing into 2026, we began strengthening our sales team to support enhanced net revenue growth and our heightened focus on the surgical market. At quarter end, we had grown our sales team to a total of 43 reps. In addition to strengthening our sales team, we're also very well positioned with a robust surgeon user network, a growing number of hospitals where our products are contract or approved to be sold, a growing number of facilities where our products were sold during the quarter, and a leading distributor network for our products that continues to expand. Let me dig into that a bit. As of quarter end, our products were contracted or approved to be sold in over 4,000 hospitals and ambulatory surgery centers throughout the United States. Our products were sold in over 1400 facilities throughout the United States, up from more than 1300 in the first quarter of last year, and we had agreements with more than 450 distributors compared to 400 at this time last year. Also, while it's not our practice to disclose specifics related to our active surgeon user base, I'm pleased to share that we saw solid growth in the number of surgeon users on a year over year basis in Q1. While most of you know this, I want to reiterate that Senera is not subject to reimbursement risk. Given we are 100% focused on the surgical setting, this means that we have lower exposure to fluctuation in the cost of volume of patient care, which allows us to recognize a predictable and reliable revenue stream with consistently strong margins. Looking ahead, we believe we are well positioned with our strengthened sales team in our more refined pure place focus on the surgical operating setting to drive growth. In terms of capital allocation, we are focused on further strengthening our own business model. Our current capital allocation strategy is to drive organic growth, judiciously invest in R and D and grow our pipeline of new products that align with our pure play surgical focus. This includes Austication, our licensed synthetic injectable structural bioadhesive bone void filler which remains on track to be introduced to the market in the first quarter of 2027 as well as some longer term initiatives that we expect to deepen our competitive moat and maintain our position as a leader in bringing innovative surgical products to market. We are encouraged by the strong start to the year and our prospects for the balance of 2026. For the second quarter, we expect to recognize net revenue in the range of 28.5 million to 29.5 million or growth of 10% to 14% year over year. Looking at the full year, we also remain confident in our previously stated guidance of full year 2026 net revenue in the range of 116 million to 121 million, representing growth of approximately 13% to 17%. With that, I will now turn the call over to Elizabeth Taylor, our CFO for a review of our financial results for the quarter. Please go ahead Elizabeth.

Elizabeth Taylor (Chief Financial Officer)
Thanks, Seth. Net revenue in the first quarter of 2026 increased 4.4 million or 19% when compared to the first quarter of 2025, primarily due to increased sales of soft tissue repair products including Celerate RX Surgical and Biosurg. As Seth mentioned before, first quarter gross profit increased 4.3 million or 20% from the prior year period to 25.9 million. Gross margin increased approximately 100 basis points to 93% of net revenue. The increase in gross profit and higher gross margin realized in the quarter was primarily due to to increase market penetration and geographic expansion, product mix and the Company's strategy to continue expanding and developing its independent distribution network in both new and existing US markets. Operating expenses for the first quarter of 2026 were 23.2 million, or 83.6% of sales, compared to 20.8 million, or 88.6% of sales for the first quarter of 2025, an increase of 2.5 million or 12% year over year. The increase in operating expenses was primarily due to higher selling general and administrative expenses offset by a decrease in research and development expenses for the first quarter of 2026. R&amp;D for the first quarter of 2026 decreased to 0.8 million, or 2.7% of sales compared to R&amp;D of 0.9 million, or 4.1% of sales for the first quarter of 2025. While R&amp; D will fluctuate from quarter to quarter based on timing of projects, the Company expects R and D on an annual basis to be within industry standards of 5 to 7% of sales. Operating income for the first quarter increased 1.8 million to 2.6 million, compared to 0.8 million for the first quarter of 2025. Other expense for the first quarter of 2026 was 2.2 million compared to 1.4 million for the first quarter of 2025. The increase in other expense was primarily due to higher interest expense and fees related to our CRG term loan and share of losses from Equity Method Investments. Net income from continuing operations for the first quarter was 0.4 million, or $0.04 per diluted share compared to net loss from continuing operations of 0.6 million or $0.07 per diluted share in the first quarter of 2025. Moving to our non GAAP results, adjusted EBITDA for the first quarter of 2026 increased 1.6 million or 58% to 4.3 million. The increase in adjusted EBITDA was primarily related to net revenue growth offset by increases in SGA. Turning to the balance sheet, as of March 31st, 2026 we had $13.6 million of cash and $46.2 million in long term debt. This compares to $16.6 million of cash and 46 million dollars of long term debt as of December 31, 2025. Net cash used in operating activities as of March 31, 2026 was 2.5 million compared to 2 million and the three months ended March 31, 2025. Notably, we paid our debt service in the quarter entirely in cash as opposed to a combination of cash and payment in kind as we have done in prior quarters. We view this as a milestone and a reflection of our improving free cash flow generation. We are particularly pleased with our working capital in the quarter and ability to pay our debt service in cash given our first quarter historically requires a higher use of cash related to the payment of employee commissions and annual bonuses, so this is encouraging as we progress through the year. As Seth stated, our capital allocation priorities have evolved alongside our strategic shift and focus to target and invest in opportunities in the pure play surgical setting. Looking ahead, we believe that our strengthened free cash flow will allow us to more efficiently invest in our organic growth which includes expanding our sales team to address more underserved geographies. With that, I will now turn it back to Seth for closing remarks.

Seth Yahn (President and Chief Executive Officer)
Thanks Elizabeth. We are very pleased with our first quarter results which serves as an encouraging early validation of our strategic shift in focus to our pure play surgical setting. We believe that we are well positioned with a strengthened sales team and growing market presence among hospitals, facilities and distributors, a robust product pipeline and improving free cash flow generation to strategically and efficiently allocate capital to drive long term growth value for our shareholders. With that operator, you may now open the call for questions.

OPERATOR
Thank you. If you'd like to ask a question, please Signal by pressing STAR1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing Star one. One moment while we poll for questions. Your first question for today is from Frank Takinen with Lake Street Capital Markets. Yes, I can hear you. One moment, please. Frank, your line is live.

Seth Yahn (President and Chief Executive Officer)
Perfect. Can you hear me now? Yes, I think so. Thanks, Frank. Sounds good. Was open to ask one follow up on the first quarter. Could you maybe just break out what was the strongest contributor to outperformance? Maybe was it core Celerate execution and Biosurg within the Vizient GPO? I'm guessing that the new reps haven't started to contribute yet, but I don't know if that's also a piece that's contributing as well. But just great to have a little more color on Q1. Thanks. Yeah, let's start with the reps, the new hires, those three that were mentioned in the call. So they're still kind of going through training that's both in house and then also out into the field as well. So their impact typically takes about from the time of training completion, about six months to start to realize some impact from those individuals. You know, they've done a great job of coming in, getting educated and getting comfortable with our technologies. And we fully anticipate that group, plus some others that you'll bring in before the end of the year, will be able to touch this business before the end of this calendar year. You know, from there, you know, we've done a really nice job in bringing back clarity to the organization on just being a surgically pure play. And we knew that was an important thing for us to do. And our team has responded extremely well. And even the distributor network, I think, has responded extremely well to it as well. So, I mean, that coupled with strong support around Celerate and Biosurg. You had mentioned, Frank, the Vizient contract that was new to us in the first quarter. It's similar to a new hire. Right? You have to go out and do ongoing training and education at the facility level and our team is doing that. And so we're starting to see some uptick from that and that's really encouraging. And at the same time, Celerate continues to be a real anchor product for us and our team continues to one, get wider into facilities that they've been working in for some time and two, reaching into new facilities as well. And they did an overall really sound job of all three of those things in the first quarter of 2020. Got it. That's very helpful. And then was hoping to ask a follow up on guidance. Heard the comments of Q1 seasonally slowest 3 day weather shutdown also strongest month in company history. Vizient coming this year as well as new reps. Maybe talk through how you contemplated leaving the guide unchanged versus maybe taking it up a little bit just given some of the tailwinds and strong execution you've had here to date. Yes, great question. I mean the goal is always to try to replicate Q4, right? I mean we know Q4 is just higher volume of procedures and if you can do that in the first quarter, you know you stand in good ground. One of the things that we were very well aware of going into this calendar year is in the start of 2025 we went through some reorg for the sales team in a really healthy way to set us up for long term success as well. And as a result of that, we probably saw a little bit of a slowdown in Q1 of 2025. So we had a ton of confidence going into this calendar year in Q1 and to obviously go above our number in Q1 and hit 19% growth was a great achievement for our group. And then you start to look into Q2 at 10 to 14% again. Some of that is just we knew we were going to have a really successful Q1 and Q2 kind of that blended results from Q1 and Q2 guidance really puts us right kind of at that midpoint for our overall guidance on the year. Got it. That's helpful. Thank you. Thanks for your questions.

Kayte
Your next question is from Yi Chen with HC Wainwright. Hi, this is Kayte on for Yi. I was wondering if you could elaborate a little bit more. You spoke of some initiatives for deepening your competitive moat. Could you give us an idea of what that looks like?

Seth Yahn (President and Chief Executive Officer)
There's a number of things. Katie, thanks for the question that we continue to work on. One, we want to surround ourselves with clinical evidence on our core products and we continue to do that at a really great rate. Two, the economic story that continued to come out and was published in the first quarter was really meaningful as well. I think hospitals have done a great job over the last many years to do a solid evaluation of their spend and the meaningfulness of the products that you've brought into the or. And so there's three things that we want to make sure that we're very well aware of. The clinical evidence that supports those technologies, the economic evidence as well, and then to be well positioned with our ASP we feel like we've done all three of those things. And then in addition to that, we're looking at things from an R and D perspective as well on product enhancements and next gen products as well, along with ip, additional IP to support our technology. So there's a lot going on right now in way of that competitive note space and we feel really confident in the work that we're doing.

Kayte
Excellent. Thank you, guys.

Christopher Veseli
Your next question is from Christopher Veseli with Visseli Capital Partners.

Seth Yahn (President and Chief Executive Officer)
Hey guys, thanks for taking the question. Just a quick one for me here. Is there any evidence that macroeconomic pressure is pressuring hospital budgets generally or the pocket of spending that covers scenario products? Yeah, Chris, listen, I think that's a great question. You know, like I said a couple minutes ago, I think hospitals are doing a great job of really assessing their spending inside the or. And we're obviously a supply cost into the drg. But again, the things that kind of let us stand out in those moments is the evidence that supports the technologies, both clinically and economic. And we feel that we're very well positioned with our selling price as well at the hospitals. So, you know, will that work continue by the hospitals? Of course. Will we continue to build more and more of our story around that evidence? Absolutely. And again, we think that we're very well situated given those three things.

Christopher Veseli
Got it, Got it. Thank you. That's all for me. Thanks for the question.

OPERATOR
We have reached the end of the question and answer session and I will now hand the call back to Seth for closing remarks.

Seth Yahn (President and Chief Executive Officer)
Well, again, thank you so much for the questions. I just want to again thank our team, thank our distributor network, the facilities that trust us, and obviously the investor community as well. We're grateful for the opportunity and we look forward to connecting with everybody after our second quarter's performance. Thank you.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.

SMTI

Sanara MedTech (NASDAQ:SMTI) reported a 19% revenue increase for Q1 2026, achieving GAAP net profitability with a net income of $0.4 million. The company expanded its sales team to 43 representatives and increased its market presence in over 4,000 hospitals. Q2 2026 revenue is expected to be between $28.5 million and $29.5 million, maintaining full-year guidance of $116 million to $121 million. Management emphasized a strategic focus on the surgical market and plans for organic growth, including a new product launch in 2027.

Transcript: Sanara MedTech Q1 2026 Earnings Conference Call