Anika Therapeutics, Inc. Stock

Thank you.

Good morning, ladies and gentlemen, and welcome to the and it could second quarter earnings conference call. I would now like to turn the call over to Mr. Matt Hall, Executive Director, Corporate Development and Investor Relations. Please proceed.

Good morning and thank you for joining us for ANACA's second quarter 2026 conference call and webcast. I'm Matt Hall, ANACA's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anaca.com. supplementary PowerPoint slides that will be used for the discussion today. With me on the call are Steve Griffin, President and Chief Executive Officer, and Ian McLeod, Senior Vice President, Chief Accounting Officer, and Treasurer. They will present our second quarter 2026 financial results and business highlights. Please take a moment and open the slide presentation and refer to slide two. Before we begin, please understand that certain statements made during today's call constitute forward-looking statements as defined in the Securities Exchange Act of 1934.

These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance, or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income from continuing operations, and adjusted earnings per share from continuing operations, which are used in addition to the results presented in accordance with GAAP financial measures. We believe that non-GAAP measures provide us an additional way of viewing aspects of our operations and performance. considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our second quarter 2026 press release.

With that context, I'll turn the call over to our President and CEO, Steve Griffin, to walk through our performance and discuss our priorities moving forward. Steve?.

Thanks, Matt. Good morning, everyone, and thank you for joining us. The second quarter marked great progress in our efforts to build a stronger, more profitable ANACA. We delivered commercial channel revenue growth, significant gross margin expansion, our highest adjusted EBITDA since 2020, and improved profitability while continuing to invest in our growth initiatives. These results reflect execution against the three strategic priorities I highlighted in my first earnings call in February. accelerating sustainable revenue growth, driving operational excellence across the organization, and advancing our hyaluronic acid-based innovation pipeline. Our first priority remains accelerating sustainable revenue growth, and the second quarter results reflect progress in that direction. In the second quarter, commercial channel revenue increased 17% to a record level. This was driven by focused execution and broad growth in our international OA pain management and regenerative solutions businesses.

The momentum was evident in our international commercial business, where focused execution and portfolio alignment continue to deliver results. Singal grew 32% and Monavis grew 24% year over year, together contributing approximately $2 million of incremental profitable revenue. Growth we've seen through the first half of the year, with Singhal growing 23% and Monavis growing 19%, has contributed more than $3 million of incremental revenue. These results underscore the durability and growing scale of our international OA pain management franchise. We believe this sustained growth also reflects the benefits of the increased focus and alignment across our international business following the portfolio actions completed over the last 18 months. During the quarter, we hosted our international distributor meeting, with more than 35 of our international distributors represented, providing an opportunity to align around growth priorities, share best practices, and strengthen commercial execution. As our organization and distribution partners increasingly concentrate their attention on our core HA portfolio, we are seeing improved engagement, greater market focus, and stronger execution, which we believe is contributing to the growth trends we are seeing today.

Within regenerative solutions, integrity remains a growth driver. Whole surgeries and units sold increased both sequentially and year-over-year, with year-to-date sales up approximately 39% and revenue just under $2 million for the second consecutive quarter. Growth was driven by expanding international demand and continued adoption of the larger sizes introduced late last year. reflecting increased surgeon confidence and broader utilization of the platform across a variety of anatomies and tendon applications. We remain encouraged by the progress of integrity. The recently launched larger sizes have exceeded our initial expectations, supporting our view that the platform can address a broader range of tendon repair procedures and patient anatomies. We also continue to advance our post-market clinical follow-up study, with enrollment expected to be completed in the coming quarters, further strengthening the clinical evidence, supporting the technology, and providing the data needed to file in the EU. Internationally, momentum remains positive, with stocking orders outside the U.S. increasing more than 50% in the second quarter and June representing the strongest month to date.

As product availability expands and surge in experience grows, we believe Integrity is positioned to support continued adoption across both U.S. and international markets. The strength of our high-aff driven regenerative business extends beyond integrity. Hyalafast performed well during the quarter outside the U.S., contributing to double-digit growth in international regenerative solutions revenue. Its sustained adoption and expanding use across geographies highlight the strength and depth of this regenerative hyaluronic acid-based technology. Together, these drivers continue to enhance the franchise's reach and support sustainable long-term growth. The OEM channel grew 14% year-over-year, driven primarily by favorable order timing across both of our US OA pain management products sold through our partnership with J&J to Pew Synthes. Within the portfolio, performance was led by monovisc unit volumes that exceeded projections for the quarter.

Supported by favorable US and market sales, Monovisk more than offset lower than expected orthovisk revenue. While we believe a portion of the quarter's performance benefited from order timing, underlying demand trends remain encouraging. Given our performance through the first half of the year, we're raising our full year OEM revenue guidance, expecting low single digit revenue growth. we continue to anticipate quarterly revenue variability due to customer ordering patterns The current Depew Synthes team has driven improved demand and enhanced commercial execution. Their focus on physician outreach, customer support, and franchise development has contributed meaningfully to the momentum we are seeing today. We look forward to continuing to build on that momentum together in the years ahead. While commercial channel execution and our J&J partnership remain important growth drivers, we also continue to focus on opportunities to expand and optimize revenue across our broader OEM product portfolio. We have several long-standing OEM relationships and legacy programs that generate attractive revenue and cash flow, and we continue to evaluate ways to enhance both growth and profitability.

While these programs may be smaller individually than our primary growth drivers, collectively they represent an important contributor to shareholder value and are an area where disciplined execution can drive incremental returns. Our second priority, strengthening operational discipline and execution, has been an increased area of focus and contributed to second quarter financial performance and profitability. Gross margin improved to 65% in the second quarter, representing one of the highest levels we have delivered in recent years. This performance reflects progress across manufacturing productivity, operational efficiency, product mix, and disciplined execution throughout the organization. Many of the operational improvements contributing to these results are structural. During the first half of the year, we completed several projects to address manufacturing constraints. monovisc and Singal manufacturing line we completed a capacity expansion project that effectively doubled throughput at a production step that had previously constrained manufacturing output We also successfully completed a planned upgrade of our OrthoVisc and non-orthopedic manufacturing line, in meaningful improvements in yield, throughput, and production efficiency. These investments strengthen our ability to support future growth while further improving the efficiency and cost structure of our manufacturing operations.

Through the first half of the year, we have increased our focus on improving how we can run our core business, and those efforts contributed to our strongest quarterly profitability performance since 2020. We view current performance as evidence that we are building a more efficient, higher return business, and our teams believe we are in the early innings of improving returns. Our focus remains on applying lean principles across the organization, eliminating waste, simplifying processes, and improving productivity. Here in Bedford, we're optimizing our manufacturing operations to increase throughput and maximize facility utilization. We have added targeted headcount to support higher production levels while still increasing gross margin, enabled by process improvements, waste reduction, and a greater focus on value-added activities. In addition, we continue to make capital investments to enhance manufacturing capabilities, increase efficiency, and support future volume growth. Our manufacturing capabilities are becoming increasingly important competitive advantage, and we believe they can create additional value over time.

While we're encouraged by the early progress made to date, we believe opportunities remain to increase throughput through our facility, improve productivity, and deliver higher profitability. Turning to our third priority, advancing our HA-based innovation pipeline, we continue to make progress across our development programs while building capabilities we believe will strengthen the long-term value of our innovation platform. Our strategy remains focused on leveraging our deep expertise in hyaluronic acid and high-f technologies to address unmet needs across OA pain management and regenerative solutions. Starting with Hyalafast, we remain actively engaged with the FDA as the PMA review process continues. We are working through the agency's deficiency letter and expect to complete our response in the coming weeks. Based on our recent engagements, the co-primary endpoints of our clinical study are the most important components of the review and could impact the timeline for ultimate product approval. While the timing of an approval remains outside of our control, our confidence in the long-term opportunity for HylaFAST remains unchanged.

Importantly, the product continues to perform well outside the United States, contributing to double-digit revenue growth and international regenerative solutions revenue during the quarter. Continued adoption across multiple international markets reinforces the clinical value of the product and the strength of our regenerative solutions portfolio. We remain fully committed to bringing Hyalofast to patients in the United States and completing the PMA process. Turning to Singal, enrollment in our bioequivalent study continues to progress as planned. As the program advances, the primary focus increasingly shifts to the Chemistry, Manufacturing, and Controls activities required to support the NDA submission. Syngal is regulated as a drug-drug combination product, creating a substantially different regulatory and manufacturing framework for hyaluronic acid. As a result, establishing the manufacturing and quality systems necessary to support hyaluronic acid as a drug is a critical component of the program.

To support these efforts, we have expanded our CMC capabilities this year and are making targeted investments in manufacturing HA as a drug to ensure we meet FDA's drug manufacturing requirements. These necessary CMC activities will likely be the final workstream completed before the NDA submission. This investment will also improve manufacturing scale over the coming years. Beyond these later stage programs, we continue to focus on long-term growth potential to unlock value from our hyaluronic acid and high-AF platforms. Our regenerative suture and tape program continues to make encouraging early progress and highlights the versatility of our high-off fiber across soft tissue repair applications. More broadly, we remain focused on identifying and advancing differentiated applications where our biomaterials expertise can create meaningful clinical and commercial value. With that, I'll now turn the call over to Ian to walk through the financial details.

Thanks, Steve. Please refer to slide five of the presentation.

Before discussing the quarter in detail, I'll take a moment to call out our first half performance. to date revenue increased 14% to 62 million driven by growth in our commercial and OEM channels. Notably, international revenue reached a record 23 million, up 17% year-over-year. This growth translated into improved financial performance. First half gross margin expanded more than 1400 basis points to 65%. That led to 11 million in adjusted EBITDA as compared to a break even start last year. The actions taken this year are translating into measurable improvements in both growth and profitability. Now turning to the quarter, ANACA generated $32.6 million in total revenue, an increase of 16% year-over-year.

Commercial revenue grew 17% to $13.9 million, driven by international execution, momentum and integrity, and growth across both our OA pain management. and regenerative solutions portfolios. International revenue reached a record $12.6 million, increasing 22% year-over-year, reflecting broad-based growth across markets and product categories. This performance was driven by market share gains and away-paying management and increasing contributions from our regenerative solutions products. Notably, our growth comes from multiple products, geographies, and channels, reflecting the broadening reach of our business. The OEM channel grew 14% year-over-year, supported by Monavis demand and favorable order timing. While quarterly OEM performance can vary, the strength of the first half supports our increased full-year outlook. Assuming a relatively even revenue contribution between the third and fourth quarters, our outlook implies strong year-over-year growth in the third quarter and moderate growth in the fourth quarter as a result of a difficult comparison with a strong fourth quarter in 2025.

Slide 18 Gross margin expanded to 65% compared to 50% 51% in the prior year. This improves improvement reflects higher manufacturing productivity, increased throughput, favorable product mix, and the continued impact of our operational excellence initiatives. These results demonstrate the operating leverage inherent in our business model as we continue to improve execution across our manufacturing lines. operations. Turning to operating expenses, total operating expenses were 18.3 million compared to 18.5 million in the prior year period. Excluding approximately $800,000 of one-time severance costs, adjusted operating expenses were approximately $17.5 million, down 6% year-over-year. G&A expenses excluding severance declined 30% in the quarter, reflecting increased organizational focus, disciplined spending, and the benefits of the actions we have taken to improve operating efficiencies across the company. R and D expense was 7.3 million compared to 6.3 million in the prior period.

Reflecting investments in our highest priority pipeline programs. This includes the advancement of single where Roman and our bio equivalent studies progressing as planned. As well, as expanded CMC activities required to support the submission. Adjusted EBITDA for the quarter was 7.1 million, representing an adjusted EBITDA margin of 22% and our strongest quarterly profitability performance since 2020. We ended the quarter with approximately $38.4 million in cash and cash equivalents in no debt. provides financial flexibility as we continue investing in our strategic priorities while maintaining a disciplined approach to capital allocation. Consistent with that approach, we recently extended our credit facility. The amended agreement maintains substantially similar terms while reducing the overall facility size to better align with our current needs.

The facility includes a $50M dollar revolving commitment along with an accordion feature that provides the flexibility requests up to an additional 50M of borrowing capacity for total potential commitment of 100M. We believe this structure provides ample liquidity and financial flexibility to support our structure. strategic priorities while maintaining an efficient capital structure. As part of our disciplined approach to capital allocation, we completed our previously announced $15 million share repurchase program during the first half of the year. Combined with actions we have taken to reduce equity-based compensation, shares outstanding declined to approximately 13.3 million shares, representing the lowest share count in more than 50 years. Stock-based compensation expense declined 28% year-over-year in the second quarter, reducing dilution and allowing a greater portion of the value created by the business to accrue to shareholders. Taken together, these actions reflect our focus on disciplined capital allocation, operational efficiency, and driving value on a per share basis. Turning to our outlook based on our first half performance, commercial momentum, favorable OEM revenue trends, and improving profitability, we are raising our full year 2026 guidance.

We now expect OEM channel revenue growth of 0% to 5% compared to our previous expectations of down 5% to flat. For the commercial channel, we now expect 12% to 18% growth compared to our prior outlook of 10% to 20%. This narrowed outlook is supported by integrity adoption, sustained international OA pain management growth, and ongoing strength across our regenerative portfolio. As a result, total company revenue guidance include increased to growth of 5% to 10% from 1% to 9% previously. our adjusted EBITDA margin guidance to 13% to 17% compared to our prior expectation of 5% to 10%. increase reflects the operating rule average across the business. Profitability in the second half will be modestly lower than the first half due to OEM order time. Lastly, impacting our 2027 revenue forecast, we are adopting a new revenue guidance practice to include only revenue from products that have received regulatory approval for clearance. Our outlook now excludes the previously implied 3 million of high alifax sales in the US.

Despite this change, total company revenue is expected to be between 0% and 5% growth in 2027. With that, I'll turn the call back over to Steve.

Thanks Ian. Before we open the call for questions, I'd like to leave you with a few final thoughts. The second quarter reflects solid progress across our strategic priorities. We delivered commercial channel revenue growth, expanded gross margins, improved profitability, advanced our pipeline, and raised our full year outlook. Just as importantly, we see multiple opportunities ahead to strengthen and grow the business. An important contributor to this progress is the culture we are building through our lean transformation. By empowering teams closest to the work to solve problems and improve processes every day, we are becoming a more efficient, agile, and accountable organization. Finally, to the many employees listening in on today's call, I want to thank you for your commitment, perseverance, and for driving the positive changes taking place here at ANACA.

Your contributions and hard work are making these changes possible. I also want to thank our distributor partners whose dedication helps bring products to our patients around the world and the patients who place their trust in our therapies every day. Looking ahead, our priorities remain, driving sustainable growth, improving profitability, and creating shareholder value. With that, operator, let's now open the line for questions.

Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Anderson Shock from B.

Riley Securities. Please go ahead.

Hi, good morning. Thank you for taking our questions and congrats on the strong quarter. So first, I mean strong first half for OEM revenue and you've raised full year guidance for growth in this channel. However, the guidance does imply a pretty meaningful sequential step down in the back half. Is this mainly a reversal of first half order timing or does.

into second half pricing or volume. I appreciate the question, Anderson. I would say we did note in our prepared remarks that there is a little bit of favorability, probably between $1 million and $2 million just due to order timing in the second quarter. That does drive some of the sequential step down. The other element, when you take a look at last year, and I know Ian noted it in his comments, is fourth quarter was very high. strong in last year's quarterly split. And so we'd expect to see some level of decline related to that. But broadly speaking, when we talk about the OEM channel, for a while now, almost two years, we've been talking about it being flat or modestly lower. And we're raising our guidance now to imply that it's actually going to grow year over year.

We're really pleased with the performance in the end market from a product perspective here in the U.S. that's helped us support that. Pricing always remains volatile quarter to quarter but underlying it when we add it all together revenue overall is expected to grow which is a nice change in pace.

Okay, got it. And then, gross margin, this is now the third quarter above 60%, improving sequentially. I guess, what are the main drivers here and how sustainable are these levels? Should we view this as the new norm?.

I would say in short, yes. I think the mid 60s is where you could expect us to operate at. You know, the main drivers that you asked about, I noted in my remarks about the lean transformation. I mean, lean is all about eliminating waste and driving throughput and productivity. We've been able to increase our output without increasing our operating expenses. We've been able to improve our yields. And then I noted there have been a number of projects that our teams have worked to implement in our manufacturing operations that have benefited in terms of how we make our products.

So we're really, really proud of that work. And I think, you know, this represents a really important step for us. As you noted, the third straight quarter of a mid-60s these gross margin and something that I think we will look to hold ourselves accountable to. The other element that I would note though is we're really still very much so in the early innings of what we're looking to accomplish. So when we think about the number of projects that we have on deck to go execute across our operations, we do see multiple opportunities to continue.

to create value. So we're going to continue to invest in the manufacturing side of the business. Okay, got it. Thank you. And then on Singall, could you give us an update on the bioequivalence study enrollment? Does this current pace still support completion inside 2026?.

In short, yes, I'd say the bioequivalent study is going as we would have expected. Enrollment remains on track and we did historically note that we'd expect it to be completed in and around year end and there's been no change to our expectations associated with that. It's a small study. It's not something that I have concern around at this point, but enrollment continues.

Okay, got it. Thank you for taking our questions. Thank you.

Thank you. And your last question comes from Mike Pitesky from Barrington Research. Please go ahead.

Good morning. So Steve, I just want to, I guess, drill down on your commentary around the sustainability of gross margin in the mid-60s. Obviously, the first couple of quarters here you've had the benefit of probably some decent favorable mix with OEM and then on On the other side, you've put in some good improvements in terms of manufacturing productivity. And so I just want to make sure, just in terms of the second half, I mean, you presumably won't have that kind of favorable trend. Tailwind in terms of order orders in OEM and I just want to make sure that sort of the, the, I guess the productivity improvements on manufacturing sort of fill that gap. And I anyway, just want to drill down and make, make sure you're, you're saying what I think you're saying. Thanks.

Yes, I appreciate that first question, Mike. I would say, you know, we've started the year at 64 and 65%. I mean, gross margin is never going to be in a straight linear line, as you know. So there is always some level of volatility, but implied in our guidance is that we will maintain sort of that 64% level. There is an element of mix that has to do with how gross margin plays out. from a business perspective, but not in a way that's more material than the overall impact of the projects that we've been able to implement. The gains that we've been able to drive from improved yields and better throughput will start to continue to flow through. So what you heard me say is accurate is that second half of the year, we expect to see sort of that 64% range.

and we'll stand behind it. Great. Just in terms of the communication between you guys and your U.S., distributor for Monovisk OrthoVis. I mean, what's your expectation in terms of pricing over the next, say, six to 12 months? I mean, is there anything you can sort of speak to there in terms of your expectation of, I mean, moderate declines, more than moderate, give ups there. I mean, can you speak to that at all? Thanks.

Yes, we maintain very close communications and regular dialogue with with J&J and Depew Synthes and I would say I Our expectations for the full year was always that there'd be some element of price erosion offset by volume. And I would say the beneficial sort of results so far through the first half of the year and also what's implied in our guidance is that pricing will continue to be a headwind, but volume will more than offset it. And that's what we've seen thus far. So I think the modest decline in price that you noted is probably a fair representation of what we'd expect to see in the coming months and quarters. And as it relates to longer term, I mean, I think there's always going to be that trade off between price and volume. And I think at this point there for the year, they're probably going to be offsetting each other to the point where we'll grow monobisk overall from a revenue perspective driven by higher volume. And we'll expect to see some decline from an orthodisc perspective.

And we haven't given much longer-term guidance beyond that. But I think the pricing headwind and that dynamic that's always been in place here in the U.S. market will continue as we look to drive volume.

Great. Just a couple more. In terms of what you guys have been able to do, it feels like you guys have gotten some meaningful things done in terms of your internal processes there. I assume that like pretty much every other company, you go after the low-hanging fruit, the things that are easiest to accomplish. first, and I'm just curious, I mean, is there more juice to be squeezed here? You know, I mean, do you see meaningful opportunities to continue to sort of improve the way you guys do things that, you know, presumably can support continued margin progress?.

Yes, I think it's a good question and I would, I'm going to break apart my answer in kind of two, two steps. The first one is we did institute a very sizable restructuring on the G&A side earlier this year. That's resulted in a 30% reduction in G&A in the quarter and as you know, 28% reduction in stock-based comp. So from a structural change perspective, there's nothing further. But as it relates to the operating expenses of the business, when we think about sort of manufacturing operations, I still think that there's a very long way to go. We're very much so in the early innings of driving this lean transformation. Those won't play out over 90 days, they take years.

And it's a playbook that's been developed by many other companies, but when deploying this lean transformation, you're really looking for both daily improvement in operations, but also sort of breakthrough projects that can impact our business over a longer time horizon, that being years. And we're working on both of those things simultaneously. So I think we're just very much so in the early innings of the manufacturing that we're looking to drive. But I think in terms of the low-hanging fruit that you referenced from a G&A perspective, I think those are, you know, mostly behind us.

Great. And then just last one, Steve, and maybe asking you to put your CFO cap, hold one back on. Obviously, you guys have moved the needle across a lot of metrics over a very short period of time. The one metric that has not sort of come along, at least over the past couple of quarters, is the cash generation. I guess I just wonder, obviously, you have a strong balance sheet. You don't need necessarily to generate cash in the near term, but I'm just curious how you think about cash generation moving forward and maybe timing for that coming alongside some of the other improvements you guys have been able to achieve. Thanks.

Yes, I would say it's definitely an area of focus of mine and Ian's and our teams. I think the reason for why you see a little bit of a lag from a cash flow perspective is we did see a larger amount of orders go out during the June time period. So AR is a little higher than normal, and we don't really ever have an AR issue in this business. So it's more so from a timing perspective, you wouldn't expect to see. some of that cash flow convert until the second half of the year. We do typically see a difficult start to the year from a cash flow timing perspective. That's just the seasonality effect of this business and a stronger end of the year. So we would expect that trend to continue, such that we're driving for positive free cash flow in the second half of the year.

I would say the other area that we've been very conscious about is investing in inventory to support our manufacturing operations. Having the appropriate levels of safety stock to enable our operations to run at the pace that they're running now is key. And that's something that we pay very close attention to and make decisions around very carefully, but have been a conscious decision that we've made. It's absolutely an expectation of ours that over time we generate stronger free cash flow and probably more of a conversation for 27 and beyond.

Great. Thank you. Thank you very much. Appreciate it. Yes, thank you.

Thank you. And there are no further questions at this time. Mr. Steve Griffin, you may continue.

Great. Thank you, everybody, for listening in on today's call, and we look forward to speaking to you after the coming quarter.

Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect. Have a great day.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good morning, ladies and gentlemen, and welcome to the Anika's First Quarter Earnings Conference Call. I will now turn the call over to Mr. Matt Hall, Executive Director, Corporate Development and Investor Relations. Please go ahead.

Good morning, and thank you for joining us for Anika's First Quarter 2026 Conference Call and Webcast. I'm Matt Hall, Anika's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com, as are the supplementary PowerPoint slides that will be used for the discussion today.

With me on the call today are Steve Griffin, President and Chief Executive Officer; and Ian McLeod, Senior Vice President, Chief Accounting Officer and Treasurer. They will present our first quarter 2026 financial results and business highlights. Please take a moment and open the slide presentation and refer to Slide 2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements.

We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations, which are used in addition to results presented in accordance with GAAP financial measures. We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measures are available at the end of the presentation slide deck and our first quarter 2026 press release.

With that context, I'll turn the call over to our President and CEO, Steve Griffin, to walk through our performance and discuss our priorities as we move forward.

Steve?

Good morning, everyone, and thank you for joining us. In the first quarter of 2026, we made meaningful progress across Anika's three strategic priorities: driving sustainable commercial channel growth, advancing our hyaluronic acid-based innovation pipeline and strengthening execution across our organization. Our first quarter performance reflects a more focused business with early benefits from the operational changes we put in place. I want to walk through our first quarter results through the lens of these three priorities and importantly, in the context of what we said we would do. First, our top priority remains accelerating sustainable revenue growth, and the first quarter results reflect continued progress in that direction.

In the first quarter, commercial channel revenue continued to grow at a double-digit rate, increasing 12%, reflecting strong performance across both regenerative solutions and our international OA pain management portfolio. Within Regenerative Solutions, Integrity continues to be a central driver of that momentum with U.S. procedures up 35% year-over-year, generating nearly $2 million in revenue. Growth was driven by U.S. surgeon adoption, the full launch of larger sizes and expanding international penetration. We continue to be pleased with Integrity's performance as it progresses through the commercialization curve, having now surpassed 3,000 cases with accelerating adoption.

We are seeing surgeons progress to their fifth and tenth Integrity cases faster than initially expected, with acceleration evident across each stage of adoption. This reinforces that once surgeons begin using Integrity, utilization ramps quickly as confidence builds. We are closely tracking new surgeon adoption with new surgeon users per month growing at a double-digit rate month-over-month. This reflects continued success both in expanding our surgeon base and in deepening engagement as surgeons increase their use of Integrity over time. We're pleased by early results following the launch of the larger Integrity sizes with demand tracking ahead of expectations. But the bigger opportunity is adoption.

Today, augmentation is used in only about 8% of rotator cuffs in the U.S. In other words, more than 90% of patients do not receive a patch at all, even though we know augmentation can support better healing. Our strategy is to change that. By expanding the Integrity platform with additional sizes, configurations and enabling instrumentation, we aim to make augmentation easier for surgeons to adopt. Over time, that can both improve patient outcomes and significantly expand the total addressable market for Integrity in the ASC.

Hyalofast also continues to contribute to the strength of our regenerative solutions portfolio, delivering steady growth outside the United States, supporting overall commercial channel performance. International demand remains solid, driven by established clinical adoption and continued expansion across key markets, underscoring Hyalofast's role as a durable contributor to our regenerative platform and a complementary driver alongside newer products within the portfolio. Turning to our international OA Pain Management portfolio. We delivered strong first quarter revenue of nearly $9 million, reflecting the continued strength of our commercial channel. Performance was driven by ongoing regional expansion and improved market share across multiple geographies for CINGAL, MONOVISC and ORTHOVISC.

Lastly, the OEM channel grew 14% year-over-year, primarily due to favorable order timing for both our U.S. OA pain management products sold through our partnership with J&J MedTech and our non-orthopedic products. We continue to expect quarterly variability in this channel. Within the U.S. OA Pain Management portfolio, performance was driven by MONOVISC unit volumes that exceeded our internal projections for the quarter.

With pricing tracking in line with expectations, MONOVISC delivered meaningful favorability and more than offset lower-than-expected demand for ORTHOVISC. This product level mix shift highlights the inherent variability in our OEM channel, where timing and demand can differ by product and quarter without changing our full year expectations. Non-orthopedic revenue was up in the quarter, driven by order timing of our animal health products.

As a reminder, we continue to assess optionality as legacy distribution agreements cycle through with a clear focus on maximizing shareholder value. Our second priority is advancing our HA-based innovation pipeline centered on Integrity, Hyalofast and CINGAL and doing so through a structured and predictable development approach. During the first quarter, we continue to make steady progress across each of these programs. The Hyalofast PMA review is ongoing as we continue to engage with the FDA through their review process. CINGAL also advanced during the quarter.

Enrollment in the bioequivalent study remains on track as we continue to prepare for an NDA submission, including the necessary CMC work to support hyaluronic acid as a drug. In addition, CINGAL has successfully achieved European Union MDR certification, becoming our third MDR certified product alongside MONOVISC and Hyalofast. Importantly, the certification includes expanded indications across multiple joints, including the knee, hip, shoulder and ankle, reinforcing CINGAL's clinical versatility and supporting continued international growth.

In parallel, the post-market clinical follow-up study supporting marketing and the Integrity EU MDR submission continues to enroll and remains on track to complete enrollment later this year. We began 2026 with a clear focus on execution and the progress delivered in the first quarter underscores that commitment. Within our regenerative pipeline, we are advancing an early-stage regenerative suture and tape program that underscores the meaningful potential still to be unlocked from our hyaluronic acid technology platform. Leveraging [ HYAFF ] fiber, we can tailor both mechanical strength and biological response to specific soft tissue and tendon repair needs across a broad range of clinical applications.

While development remains early, and we are not yet quantifying its financial impact, the preclinical data are very encouraging, and we look forward to sharing more as this and other programs progress. Our third priority, strengthening operational discipline and execution has been an increased area of focus, and it was a significant contributor to our first quarter financial performance. Gross margin improved meaningfully compared to the first quarter of 2025. That improvement reflects a combination of higher manufacturing productivity and throughput, the continued benefits of our margin improvement initiatives and greater discipline across our operations. As a result, adjusted EBITDA increased by more than $4 million compared to the first quarter of last year.

Importantly, these results are not the outcome of a single quarter or a onetime action. They are being delivered through deliberate operational transformation that embeds lean manufacturing principles across our operations with a strong focus on continuous improvement and empowering our teams. We have reduced nonstandard work, strengthened engineering solutions and improved productivity by enabling teams closer to the work to drive meaningful change. At the same time, targeted investments in equipment upgrades have supported these efforts, allowing us to execute more efficiently and with greater consistency. Collectively, these actions are changing how we run the business, tightening processes, increasing operational discipline and building a more scalable operating model as volumes grow.

While we don't expect margin performance to move in a straight line each quarter, the first quarter provides clear evidence that our operational transformation is underway and beginning to create meaningful operating leverage in the business. On the expense side, we continue to demonstrate strong cost control across the organization. Excluding onetime severance charges related to actions we took earlier in the year, SG&A remained well managed, reflecting the benefits of a more focused operating model and disciplined resource allocation.

R&D expenses increased this quarter as expected, reflecting deliberate investment in our key pipeline programs. These investments are targeted and aligned with the advanced programs, we believe offer the greatest potential to drive future growth and value creation.

With that, I'll turn it over to Ian to walk through the financial details.

Thanks, Steve. Please refer to Slide 5 of the presentation as I provide updates on the first quarter of 2026. In the first quarter, Anika generated $29.6 million in total revenue, up 13% year-over-year. Commercial channel revenue grew 12%, reaching $12.6 million, driven by strong international execution and continued momentum in Integrity, which continues to exceed our commercial expectations. Our international OA pain management business remained a key contributor, delivering 9% growth in the quarter to $8.9 million of revenue, led by sustained market share gains for MONOVISC and CINGAL across several regions.

OEM channel revenue was $17 million in the quarter, representing a 14% increase year-over-year. The increase was driven primarily by order timing, including shipments of U.S. OA pain management products sold through J&J MedTech as well as certain non-orthopedic OEM products. As we have discussed, the OEM channel is subject to variability related to customer ordering patterns. As a result, some revenue shifted into the first quarter, which may affect reported OEM revenue in the second quarter. Importantly, this timing-related variability does not change our expectations for the full year.

Our gross margin improved in the first quarter, driven by higher volumes and improved execution across our manufacturing operations. GAAP gross margin increased to 64%, up from 56% in the prior year, reflecting higher productivity, increased throughput and the early benefits of our lean manufacturing efforts. Turning to operating expenses. First quarter operating expenses were $24.5 million compared to $19 million in the prior year period. Selling, general and administrative expenses increased to $17.8 million from $12.9 million a year ago, primarily reflecting $4.9 million of onetime severance-related costs associated with previous announced cost reduction actions. R&D expense was $6.6 million, up 11% from $6 million a year ago, driven by continued investment in key regulatory and clinical programs, including Hyalofast and CINGAL.

We are continuing to closely monitor operating expenses, balancing disciplined spending with targeted investment in the programs most critical to long-term growth. Total adjusted EBITDA for the quarter was $4.3 million, driven by strong gross margin expansion and improved operating leverage. We ended the quarter with $41 million in cash with no debt, giving us a strong liquidity position and the flexibility to continue investing in our growth priorities. First quarter cash usage reflected typical seasonal expense dynamics, and we expect cash flow to improve as the year progresses. As previously communicated, we initiated a $15 million 10b5-1 stock repurchase plan in November 2025. And as of April 10, that program has been completed. As part of the second 10b5-1, we have purchased $15 million of stock at an average price of $10.76.

Now please turn to Slide 6 as I review our financial outlook for 2026. Based on our first quarter performance and current visibility across the business, we are maintaining our previously issued full year 2026 guidance. At the total company level, we continue to expect full year revenue of $114 million to $122.5 million, representing 1% to 9% year-over-year growth. This outlook reflects continued momentum in our commercial channel alongside the market dynamics we've discussed in our OEM business. Within the commercial channel, we are maintaining our expectation for 10% to 20% growth or $53 million to $58 million for the full year.

Growth is expected to be driven by the ongoing expansion of Integrity in the U.S., sustained Hyalofast performance outside the U.S. and increasing adoption across our international OA pain management portfolio. For the OEM channel, we continue to expect revenue to be flat to down approximately 5% year-over-year or $61 million to $64.5 million. This outlook reflects anticipated MONOVISC unit volume growth, partially offset by lower pricing. Turning to profitability. We are maintaining our expectation for adjusted EBITDA to be in the range of 5% to 10% of revenue.

At the midpoint, this improvement is driven by higher expected revenue led by commercial channel momentum, along with the benefits of previously announced G&A cost reduction actions and continued productivity and manufacturing improvements as demonstrated in the first quarter. These gains are partially offset by modestly lower J&J MedTech pricing. With that, I'll turn the call back over to Steve.

Thanks, Ian. As we continue the transformation of the company following our divestitures in 2025, the Board is also evolving to reflect this next phase and two directors will be stepping down as outlined in the proxy filed last night. We are grateful for Dr. Glenn Larsen and Bill Jellison's contributions and valuable service to the company. With that context, before we move to Q&A, I want to briefly reinforce what we're focused on and how we're operating. Our priorities are clear. First, we are continuing to drive revenue growth across our commercial channels.

Second, we are advancing our HA-based innovation pipeline through key regulatory milestones in a disciplined and predictable way. And third, we are building on the progress we've made operationally to support improved profitability and long-term scalability. Equally important is how we're going about this. We are running the company with a simple operating mindset built around two principles broadly shared by the best lean manufacturing systems.

First, respect for people; and second, continuous improvement. Respect for people means recognizing that the most important work happens closest to our products and our customers. Leaders exist to support that work to simplify processes, remove obstacles and make it easier for teams to execute and improve every day. Continuous improvement is about being practical, disciplined and honest about where we can do better and then acting on it. This approach is helping us operate more effectively, staying close to customers and surgeons and running the business with a leaner, more focused leadership structure while maintaining strong accountability and execution. I want to thank our employees across the company who are embracing this way of working and showing up every day focused on execution and improvement.

I'd also like to thank the surgeons and patients who rely on our products and partner with us. We value that trust and it keeps us focused on delivering consistent quality and performance. And finally, I want to acknowledge our shareholders. We appreciate your support and engagement as we make these changes to work to build a stronger, more durable business. Your interests are aligned with ours and those of our employees and customers as we focus on long-term value creation.

With that, I'd like to now open it up for questions.

[Operator Instructions] And your first question comes from Mike Petusky from Barrington Research.

So I guess the first question I have is sort of around gross margin. Obviously, a really good quarter in terms of gross margin with some favorable order timing or I should say, favorable mix, particularly, I think, and obviously getting some benefit from manufacturing efficiencies. I guess going forward, I'd assume probably mid -- I'm sorry, upper 50s for most of '26. I mean, is that the right way to model this as things sort of normalize in terms of mix? Or might 60% or very low 60% be more of the new normal going forward?

Yes. Mike, thanks for the question. I think the first quarter is a demonstration of what we can do, and I think the lean manufacturing improvements that we've made are starting to show through. You are correct that we received some favorability in the first quarter as it relates to mix and some of the order timing on the OEM side that benefits the overall business. And so I do think that it will be likely lower over time, and it's going to vary quarter-to-quarter.

I haven't given a specific guide, but it's implied through the EBITDA guidance that we don't expect it to maintain at the same level as it's at in the first quarter. But I think it is a good demonstration of what we're shooting for. Longer term, beyond just the course of this year, we're focused on improving the manufacturing productivity so that we can reduce our cost per unit as we continue to scale and grow operations. And I think this is an important step in that right direction.

Okay. Great. And Steve, you sort of -- you gave a lot of detail, and I really appreciate, I'm sure other people really appreciate around integrity and sort of utilization and the footprint you're building out there with surgeons, et cetera. So given the opportunity that you sort of described, how do you guys sort of, I guess, approach that in terms of training surgeons? I mean, is there sort of a cadence, a rhythm that you all are going out and trying to achieve? Like what's the plan there to sort of get after that 92% of the market opportunity you don't think you're touching now?

Yes. It's an excellent question. And I would say we've talked in the past about the investment that we've made in our commercial channel. It's primarily related to the need to train surgeons on the procedure. And that's really where we spend a lot of our time and focus is on that new surgeon adoption. We closely monitor and track how long it takes the surgeons to get to that fifth and tenth case because that's really an indication of how well they're getting through the learning curve of the product. And that's been sort of our primary focus with the team that we have that are boots on the ground that have done a really great job of establishing a footprint here in the U.S.

I think the broader question you're asking about in terms of how big the total addressable market is, just given sort of the current rotator cuff augmentation percentage rates is another clear indication of where we want to try and grow. And that's going to come not just from surgeon adoption, but also from the ease of use and the different sizes and shapes and instrumentation that we can deploy. And I think that we've got a really interesting product here from its regenerative capability and where we're focused on for R&D in the [ HYAFF ] space in the U.S. is around trying to make that easier so that surgeons are able to deploy it more rapidly to more patients. So it's not just the adoption, but it's also the R&D efforts in that space. And that, plus the clinical data that we're working to gather are sort of all part of our plan as we launch this U.S. commercial channel.

Okay. Steve, I don't think I asked that question as well as I wanted to. I'm going to take a second shot at it. Is there targets internally, and I'd love if you'd be willing to share some of it in terms of how many trainings, how many new surgeons you want to train on Integrity over the course of '26? Like are there targets that you guys are trying to achieve there?

Yes. I appreciate the question. I'll answer it super simply. Yes, we have targets. Yes, our team works against those to try and get new surgeons adopted to the technology. And no, we're not going to share those externally.

All right. Last question for me, at least for now. In terms of the share repurchase, obviously, completed it. Congratulations, particularly on the cost basis of those shares that you all repurchased. I guess my question is, given $40 million of cash on the balance sheet, as you look at sort of capital allocation priorities post the completed share repurchase, what would you call out there in terms of your priorities going forward?

Yes, I appreciate that question. Certainly, the share repurchase is part of a broader capital allocation strategy at the company level. And when we think about capital allocation, there's a few different facets to it. First is the operational investments we've made. So we've made investments in the CapEx in our manufacturing facility, and those are important to allow us to drive growth and scalability. Second will be the investments we've made into our U.S. regenerative commercial channel. So that's been an investment that we've talked about historically as something that's a drag to the P&L.

We think of that really as a capital allocation decision we're making. And then as we think about capital allocation longer term, the share repurchase opportunity is certainly a piece of it. We think about that in the sense that it represents a long-term shareholder value, and we think that the shares today represent value, but we're also considering other elements of the business associated with the long-term potential and where we see our business headed. And at this point, we have nothing further to share.

And your next question comes from Anderson Schock from B. Riley Securities.

Congratulations on the strong quarter. So you mentioned that Hyalofast review time line remains intact. Could you remind us that time line and when you expect to submit the complete response and your working assumptions for an FDA decision window?

Absolutely. Appreciate the question this morning. So we had previously communicated from an impact to Anika's revenue opportunity that it could impact the fourth quarter of next year. That's built into our guidance. And with that is an expectation of sort of an extended time frame of discussions with the FDA. As you noted, we did submit the third and final module in the fourth quarter of 2025, and we received the deficiency letter from the FDA in the first quarter of this year, and we're working on those responses.

We haven't given a specific timetable as to when we expect to have our full response back into them, but it's safe to say that it's in the coming months in terms of what we're planning on submitting back to them, and then we expect to have it back and forth with them associated with the previously announced clinical data.

Okay. Got it. And 2027 guidance remains unchanged. So I guess at what point in the year would you need a positive FDA decision to have enough lead time to ramp commercial infrastructure to support the expected $3 million of 2027 U.S. Hyalofast revenue?

Yes. I think it's safe to say that we've built in a level of buffer in terms of what we think we would need for the commercialization ramp-up to support our business. Everything that we've kind of built into our assumption here of our back and forth with them is kind of built into that overall financial framework. Our teams are obviously working internally on the things that we can do now in support of a potential launch of Hyalofast and then a ramp further in next year would be decisions we would make depending upon FDA.

Okay. Got it. And then could you provide an update on CINGAL's bioequivalent study enrollment to date? Does the current enrollment pace allow you to provide more specific completion and NDA filing window?

It doesn't, but I expect that as we continue to work our way through that, we will be in a position to share more associated with an NDA filing time frame. As you noted, we are working through sort of the two elements of it, which is the bioequivalence study, which I'm not going to share the specific numbers, but it remains on track versus our original expectations as we've started this year.

I think we noted on our fourth quarter call that we had initiated the study in the December time frame of 2025. And so the pace of enrollment is on track. And then we're working that in conjunction with preparation of the CMC work to be able to file for Hyalofast as a drug. So those two things are running concurrently.

Okay. Got it. And then finally, you mentioned a new regenerative sutures and tapes program in development. Could you provide some more color on the size of the market opportunity here?

Yes. I'd say it's a little early. I noted in the prepared remarks that we're not going to necessarily share, I'll call it, financial projections of this because it's still early. Really, what we wanted to do is just highlight the opportunity that exists for HYAFF as a regenerative technology in spaces that are outside of the areas that we're currently covering. Certainly, suture and tape is the space that we think would be most opportunistic. It's a very large addressable market, but that doesn't mean that it would be entirely addressable for us. But it's an area for where we think about regenerative technology in the long term, it could have a bigger impact. I don't think we're at the point yet to share more on that, but the early indication we have on some of the data we've seen has been encouraging.

And there are no further questions at this time. Mr. Steve Griffin, you may please proceed.

Thank you. Thank you, everybody, for joining our call today, and we look forward to speaking with you on our second quarter earnings call.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation. You may now disconnect. Have a good day.

Good morning, ladies and gentlemen, and welcome to Anika's Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 26, 2026.

I would now like to turn the call over to Matt Hall, Executive Director, Corporate Development and Investor Relations. Please proceed.

Good morning, and thank you for joining us for Anika's Fourth Quarter and Year-end 2025 Conference Call and Webcast. I'm Matt Hall, Anika's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com as are the supplementary PowerPoint slides that will be used to the discussion today.

With me on the call today are Steve Griffin, President and Chief Executive Officer; and Ian McLeod, Senior Vice President, Chief Accounting Officer and Treasurer. They will present our fourth quarter and year-end 2025 financial results and business highlights.

Please take a moment and open the slide presentation and refer to Slide #2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance.

In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations which are used in addition to results presented in accordance with GAAP financial measures. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. Reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our fourth quarter and full year 2025 press release.

And now I'd like to turn the call over to our President and CEO, Steve Griffin. Steve?

Good morning, everyone, and thank you for joining us. Before turning to the results, I want to express how grateful I am for the opportunity to lead Anika and for the continued trust and support of our Board as I step into the CEO role. I also want to recognize Cheryl Blanchard for her leadership in repositioning the company and for the partnership she has provided through this transition. Under her tenure, Anika took important steps to sharpen its focus, including portfolio actions and progress across Integrity, Hyalofast and Cingal, which put us in a stronger position to execute going forward. I'm especially appreciative that in her new role as Executive Chair, we will continue to benefit from Cheryl's experience, perspective and relationships as we execute on our priorities particularly as we work to advance key regulatory, commercial and pipeline initiatives.

As we begin today's call, I want to clearly outline the 3 strategic priorities that guide how we run the business, allocate capital and measure success. These priorities build directly on the foundation established under Cheryl's leadership and sharpen our execution as we move forward.

First, revenue growth driven by the commercial channel. Our top priority is accelerating sustainable revenue growth with the commercial channel as the primary driver. This includes continued expansion of our international OA pain portfolio and scaling Integrity as a differentiated regenerative platform. These businesses generate attractive, stable margins, give us greater control over pricing and reduce our reliance on our OEM channel partners while meaningfully improving revenue diversification over time.

The second priority is advancing our HA-based innovation pipeline, centered on Integrity, Hyalofast, Cingal and longer-term development opportunities. These programs address large underserved markets and will further Anika's leadership position in hyaluronic acid. We've made meaningful progress in recent years and remain focused on advancing these programs toward regulatory approvals in the markets where they are not yet approved.

Third, improving operational execution. The third priority in an increased area of focus is strengthening operational execution. This includes improving manufacturing productivity, yield and capacity, which directly supports growth in both our commercial business and our OEM partnership with J&J MedTech, which continues to drive double-digit growth in Monovisc unit shipments.

At the same time, we are establishing a more streamlined organizational design to improve profitability and cash generation. This is not a change in direction, but a sharpening of execution to ensure strategy translates into improved financial performance. With that framework in mind, I want to walk through our 2025 performance through the lens of these 3 priorities.

First, revenue growth. In 2025, revenue growth was led by strong performance in our commercial channel, driven by international OA pain management and continued adoption of Integrity. With these two contributors together delivering commercial channel revenue growth of 22% in the fourth quarter and 15% for the full year, in line with our guidance. Internationally, our OA pain management portfolio, which includes Monovisc, Orthovisc and Cingal, delivered another year of strong growth and share gains. International OA pain revenue increased 28% in the fourth quarter and 12% for the full year, reflecting outstanding execution by our global teams and the durability of these products across multiple regions. Hyalofast also continued to gain traction outside the U.S., benefiting from its ease of use and differentiation. Importantly, our international business has driven strong double-digit growth with a lean cost structure.

Integrity also had an exceptional year. In 2025, Integrity procedures and revenue more than doubled to approximately $6 million, marking its seventh consecutive quarter of sequential growth. Since launch, more than 2,500 surgeries have been performed with over 300 surgeons using the product and a majority scheduling additional cases. During the fourth quarter alone, approximately 600 surgeries were performed, up 20% sequentially, supported by continued surgeon adoption, new size introductions and expanding tendon applications. In 2025, our commercial growth was offset by our OEM channel as a result of a more challenging U.S. OA pain management pricing environment. OEM revenue declined 12% in the fourth quarter and 17% for the full year, consistent with expectations. Importantly, J&J MedTech, which sells Orthovisc and Monovisc maintained their market-leading position. As we focus on growing total company revenue, driven by outperformance in our commercial channel, we continue to work with our OEM partners to drive stability and predictability.

Second, advancing the innovation pipeline. Through 2025, we continue to advance our HA-based innovation pipeline with meaningful progress across Hyalofast, Cingal and building on the Integrity platform. For HYALOFAST, we submitted the third and final module of the PMA to the FDA in the fourth quarter of 2025, including results from the FastTRACK Phase III study. As we previously reported, while the study did not achieve its prespecified co-primary endpoints, it did demonstrate statistically significant improvements across key measures of pain and function used to approve other cartilage repair products. As expected, we received a deficiency letter from the FDA in the first quarter of 2026 related to CMC and clinical data. While we can never make an assurance of FDA approval, we are actively engaging with the FDA, and we remain confident in the evidence supporting Hyalofast's clinical value.

Cingal also made important progress during the year. Cingal has now surpassed 1 million injections across more than 40 international markets and continues to demonstrate strong clinician adoption. In the U.S. The FDA identified two remaining filing requirements for Cingal. The first was a set of required toxicity studies, which we initiated and successfully completed in 2025. The second requirement, the bioequivalence study was initiated in December 2025 and is now underway. Together, these steps keep us on track toward NDA submission and position Cingal as a differentiated solution and a large next-generation OA pain management market.

Finally, Integrity continues to mature, not only commercially but clinically. We are now past the halfway point in our post-market clinical study and remain on track to complete enrollment this year. As a reminder, the post-market clinical study data will be used to support NDR filing, which will enable continued Integrity growth outside the U.S. and accelerate commercial growth in the U.S. In addition, a peer-reviewed MRI-based manuscript, led by Dr. Chris Baker, has been accepted for publication, demonstrating early clinical outcomes that align with our preclinical data and support Integrity's differentiated profile.

Our third strategic priority, operational execution was a significant contributor to improved financial performance in the second half of 2025. Through improved manufacturing productivity, higher yields and increased throughput, we delivered expanded gross margins, positive operating income for the fourth quarter and meaningful free cash flow. These improvements not only strengthen profitability, but also enhanced our ability to support increased volumes for both our commercial products and our OEM partner. Fourth quarter revenue performance, which included the recovery of late shipments, demonstrated how increased volume and disciplined execution can drive improved throughput and productivity. While we do not expect these margins at this level every quarter, the quarter provides a clear illustration of the operating leverage that we can achieve as volumes grow, and we continue to deploy our teams efficiently.

Operational execution goes beyond manufacturing and includes our ability to deliver growth with a lean, efficient back office organization that supports improved profitability. In line with this, we recently implemented a new organizational structure designed to streamline leadership layers, reduce expenses and better align resources with our highest priority growth initiatives. These changes include a combination of senior leadership role eliminations and releveling to better match the current scale of our operations. As we implement these changes, we will work through role transitions over the coming months, supported by the strong team we have here at place at Anika.

As part of this evolution, we mutually agreed with David Colleran that he would transition from his role as Executive Vice President, General Counsel and Corporate Secretary, effective May 2026. I want to thank David for his leadership and many contributions over the past 6 years.

All of the announced changes impact our G&A functions. Together with the recent leadership transitions, these actions are expected to drive approximately $2.5 million in annualized head count savings in addition to more than $3 million in stock-based compensation savings. As responsibilities are transitioned internally and the work is realigned, we expect to see improved profitability in the coming quarters.

As part of this new organizational structure and as I step into the CEO role, Ian McLeod, our current Chief Accounting Officer since 2021 has assumed broader responsibilities across our finance and legal organizations. With these changes, we will not backfill the CFO, COO or General Counsel roles. Responsibilities are being absorbed by experienced senior leaders, creating a more efficient structure that supports sustained profitability and improved cash generation. With these priorities, accelerating growth, advancing innovation and strengthening operational execution firmly in place, we enter 2026 with clarity, momentum and confidence in our ability to deliver improved performance and long-term value.

With that, I'll turn it over to Ian to walk through the financial results.

Thanks, Steve. Before I walk through the financials, I want to take a moment to briefly introduce myself. I've had the privilege of serving as Anika's Chief Accounting Officer since 2021 and I'm excited to step into this expanded role supporting both our finance and legal organizations. I look forward to continuing to work closely with Steve and the broader leadership team as we execute our strategy. With that, let me turn to the results.

Please refer to Slide 5 of the presentation as I provide updates on the fourth quarter of 2025. In the fourth quarter, Anika generated $30.6 million in total revenue which was flat year-over-year, consistent with our revised full year expectations. Commercial channel revenue grew 22%, reaching $13.3 million driven by strong international execution and continued momentum in Integrity, which is exceeding our commercial expectations. Our international OA pain management business remains a key contributor delivered 28% growth in the quarter, led by sustained market share gains for Monovisc and Cingal across several regions. In the OEM channel, revenue was $17.3 million for the fourth quarter down 12% year-over-year, in line with our revised full year expectations. Pricing for Monovisc and Orthovisc sold through J&J MedTech was lower year-over-year as previously communicated. Despite these pricing headwinds, both products continue to hold strong market leadership positions and contribute meaningfully to Anika's overall profitability. Non-orthopedic revenue also declined quarter, reflecting lower demand for legacy products.

In the fourth quarter, gross GAAP gross margin increased to 63% from 56% in the prior year reflecting higher revenue from international OA pain sales and higher volumes of U.S. OA pain, both of which improved throughput and productivity within our manufacturing operations. The margin improvement underscores the structural benefits of our revolving revenue mix and positions us well for improvements in profitability as we move into 2026. We're pleased with the improvements in the second half gross margin and will continue to drive improvements in manufacturing operations into 2026 to increase throughput.

In the fourth quarter, operating expenses were $18.5 million, up from $17.8 million in the same year last year. Selling, general and administrative expenses increased to $12.1 million compared to $11.3 million a year ago, driven by higher sales and marketing expenses, primarily with the growth of Integrity. Research and development expense was $6.5 million, flat versus prior year as we continue to invest in key regulatory and clinical programs, including ongoing work on Hyalofast and Cingal. We continue to monitor our total operating expenses closely to focus on disciplined spending, while advancing the program's most critical to long-term growth.

Total adjusted EBITDA from continuing operations was $4.5 million in the quarter, higher than our revised guidance, reflecting strong commercial channel performance and expanding gross margin. Discontinued operations include the Arthrosurface and Parcus results, which were divested in late 2024 and early 2025, with all material transition work completed, we do not anticipate discontinued operations activity going forward.

Now turn to Slide 6, where I will discuss full year results. For the full year 2025, Anika generated total revenue of $112.8 million, a decline of 6% compared to the prior year and consistent with our revised guidance for the year. Commercial channel revenue was $48.4 million, up 15% compared to the prior year and continues to be a key growth driver in increasing adoption across all our international HA-based OA pain management portfolio and continued Integrity growth. International OA pain management remained a bright spot, reflecting the strong execution of our international commercial team and distributor network and Integrity continues to outperform, driven by increased U.S. adoption and more than doubling revenue to $6 million in 2025.

Revenue in our OEM channel totaled $64.4 million, down 17% year-over-year, in line with adjusted expectations. The decline was primarily driven by pricing and market dynamics of Monovisc and Orthovisc in the U.S. market. GAAP gross margin for the full year was 57% compared to 63% in 2024, reflecting product mix, higher manufacturing costs driven by the manufacturing disruptions from earlier in the year and legacy program costs.

Looking at operating expenses for the full year. We continue to strengthen our discipline across the organization while ensuring we invested in the programs most critical to our long-term growth. Total operating expenses for 2025 were $74.9 million, down from $81.1 million in the prior year, reflecting the meaningful cost actions we executed throughout the year and our continued focus on efficiency. R&D expenses were $25.8 million, essentially flat with the prior year as we continue to invest in the regulatory and clinical work activity supporting Hyalofast and Cingal as well as the ongoing expansion of the Integrity platform. In total, we invested approximately [ $5.2 million ] in 2025 to support Hyalofast and Cingal-related regulatory and clinical activities, representing focused investments that will generate meaningful future benefit across both our OA pain management and regenerative solutions portfolios. SG&A expenses were $49.1 million, a reduction from $55.6 million in 2024 driven by lower G&A head count and expense discipline.

For 2025, adjusted EBITDA was $5.3 million or approximately 5% of revenue which represents an outperformance versus our revised full year outlook of minus 3% to plus 3%. Our results reflect the positive impact of revenue, slightly ahead of expectations improved manufacturing yields and disciplined cost management.

For the full year 2025, we generated $11.2 million in operating cash flow, an improvement over the $5.4 million we generated in 2024 driven by efficient working capital management and lower expenses. Capital expenditures for the year were $6.8 million, reflecting our continued investment in our manufacturing facility to support higher expected output of OA management and regenerative solutions products. We ended the year with $57.5 million in cash with no debt providing us with a strong liquidity decision and the flexibility to continue investing in our growth priorities while executing our share repurchase program. As previously communicated, we initiated a $15 million 10b5-1 stock repurchase plan in November 2025. In the fourth quarter, we purchased 5.5 million common stock. To date, the company has purchased $10.7 million in stock, and the program is expected to be complete in the second quarter of 2026.

Now please turn to Slide 7, as I turn the call back over to Steve to review our financial outlook for 2026.

Thanks, Ian. For 2026, Anika is maintaining its previously communicated revenue guidance ranges by channel and introducing a total company revenue outlook. At the total company level, we expect full year revenue between $114 million and $122.5 million, representing a 1% to 9% year-over-year growth. This outlook reflects continued momentum in our commercial channel and the market dynamics in our OEM business. Within the commercial channel, we are maintaining our outlook of 10% to 20% growth year-over-year or $53 million to $58 million. Growth is expected to be driven by ongoing expansion of Integrity in the U.S. market, sustained Hyalofast performance outside the U.S. and increasing adoption of our international OA pain management portfolio. For the OEM channel, we are maintaining our revenue expectation of flat to down 5% year-over-year or $61 million to $64.5 million. This reflects anticipated Monovisc unit volume growth partially offset by lower pricing, while Orthovisc is remaining modestly flat for the year.

Turning to profitability. As we expect adjusted EBITDA of 5% to 10% of revenue, at the midpoint of this range, this improvement reflects higher expected revenue led by the commercial channel growth, the benefit of our recently initiated G&A cost reduction actions, including leadership changes, as well as productivity and manufacturing gains supporting increased OA pain production, partially offset by modestly lower U.S. OEM pricing dynamics.

To close, we entered 2026 with clarity, momentum and a strong foundation for sustained performance. Our commercial channel is delivering. Our innovation pipeline is advancing with purpose, and our operational execution is driving meaningful improvements in profitability and cash generation. We have the right strategy, the right organization and the right team in place to execute. I'm confident in our ability to build on this progress and create long-term value for our shareholders.

Thank you for your continued support, and we look forward to updating you on our progress throughout the year. With that, we'll open the line for questions.

[Operator Instructions] Your first question comes from Mike Petusky from Barrington Research.

Steve, so real quick on the guidance slide, you guys have U.S. Hyalofast in 2027. And I'm just curious, is a meaningful contribution from Hyalofast in the U.S. aiming the '27, 10% to 20% guide?

I appreciate the question. We had previously shared that we had included about $3 million of anticipated revenue for Hyalofast in '27. We haven't changed that outlook, so it remains the same. Obviously, it's contingent upon approval in the U.S. So that's kind of the big open item that we'll work our way through, but that's the dollar amount associated with it.

Okay. All right. Okay then. Then sort of moving on. In terms of the gross margin, obviously, was really strong this quarter. I'm just wondering as we sort of reset for '26, I mean, should we be thinking more like high 50s for sort of a normalized gross margin? I'm assuming that what you just delivered is not likely, at least sustainable in the near term, although you may get there over time.

Yes, Mike, I think you framed it very well. I think that's exactly what we're planning for. As you noted, I think it illustrates the capability that we have to deliver within our existing business and manufacturing capabilities. To your point, it's not always going to be at that level, but it gives our team something that we're shooting for over the longer term. The high 50s that you just noted though, is appropriate.

Okay. Two more real quick. Obviously, a nice positive free cash for the year and evidently for the quarter. In terms of what you see going forward? And I know it's not an official part of your guidance, but I'm just curious, do you expect free cash to grow off of '25 levels? And if so, I mean, will it be slight or will be somewhat material?

Yes, sure. I would say '26 cash -- I expect it to be probably somewhat in line with '25 just given some of the puts and takes and dynamics that we just referred to. Obviously, we've got to work through some of the restructuring-related elements of the things that I just noted earlier about some of the operating expenses for the business. At this point, though I'd say modestly in line with the '25 results.

Okay. And then just one more, and I'll let other people have a shot here. Obviously, international OA pain outperformed, had a really good year. I'm just curious, in terms of the dynamics internationally, I mean, are there countries where you're there, you're approved, but you're really sort of under optimizing? And then are there also new countries that you don't really have a foothold in, but you could actually commercially launch products?

Sure. Our international OA pain franchise is led by James Chase, who's done an excellent job, as you can tell, in creating a really sustained momentum. And I think it is a multitude of contributors. So first and foremost is market share gains in the places where we play today as well as growth in new markets. There's no one single market that stands out to kind of drive this top line growth. And I'd say he's got a long-term pipeline for each product in each country targeted with each distributor that we work with to find the right opportunities, and it goes out many years. So we're very pleased with the results that he's been able to generate consistently over the last 5 to 6 years, and we look forward to continuing to do that in this year's plan as well.

Your next question comes from Anderson Schock from B.Riley Securities.

Congrats on the strong quarter. So first, on the OEM channel, so you posted some strong sequential improvement, about 9% from the third quarter despite the continued pricing headwinds. Could you unpack what drove that improvement? And as you look at early 2026 order patterns in your conversations with J&J, what gives you the confidence that OEM lands flat to modestly lower for the full year?

Sure. Anderson, thanks for the questions. It's nice Like to talk to you again. We did see a bit of an increase, and I think it's tied primarily to volume and user demand. I noted earlier that we still see very strong end-user demand from a unit perspective on Monovisc, which is the largest contributing factor to the sequential improvement that you're noting. When we look to 2026, we've had many conversations with J&J as they look at the future of this market. We expect to see continued market share gains and volume growth, offset modestly by price. A little too early probably to tell exactly how it will play out. I mean, this is one of those businesses where it could be a little lumpy, and there is some fourth quarter dynamics in the United States to some extent. But we'll see it play out over the course of this year, but suffice to say that we believe that this is the appropriate guide for the year.

Okay. Got it. And then with both the toxicity studies for Cingal now completed, the bioequivalent study initiated in December. Could you provide a more specific time line for the study's completion and expected NDA filing?

Sure. I appreciate the question. So the timing of the NDA filing is going to be paced by the enrollment of the bioequivalent study, which is the final clinical requirement for the submission, and we noted we began enrollment for that in December. The enrollment is ongoing, and the study remains on track. And in parallel to that, our teams are actively preparing other components associated with the NDA, so that we're positioned to move forward efficiently. Once the study is complete, I haven't been able to necessarily give you a timetable, but as we progress further down enrollment of bioequivalence study, we expect to provide that time frame.

Okay. Got it. And then Integrity had $6 million of revenue for '25, more than doubling as guided. And as we think about '26 commercial channel guidance, can you help us frame how much of that growth is from Integrity versus international OA pain? And are there any revenue or procedure volume targets for Integrity in '26?

Internally, absolutely. In terms of what we will share externally, what I would say is we do expect another strong year in the commercial channel on the international OA pain side kind of in that double-digit range that we've seen. And I think when we look at Integrity, it had a very good year, obviously, from a variance percentage basis, it was up almost 100%. I don't think it's going to be up near that same range, but we're still talking about strong double-digit growth, and we're very pleased with the performance in the United States on that growth on Integrity. I'll give further updates as we go throughout the year in terms of the performance.

Okay. Got it. And then finally, so you launched the larger shapes and sizes for Integrity. I guess, how is the early uptake trending? And is this opening up meaningful new call points beyond your existing shoulder focused surgeon base?

We did. We launched two new shapes and sizes last year, and it's gone well. We've seen strong uptick on those products. I'd say this market is still majority rotator cuff. So when we look at the overall market procedures, the rotator cuff represents still the largest portion of it, the largest portion of our overall revenue. But I think the new shapes and sizes help increase surgeon adoption and get further expansion into some of those smaller adjacent markets. We're pleased with how well it's gone so far and look forward to continue to drive adoption into 2026.

Your next question comes from Mike Petusky from Barrington Research.

All right. Excellent. I have a couple more, I appreciate the follow-up. Steve, in terms of the bioequivalence study, what is the targeted enrollment?

It's just under 60 patients.

I mean is that -- I have no idea, is it fairly easy to enroll patients for this kind of study? Or is it a slog?

I wouldn't call it a slog. I mean it does have specific enrollment criteria designed to meet the FDA requirements. We're executing well, but enrollment can take slightly longer than maybe a typical bioequivalent study. So far, it's on track to what we would have expected.

Okay. All right. And then would you be willing to share sort of the revenue run rate that Integrity ended the year with in Q4? I mean is it -- I mean, is it run-rating that $7 million, $8 million. Any help there?

We haven't necessarily broken it out by quarter, but we did $6 million over the course of the full year, and I think we noted that it grew 20% sequentially from 3Q to 4Q. So it's at a pretty decent run rate as we exit the year. I will also note, though, that, that tends to be the case. There's some fourth quarter seasonality just in the United States associated with procedural volumes. So as we look to the start this year, we do expect that seasonality effect to kind of continue, but we're very pleased with its growth.

Okay. Great. And then just one last question. I guess around capital allocation. Obviously, you guys said what you said on finishing up the share repurchase commitment. But as you sort of look at the fact that you guys have been -- if presumably generate some free cash this year, you've got $55-plus million net cash on the balance sheet. I mean outside of the share repurchase, I mean, what are the priorities? I mean, is it potentially some small sort of tuck-in M&A? Or is that just not a thing you can focus on giving given where you are right now?

I appreciate the question, Mike. I would say our capital allocation priorities start first and foremost with being able to deliver for our patients and customers. So we obviously are spending CapEx to improve our manufacturing operations here in Bedford. We will continue to do that. So we'll make investments into our manufacturing capability, and that is the first and foremost.

The second thing that we talk about is capital allocation is the investments we're making into our U.S. sales channel, those are still investments that we are making, and we very consciously evaluate those. And while we operate with a level of expense discipline, it is still an investment nonetheless, I think longer term, there are certainly opportunities for us to evaluate what else we may do. But at this point, it's not something that we're looking to share. We've got a lot on our plate in the very near term, some of the restructuring activities that we mentioned earlier, plus the activities for Integrity, Hyalofast and Cingal, knows a lot on our plate, a lot of shareholder value that can be generated by executing well. And I think the 3 strategic priorities we laid out at the very beginning: first, commercial revenue growth; second, advancing our R&D pipeline; and third, executing with operational discipline. Those are the priorities for us in the near future.

And there are no further questions at this time. I will turn the call back over to Steve Griffin for closing remarks.

Great. Thank you all for joining us today. We hope you have a great week.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to Anika's third quarter earnings conference call. [Operator Instructions]

I will now turn the call over to Matt Hall, Director, Corporate Development and Investor Relations. Please proceed.

Good morning, and thank you for joining us for Anika's Third Quarter 2025 Conference Call and Webcast. I'm Matt Hall, Anika's Director of Corporate Development and Investor Relations.

Our earnings press release was issued earlier this morning and is available on our Investor Relations website at www.anika.com, as are the supplementary Powerpoint slides that will be used for the discussion today.

With me on the call today are Dr. Cheryl Blanchard, President and Chief Executive Officer; and Steve Griffin, Executive Vice President, Chief Financial Officer and Chief Operating Officer, who will present our third quarter 2025 financial results and business highlights.

Please take a moment and open the slide presentation and refer to Slide #2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur, that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance.

In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations, which are used in addition to results presented in accordance with GAAP financial measures.

We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our third quarter 2025 press release.

And now, I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Matt. Good morning, everyone, and thanks for joining us today to discuss Anika's third quarter 2025 results.

Please turn to Slide 3. This quarter reflects strong execution across our strategic priorities, including robust Commercial Channel revenue growth, completing the filing of the third and final PMA module for Hyalofast and continued progress toward completing the final requirements needed to file the Cingal NDA.

I'll start out by walking you through the financial results for the quarter, which are in line with expectations, while also generating strong operating cash flow and positive adjusted EBITDA. Revenue for the quarter was down 6% compared to the same period last year, as expected, as Johnson & Johnson continues efforts to stabilize pricing in our important and profitable U.S. OA Pain Management business, which accounts for the majority of our OEM channel revenue.

As a note, J&J announced their intent to separate their orthopedic business to enhance strategic and operational focus. We do not anticipate any negative impact to our OA Pain Management business related to that separation. And in fact, after the quarter, J&J MedTech exercised its option to extend the current license and supply agreement for Monovisc for another 5-year term through December 2031.

The expected results from our OEM channel were offset by strong continued momentum in our Commercial Channel, where we delivered double-digit growth in the quarter, advancing our strategic priorities, while moving Hyalofast and Cingal closer to FDA approval and launch.

Commercial Channel revenue grew 22%, fueled by strong Integrity growth, continued growth of Hyalofast outside the U.S. and international growth in OA Pain Management. Additionally, the steps we've taken to improve our cost structure is flowing through, with SG&A expenses down 12% year-over-year and overall operating expenses down 3%, driving improved profitability and free cash flow.

Turning to our Commercial Channel portfolio. Integrity procedures in the U.S. grew for the sixth consecutive quarter, driving Regenerative Solutions growth of 25% year-over-year. Integrity growth is outpacing the overall U.S. soft tissue augmentation market, keeping us on track to more than double Integrity procedures and revenue in 2025 compared to last year.

As shown on Slide 4, about 500 Integrity procedures were performed during the quarter, bringing our number of surgeon users to nearly 300. Our U.S. commercial team remains focused on expanding adoption and repeat use, supporting existing users as they integrate Integrity more fully into their practice, while also training new surgeons on its safe and effective use.

Notably, over 60% of users have completed multiple cases, a strong indicator of growing and sustained clinical confidence. We are also excited that we started limited launches of Integrity outside the U.S. and cases have been performed in 10 countries.

This growing base of experienced users demonstrates sustained clinical confidence and adoption of this game-changing technology that offers both enhanced regenerative capacity and greater strength when compared to competitive products.

During the quarter, we also initiated the limited release of the first SKU of the larger shapes and sizes of Integrity, designed for a variety of tendon applications, including in the hip, knee and foot and ankle. A number of surgeries have been performed and the initial feedback from surgeons has been positive. Additional SKUs of shapes and sizes that are designed for more specific tendon augmentation applications, will be released in the coming quarters. We expect these additions to further accelerate adoption and support continued commercial momentum into 2026.

Also contributing to our commercial channel growth was the continued success of our international team, driving Hyalofast expansion and delivering double-digit gains in international OA Pain Management revenue. The team partnered closely with distributors to strengthen business in existing markets and expand into new geographies.

International OA Pain Management revenue grew 21% year-over-year, primarily driven by the timing of distributor orders. Year-to-date, that business is up 6% compared to 2024. This successful quarter for our international business was underscored by a major milestone. We have now surpassed sales of 1 million Cingal injections since the 2016 launch. The strong uptake of Cingal outside the U.S. is a testament to its effectiveness to relieve both short and long-term pain and get patients back to active living.

Turning to Hyalofast. On October 31st, we submitted the third and final module of our PMA to the FDA, marking a major milestone in our U.S. regulatory pathway for our breakthrough cartilage repair device. We look forward to engaging with the agency to progress toward U.S. approval and commercialization.

Concurrent with earnings, we have also released the data from our U.S. Phase III FastTRACK study. As previously reported, while Hyalofast consistently demonstrated improvements in pain and function, the study did not meet its 2 co-primary endpoints under the original statistical framework. This was in part due to a disproportionate amount of missing data in the microfracture active control arm.

While Hyalofast showed clinically meaningful improvements in both KOOS pain and IKDC function from baseline at 24 months, it was not statistically significant when compared to the active microfracture control arm. Statistically significant improvements were achieved in relevant key secondary endpoints, including KOOS sports and recreation function, quality of life and total KOOS, all of which have been used as the basis for FDA approvals of other cartilage repair products.

In addition, because the data was not normal and not missing at random, as assumed in the predefined statistical analysis plan, supplemental statistical analyses were prepared for FDA consideration. These analyses include a review of observed data, which is the data without statistical imputations. In the observed data analysis, we achieved significance for KOOS pain.

The post-hoc analysis also included responder analyses for several outcome measures. Our responder analysis provides the number of patients in the study who achieved a clinically meaningful level of improvement.

In the FastTRACK study, more Hyalofast patients achieved higher levels of improvement in pain at 24 months than microfracture patients did, and with statistical significance. We believe these additional analyses confirm the consistent and meaningful clinical benefit that Hyalofast with BMAC brings to patients with cartilage defects.

We're encouraged by the strength and consistency of the data we have submitted to the FDA, both from the FastTRACK study and the over 15 years of independent clinical experience outside the U.S. The international experience continues to demonstrate Hyalofast's safety and efficacy across a broad range of patients with over 35,000 treated to date as we continue to see strong penetration of Hyalofast in the over 35 markets where it is sold today.

Now turning to Cingal, our next-generation OA pain management product. During the quarter, we made meaningful progress toward our U.S. NDA submission. We successfully completed the first of 2 toxicity studies and initiated patient screening for the bioequivalent study, which remains on track to begin before the end of the year. As a reminder, these studies represent the final steps required for our NDA filing.

We're encouraged by our continued progress with this important program and remain focused on advancing Cingal towards regulatory submission and ultimately, commercial availability in the U.S. market.

Lastly, beginning in 2023, the company undertook a comprehensive strategic review, evaluating a broad range of alternatives. We have formally concluded that process and remain focused on executing our product growth strategy and enhancing operational performance to create shareholder value and return capital.

As part of that commitment, we are commencing a second $15 million share repurchase under our previously announced program. We continue to prioritize key growth and regulatory milestones, including growing integrity, engaging with the FDA on the Hyalofast PMA submission, completing the Cingal bioequivalent study and subsequent NDA submission and delivering ongoing operational improvements aimed at strengthening profitability and cash flow.

And with that, I'll now turn the call over to Steve for a detailed review of our financial results.

Thank you, Cheryl, and thank you, all, for joining us. Our third quarter results reflect steady progress across key areas in both profit and cash flow, with performance in line with expectations and signs of continued momentum. We're executing on our key objectives and the resulting improved financial performance is showing.

Please refer to Slide 5 of the presentation as I provide financial updates on the quarter. In the third quarter, Anika generated $27.8 million in total revenue, a 6% decline compared to the same period in 2024. Our commercial channel, which includes globally distributed, highly differentiated products, delivered $12 million, up 22% year-over-year. This growth was driven by continued momentum in our regenerative solutions portfolio, which was up 25% in the quarter as the Integrity Implant system continues to gain market share.

Integrity has now delivered sequential growth for 6 consecutive quarters in the United States and remains on track to more than double in 2025. With the launch of larger shapes and sizes in the third quarter, we're encouraged by the continued expansion and trajectory of the platform.

Also, within our commercial channel, international OA pain sales grew 21% in the quarter as our international sales team continues to gain share with our existing product portfolio. Year-to-date growth stands at 6%, slightly below expectations, due to shipment timing impacted by the second quarter production-related disruptions. We expect any remaining impact to be resolved before year-end.

While this channel can be somewhat variable quarter-to-quarter, it continues to show strong underlying momentum, building on several years of consistent double-digit growth.

Revenue in the OEM channel, which includes our domestic OA pain and non-orthopedic products sold by third parties under long-term agreements, declined 20% in the third quarter to $15.8 million, in line with our full year guidance, primarily due to pricing pressure on end-user sales.

Orthovisc sales were lower, reflecting both reduced pricing and a continued shift towards single-injection treatments. Monovisc saw strong unit growth, up low double-digits in the quarter, though this was offset by a double-digit decline in pricing. Year-to-date, Monovisc unit volume is up 11%, while average price is down 17%.

Despite ongoing pricing pressure, we continue to expect more stable revenue trends as we head into 2026, supported by anticipated unit volume growth that we believe will mostly offset price dynamics, resulting in flat to modestly lower revenue, in line with our previously provided financial framework.

Recall, J&J is responsible for marketing and selling OA pain products in the U.S. We continue to work with them in an effort to drive for greater price stability and market expansion. On a combined basis, Monovisc and Orthovisc continue to lead the U.S. market and remain profitable contributors to our business. The remainder of our OEM business, our non-orthopedic sales, declined in the quarter due to the timing of customer orders.

Third quarter gross margin was 56%, a decrease of 10 percentage points year-over-year, but an improvement of 5 percentage points sequentially from the second quarter. The year-over-year decline was primarily driven by a $3.2 million reduction in Monovisc and Orthovisc sales to J&J, largely due to lower pricing. This impacted both transfer units and royalty revenues and directly reduces gross profit.

Sequential margin improvement reflects our recovery from early summer production disruptions, which had previously led to elevated inventory reserves and negatively impacted gross profit.

Turning to operating expenses. Total third quarter OpEx was $18.8 million, a decrease of $700,000 or 3% compared to the same period last year. Selling, general and administrative expenses declined $1.7 million or 12%, primarily driven by headcount-related cost savings and lower stock-based compensation.

Following the 2 divestitures completed earlier in 2025, we streamlined and optimized our organizational structure to better align with our strategic priorities and reduce operating costs. Notably, general and administrative expenses were down 17% year-over-year. We remain focused on identifying cost savings initiatives, while continuing to invest in areas that support sustainable long-term growth, partially offsetting the G&A savings.

Research and development expenses increased $1 million or 17%, driven by the costs associated with the Cingal toxicity study. Year-to-date, R&D expenses are up 1%, driven by a $1.8 million increase in external expenses, largely due to a $2 million increase in Cingal pre-filing requirements.

In contrast, total internal R&D expenses are down 12% year-to-date versus 2024, underscoring our commitment to operational efficiency, while maintaining momentum in key development areas.

Adjusted EBITDA from continuing operations was positive in the quarter, totaling $900,000, a decline of $3.7 million compared to the same period in 2024. This result exceeded the anticipated breakeven level and represented a $1 million improvement over the second quarter.

The year-over-year decline was primarily driven by reduced high-margin revenue from J&J, partially offset by meaningful reductions in operating expenses. The improved expense profile contributed to profitability that was better than previously guided.

Now turning to cash and liquidity. Anika delivered strong operating cash flow of $6.9 million in the third quarter, up from $5 million in the same period last year. This improvement was driven by favorable timing, stronger working capital management and disciplined cost controls.

Year-to-date operating cash flow totaled $6.6 million, a $2.8 million increase over 2024. This performance reflects the company's disciplined approach to working capital and expense management.

We invested $1.9 million in capital expenditures during the quarter, an increase of $700,000 year-over-year, primarily due to timing. These investments are focused on expanding capacity at our Massachusetts manufacturing facility to support anticipated volume growth across Monovisc, Cingal, Integrity and Hyalofast. This positions us to efficiently scale operations and meet future demand.

We ended the third quarter with $58 million in cash and no debt. As Cheryl mentioned, we are commencing a second $15 million share repurchase, consistent with the plan announced in May 2024. This repurchase will be executed under a 10b5-1 program, which we expect to complete by June of 2026. It reflects our ongoing commitment to returning capital to shareholders while preserving the flexibility to pursue strategic growth initiatives.

Now on Slide 6, I'll review our full year financial outlook for 2025. We are maintaining our full year 2025 guidance. We continue to expect our commercial channel to generate between $47 million and $49.5 million in revenue, representing a year-over-year growth of 12% to 18%.

Our OEM channel remains on track to deliver between $62 million and $65 million in revenue for 2025, representing a year-over-year decline of 16% to 20%. At the midpoint of an 18% decline, this range reflects higher volumes offset by lower pricing from J&J.

Now turning to profitability. We are maintaining our 2025 adjusted EBITDA guidance range of positive 3% to negative 3%. Our liquidity remains strong with no need to raise capital, and we remain confident in our ability to execute on our strategy. We continue to be focused on improving our expense profile to deliver positive operating cash flow. This financial discipline enables us to reinvest in the business, capitalize on the value propositions of our product pipeline, and ultimately deliver sustainable returns for our shareholders.

With that, I will now turn the call back over to Cheryl.

Thanks, Steve. In closing, we're pleased with Anika's solid third quarter performance, which reflects continued momentum in our commercial channel, disciplined expense management and meaningful progress across our pipeline. Additionally, with strong operating cash flow, a healthy balance sheet and a clear path toward key regulatory milestones, in total, we believe this will deliver long-term value for shareholders.

We want to thank our shareholders for their continued support, and we'd also like to extend our deepest gratitude to the entire Anika team whose dedication to developing, manufacturing and delivering world-class HA-based products enables us to restore active living for patients around the world.

And with that, we'll open up the line for questions. Operator, please proceed.

[Operator Instructions] Your first question is from Michael Petusky from Barrington Research.

Thanks for some of the additional detail in the presentation today. That's great. So I guess I want to ask a question around Integrity, Cheryl. In terms of what you would view as the bigger priority or maybe the lower-hanging fruit, I mean, is it driving increased utilization with your existing surgeon base? Is it doing more trainings and expanding the footprint? I mean, can you just sort of talk about how you guys are approaching maybe turning 300 surgeons into 600 and 500 cases a quarter into 1,000 cases? Like how do you get there?

Great question. Thanks for that, Mike. So I'd say, first of all, that we're feeling very bullish in the U.S. market with our team coming from a position of strength because what we're seeing from the surgeon reaction and adoption, new surgeon use and further penetration with existing surgeons is that this product really does provide significant clinical advantages.

It's stronger, has higher suture retention even when wet and it has additional regenerative capacity. It just -- it does things that the existing products out there don't do.

So, I would tell you, though, that we are probably equal parts focused on going out and getting new surgeons, getting new surgeons excited about the technology and also continuing to do training and education on the safe and effective use of the product for new and existing surgeons, especially as we continue to launch these additional SKUs that are really designed for use in the other tendon applications in the hip, in the knee, and the foot and ankle.

So, I would say it's really across the board, and our team is very busy doing both. Obviously, we've talked about this year that we are on track to double this year. And so, we continue to invest in this product. We think it's a great product. We believe in what it's doing, and we're excited for that team to continue to drive both penetration and acquiring new customers.

Okay. All right. Great. And I guess, if you could just remind me and maybe others, the timing for sort of wrapping up everything related to Cingal bioequivalence and the second toxicity, is that sort of mid-'26? Is that when you hope to sort of wrap all of that up? Or am I [ misremembering ]?

No, I don't think you're -- we have not given a specific updated timeline, which we will be in a position to do at the next earnings call because we need to get the bioequivalence study started.

We've talked about -- we are on track to start that by the end of the year. We started screening patients for that study. And as soon as that study gets started, we'll be able to provide a more fulsome update on the timeline.

We have one last toxicity study that will be done in the first quarter. And then the timing of the bioequivalent study is really what's going to dictate our fulsome timeline to get to an NDA filing. But everything is on track as we sit here today.

Okay. And then just one more. This is probably for Steve. Steve, in terms of capital deployment priorities, obviously, you guys called out the share repurchase. Can you just talk about either ranking or how you guys think about sort of share repurchase relative to internal investment relative to M&A? Obviously, you have a balance sheet that could support some -- multiple things. Can you just talk about how you think about capital deployment?

Absolutely. I appreciate the question, Mike. When we look at the hierarchy of our capital needs, I'd say, first and foremost, we have internal investment that we're making into our business today. We've shared that we're investing approximately $14 million of profit into our regenerative solutions portfolio, which is the launch of Integrity and then the preparations associated with Hyalofast. We look at that as a strategic investment that we're making as part of the growth of our product pipeline. That's first and foremost that we talk about.

Second is the need for CapEx in the business to support those product launches. Most of all of our CapEx is associated with our Bedford-based manufacturing facility to support the growth of our cross products in Cingal and Monovisc as well as all of our [ high-end ] products, Integrity and Hyalofast.

And then third on that list would be the share repurchase that we've communicated today.

Are there other actions that we could do and things we could look at? Certainly, we have a long list of things that we consider outside of the ones that I just referenced, M&A being one of them. But at this point, that's not something that the company is ready to undertake. And I'd say those -- first 3 of those areas that we pay the most attention to in terms of ranking our priorities.

Okay. And then actually, let me sneak one more in, and then I promise I'll get off and let other people ask questions. Steve, in terms of the production issues, I was under the impression that, that had largely been resolved earlier. In Q3 it seems like some of that persisted. Is that a different issue? Or is that essentially hangover from the same issue?

It's the latter. It's the hangover from the same issue. So from a resolution, we're back to where we are from a yield perspective where we historically were. It's just about getting back on all of our POs for customers that we were not on track to. So this is just a matter of available capacity and running our teams over weekend shifts and the like to get back to PO, which is why I'm focused around getting it back to healthy by year-end.

It is obvious we take every customer PO very seriously, but it has a small impact on some of our [ OUS ] customers and a very minimal impact on our U.S.-based customers.

Okay. I think you had said that you had expected a overall gross margin to sort of return to like the high 50s, like 58%, 59% in the second half. Is that maybe tracking a quarter behind? Like essentially, should we expect gross margin in Q4 to look more like Q3 or more like high 50s?

It's probably between where we are today and a little bit higher towards the fourth quarter. A lot of it comes down to the recovery from a product shipping perspective. So I would say that's probably more associated with some of the current gross margin dynamics.

Okay. But 58%, 59% longer term is doable, I assume.

Yes. A lot of that comes down to pricing with J&J, right? So as you know, that's a very profitable piece of our business. So I don't really give long-term gross margin projections just because that pricing has been so volatile.

What you're seeing us return to is north of 55%, between 55% and 60%. That's kind of a more normalized level for the business today, barring changes that could occur from a pricing perspective.

There are no further questions at this time. And that concludes our question-and-answer session for today. Ladies and gentlemen, the conference call has now ended. Thank you all for joining. You may now disconnect your lines.