Sanara MedTech Inc Stock

Good morning, everyone, and thank you for participating in today's conference call to discuss Sanara MedTech's financial results for the first quarter ended March 31, 2026. [Operator Instructions] Please note that this conference call is being recorded, and a replay will be available on the Investor Relations page of the company's website shortly. The company issued its earnings release yesterday evening. On today's call are Seth Yon, President and Chief Executive Officer; and Elizabeth Taylor, Chief Financial Officer.

Before we begin, I would like to remind everyone that certain statements on today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K.

This call will also include references to certain non-GAAP financial measures. Reconciliations of those non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are provided in the earnings release available on the Investor Relations section of the company's website.

I would now like to turn the call over to Mr. Yon. Please go ahead, sir.

Thank you, operator, and welcome, everyone, to our first quarter 2026 earnings conference call. This was a strong quarter for us, which exceeded our expectations. Q1 2026 was the first full quarter in which we were entirely focus on the surgical market. and the results reflect our sharpened focused and enhanced financial model. We delivered 19% revenue growth compared to the first quarter of 2025, margin improvement and broke through to GAAP net profitability with net income from continuing operations of $0.4 million or $0.04 per diluted share.

Our first quarter revenue growth was largely supported by increased sales of our soft tissue repair products, including CellerateRX and BIASURGE. Demand for our products is strong, and we're particularly pleased with our first quarter results given that our first quarter is historically our seasonally slowest sales period of the year. The quarter was also impacted by a 3-day related shutdown in January, which caused us to lose 3 days of shipping during this period. Despite these challenges, we closed out the first quarter with the strongest sales month in company history in March, excluding October of 2024, which benefited from approximately $1.8 million of BIASURGE sales due to the industry disruption caused by Hurricane Helene.

During the end of 2025 and continuing into 2026, we began strengthening our sales team to support enhanced net revenue growth and our heightened focus on the surgical market. At quarter end, we had grown our sales team to a total of 43 reps. In addition to strengthening our sales team, we're also very well positioned with a robust surgeon user network, a growing number of hospitals where our products are contracted or approved to be sold, a growing number of facilities where our products were sold during the quarter and a leading distributor network for our products that continues to expand.

Let me dig into that a bit. As of quarter end, our products were contracted or approved to be sold in over 4,000 hospitals and ambulatory surgery centers throughout the United States. Our products were sold in over 1,400 facilities throughout the United States, up from more than 1,300 in the first quarter of last year. And we had agreements with more than 450 distributors compared to 400 at this time last year. Also, while it's not our practice to disclose specifics related to our active surgeon user base, I'm pleased to share that we saw solid growth in the number of surgeon users on a year-over-year basis in Q1. While most of you know this, I want to reiterate that Sanara is not subject to reimbursement risk, given we are 100% focused on the surgical setting. This means that we have lower exposure to fluctuation in the cost of volume of patient care which allows us to recognize a predictable and reliable revenue stream with consistently strong margins.

Looking ahead, we believe we are well positioned with our strengthened sales team and our more refined pure-play focus on the surgical operating setting to drive growth. In terms of capital allocation, we are focused on further strengthening our home business model. Our current capital allocation strategy is to drive organic growth judiciously invest in R&D and grow our pipeline of new products that align with our pure-play surgical focus. This includes OsStic, our licensed synthetic injectable structural bioadhesive bone-void filler which remains on track to be introduced to the market in the first quarter of 2027 as well as some longer-term initiatives that we expect to deepen our competitive moat and maintain our position as a leader in bringing innovative surgical products to market.

We are encouraged by the strong start to the year and our prospects for the balance of 2026. For the second quarter, we expect to recognize net revenue in the range of $28.5 million to $29.5 million or growth of 10% to 14% year-over-year. Looking at the full year, we also remain confident in our previously stated guidance of full year 2026 net revenue in the range of $116 million to $121 million, representing growth of approximately 13% to 17%.

With that, I will now turn the call over to Elizabeth Taylor, our CFO, for a review of our financial results for the quarter. Please go ahead, Elizabeth.

Thanks, Seth. Net revenue in the first quarter of 2026 increased $4.4 million or 19% when compared to the first quarter of 2025, primarily due to increased sales of soft tissue repair products including CellerateRX Surgical and BIASURGE as Seth mentioned before. First quarter gross profit increased $4.3 million or 20% from the prior year period to $25.9 million. Gross margin increased approximately 100 basis points to 93% of net revenue. The increase in gross profit and higher gross margin realized in the quarter was primarily due to increased market penetration and geographic expansion, product mix and the company's strategy to continue expanding and developing its independent distribution network in both new and existing U.S. markets.

Operating expenses for the first quarter of 2026 were $23.2 million or 83.6% of sales compared to $20.8 million or 88.6% of sales for the first quarter of 2025, an increase of $2.5 million or 12% year-over-year. The increase in operating expenses was primarily due to higher selling, general and administrative expenses, offset by a decrease in research and development expenses for the first quarter of 2026. R&D for the first quarter of 2026 decreased to $0.8 million or 2.7% of sales compared to R&D of $0.9 million or 4.1% of sales for the first quarter of 2025.

While R&D will fluctuate from quarter-to-quarter based on timing of projects, the company expects R&D on an annual basis to be within industry standards of 5% to 7% of sales. Operating income for the first quarter increased $1.8 million to $2.6 million compared to $0.8 million for the first quarter of 2025. Other expense for the first quarter of 2026 was $2.2 million compared to $1.4 million for the first quarter of 2025. The increase in other expense was primarily due to higher interest expense and fees related to our CRG term loan and share of losses from equity method investments. Net income from continuing operations for the first quarter was $0.4 million or $0.04 per diluted share compared to net loss from continuing operations of $0.6 million or $0.07 per diluted share in the first quarter of 2025.

Moving to our non-GAAP results. Adjusted EBITDA for the first quarter of 2026 increased $1.6 million or 58% to $4.3 million. The increase in adjusted EBITDA was primarily related to net revenue growth offset by increases in SG&A.

Turning to the balance sheet. As of March 31, 2026, we had $13.6 million of cash and $46.2 million in long-term debt. This compares to $16.6 million of cash and $46 million of long-term debt as of December 31, 2025. Net cash used in operating activities as of March 31, 2026, was $2.5 million compared to $2 million in the 3 months ended March 31, 2025. Notably, we paid our debt service in the quarter entirely in cash as opposed to a combination of cash and payment in kind as we have done in prior quarters. We view this as a milestone and a reflection of our improving free cash flow generation. We are particularly pleased with our working capital in the quarter and ability to pay our debt service in cash, given our first quarter historically requires a higher use of cash related to the payment of employee commissions and annual bonuses.

So this is encouraging as we progress through the year. As Seth stated, our capital allocation priorities have evolved alongside our strategic shift and focus to target and invest in opportunities in the pure-play surgical setting. Looking ahead, we believe that our strengthened free cash flow will allow us to more efficiently invest in our organic growth, which includes expanding our sales team to address more underserved geographies.

With that, I will now turn it back to Seth for closing remarks.

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

[Operator Instructions] Your first question for today is from Frank Takkinen with Lake Street Capital Markets.

Operator?

Operator, can you hear us?

Yes, I can hear you. One moment, please.

Yes, we lost Frank. So we only heard his intro.

Frank, your line is live.

Can you hear me now?

Yes.

I was hoping to ask one follow-up on the first quarter. Could you maybe just break out what was the strongest contributor to outperformance, maybe was it core Cellerate execution, BIASURGE within the Vizient GPO, I'm guessing that the new reps haven't started to contribute yet, but I don't know if that's also a piece that's contributing as well. It's just great to have a little more color on Q1.

Let's start with the reps, the new hires, those 3 that were mentioned in the call. So they're still kind of going through training that's both in-house and then also out into the field as well. So their impact typically takes about -- from the time of training completion about 6 months to start to realize some impact from those individuals. They've done a great job of coming in, getting educated and getting comfortable with our technologies, and we fully anticipate that group plus some others that we'll bring in before the end of the year, we'll be able to touch this business before the end of this calendar year.

From there, we've done a really nice job in bringing that clarity to the organization on just being surgically pure play. And we knew that was an important thing for us to do, and our team has responded extremely well. And even the distributor network, I think, has responded extremely well to it as well. So I mean that, coupled with strong support around Cellerate and BIASURGE -- you had mentioned, Frank, the Vizient contract. That was new to us in the first quarter. It's similar to a new hire, right? You have to go out and do ongoing training and education at the facility level, and our team is doing that. And so we're starting to see some uptick from that, and that's really encouraging. And at the same time, Cellerate continues to be a real anchor product for us. and our team continues to: one, get wider into facilities that they've been working in for some time; and two, reaching into new facilities as well. And they did an overall really sound job of all 3 of those things in the first quarter of 2026.

Got it. That's very helpful. And then I was hoping to ask a follow-up on guidance. I heard the comments of Q1 seasonally slowest, three-day weather shutdown, also strongest month in company history, Vizient is coming this year as well as new reps. Maybe talk through how you contemplated leaving the guide unchanged versus maybe taking it up a little bit, just given some of the tailwinds and strong execution you've had year-to-date.

Yes, great question. I mean the goal is always to try to replicate Q4, right? I mean we know Q4 is just higher volume of procedures. And if you can do that in the first quarter, you stand in good ground. One of the things that we were very well aware of going into during this calendar year is in the start of 2025, we went through some reorg for the sales team in a really healthy way. to set us up for long-term success as well. And as a result of that, we probably saw a little bit of a slowdown in Q1 of 2025. So we had a ton of confidence going into this calendar year in Q1 and to obviously go above our number in Q1 and hit 19% growth was a great achievement for our group.

And then you start to look into Q2 at 10% to 14%. Again, some of that is just we knew we were going to have a really successful Q1 and Q2, kind of that blended results from Q1 and Q2 guidance really puts us right kind of at that midpoint for our overall guidance on the year.

Your next question is from Yi Chen with H.C. Wainwright.

This is Katie on for Yi. I was wondering if you could elaborate a little bit more. You spoke of some initiatives for deepening your competitive moat. Could you give us an idea of what that looks like?

There's a number of things, Katie. Thanks for the question that we continue to work on. One, we want to surround ourselves with clinical evidence on our core products, and we continue to do that at a really great rate. Two, the economic story that continued to come out and was published in the first quarter was really meaningful as well. I think hospitals have done a great job over the last many years to do a solid evaluation of their spend and the meaningfulness of the products that get brought into the OR. And so there's 3 things that we want to make sure that we're very well aware of the clinical evidence that supports those technologies, the economic evidence as well and then to be well positioned with our ASP.

We feel like we've done all 3 of those things. And then in addition to that, we're looking at things from an R&D perspective as well on product enhancements and next-gen products as well, along with IP, additional IP to support our technology. So there's a lot going on right now in way of that competitive moat space, and we feel really confident in the work that we're doing.

Your next question is from [ Christopher Viselli ] with [ Viselli ] Capital Partners.

Just a quick one for me here. Is there any evidence that macroeconomic pressure is pressuring hospital budgets generally or the pockets of spending that covers Sanara products?

Yes. Chris, listen, I think that's a great question. Like I said a couple of minutes ago, I think hospitals are doing a great job of really assessing their spend inside the OR, and we're obviously a supply cost into the DRG. But again, the things that kind of let us stand out in those moments is the evidence that supports the technologies, both clinically and economic. And we feel that we're very well positioned with our selling price as well as the hospitals. So will that work continue by the hospitals? Of course. Will we continue to build more and more of our story around that evidence? Absolutely. And again, we think that we're very well situated given those 3 things.

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

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

This does conclude today -- our conference call for today. Thank you for your participation.

Welcome to the Sanara MedTech Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note that this conference call is being recorded, and a replay will be available on the Investor Relations page of the company's website shortly. The company issued its earnings release earlier today. Before we begin, I would like to remind everyone that certain statements on today's call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K.

This call will also include references to certain non-GAAP financial measures. Reconciliations of those non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release available on the Investor Relations section of our website. Today's call will include remarks from Seth Yon, President and Chief Executive Officer; and Elizabeth Taylor, Chief Financial Officer. I would now like to turn the call over to Mr. Yon. Please go ahead, sir.

Thanks, operator, and welcome, everyone, to our fourth quarter and full year 2025 earnings call. Let me outline the agenda for today's call. I'll begin by reviewing several key financial accomplishments for the full year 2025. I'll then discuss our fourth quarter net revenue performance as well as our commercial execution across the three key initiatives, our commercial strategy. After this, I'll provide an update on a few other select areas of operational progress in the quarter. Elizabeth will cover our fourth quarter financial results in further detail and review our full year net revenue guidance for 2026, which we reaffirmed in our earnings release today. I'll then conclude our remarks with some thoughts on our positioning as we enter 2026, our strategic priorities for the year and our outlook before we open the call for questions. With that said, let's get started. Looking back at our financial performance for the full year 2025, I'd like to highlight several key accomplishments to demonstrate the significant progress we've made as an organization.

First, we exceeded $100 million of net revenue for the first time in our company's history. Specifically, we generated $103.1 million of net revenue for the full year 2025, representing growth of 19% year-over-year. Importantly, we accomplished this impressive performance while maintaining the size of our field sales team with 40 representatives at the end of 2025. Our field sales headcount at the end of 2025 was essentially unchanged compared to the end of 2024, 2023 and 2022. Our performance demonstrates the strength of our hybrid commercial model, which includes both field sales reps and a growing network of independent distributor partners. Together, they raise awareness of our products and educate prospective surgeon customers on their benefits and clinical applications. Second, we drove significant improvements in our profitability profile on a year-over-year basis. Specifically, we expanded our gross margins by approximately 200 basis points to 93% for the full year 2025 and demonstrated notable operating leverage.

We ultimately achieved a $1.5 million or 80% reduction in net loss from continuing operations and a $7.9 million or 86% improvement in adjusted EBITDA, resulting in $17 million for the full year 2025. Third, this performance, coupled with improvements in our working capital management, ultimately enabled us to generate $6.8 million of cash provided by operations for the full year 2025. This compares to $24,000 of cash used in operations for the full year 2024. In short, our financial results in 2025 reflect the fundamental strength of our surgical business and support our recent strategic decision to focus our resources and capabilities on the surgical market. Turning to an overview of our fourth quarter net revenue performance. Our team delivered solid commercial execution in the fourth quarter, generating net revenue of $27.5 million, representing growth of 5% year-over-year. Our net revenue growth was largely driven by sales of soft tissue products with modest contributions from sales of our bone fusion products as well.

As a reminder, our net revenue in the fourth quarter 2024 benefited from approximately $1.8 million of BIASURGE sales due to the industry disruption caused by Hurricane Helene. Excluding the $1.8 million of BIASURGE sales related to this dynamic, our net revenue in the fourth quarter of 2025 increased 13% year-over-year. Importantly, our fourth quarter net revenue performance came in at the high end of both the preliminary range that we provided in our press release on January 23, 2026, as well as the expectations we shared on our third quarter's earnings call in November 2025. With these results as our backdrop, I'll now share on our commercial execution. In 2025, our team continued to drive momentum across the three key initiatives of our commercial strategy, which represents important drivers of our growth. As a reminder, these three initiatives are: one, strengthening our relationships with independent distributors; two, selling into new health care facilities; and three, expanding the existing health care facilities we serve.

I'll now share updates on our progress across each of these initiatives, beginning with our relationship development with independent distributors. In 2025, we significantly grew our network of distributor partners. Specifically, we ended 2025 with over 450 contracted distributors compared to over 350 at the end of 2024. Given the significant progress we've made in expanding the size of our distributor network, our team has also focused increasingly on optimizing our distributor relationships. We are doing this by onboarding newly contracted distributors, training their sales representatives and partnering with them to educate prospective surgeon customers about the clinical benefits of our products. Our partnership approach to engaging and working with our distributor remains our core component of our commercial philosophy. We believe it's one of the items that differentiates Sanara in the market and provides important advantages for our organization going forward.

Turning to our second commercial initiative, adding new facility customers. We continue to leverage our network of distributor partners to begin selling into new health care facilities where our products have been contracted or approved. I'm pleased to report that we achieved our stated target, which we initially provided on our first quarter earnings call in May 2025 of selling into over 1,450 health care facilities by the end of 2025. This compares to over 1,300 facilities in 2024. We continue to see significant runway to add new health care facility customers to our base over the coming years as our products were contracted or approved for sale in over 4,000 facilities at year-end. With respect to the third initiative I mentioned, penetrating our existing facility customers, we continue to drive adoption of our products by adding new surgeon users within the health care facilities we currently serve.

In both the fourth quarter and full year 2025, we realized strong year-over-year growth in the size of our surgeon customer base. We continue to add new surgeon users ranging across a variety of specialties, including our traditional focus of spine and orthopedics as well as general, plastic and vascular surgery. Despite our progress in 2025, our surgeon penetration within the over 1,450 health care facilities we serve remains relatively low. With that in mind, we believe that the opportunity to go deeper within these existing facilities remains perhaps our largest untapped opportunity for future growth. In summary, our progress across each of the key commercial initiatives leaves us well positioned as we enter 2026 with multiple levers to drive continued growth in the surgical market. In addition to our commercial execution, the broader Sanara team made significant progress during the fourth quarter with respect to multiple areas of our strategy. I'd like to take a minute to highlight several important operational accomplishments.

During the quarter, we continued to wind down the operations of Tissue Health Plus or the THP segment following our decision to cease operations, which we discussed in detail on our third quarter 2025 earnings call. I'm pleased to report that the THP wind-down process was substantially complete at the end of 2025, consistent with our previously stated expectations. From a financial perspective, total cash use related to THP over the second half of 2025 was $5.3 million, below the $5.5 million to $6.5 million range we shared on our second quarter earnings call in August 2025. As a reminder, the operations of THP, which were previously reported as the THP segment are classified as discontinued operations for the three months and full years ending December 31, 2025, and 2024. And importantly, we continue to anticipate no material cash spend related to THP going forward.

With this in mind, we are entering into 2026 as a leaner, pure-play surgical company focused on continuing to bring innovative products to the operating room setting. In the fourth quarter, we also continued to support the future growth of our BIASURGE product by expanding into health care facility approvals. Most notably, we secured an innovative technology contract from Vizient. For those unfamiliar, Vizient is the largest group purchasing organization in the U.S. with an extensive client base of health care facility customers. Through Vizient's innovative technology program, Vizient works with councils led by hospital experts from its client base. These councils are tasked with evaluating products and assessing their potential to bring innovation to health care delivery. Following evaluation, our BIASURGE product was awarded an Innovative Technology contract as it was deemed to offer unique qualities and a potential benefit over other products available in the market today.

As a reminder, BIASURGE is a no-rinse irrigation solution that enables surgeons to cleanse wound bed more efficiently than with saline alone. It also provides broad-spectrum antimicrobial effectiveness, helping to reduce the risk of surgical site infections. Beginning January 1, 2026, BIASURGE is now available to Vizient's network of health care facility customers. We believe this contract provides approximately 1,800 health care facilities with access to BIASURGE at contracted pricing and prenegotiated terms. All in all, it represents a significant opportunity to further expand BIASURGE customer base in 2026 in the coming years. In addition to these efforts, we continue to support our surgical product portfolio by expanding and enhancing our body of clinical evidence.

Our products were featured in multiple peer-reviewed studies published during the first quarter. I'll take a moment to highlight two of them. A comparative peer-reviewed in vitro study featuring BIASURGE was published in the Journal of Arthroplasty. It evaluated the effectiveness of 9 commercially available irrigation solutions, including BIASURGE. Specifically, it assessed their ability to prevent the formation of biofilm on orthopedic implant materials by two common types of bacteria that are notorious for causing severe antibiotic-resistant infections in surgical wounds. The researchers also evaluated the cytotoxicity of each irrigation solution to ensure the patient's safety. In this study, BIASURGE exhibited high antimicrobial efficacy and low cytotoxicity. It is identified as one of the two irrigation solutions that were most effective in preventing biofilm formation among the 9 products tested.

Our ALLOCYTE Plus product was also featured in a long-term clinical study published in the Journal of Spine and Neurosurgery. This study evaluated the outcomes of lumbar spinal fusion that used ALLOCYTE Plus as a stand-alone graft substitute. Ten patients were followed for 24 to 36 months, demonstrated successful solid bone healing within 6 months of receiving the operation. No adverse events, including complication, graft failures or revision surgeries were reported during the follow-up period. Importantly, these patients also demonstrated sustained improvements in both neurological and clinical outcomes as well. The study's findings support our position that ALLOCYTE Plus provides a safe, biologically active alternative to using traditional autogenous iliac crest bone grafts, which tend to be associated with the complications in donor site morbidity.

Our R&D team also remains focused on expanding our IP portfolio to protect and advance our existing products. As a reminder, in 2024, we submitted 11 provisional patent applications covering innovations in proprietary antimicrobial and hydrolyzed collagen technologies, including novel formulations, treatment applications and key component advancements. Over the course of 2025, our team converted these 11 provisional patent applications into nonprovisional filings, a major step forward in the progress towards securing approval while also submitting the corresponding U.S. and PCT applications for international protection. In addition to this progress, we submitted an additional three provisional patent applications that protect specific components and compositional aspects of our CellerateRX Surgical product. We look forward to continuing to expand the breadth of IP protection as well as our future product development efforts related to our surgical products.

Lastly, we continue to make progress in our efforts to expand our portfolio through our partnership with Biomimetic Innovations, or BMI, with the goal of bringing OsStic to the U.S. commercial market. As a reminder, during the first 9 months of 2025, BMI achieved all of the key product development, clinical, regulatory and medical education milestones outlined under our agreement. Based on our continued progress in the fourth quarter of 2025 and the initial months of 2026, I'm pleased to report that we remain on track to introduce the OsStic synthetic injectable bone bio-adhesive to the U.S. market in the first quarter of 2027. Given its status as an FDA-designated breakthrough device, we believe OsStic will be the first synthetic injectable bone bio-adhesive available in the U.S. once it receives regulatory approval. In preclinical mechanical testing, OsStic demonstrated bonding to bone that was 40x stronger than traditional calcium phosphate bone cement.

We expect OsStic to represent a new anchor product for our bone fusion portfolio and look forward to bringing this innovative technology to support the more than 100,000 periarticular fractures that occur in the U.S. each year. In summary, 2025 was a significant transition year for Sanara MedTech. Perhaps most notably, Sanara transitioned to new leadership in both CEO and CFO roles to guide the next phase of our growth and development as an organization. As a company, we navigated the strategic realignment of our business to focus solely on the opportunities in the surgical market going forward. And in tandem, our team successfully executed our strategy in the surgical market, driving significant commercial, financial and operational progress across all major fronts. Our progress this past year is a credit to the remarkable team of individuals who work at Sanara MedTech.

It also reflects our team's commitment to advancing the treatment of surgical wounds for the benefit of all the constituents in the health care industry, including patients, surgeons and health care systems. With that said, I'll turn it over to Elizabeth to cover our fourth quarter 2025 financial results in greater detail and review our full year net revenue guidance for 2026.

Thanks, Seth.

I will begin by reiterating that the operations of THP, which were previously reported as the THP segment, have been classified as discontinued operations for the three months and full years ended December 31, 2025 and 2024. As such, unless noted otherwise, all commentary that follows is on a continuing operations basis. In our earnings press release issued today, we have included tables detailing our historical results of operations on a continuing operations basis in 2025, 2024 and 2023, which aligns with our reporting going forward. Given that Seth covered our net revenue results for the quarter, I'll begin with gross profit. All percentage changes referenced throughout my remarks compare to the prior year period, unless otherwise specified. Fourth quarter gross profit increased $1.6 million or 7% to $25.7 million.

Fourth quarter gross margin increased approximately 175 basis points to 93% of net revenue, driven primarily by sales of soft tissue repair products and lower manufacturing costs related to CellerateRx Surgical. Fourth quarter operating expenses increased $2.8 million or 13% to $24.6 million. The change in operating expenses was driven by a noncash impairment charge of $1.8 million in the fourth quarter of 2025, which was related to a write-down of certain IP assets in connection with our strategic shift to focus on products in the surgical market and a $1.2 million increase in research and development expenses, which was primarily due to product enhancement initiatives associated with our soft tissue repair products. Operating income for the fourth quarter was $1.1 million compared to $2.3 million last year. Excluding the aforementioned $1.8 million noncash impairment charge in the fourth quarter of 2025, our operating income increased $0.6 million or 28% to $2.9 million.

Other expense for the fourth quarter was $2.2 million compared to $1.3 million last year. The increase in other expense was primarily due to higher interest expense and fees related to our CRG term loan as well as higher share of losses from equity method investments. Net loss from continuing operations for the fourth quarter was $1.1 million or $0.13 per diluted share compared to net income from continuing operations of $0.9 million or $0.10 per diluted share last year. Adjusted EBITDA for the fourth quarter of 2025 was $4.7 million compared to $4.1 million last year. Turning to the balance sheet. As of December 31, 2025, we had $16.6 million of cash and $46 million of long-term debt. This compares to $15.9 million of cash and $30.7 million of long-term debt as of December 31, 2024. For the full year 2025, we were pleased to generate $6.8 million of cash provided by operating activities compared to $24,000 of cash used in operating activities in the full year 2024.

The increase in cash from operating activities was driven in part by the reduction in net loss from continuing operations and improvements in working capital efficiency compared to the prior year. Importantly, we estimate that $6.8 million of cash generated from operating activities in the full year 2025 was inclusive of approximately $9 million of cash used in operating activities related to THP. As Seth mentioned, we continue to anticipate no material cash spend related to THP going forward. Turning to our net revenue guidance for the full year 2026, which we introduced via press release in January and reaffirmed in our earnings release today, we continue to expect full year 2026 net revenue to range from $116 million to $121 million, representing growth of approximately 13% to 17% compared to net revenue of $103.1 million for the full year 2025. Lastly, we would like to share a few additional considerations for modeling purposes.

With respect to operating expenses, as Seth will discuss further, in connection with our enhanced focus as an organization on the surgical market, we are investing in our field sales team and R&D initiatives to lay the foundation for strong, sustainable growth in 2026 and the coming years. With $16.6 million of cash at December 31, 2025, combined with our expected cash flows from operations, we are comfortable with our balance sheet liquidity in 2026. From a modeling perspective, as a reminder, we typically pay employee commissions and annual bonuses in the first quarter of our fiscal year, requiring a higher outlay of cash. Lastly, given the proximity to the end of the first quarter and for avoidance of doubt, we would like to provide additional transparency regarding our expectations for the first quarter net revenue results. Specifically, we expect net revenue of approximately $26.7 million to $27.2 million for the first quarter of 2026, representing growth of approximately 14% to 16% year-over-year.

With that, I will now turn it back to Seth for closing remarks.

Thanks, Elizabeth. Sanara MedTech is providing full year net revenue guidance in 2026 for the first time in our company's history. The decision to introduce net revenue guidance was made as a part of our commitment to provide increased transparency regarding our anticipated future performance. It reflects the significant scale we have achieved as a company in recent years as well as the evolution and development of our organization across multiple fronts. As Elizabeth mentioned, we are reaffirming our full year net revenue guidance today, which reflects growth of 13% to 17% in 2026. We look forward to delivering growth within this range and providing updates on our progress throughout the year. Before opening the call for questions, I'd like to share some closing thoughts on our positioning and strategic priorities as we enter 2026. In short, we like how we're positioned heading into this year.

We are entering 2026 as a focused pure-play surgical company dedicated exclusively to the operating room setting with three anchor products, two currently in the market, CellerateRx Surgical and BIASURGE and one in our pipeline, OsStic. Our anchor products possess differentiated capabilities that enable them to satisfy clear clinical needs in the treatment of surgical wounds. They are not subject to reimbursement risk, and they collectively address a multibillion-dollar annual opportunity in the surgical market. To effectively capitalize on this opportunity, we've developed an effective time-tested commercial team, model and strategy that has enabled us to achieve significant commercial scale and momentum. And based on our historically strong margin profile and balance sheet condition as of December 31, 2025, we believe we have the resources necessary to achieve our primary strategic and financial objectives this year through focused execution and disciplined capital allocation.

In terms of our strategic priorities for 2026, we are focused on the following three items: First, continuing to penetrate the surgical wound market by executing our commercial strategy with our existing products. Specifically, we remain focused on driving further progress in developing our distributor network, expanding our facility customer base and adding new surgeon users within the facilities we currently serve. These three initiatives have been the foundation of our commercial success in recent years, and we see substantial runway for continued growth across each of them as we move through 2026 and beyond. Second, pursuing targeted investments in our business to support our growth in 2026 and future years. Stepping back, given Sanara's broader scope of focus in prior years, the company historically pursued investments in opportunities outside of our core business in the surgical market.

Going forward, we are committed to pursuing a focused approach as a pure-play surgical company. With that commitment, we are intent on supporting our surgical product portfolio and commercial distribution network with investments that will protect and enhance our position in the surgical market and prove to be truly impactful over time. Specifically, we are investing in our surgical field sales team and R&D initiatives to lay the foundation for strong, sustainable growth. With respect to our field sales team, as I mentioned earlier, the size of our team has remained essentially consistent for multiple years with roughly 40 sales representatives. During the first quarter of 2026, we are making targeted investments to expand our sales rep coverage in key territories across the U.S. We are currently focused on onboarding and training, and we expect these new reps to become increasingly productive as they develop over the balance of 2026.

With respect to our R&D initiatives, we will continue our efforts to expand the portfolio of clinical evidence supporting our anchor products while bolstering our IP protection. In addition, we are investing in several longer-term product development initiatives with a focus on pursuing enhancements to strengthening our existing surgical portfolio and address the evolving needs of our customers. These investments are designed to deepen our competitive moat and ensure that we maintain our position as a leader in bringing innovative surgical products to the market. Lastly, we are focused on bringing OsStic to market through our strategic partnership with BMI and preparing for U.S. commercialization in the first quarter of 2027. We believe OsStic represents a significant opportunity to expand our presence in the bone fusion market and provide surgeons with a truly differentiated solution for periarticular fracture repair. In conclusion, we are committed to focused execution and targeted capital allocation across these three strategic priorities in 2026.

We believe our successful execution on these items will position us for strong, sustainable growth this year as well as cash generation and profitability in the years to come. I'd like to close by thanking the entire Sanara MedTech team for their exceptional work in 2025. I'd also like to thank our shareholders and customers for their continued support and to those on today's call for their interest in Sanara MedTech. With that, operator, you may now open the call for questions.

[Operator Instructions] your first question for today is from Yi Chen with H.C. Wainwright.

This is Eduardo on for Yi. Congrats on all the progress in the year. I had a question on BIASURGE, following the Vizient contract effective January 1, how much of your growth in 2026 do you think is attributable to this new volume of GPO versus organic growth in existing accounts? And do you anticipate any other of these deals to materialize in 2026?

This is Seth. So I'll answer that question. First of all, the Vizient contract was a really significant thing for us to accomplish and to get on to that contract. To our knowledge, we're the only [ wash ] to have done that. It will still take a little bit of time to go out and educate at the facility level. And so we haven't given guidance specific to a product in past, just talking more about soft tissue repair, which BIASURGE would fall to. So our team is working daily inside those 1,800 accounts to continue to get access into those accounts and bring that technology to life. It was a major step forward for us as we think back to a soft launch in that product just a couple of years ago. You're doing that at a pretty slow pace, right? You have to do that one facility at a time. And now to have on contract 1,800-plus facilities, we think that gives us great runway to perform in 2026, but truly well beyond that as well.

Got it. And then if I could ask another one on CellerateRX growth. So with this new study and cost effectiveness, do you see any opportunity for -- what do you think the impact on growth and maybe reimbursement in terms of cost effectiveness? And do you expect any other studies for CellerateRX to come out during this next year that could also bolster?

Yes. Well, first of all, we believe strongly in clinical evidence, specific to our anchor products, CellerateRX, BIASURGE and then soon to be OsStic as well once that commercializes. So we'll continue to put energy against that from all those different fronts, both scientifically, clinically and then economically. We feel really confident in that economic study that came out. We think that facilities will see great value in that as well to showcase a product that, again, is a supply cost inside the DRG.

So I think it's really important to understand for everybody on this call, we don't have reimbursement risk with that product and won't into the future. That, again, is a supply cost. So I think it only strengthens our relationships inside the hospital with the clinical evidence that we have specific to Cellerate and now the economic evidence to come alongside of that is really significant. So we think it has an impact for our numbers going forward as a result of all of that research that's been done.

We are currently seeing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.

Welcome to the Sanara MedTech Third Quarter of 2025 Earnings Conference Call. Please note that this conference call is being recorded, and a replay will be available on the Investor Relations page of the company's website shortly. The company issued its earnings release earlier today.

Before we begin, I would like to remind everyone that certain statements on today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For more information about the risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in the company's most recent annual report on Form 10-K as supplemented by the risk factors in the company's most recent quarterly reports on Form 10-Q.

This call will also include references to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release available on the Investor Relations section of our website.

Today's call will include remarks from Seth Yon, President and Chief Executive Officer; and Elizabeth Taylor, Chief Financial Officer.

I would now like to turn the call over to Mr. Yon. Please go ahead.

Thanks, operator, and welcome, everyone, to our third quarter of 2025 earnings call. Let me outline the agenda for today's call.

As the recently appointed President and CEO, I'll begin with a brief introduction and provide some opening thoughts on Sanara MedTech. I'll then discuss the announcement we made yesterday regarding Tissue Health Plus. Following this discussion, I'll review our net revenue performance, commercial progress and select operational highlights in the third quarter.

Elizabeth will then cover our quarterly financial results in further detail. Following her remarks, I'll share some additional thoughts on our near- and long-term strategic priorities before we open the call for questions.

With this agenda as our backdrop, I'd like to take a moment to introduce myself and provide some context on my background with the company.

I joined Sanara in March of 2018 as one of our first regional sales managers. Over the next 7 years, I served in a variety of leadership roles on our commercial team, including as National Sales Director, Vice President and President of Commercial and most recently as our President and Chief Commercial Officer.

While developing our commercial strategy and leading our sales organization, I've gained a comprehensive view of our business operations, our customer relationships and how our products perform in clinical settings. I was appointed President and CEO effective September 15. I appreciate the level of confidence placed in me by the Board and look forward to building on the foundation established around Nixon's leadership as we pursue the opportunities ahead of us.

There are numerous factors that motivated me to lead Sanara MedTech, but let me start with three fundamental aspects of our business that speak to our unique positioning in the surgical market.

First, our technologies are both differentiated and effective in addressing real clinical needs in the surgical operating room. Our portfolio is built around 2 key products, CellerateRX and BIASURGE, which have established their utility in clinical practice, helping to improve patient outcomes while reducing overall cost to the health care system.

Through my experience leading Sanara's commercial team, I've observed firsthand the benefits of adopting these key products across hundreds of cases as well as their impact on surgical outcomes.

Second, Sanara's go-to-market strategy and commercial distribution model have demonstrated their effectiveness over the better part of a decade and enabled us to rapidly grow our key products. We've secured over 4,000 healthcare facility approvals, identified surgeons who would benefit from their use and established a network of regional sales managers and distributors to engage, educate and address the needs of these surgeons.

This has enabled us to develop a track record of strong growth in recent years, while positioning us to achieve significant operating leverage as well.

Third, Sanara has established an [ impressive ] team with the expertise necessary to achieve our mission of improving clinical outcomes and reducing health care expenditures in the surgical market. I'm proud of the level of talent we've been able to attract in recent years.

Though we've made impressive progress, I believe we have opportunities to continue evolving as an organization. I'm confident in our team's ability to achieve the next stage of sustainable growth and development as we continue to expand our share of the large untapped market opportunity that products address.

Now I'd like to address the announcement we made yesterday regarding Tissue Health Plus and provide some additional context on this important strategic decision. I'll begin with some background for those less familiar.

In parallel with developing and establishing THP, Sanara has been focused over the last 2 years on identifying and engaging with potential strategic and financial part to invest in and assist in the execution of this business.

At the beginning of the third quarter, we initiated a formal process of evaluating strategic alternatives for THP, which we announced on our second quarter call in August. We engaged an external strategic adviser to assist in this process as we explored a range of options with the goal of maximizing shareholder value.

Together with our external strategic adviser, we performed a market check and explored a range of strategic alternatives during the third quarter. This formal process ultimately did not result in finding a partner to assume significant responsibility for this investment or surface a viable option to monetize our THP asset.

After concluding this process, our management team and Board of Directors determined that the most appropriate course of action was to cease operations of THP, which we announced via press release yesterday after market close. Let me walk you through the rationale behind this decision.

While our THP team achieved significant progress in developing this platform over recent years, the next stage of bringing THP for commercialization and achieving the scale necessary for THP to be accretive to our adjusted EBITDA would have required considerable investment over a multiple year period.

Ultimately, this decision allows us to enhance our operational efficiency and focus our resources on our core Surgical business. We believe this focus will enable Sanara to capitalize on our greatest opportunities and deliver sustained long-term growth and value creation over time.

After reaching this decision, we acted promptly to discontinue THP and have made considerable progress in winding down its operation in recent months. We expect process to be substantially completed by the end of 2025. From an accounting and financial reporting perspective, we have classified the operations of THP, which were previously reported as the THP segment, as discontinued operations for the 3 and 9 months ended September 30, 2025 and 2024.

Elizabeth will discuss the financial implications of this decision further. However, I want to emphasize that we continue to anticipate total cash investment related to THP will range from $5.5 million to $6.5 million in the second half of 2025. This is consistent with the expectation we shared on our last earnings call in August. We also continue to anticipate no material cash spend in THP after 2025.

In summary, this strategic realignment of our business is designed to enhance Sanara's ability to capitalize on our strengths, capabilities and opportunities in the surgical market while facilitating a leaner and more efficient organization. After careful consideration, both the Board of Directors and management believes it represents an important proactive step forward for the long-term benefit of Sanara MedTech and our stakeholders.

Now let's review our third quarter net revenue performance. In the third quarter, our surgical team achieved net revenue of $26.3 million, representing growth of 22% year-over-year. Our net revenue growth was driven almost exclusively by our sales of soft tissue repair products. Soft tissue repair product sales increased 24% year-over-year to $23.4 million, led by strong sales of our key products, CellerateRX Surgical and BIASURGE.

Importantly, we complemented our net revenue performance with year-over-year improvements in our gross margins and demonstrated significant operating leverage. As a result, we achieved notable year-over-year improvements in our profitability profile with a $1 million improvement in net income from continuing operations and a $2.3 million improvement in adjusted EBITDA on net revenue growth of $4.7 million.

Lastly, we generated $2.2 million of net cash from operating activities in the third quarter. All in all, we were pleased with our third quarter financial performance, the focus and dedication of our team and the level of demand for our surgical products in the market.

With respect to the key drivers of our net revenue growth, our performance in the third quarter reflects on our commercial team's strong execution across the following three key initiatives: one, developing our relationships with independent distributors; two, selling into new healthcare facilities; and three, penetrating the existing healthcare facilities we serve.

I'll now take a minute to touch on each of these three initiatives related to our commercial strategy, beginning with our efforts to develop our independent distributor network.

Our team has made considerable progress in identifying and partnering with new independent distributors in key geographies across the U.S. Specifically, during the last 12 months ended September 30, we expanded our network from more than 300 contracted distributors to more than 400. In tandem, we have increasingly focused on onboarding our recently contracted distributors and training their reps to position them for success in selling our products.

Truly believe partnering with our distributors for shared long-term growth versus simply contracting with them is a core component of our approach that we believe differentiates Sanara. Philosophy will continue to guide our approach as we focus on optimizing our relationships with existing distributors while expanding our network selectively going forward.

Turning to our second commercial initiative, our team continued to leverage our network of distributor partners, whose reps possess strong local relationships across the U.S., to begin selling into new healthcare facilities where our products have been contracted or approved.

As a result, we significantly expanded our base of healthcare facility customers over the last 12 months. Specifically, our products were sold into more than 1,400 health care facilities during the trailing 12 months ended September 30 compared to more than 1,200 facilities in the prior-year period.

As a reminder, our products are approved or contracted for sale in over 4,000 facilities, so we see considerable runway for future expansion on this front.

And in terms of our third commercial initiative, across the more than 1,400 healthcare facilities we currently serve, our penetration of these facilities remains very low. This represents one of our most significant opportunities for future growth.

With this in mind, we are focused on increasing the number of surgeons using our products within the existing healthcare facilities by targeting practitioners, both within and outside of our traditional specialties of spine and orthopedics. Our team continued to deliver impressive progress on this front, significantly expanding the number of surgeon users on a year-over-year basis in the third quarter.

Lastly, we remain pleased with the performance of BIASURGE in the third quarter and the progress made during its second year of commercialization. Our team continues to facilitate its future growth by securing new facility approvals and introducing it to our existing CellerateRX customers.

Turning to our other operational highlights. In addition to executing our commercial plan and navigating the path forward regarding THP, we continue to make progress in expanding our portfolio of clinical evidence and advancing our new product initiatives.

With respect to clinical evidence, we are focused on demonstrating the clinical efficacy and cost effectiveness of our key products across a variety of surgical procedures, including some of the most challenging cases. To this end, we are pleased to see the publication of two studies in peer-reviewed medical journals that are worth highlighting this quarter. Both publications discussed retrospective case series, which examined the use of CellerateRX in challenging procedures.

The first was published in the Journal of Foot and Ankle Surgery, the official publication of the American College of Foot and Ankle Surgeons.

It was focused on the use of CellerateRX in treating high-risk patients with multiple comorbidities. These patients underwent complex orthopedic and plastic reconstructive surgery to preserve their limbs. The researchers concluded that CellerateRX demonstrated significant value in assisting these complex procedures, helping to support the healing of soft tissue in extremely compromised patients.

The second was published in the Annals of Case Reports, an open-access multidisciplinary journal. It was focused on the use of CellerateRX in treating surgical wounds following [ lobectomy ] procedures, which tend to involve high complication rates. Based on the findings, the researcher concluded that CellerateRX may serve as a valuable adjunct in enhancing postoperative wound healing for [ lobectomy ] patients.

Our expanding portfolio of clinical evidence continues to demonstrate the value our key products bring to the treatment of some of the most challenging surgical wounds, helping us to educate the medical community and raise awareness of their benefits.

With respect to our new product initiatives, I'm pleased to report continued progress under our strategic partnership with Biomimetic Innovations Limited, or BMI. By way of background, we have an exclusive U.S. license and distribution agreement with BMI for OsStic as well as an adjunctive fixation technology.

OsStic is an innovative and differentiated product designed to enhance the repair process for periarticular fractures. While not currently cleared for sale in the U.S., it's been granted Breakthrough Device designation by the FDA.

Throughout 2025, BMI has been focused on advancing through a series of key product development, clinical and regulatory milestones structured in our agreement. After achieving the first of these milestones during the second quarter, they have made significant progress in recent months. As of September 30, they have completed all of our agreed-upon milestones.

Based on the recent pace of progress, we continue to anticipate U.S. commercial launch in the first quarter of 2027. We look forward to leveraging our sales and distribution team to help address the more than 100,000 periarticular fractures that occur annually in the U.S.

Elizabeth will now review our third quarter financial performance in greater detail.

Thanks, Seth. I will begin by reiterating that the operations of THP, which were previously reported as the THP segment, have been classified as discontinued operations for the 3 and 9 months ended September 30, 2025 and 2024. As such, unless otherwise noted, all commentary that follows relates to our Surgical business on a continuing operations basis.

In our 8-K filed with the SEC today, we have included tables detailing the historical results of our operations on a quarterly basis by business for our Surgical and THP businesses in 2025, 2024 and 2023. These materials are also available on the Events section of our investor website, next to the webcast link for today's earnings call.

Given that Seth covered our net revenue results for the quarter, I'll begin with gross profit. All percentage changes referenced throughout my remarks compared to prior-year period unless otherwise specified.

Third quarter gross profit increased $4.8 million or 24% to $24.5 million. Gross margin increased approximately 200 basis points to 93% of net revenue, driven primarily by increased sales of soft tissue repair products.

Third quarter operating expenses increased $2.6 million or 14% to $21.5 million. The change in operating expenses was driven by a $2.5 million or 14% increase in selling, general and administrative expenses and to a lesser extent, a $200,000 or 31% increase in research and development expenses. The $2.5 million increase in SG&A was driven primarily by a $1.4 million increase in compensation and contract services and an $800,000 increase in direct sales and marketing expenses.

Operating income for the third quarter increased $2.2 million or 278% to $2.9 million. Other expense for the third quarter was $2.1 million compared to $1 million of expense last year. The increase in other expense was primarily due to higher interest expense and fees related to our CRG term loan as well as higher share of losses related to equity method investments.

Net income from continuing operations for the third quarter was $800,000 or $0.09 per diluted share compared to a net loss from continuing operations of $200,000 or $0.02 per diluted share last year. Adjusted EBITDA for the third quarter of 2025 increased $2.3 million to $4.9 million.

Turning to the balance sheet, as of September 30, 2025, we had $14.9 million of cash, $45.1 million of long-term debt and $12.25 million of available borrowing capacity, which is accessible through December 31, 2025. This compares to $15.9 million of cash, $30.7 million of long-term debt and $24.5 million of available borrowing capacity as of December 31, 2024.

Lastly, a few considerations to bear in mind for the remainder of the year. We remain focused on driving strong net revenue growth for the full year 2025, coupled with improvements in our profitability on a continuing operations basis.

With respect to our net revenue over the balance of the year, as a reminder, our net revenue in the fourth quarter of 2024 grew 49% year-over-year. This exceptional performance benefited in part from increased demand for BIASURGE following the disruption caused by Hurricane Helene last fall, which caused industry shortages of IV fluids and saline solutions.

As we have shared previously, of the $26.3 million of net revenue generated in the fourth quarter of 2024, we believe approximately $1.8 million was attributable to this unique dynamic. Excluding this $1.8 million headwind, we expect our revenue in the fourth quarter of 2025 will increase in the high single digits to low teens on a year-over-year basis compared to strong year-over-year growth in the fourth quarter of 2024.

With respect to anticipated cash utilization, as Seth mentioned, we continue to expect the total cash investment related to THP will range from $5.5 million to $6.5 million in the second half of 2025. Specifically, our total cash investment in THP was $4 million in the third quarter of 2025, implying approximately $1.5 million to $2.5 million of cash investment in the fourth quarter as we continue to wind down THP.

We continue to anticipate no material cash spend in THP after 2025. Lastly, we continue to expect that tariffs will not materially impact our results of operations in 2025.

With that, I will now turn it back to Seth for closing remarks.

Thanks, Elizabeth. Stepping back, over the trailing 12 months ended September 30, 2025, our Surgical business has generated nearly $102 million of net revenue, representing growth of 31% over prior-year period. In the third quarter of 2025 alone, we generated higher net revenue than over the entirety of 2021.

Our ability to achieve the significant commercial scale in a relatively short time speaks to the strength of our key surgical products, our go-to-market strategy and our team. It also represents a validation of our large addressable opportunity we continue to pursue in the surgical market.

With clarity on THP, we are moving forward with a leaner organization and a renewed commitment to building on the progress made in our Surgical business. As we close out 2025, our team is focused on executing our commercial plan, including the three initiatives I outlined earlier, while improving our efficiency and investing prudently and strategically in our Surgical business.

Longer term, we are focused on supporting the future development and evolution of our surgical business by improving our systems and processes, deepening our competitive moat and enhancing our commercial strategy.

Through these efforts, we will position Sanara to continue driving strong sustainable growth, both in 2025 and over the coming years, as we progress to our next phase as an organization.

I'd like to close by congratulating the entire Sanara MedTech team on the progress made this past quarter, which is a testament to our collective vision, grit and execution. Thank you as well to our shareholders and customers for their support and to those on today's call for their interest in Sanara MedTech.

With that, operator, you may now open the call for questions.

[Operator Instructions] Your first question is coming from Ross Osborn with Cantor Fitzgerald.

Congrats on the progress. So starting off, could you spend some more time on some of your initiatives in driving further penetration within existing facilities? How do your conversations go with new physicians? What are people excited about? What do they have more questions about?

Ross, it's Seth. Yes, a couple of things to answer that. So we've done a lot at the street level with the sales force, both on our W-2 side plus our distributor side to expand into new specialties. But in addition to that, both our R&D team and our clinical team as well have worked really hard on both scientific, clinical and even economic evidence that supports the value that our products provide.

So it's really a culmination of all those things to continue to expand into new users and also into new facilities at the same time. So we've talked a lot about this in the past. We've grown considerably in the number of facilities, but we know we've got a lot of room to grow there as well. And same is true with our distributor network and surgeon base as well.

So we like the formula that we have. We'll continue to take that and replicate that where we can and then get creative as we go into 2026 and beyond.

Okay. Great. Then when thinking about operating profitability, are there areas outside of THP where we should expect cash savings? Or should we begin to expect leverage on sales and marketing going forward?

I think we've kept our headcount and sales flat with 40 reps and 400 distributors, and it's evidence that the model is working, and you're seeing the operating leverage on the EBITDA line.

We're focused on sustainable and profitable growth and -- the balance of which we're going to invest in our product portfolio and growing the top line going forward. And like all medtech companies, we need to invest in our current product portfolio and from an IP perspective, invest there as well.

So we see leverage in our sales channel, and we'll continue to invest and no longer be spending some of our cash flow in the THP segment.

Your next question is coming from Daniel Journey with Unrivaled Investing. [Operator Instructions]

A little disappointed with the THP result, but thanks for coming to that conclusion, trying to rationally manage your capital.

So based on your outlook for the next quarter, you mentioned that excluding onetime benefits from last year, growth is going to be high single digits, low teens. Is that the right sort of expectation for this business going forward? Are you still -- because it is a significant sort of deceleration from where you've been. And so I'm curious on how you think about the cadence that you're expecting, your internal threshold that you're expecting.

And the same thing along with the margins, where I noticed your EBITDA margin was effectively flat sequentially. And so I'm curious, do you have any sort of benchmark or target? So that way, investors can understand, okay, this is a 10% grower? Is this a 20% grower? And what's the sort of operating margin that you should -- we should be thinking about long term, ballpark?

Daniel, thanks for the question. We'll kind of divide and conquer on this, if you don't mind. So I'll take part of the question. I'll let Elizabeth do the same.

As far as Q4 performance and looking at that, as Elizabeth had mentioned, we grew 49% in Q4 of 2024. If you take out that adjusted $1.8 million, it's still about 38%, which obviously was just a very, very significant growth quarter for us.

And even inside that 38%, when you think about the $1.8 million that we grew as a result of the saline shortage, that was solely on just new accounts. So we had other growth as well coming from BIASURGE in existing accounts as well. That's not captured in that $1.8 million.

So we know we had a really significant number. We still believe in a very strong quarter this coming quarter as well. And again, I don't think that the expectation going into the fourth quarter should be concerning to anybody.

We still feel very confident in our ability to perform at a high level going into the new year, given the opportunities that we have and the number of facilities that we have approved, the distributor partnerships that we have currently in place and those where we'll expand.

And again, there's great opportunity to continue to reach more surgeons. So we remain very confident as we go into the new year and how we'll perform.

I'll let Elizabeth answer the EBITDA question as well.

Great. Thank you. If you look at our trailing 12 months EBITDA, last year, it was $6.6 million and this year, $16.4 million. So with a revenue growth of 31%. So you're seeing operating leverage in that. And it's a testament to Seth having built out a really strong sales force, and he's been able to increase sales with a flat headcount for the last 2 years.

Will the business require additional headcount? Yes, at some point. But the point is that you're seeing -- we sort of built and then are growing from what we built. So we feel strongly about our performance and feel good about it.

Got it. So is there a sense that there is a lot of room still to expand margins, though?

Yes, I believe we feel good about where the business is going and what we've shown in the past. We don't give forward-looking guidance. So...

And before we take any additional audio questions in our queue, we have a question coming from the webcast. The question is, it is my understanding a strategic partner was always expected to be required to bring to the market. Is this correct? With this in mind, why was a strategic partner not considered as an integral part before the costs were incurred?

Sure. Looking back over the last 18 to 24 months or so, I think it was the beginning of March, if I remember correctly, of 2024, that THP really started to pursue some form of strategic partner and thought that we could do that along the way.

Again, the team had done a nice job of developing that software. And our hopes with that, coupled with some of the beta sites that we're also in would start to encourage that activity.

And again, unfortunately, that didn't happen, and that put us in a position going into the third quarter and certainly into the end of the year that we needed to make that decision.

We did that with confidence, both at the Board level on the managerial group as well. Going into the future, we knew that those resources needed to be put back into the surgical space, and that was a decision that we made back into September as we went forward.

Your next question from the audio lines is coming from Yi Chen with H.C. Wainwright.

Now that the THP is going to be discontinued, could you comment on the trend of total operating expenses? Should we project to see a meaningful decrease in operating expenses?

Thanks for the question. We don't give forward-looking guidance, but I would remind everyone that we have put a supplemental disclosure on our website that examines the Surgical business as a stand-alone business historically. And I think you'll -- using that information can see good trends in that business and be able to model it from there.

There appear to be no further questions in queue. I would now like to turn it back to Seth Yon for his closing remarks.

Like to say again, congratulations to the entire Sanara MedTech team and all our distributors as well for an excellent quarter, really a testament again to the vision and the grit and ultimately delivering on our go-to-market plan.

In addition, again, just thank you to all of our shareholders and our customers that see value in us as a company and our technologies as well, and for those joining maybe the call for the very first time as well. Thank you for your time, and have a great day.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.