Mimedx Group, Inc.: Form 10-Q for the period ended Mar 31, 2025

Overview

Executive Summary

During the first quarter of 2025, the Company delivered the following operational and financial highlights:

• Net sales of $88 million, reflecting 4% growth over the prior year period, which were comprised of:
• Net sales of Wound products of $56 million, reflecting a modest decline of 1.7% compared to the prior year period
• Net sales of Surgical products of $32 million, reflecting an increase of 16.2% compared to the prior year period
• GAAP net income and net income margin for the first quarter of 2025 of $7 million and 8%, respectively.
• Increased cash balance to $106 million, representing a $2 million increase sequentially and a $58 million increase compared to March 31, 2024

Overview

MIMEDX is a pioneer and leader focused on helping humans heal. With more than a decade of experience helping clinicians manage acute and chronic wounds, MIMEDX has been dedicated to providing a leading portfolio of products for applications in the wound care, burn, and surgical sectors of healthcare. All of our products sold in the United States are regulated by the U.S. Food & Drug Administration (“FDA”). We apply Current Good Tissue Practices (“CGTP”) and other applicable quality standards in addition to terminal sterilization to produce our allografts.

This discussion, which presents our results for the three months ended March 31, 2025 and 2024, should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in this Form 10-Q and the financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Results of Operations

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

(in thousands)

Changes noted as “nm” in the table above indicate that the percentage change is not meaningful.

Net Sales

We recorded net sales for the three months ended March 31, 2025 of $88.2 million, a $3.5 million, or 4.1%, increase compared to the three months ended March 31, 2024, in which we recognized net sales of $84.7 million.

Our sales by product line were as follows (amounts in thousands):

Net sales of our Wound product portfolio were $56.1 million for the three months ended March 31, 2025, a $1.0 million or 1.7% decrease compared to $57.0 million for the three months ended March 31, 2024. The decrease was primarily driven by continued challenges associated with ongoing competitive challenges related to Medicare business in the private office and associated care settings and higher-than-expected turnover of certain of our sales team and loss of associated sales in mid-2024. The Company’s recent addition of CELERA to its product portfolio helped to partially offset these headwinds.

Net sales of our Surgical products totaled $32.1 million for the three months ended March 31, 2025, reflecting an increase of $4.5 million, or 16.2%, compared to $27.7 million for the three months ended March 31, 2024. Sales growth from certain Surgical products, particularly AMNIOFIX and AMNIOEFFECT, as well as contributions from HELIOGEN, drove this increase.

Cost of Sales and Gross Profit Margin

Cost of sales for the three months ended March 31, 2025 and 2024 was $16.6 million and $13.0 million, respectively, an increase of $3.6 million, or 27.5%, year-over-year. Gross profit margin for the three months ended March 31, 2025 was 81.2% compared to 84.7% for the three months ended March 31, 2024. The year-over-year decrease in gross margin was driven by production variances and product mix. In addition, amortization of our acquired intangible assets during the three months ended March 31, 2025 further decreased margins. There was no equivalent activity during the three months ended March 31, 2024.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expense for the three months ended March 31, 2025 was $60.0 million, compared to $55.1 million for the three months ended March 31, 2024. The following table shows the composition of this expense between selling and marketing (“S&M”) and general and administrative (“G&A”) components (amounts in thousands):

Sales and marketing expenses increased $2.4 million or 5%, year over year, which was driven by increases in commissions due to higher sales and higher effective commission rates. General and administrative expenses increased $2.5 million or 23%, year over year, which was driven by incremental spend from legal and regulatory disputes in the current period, including our ongoing litigation with a competitor and several former employees.

Research and Development Expense

Our research and development (“R&D”) expense for the three months ended March 31, 2025 was $3.3 million, compared to $2.8 million for the three months ended March 31, 2024, an increase of $0.5 million, or 17.1%. R&D spend in the quarter was driven by the ongoing enrollment of our EPIEFFECT randomized clinical trial along with ongoing investments in the development of future products in our pipeline.

Amortization of Intangible Assets

Amortization expense related to intangible assets was $0.1 million for the three months ended March 31, 2025, compared to $0.2 million for the three months ended March 31, 2024, a decrease of $0.1 million or 47.6%. The decrease is due to certain intangible assets being fully amortized.

Interest Income (Expense), Net

Interest income, net was $0.5 million for the three months ended March 31, 2025 compared to net interest expense of $1.7 million for the three months ended March 31, 2024. The three months ended March 31, 2024 reflected loss on extinguishment of debt of $1.4 million resulting from the repayment and termination of a previous loan agreement. The remaining difference was driven by year-over-year decreases in outstanding borrowings and interest rates on outstanding borrowings, as well as improvements to our treasury management.

Income Tax Provision Expense

The effective tax rates for the Company were 18.5% and 20.6% for the three months ended March 31, 2025 and March 31, 2024, respectively. The effective tax rates in each period were favorably impacted by vestings of restricted stock.

Discussion of Cash Flows

Operating Activities

Net cash provided by operating activities from continuing operations during the three months ended March 31, 2025 was $5.3 million, compared to $6.8 million for the three months ended March 31, 2024. The change was primarily the result of lower collections and greater expenses during the three months ended March 31, 2025.

Investing Activities

Net cash used for investing activities during the three months ended March 31, 2025 was $0.4 million, compared to $6.0 million for the three months ended March 31, 2024. Activity for the three months ended March 31, 2024 reflects our $5.0 million investment to expand our product portfolio through the TELA and Regenity agreements. There was no equivalent activity during 2025. The remaining difference reflects a year-over-year decrease in capital expenditures.

Financing Activities

Net cash used for financing activities during the three months ended March 31, 2025 was $2.9 million. Cash used by financing activities was $33.5 million during the three months ended March 31, 2024. The cash used during the three months ended March 31, 2024 was due to the repayment of the initial $30.0 million drawing under the Revolving Credit Facility, as well as deferred financing costs and other payments made as part of the Debt Refinancing Transactions, as defined above. There was no equivalent activity during the same period in 2025. The cash used during the three months ended March 31, 2025 was primarily related to tax witholdings on vestings of restricted stock.

Liquidity and Capital Resources

We require capital for our operating activities, including costs associated with the sale of product through direct and indirect sales channels, research and development activities, compliance costs, costs to sell and market our products, regulatory fees, and legal and consulting fees in connection with ongoing litigation and other matters. We generally fund our operating capital requirements through our operating activities and cash reserves. We expect to use capital to invest in the broadening of our product portfolio, including through potential acquisitions, licensing agreements or other arrangements, the international expansion of our business and certain capital projects.

As of March 31, 2025, we had $106.4 million of cash and cash equivalents, total current assets of $200.1 million and total current liabilities of $42.6 million, reflecting a current ratio of 4.7. We had no borrowings outstanding and $75 million of availability under our Revolving Credit Facility (as defined below).

The Company is currently paying its obligations in the ordinary course of business. We believe that our cash from operating activities, existing cash and cash equivalents, and available credit under the Citizens Credit Agreement, as defined below, will enable us to meet our operational liquidity needs for the twelve months following the filing date of this Quarterly Report.

Citizens Credit Agreement

In January 2024, the Company entered into the Citizens Credit Agreement, which provided the Company with $30.0 million under the Revolving Credit Facility and $20.0 million under the Term Loan Facility. Proceeds from the initial drawings under the Credit Facilities together with cash on hand were used to repay in full the $50.0 million principal amount and other outstanding obligations under a previous loan agreement and to pay related fees, premiums, costs and expenses (collectively with the entry into the Citizens Credit Agreement and the initial borrowings thereunder, the “Debt Refinancing Transactions”). In February 2024, the Company repaid the initial $30.0 million drawing under the Revolving Credit Facility and had no outstanding borrowings under this facility as of March 31, 2025. The Term Loan Facility matures in January 2029 (the “Maturity Date”).

Borrowings under the Citizens Credit Agreement bear interest at a rate per annum equal to (i) the Alternate Base Rate, as defined therein, or (ii) a Term SOFR as defined therein, in each case plus an applicable margin ranging from 1.25% and 2.50% with respect to Alternate Base Rate borrowings and 2.25% and 3.50% for Term SOFR borrowings, plus a fallback provision of 0.1%. The Term Loan Facility carried an interest rate of 7.9% as of March 31, 2024.

Contractual Obligations

There were no significant changes to our contractual obligations during the three months ended March 31, 2025 from those disclosed in the section Item 7, “Management’s Discussion and Analysis of Financial Condition and Results from Operations”, in our Annual Report on Form 10-K filed with the SEC on February 26, 2025.

Critical Accounting Estimates

In preparing financial statements, we follow accounting principles generally accepted in the United States, which require us to make certain estimates and apply judgments that affect our financial position and results of operations. We regularly review our accounting policies and financial information disclosures. A summary of critical accounting estimates in preparing the financial statements was provided in our Annual Report on Form 10-K filed with the SEC on February 26, 2025. There were no new critical accounting estimates applied in the preparation of this Form 10-Q.

Recent Accounting Pronouncements

For the effect of recent accounting pronouncements, see Note 2, Significant Accounting Policies, to the unaudited condensed consolidated financial statements contained herein.

We are exposed to risks associated with changes in interest rates that could adversely affect our results of operations and financial condition. We do not hedge against interest rate risk.

The interest rate on our Term Loan Facility is determined quarterly based on the 1-month term SOFR. As of March 31, 2025, the interest rate on our Term Loan Facility was 6.7%. A 100 basis point change in SOFR would change our interest expense by $0.2 million on an annualized basis.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.