Mimedx Group, Inc.: Form 10-Q for the period ended Jun 30, 2025

Executive Summary

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

• Net sales of $99 million, reflecting 13% growth over the prior year period, which were comprised of:
• Net sales of Wound products of $64 million, reflecting an increase of 12% compared to the prior year period
• Net sales of Surgical products of $34 million, reflecting an increase of 15% compared to the prior year period
• GAAP net income and net income margin for the second quarter of 2025 of $10 million and 10%, respectively.
• Increased cash balance to $119 million, representing a $12 million increase sequentially and a $50 million increase compared to June 30, 2024

On July 14 and 15, 2025, the Centers for Medicare and Medicaid Services (“CMS”) released the CY 2026 Physician Fee Schedule (“PFS”) proposal and the CY 2026 Hospital Outpatient Prospective Payment System (“OPPS”) proposal. Under these proposed rules, which are scheduled for implementation on January 1, 2026, CMS is calling for a consistent payment approach for skin substitutes across the private office and HOPD settings with a fixed price of $125.38 per square centimeter. The PFS and OPPS proposals are currently in a comment period, ending in mid-September, after which CMS will publish its final rules for reimbursement in these care settings. Together with the Local Coverage Determinations and the recently announced Wasteful and Inappropriate Service Reduction model, there are several significant potential changes to reimbursement of skin substitutes that could begin impacting the industry and MIMEDX, beginning January 1, 2026.

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 and six months ended June 30, 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 June 30, 2025 Compared to the Three Months Ended June 30, 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 June 30, 2025 of $98.6 million, a $11.4 million, or 13.1%, increase compared to the three months ended June 30, 2024, in which we recognized net sales of $87.2 million.

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

Net sales of our Wound product portfolio were $64.5 million for the three months ended June 30, 2025, a $6.9 million or 12.0% increase compared to $57.5 million for the three months ended June 30, 2024. Second quarter Wound product sales growth was driven by sales of our newer products, CELERA and EMERGE, which offset decreases in sales of other products in our Wound portfolio. The increase is also attributable to turnover of certain of our sales team and customers in the three months ended June 30, 2024.

Net sales of our Surgical products totaled $34.1 million for the three months ended June 30, 2025, reflecting an increase of $4.5 million, or 15.1%, compared to $29.7 million for the three months ended June 30, 2024. This increase was primarily driven by sales volume contributions from certain Surgical products, particularly AMNIOFIX and AMNIOEFFECT, as well as contributions from HELIOGEN.

Cost of Sales and Gross Profit Margin

Cost of sales for the three months ended June 30, 2025 and 2024 was $18.7 million and $14.9 million, respectively, an increase of $3.8 million, or 25.8%, year-over-year. Gross profit margin for the three months ended June 30, 2025 was 81.1% compared to 83.0% for the three months ended June 30, 2024. The year-over-year decrease in gross margin was driven by production variances and product mix. In addition, amortization of our acquired EMERGE and CELERA trademarks assets during the three months ended June 30, 2025 further decreased margins.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expense for the three months ended June 30, 2025 was $64.2 million, compared to $55.4 million for the three months ended June 30, 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 $6.1 million or 14.7%, year over year, which was driven by increases in commissions due to higher sales and higher effective commission rates. General and administrative expenses increased $2.6 million or 19.1%, 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 June 30, 2025 was $3.3 million, compared to $3.0 million for the three months ended June 30, 2024, an increase of $0.3 million, or 9.7%. 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.

Investigation, Restatement and Related Benefit

Investigation, restatement and related benefit was $9.7 million for the three months ended June 30, 2024. The benefit resulted from various settlements related to former officers and other related matters. Investigation, restatement and related costs ceased in 2024.

Amortization of Intangible Assets

Amortization expense related to intangible assets was $0.1 million for the three months ended June 30, 2025, compared to $0.2 million for the three months ended June 30, 2024, a decrease of $0.1 million or 47.4%. The decrease is due to certain intangible assets being fully amortized.

Interest Income, Net

Interest income, net was $0.7 million for the three months ended June 30, 2025 compared to immaterial interest income for the three months ended June 30, 2024. The increase was generally driven by increases in our cash balances, year over year.

Income Tax Provision

The effective tax rates for the Company were 26.1% and 24.1% for the three months ended June 30, 2025 and June 30, 2024, respectively. The effective tax rates in each period were favorably impacted by vestings of restricted stock, offset by deduction limitations on executive compensation.

Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 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 six months ended June 30, 2025 of $186.8 million, a $14.9 million, or 8.7%, increase compared to the six months ended June 30, 2024, for which we recorded net sales of $171.9 million.

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

Net sales of our Wound product portfolio were $120.5 million for the six months ended June 30, 2025, a $6.0 million or 5.2% increase compared to $114.6 million for the six months ended June 30, 2024. The increase was primarily driven by sales of our newer products, CELERA and EMERGE, which offset decreases in sales of other Wound products. The increase is also attributable to turnover of certain of our sales team and customers in the six months ended June 30, 2024.

Net sales of our Surgical products totaled $66.3 million, reflecting growth of $8.9 million, or 15.6%, compared to the six months ended June 30, 2024. The increase was primarily driven by sales volume contributions from certain Surgical products, particularly AMNIOFIX and AMNIOEFFECT, as well as contributions from HELIOGEN.

Cost of Sales and Gross Profit Margin

Cost of sales for the six months ended June 30, 2025 was $35.2 million, an increase of $7.4 million, or 26.6%, compared to $27.8 million for the six months ended June 30, 2024. Gross profit margin for the six months ended June 30, 2025 was 81.1% compared to 83.8% for the six months ended June 30, 2024. The increase in cost of sales were driven by increases in sales volume. 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 six months ended June 30, 2025 further decreased margins.

Selling, General and Administrative Expense

Selling, general and administrative expenses for the six months ended June 30, 2025 increased by $13.6 million, or 12.3%, to $124.1 million, compared to $110.5 million for the six months ended June 30, 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 $8.5 million or 9.9%, year over year, which was driven by increases in commissions due to higher sales and higher effective commission rates. General and administrative expenses increased $5.1 million or 20.8%, 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 expenses for the six months ended June 30, 2025 was $6.6 million, compared to $5.9 million for the six months ended June 30, 2024. This increase 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.

Investigation, Restatement and Related Benefit

There was no investigation, restatement and related expense for the six months ended June 30, 2025 compared to a benefit of $9.4 million for the six months ended June 30, 2024. The benefit resulted from various settlements related to former officers and other related matters. Investigation, restatement and related expenses ceased in 2024.

Amortization of Intangible Assets

Amortization expense related to intangible assets was $0.2 million for the six months ended June 30, 2025 compared to $0.4 million for the six months ended June 30, 2024. The decrease is due to certain intangible assets being fully amortized.

Impairment of Intangible Assets

Impairment for the six months ended June 30, 2024 was $0.1 million, which relates to abandoned patents.

Interest Income (Expense), Net

Interest income, net was $1.2 million for the six months ended June 30, 2025 compared to interest expense, net of $1.7 million for the six months ended June 30, 2024. The change was the result of a decrease in outstanding debt and lower interest rates under the Citizens Credit Facilities. The change was also driven by increased cash balances, year over year. Additionally, 2024 reflects loss on extinguishment of debt arising from the repayment and termination of a previous loan agreement ($1.4 million).

Income Tax Provision

The effective tax rates for the Company were 23.0% and 22.9% for the six months ended June 30, 2025 and 2024, respectively. The effective tax rates in each period were favorably impacted by vestings of restricted stock. These effects were partially offset by deduction limitations on executive compensation.

Discussion of Cash Flows

Operating Activities

Net cash provided by operating activities from continuing operations during the six months ended June 30, 2025 was $19.7 million, compared to $27.8 million for the six months ended June 30, 2024. The change was primarily the result of greater expenses during the six months ended June 30, 2025.

Investing Activities

Net cash used for investing activities during the six months ended June 30, 2025 was $1.3 million, compared to $6.9 million for the six months ended June 30, 2024. Activity for the six months ended June 30, 2024 reflects our $5.0 million investment to expand our product portfolio through the TELA and Regenity agreements compared to the $0.7 million in cash paid for acquisitions during the six months ended June 30, 2025. The remaining difference reflects a year-over-year decrease in capital expenditures.

Financing Activities

Net cash used for financing activities during the six months ended June 30, 2025 was $4.0 million. Cash used by financing activities was $33.8 million during the six months ended June 30, 2024. The cash used during the six months ended June 30, 2024 was due to the repayment of the initial $30.0 million draw under the Revolving Credit Facility. There was no equivalent activity during the same period in 2025. The cash used during the six months ended June 30, 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 June 30, 2025, we had $118.9 million of cash and cash equivalents, total current assets of $220.9 million and total current liabilities of $50.3 million, reflecting a current ratio of 4.4. We had $18.5 million of long term debt outstanding and $75 million of availability under our Revolving Credit Facility (as discussed 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 a $20 million Term Loan Facility and a $30 million Revolving Credit Facility. As of June 30, 2025, the Company has $18.5 million of principal outstanding on the Term Loan Facility that bears interest at 6.7% and no borrowings outstanding under the Revolving Credit Facility.

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%.

Contractual Obligations

There were no significant changes to our contractual obligations during the six months ended June 30, 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.

There have been no material changes in market risk from the information provided in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K.

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 June 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.