Jim Sidoti

Jim Sidoti of Sidoti & Company, LLC asked about the percentage of centers currently using the DeepHealth OS, the timeline for full implementation, the overall same-center volume increase for the quarter, and the status of the iCAD sales force post-acquisition.

Answer

Howard Berger, Chairman, President & CEO, clarified that centers are using DeepHealth modules but none are on the full OS yet, with a full rollout targeted for completion in 15-18 months. He and Mark Stolper, EVP & CFO, confirmed the iCAD sales force of about 25-26 people has come on board. Mark Stolper provided a same-center volume breakdown, resulting in a blended increase of about 2.7%, driven by a 6.6% rise in advanced imaging.

Jim Sidoti of Sidoti & Company, LLC asked what percentage of centers are currently using the DeepHealth OS and the expected timeline for full implementation. He also asked for the overall same-center volume increase and the status of the iCAD sales force.

Answer

Howard Berger, Chairman, President & CEO, stated that no centers are using the full DeepHealth OS yet, but modules are being deployed. He estimated a 15-18 month timeline for full implementation by early 2026 and confirmed they plan to retain the entire iCAD sales force. Mark Stolper, EVP & CFO, provided a breakdown of same-center volume growth, which blended to a 2.7% increase overall.

Jim Sidoti asked whether the growth in the distributed revenue segment was due to one-time sales, questioned the sustainability of lower SG&A expenses, and sought clarity on the future tax rate after NOLs are utilized.

Answer

CEO Amir London confirmed that the distributed revenue growth from biosimilar launches is sustainable and not a one-time event. He attributed lower SG&A to disciplined expense management, noting H2 expenses might be slightly higher but the focus remains on improving EBITDA margins. CFO Chaime Orlev addressed the tax question, explaining the Q2 tax credit was due to currency fluctuations and projecting a future effective tax rate of 20% to 25% once NOLs are fully used in 2025.

Jim Sidoti of Sidoti & Company, LLC inquired about the sustainability of growth in the distributed revenue segment, the reasons for the significant decrease in SG&A expenses, and the factors behind the quarterly tax credit and future tax rate expectations.

Answer

CEO Amir London confirmed that growth in the distribution segment from biosimilars is sustainable and not a one-time event. He attributed lower SG&A to disciplined expense management, while noting H2 expenses may be slightly higher. CFO Chaime Orlev explained the tax credit was due to currency fluctuations and projected a future effective tax rate of 20-25% once NOLs are fully utilized.

Jim Sidoti of Sidoti & Company, LLC inquired about the allocation of the $6 million raised for Ignaton, whether the company remains on track for its 12% annual revenue growth target, and the current performance and strategic purpose of the Gaia Marketplace.

Answer

Executive Chairman Jirka Rysavy explained the Ignaton funds are for a larger launch, not primarily for production capacity. He also positioned the Marketplace as a community-building tool, not a revenue driver. CFO Ned Preston confirmed Gaia is on track for its 12% annual revenue growth target, driven by the core SVOD business. CEO Kiersten Medvedich reinforced the Marketplace's community focus, highlighting the success of sold-out travel events.

Jim Sidoti of Sidoti & Company, LLC questioned how the $6 million raised for Ignaton would be spent, whether management was still on track to meet its 12% annual revenue growth target, and asked for an update on the Gaia Marketplace's performance and strategy, including new product launches.

Answer

Executive Chairman Jirka Rysavy explained the Ignaton funds would support a larger launch rather than production capacity, which is already sufficient. He also clarified the Marketplace's primary goal is community building, not revenue generation. CFO Ned Preston reaffirmed the 12% full-year revenue growth target, citing strong performance in the core SVOD business. President & CEO Kiersten Medvedich added that the Marketplace is foundational to community, highlighting that recent travel offerings to Peru sold out quickly.

Jim Sidoti of Sidoti & Company, LLC asked about the financial impact of fulfilling delayed China orders, the sales outlook for China in Q4, the involvement of medical OEMs in photon counting development, and the company's future debt reduction strategy.

Answer

CEO Sunny Sanyal confirmed that fulfilling the China orders did not result in higher-than-normal expenses. CFO Shubham Maheshwari described demand in China as stable but did not provide specific regional guidance. Sanyal clarified that the major photon counting projects are with medical OEMs. Maheshwari explained the plan is to build cash reserves for a refinancing event in approximately two years, targeting a gross debt level between $300 million and $350 million.

Jim Sidoti of Sidoti & Company, LLC asked about management's top priorities post-refinancing, the performance of the GoHealthProtect product line, and for guidance on the post-transaction share count.

Answer

CEO Vijay Kotte outlined three key priorities: pursuing M&A through the new Transformation Committee, enhancing the GoHealthProtect product, and preparing for AEP. He confirmed GoHealthProtect's Q2 performance met expectations and the focus is on optimizing it rather than adding new products. The share count modeling question was deferred to one-on-one follow-ups.

Jim Sidoti from Sidoti & Company, LLC asked if 35% is a realistic ongoing SG&A target, inquired about the M&A pipeline for branded products, and questioned the potential impact of tariffs on goods from India.

Answer

CFO Mike Koempel confirmed that 35% SG&A is a reasonable target. President of Branded Products Jake Himelstein and CEO Michael Benstock stated that while they are selective, they are actively looking for accretive acquisitions again after a period of caution. Benstock also clarified that India is a minimal and non-exclusive supplier, so any new tariffs there would have a negligible impact.

Jim Sidoti from Sidoti & Company, LLC asked about the long-term gross margin trajectory as the commercial channel grows, the potential timing of a CINGAL distribution deal relative to FDA approval, the company's cash position, and whether manufacturing capacity will be sufficient by year-end.

Answer

EVP, CFO & COO Steve Griffin stated that while the growing commercial channel has a lower margin, the growth of higher-margin products like Integrity should keep overall margins in a stable range, and confirmed new products would be accretive. President & CEO Dr. Cheryl Blanchard noted that the timing for a CINGAL deal would be driven by maximizing shareholder value. Mr. Griffin added that while operating cash flow is improving, CapEx investments in manufacturing might lead to a lower cash balance, and that capacity expansion is an ongoing, multi-year investment to meet future demand.

Jim Sidoti of Sidoti & Company, LLC asked about the long-term gross margin outlook as the commercial channel grows, the potential timing of a CINGAL distribution deal, whether the current cash balance represents a low point, and if manufacturing capacity will be sufficient by year-end to meet future demand.

Answer

EVP, CFO & COO Steve Griffin stated that while the commercial channel has a lower margin, new higher-margin products like Integrity should be an offset, keeping margins in a similar range to the 2H 2025 forecast. President & CEO Dr. Cheryl Blanchard noted that the timing of any CINGAL deal would be driven by maximizing shareholder value. Mr. Griffin explained that while operating cash flow is improving, CapEx investments in the Massachusetts facility could lead to a lower cash balance. He confirmed that capacity investment is ongoing to meet future demand for all key products.

Asked about the drivers of the strong Oncology growth, the sustainability of the Device Solutions margin improvement, risks from budget cuts, the timeline for IT upgrade costs to phase out, and the reasons for the high tax rate.

Answer

Executives explained Oncology growth was a mix of volume and strong collections, with collections being less sustainable. Device Solutions margin is sustainable due to the rental business model. They see minimal risk from budget cuts due to their home care focus and low government exposure. IT costs will mostly end after 2025, with a small amount in Q1 2026. The high tax rate was a non-cash event due to non-deductible expenses and will normalize.

Sought clarification on the negative pressure business, specifically the distinction between Cork and Smith+Nephew devices, and questioned the reasons for the significant increase in medical equipment purchases in Q2 and its allocation across business segments.

Answer

Executives explained that the company is device-agnostic, and all negative pressure devices (Cork, Genadyne, Smith+Nephew) can be used for home referrals. The spike in Q2 capital expenditure was attributed to a large new rental customer and growth in pain, oncology, and wound care, and is not expected to persist at that level. The spending was spread across these various business lines.