Michael Petusky

Michael Petusky asked for an update on the progress made in implementing steps to turn around the implant business, such as adding reps, improving training, adjusting branding, and leveraging infrastructure, since the Q3 conference call.

Answer

President and CEO Dan Scavilla confirmed progress, including the creation of a focused sales force within implants, expansion of clinical education, and acceleration of innovation through R&D funding. He noted that the brand strategy for implants, abutments, and crowns is still being finalized, with an expected update in Q2, but the team's firepower and education are now in place.

Michael Petusky from Barrington Research followed up on previous discussions regarding Dentsply Sirona's plans to turn around its implants business, asking about the implementation status of steps such as adding more reps, better training, branding adjustments, and leveraging infrastructure.

Answer

President and CEO Dan Scavilla confirmed that the focused sales force for implants and expanded clinical education are implemented. He also noted that a pull-forward of innovation through R&D funding is underway. Mr. Scavilla stated that the brand strategy for implants, abutments, and crowns is still being worked on and is expected to be finalized in Q2, aiming to leverage the full power of the team and education.

Michael Petusky from Barrington Research inquired about the anticipated U.S. revenue contribution from Hyalofast in 2027, the expected normalized gross margin for 2026, and the outlook for free cash flow growth compared to 2025. He also asked about the dynamics driving international OA pain growth, the target enrollment for the Cingal bioequivalence study, Integrity's Q4 revenue run rate, and the company's capital allocation priorities beyond share repurchases.

Answer

Steve Griffin, President and CEO, confirmed a $3 million anticipated revenue for Hyalofast in 2027, contingent on U.S. approval, and indicated a normalized gross margin in the high 50s for 2026. He projected 2026 free cash flow to be modestly in line with 2025. Griffin attributed international OA pain growth to market share gains and new market expansion, led by James Chase. Regarding Cingal, he stated the bioequivalence study targets just under 60 patients and is on track, with NDA filing paced by enrollment. He noted Integrity's strong sequential growth in Q4 but did not provide a specific run rate, mentioning Q4 seasonality. For capital allocation, Griffin prioritized manufacturing CapEx and U.S. sales channel investments, deferring other long-term evaluations.

Michael Petusky from Barrington Research inquired about Anika's capital allocation priorities beyond the ongoing share repurchase program, specifically asking about potential small tuck-in M&A, given the company's cash position and expected free cash generation.

Answer

Steve Griffin, President and CEO of Anika Therapeutics, outlined capital allocation priorities as: first, investments in manufacturing operations (CapEx) in Bedford; second, investments in the U.S. sales channel. He stated that while longer-term M&A opportunities exist, the immediate focus is on executing current initiatives (restructuring, Integrity, Hyalofast, Cingal) to generate shareholder value.

Michael Petusky of Barrington Research Associates sought more detail on the HYALOFAST trial's reduced sample size and patient dropout rate, questioned the significance of the FDA's encouragement to submit the full data package, asked if the planned $14 million investment in the regenerative portfolio was still on track, and inquired about recent surgeon adoption or surgery numbers for Integrity.

Answer

President & CEO Dr. Cheryl Blanchard explained that the HYALOFAST trial was impacted by differential dropout in the microfracture arm and missing data due to COVID, but the FDA encouraged a full submission for the Breakthrough Device, including all secondary and international data. EVP, CFO & COO Steve Griffin confirmed the $14 million investment is still on track but noted all investments are consistently reviewed and that curbing the amount is 'possible'. Dr. Blanchard addressed the Integrity question by highlighting that the business is on track to double in 2025, from which strong surgeon adoption can be extrapolated.

Michael Petusky of Barrington Research Associates, Inc. requested more detail on the HYALOFAST trial's reduced sample size and dropout rate, asked if the FDA's encouragement to submit data was standard procedure, questioned if the planned $14 million regenerative portfolio investment would be maintained, and inquired about surgeon adoption metrics for Integrity.

Answer

President & CEO Dr. Cheryl Blanchard explained the HYALOFAST trial was impacted by patient dropouts in the microfracture arm and missed visits during COVID, but noted the FDA encouraged a full data submission, which is significant for a Breakthrough Device. EVP, CFO & COO Steve Griffin confirmed the $14 million investment is still on track but that all spending is constantly evaluated and could possibly be curbed. Dr. Blanchard addressed Integrity by focusing on its strong top-line performance, stating the business is on track to double in 2025, rather than providing specific surgeon numbers.

Michael Petusky of Barrington Research pressed for more specific timing on the final Hyalofast module filing, sought clarity on the pricing floor for U.S. OA Pain products, and requested details on surgeon adoption and marketing strategies for the Integrity implant system.

Answer

CEO Dr. Cheryl Blanchard indicated a more precise Hyalofast filing timeline would be provided on the next earnings call. CFO Steve Griffin stated that while OA Pain pricing is lower, they expect stabilization in 2026 and noted the core business remains profitable when excluding key growth investments. Dr. Blanchard detailed that Integrity's growth is driven by both deepening use with current surgeons and acquiring new ones, supported by clinical data, training events, and a multi-faceted sales approach highlighting the product's strength and regenerative benefits.

Michael Petusky of Barrington Research asked for details on the commercial progress of Integrity, specifically whether its uptake is driven by a small group of surgeons or a broad base. He also inquired about the completion timeline for Cingal's nonclinical testing and the key drivers behind the projected acceleration in long-term commercial channel revenue growth.

Answer

President and CEO Dr. Cheryl Blanchard stated that Integrity's uptake is being driven by a broad set of surgeons, highlighting significant interest at a recent industry conference. Regarding Cingal, she explained that a timing update is pending formal feedback from a recent Type C meeting with the FDA. CFO Steve Griffin added that the long-term commercial revenue growth acceleration to 20-30% will be driven by continued Integrity growth, the U.S. launch of Hyalofast in late 2026, and Hyalofast becoming a primary contributor in 2027.

Michael Petusky of Barrington Research sought details on the divested Arthrosurface business, including its annual revenue, total acquisition cost with earn-outs, and the standalone EBITDA margins of the U.S. OA business with JNJ. He also asked about expectations for the Parcus divestiture and the scope of the announced headcount reduction.

Answer

EVP and CFO Steve Griffin disclosed that Arthrosurface's annual revenue was around $25 million and the total acquisition cost was approximately $77 million. While declining to provide specific margins for the JNJ business, he noted the remaining OA Pain segment has 'strong 20-plus percent margins.' He stated it was too early to comment on the Parcus sale proceeds. Both Mr. Griffin and CEO Dr. Cheryl Blanchard confirmed the headcount reduction from 325 to 225 was all-inclusive of the divestitures and restructuring.

Michael Petusky from Barrington Research inquired about the drivers of LeMaitre Vascular's strength in Europe, specifically if the company's aggressive approach to MDR compliance and competitors exiting the market contributed to market share gains. He also asked for an update on the China market, its growth, and any specific developments. Finally, he questioned the sustained 20% growth of valvulotomes, a long-standing product, and requested the overall unit growth split for the company in the quarter.

Answer

CEO George LeMaitre confirmed the company's aggressive MDR approach, including the recent PTFE LifeSpan approval, but noted no new material players dropping out due to MDR. He suggested that larger companies acquiring competitors sometimes create opportunities, and LeMaitre's strategy of going direct in new countries (e.g., Portugal, Czechia, Poland) contributes to its strong European presence. For China, George LeMaitre reported 24% revenue growth in Q4, making it a profitable market for the first time, largely due to price increases offsetting tariffs. He mentioned the XenoSure Cardiac approval was a "nothing burger," but the XenoSure Vascular application is finalized. Regarding valvulotomes, George LeMaitre attributed the 20% reported sales growth (17% organic) to focused efforts and a perfectly built sales channel, noting that units are generally flat but growth comes from global expansion. President Dave Roberts added that the BEST-CLI study reinforced peripheral bypass as a robust procedure, contributing to the resilience of valvulotomes. CFO Dorian LeBlanc clarified the Q4 overall growth split as 9% price and 6% units.

Michael Petusky asked about the drivers of LeMaitre Vascular's strength in Europe, specifically if MDR compliance contributed to market share gains. He also sought an update on the China market, the surprising 20% growth in valvulotomes, and the overall unit versus price growth for the company in Q4.

Answer

CEO George LeMaitre confirmed aggressive MDR compliance, noting early share gains but no new material players exiting. He cited direct market expansion in Europe as a factor. For China, LeMaitre reported 24% Q4 revenue growth, Q4 profitability, and overcoming tariffs by raising prices. Regarding valvulotomes, he attributed growth to focus and channel strength, with units generally flat. CFO Dorian LeBlanc stated Q4 organic growth was 9% price and 6% units.

Michael Petusky of Barrington Research Associates asked for a deeper analysis of the drivers behind the 7% unit volume growth, beyond catheter stocking, and inquired about the current M&A landscape and areas of interest for LeMaitre.

Answer

Chairman & CEO George LeMaitre clarified that excluding the catheter impact, unit growth was 5%, in line with recent history. He highlighted strong unit growth from ArteGraft (+10%), XenoSure in Europe (+9%), and RFA Cardiac (+61%). President & Director Dave Roberts added that the company continues to seek acquisitions in open vascular and cardiac surgery, with a revenue sweet spot of $15M to $150M, preferring drop-in products.

Michael Petusky asked about potential delays for the XenoSure approval in China due to trade tensions, requested Q1 cash flow and CapEx figures, inquired about the total number of MDR CE marks received, and asked if tariff uncertainty was affecting M&A discussions.

Answer

CEO George LeMaitre acknowledged the China situation was frustrating but reiterated a long-term commitment. President Dave Roberts noted the team is actively seeking provincial listings for XenoSure. Executive Dorian LeBlanc provided the financial figures: $9M in cash from operations and $1.38M in CapEx. LeMaitre confirmed 17 of 23 MDR CE marks are complete. Roberts stated that M&A discussions are proceeding, with sellers not yet making decisions based on tariff news.

Michael Petusky of Barrington Research asked if the recent capital raise has altered the company's M&A strategy regarding the size of potential targets. He also questioned whether the outsized benefit from implementing pricing floors in recent years is likely to be repeated.

Answer

President David Roberts confirmed the increased cash balance enables larger acquisitions, referencing a past look at a deal over $500 million, but stressed that the company remains disciplined and is 'waiting for our pitch.' On pricing, CEO George LeMaitre and EVP, CFO & Treasurer Joseph Pellegrino argued that while the initial floor implementation was impactful, the new 8% U.S. list price increase and the core strategy of selling differentiated products in niche markets should continue to support strong pricing power.

Michael Petusky of Barrington Research asked about the status of the XenoSure submission in China, the criteria for the new CFO, gross margin sustainability, and the company's M&A strategy, including its willingness to use leverage.

Answer

CEO George LeMaitre confirmed the XenoSure submission in China is complete but was cautious on the timeline. CFO Joseph Pellegrino stated gross margins are sustainable through Q4, dependent on price, mix, and efficiencies. President Dave Roberts noted that while the company is seeking larger deals and could finance upwards of $300 million, strategic fit remains the top priority.

Michael Petusky inquired about the contribution of the SCOUT system to Peripheral Intervention (PI) growth in Q4 2025, the reasons behind its growth, and requested a breakdown of regional performance for Q4 2025, including an update on China's 2025 performance versus expectations.

Answer

CFO Raul Parra stated that Radar Localization and delivery systems, which include SCOUT, increased over 25% year-over-year and represented almost 45% of total PI growth in Q4. President and CEO Martha Aronson attributed SCOUT's growth to a top-notch sales organization, strong physician relationships, clinical value, and improved supply. Raul Parra provided Q4 2025 regional sales growth: US up 12% (8% organic constant currency), International up 6% (4% organic constant currency), APAC up 3% constant currency, EMEA up 12% constant currency, and Rest of World up 4.5% constant currency. He confirmed China was down about 2% in 2025, in line with expectations.

Michael Petusky asked how much of the Peripheral Intervention (PI) growth in Q4 2025 was attributable to the SCOUT system (Radar Localization and delivery systems), and what factors explained that level of growth. He then requested a breakdown of Q4 2025 sales performance by geographic region (US, International, APAC, EMEA, Rest of World) and asked for clarification on China's 2025 performance relative to expectations.

Answer

Raul Parra, Chief Financial Officer and Treasurer, stated that Radar Localization and delivery systems increased over 25% year-over-year, representing almost 45% of total PI growth. Martha Aronson, President and CEO, added that SCOUT reached a significant milestone in procedures, attributing its success to a top-notch sales organization, clinical value, and improved supply. Raul Parra provided Q4 2025 regional sales: US up 12% (8% organic constant currency), International up 6% (4% organic constant currency), APAC up 3% constant currency, EMEA up 12% constant currency, and Rest of World up 4.5% constant currency. He reiterated that China's 2025 performance was down around 2%, in line with expectations.

Michael Petusky of Barrington Research asked for more specific details on the softness in China, the actual dollar impact from tariffs in Q2, and CEO Fred Lampropoulos's view on the current M&A environment and valuations.

Answer

CFO Raul Parra stated the China softness is a general macro issue, consistent with their full-year low single-digit growth expectation for APAC, and confirmed the Q2 tariff impact was approximately $1.2 million. CEO Fred Lampropoulos commented on M&A by stating that opportunities exist, but the company will remain patient and disciplined, acting only when a deal is the right fit for Merit, even if it requires waiting a long time.

Michael Petusky inquired about evidence of pre-tariff stocking orders from China, whether the Endoscopy guidance implies post-acquisition customer attrition, and if recent OEM strength suggests a new, higher growth expectation.

Answer

EVP and CFO Raul Parra confirmed some minor, non-material stocking occurred late in Q1. He and CEO Fred Lampropoulos clarified that the Endoscopy sales cadence was planned to allow for sales force integration and did not reflect customer loss. On OEM, Parra reiterated the full-year expectation remains high single-digit growth, despite recent outperformance.

Michael Petusky of Barrington Research inquired about the spike in Q4 R&D expense and whether it represents a new normal. He also asked for the expected spending cadence of the significant CapEx planned for 2025.

Answer

Executive Raul Parra clarified that the Q4 R&D increase was a deliberate, one-time investment to utilize strong gross margin for some overdue consulting work, not a new run-rate. He could not provide a specific CapEx cadence for the new distribution center, as construction progress is weather-dependent, but he reiterated the company's focus on controlling spending and delivering strong free cash flow.

Michael Petusky of Barrington Research asked about the WRAPSODY regulatory process, specifically if there had been any stoppages in communication with the FDA since the PMA filing. He also inquired about M&A strategy, asking what leverage ratio management is comfortable with for potential deals.

Answer

Executive Fred Lampropoulos confirmed that the PMA was filed on schedule by the end of Q2 and stated there have been 'no stoppages' in the 180-day FDA review process. Executive Raul Parra addressed leverage, stating that in the current interest rate environment, the company is comfortable around a 3x ratio, but emphasized a continued disciplined approach to M&A that aligns with the CGI program targets.

Michael Petusky asked about the bullish forecast for the Hospital segment in Q4 fiscal year 2026, seeking clarification on the drivers, such as order timing reversal or clawbacks in vascular closure. He also inquired about the progress in the 50 identified vascular closure accounts where business was previously lost, asking about current competitive dynamics and anecdotal evidence of a turnaround.

Answer

Chris Simon (President and CEO, Haemonetics) confirmed the bullish Q4 forecast for Hospital, driven predominantly by continued strength in Blood Management Technologies (TEG 6s disposable sales, TEG 5000 system upgrade). He also expects stabilization in Interventional Technologies from order timing and head-to-head competition, with investments made to encourage new usage and motivate the sales team, setting up growth for FY2027. Regarding the 50 accounts, he stated Haemonetics is 'giving at least as good as we get,' with strengthened commercial operations tracking wins and losses. He acknowledged two distinct competitors but asserted that the balance has shifted due to a fit-for-task team, a superior product, and a commitment to returning IVT, especially vascular closure in AFib, to growth.

Michael Petusky asked about the bullish forecast for the hospital segment in Q4 2026, seeking clarification on the primary drivers, such as order timing reversal or clawbacks in vascular closure. He also followed up on the 50 vascular closure accounts identified previously where business was lost, asking about current competitive dynamics and any anecdotal evidence of a turnaround in those specific accounts.

Answer

Chris Simon, President and CEO, confirmed the bullish Q4 forecast for the hospital segment, driven predominantly by strong performance in Blood Management Technologies (TEG 5000 system upgrades, TEG 6s disposable uptake). He also expects stabilization in Interventional Technologies (IVT) from order timing and head-to-head competition, with investments made to pare losses and set up FY2027 growth. Regarding the 50 accounts, Simon stated they are 'giving at least as good as we get,' with strengthened commercial operations tracking wins and win-backs. He acknowledged formidable competition from an established industry standard and a more aggressive Mynx product, but asserted that the balance has shifted due to a 'fit for task' team and a superior product, especially in AFib.

Michael Petusky inquired about the geographic performance of the TEG business, particularly in EMEA and China. He also asked about the expected cadence of the recovery in the U.S. EP market for Vascade and for more detail on the new sales and marketing leadership hires.

Answer

CEO Christopher Simon stated that TEG's outperformance is concentrated in the U.S. (high 20s growth) and that challenges in China, now less than 4% of total revenue, have stabilized. For the Vascade recovery, he anticipates a 'gradual build' as the team makes the right long-term investments rather than taking shortcuts. He described the leadership changes as fundamental, impacting all levels from senior leaders to first-level supervisors, to prepare the business for a new level of scale and performance.

Michael Petusky of Barrington Research asked for clarification on the Q1 fiscal 2026 earnings outlook, specifically if it would be a negative year-over-year comparison. He also asked if the company provided a revenue figure for the Sensor Guided and Esophageal Protection businesses and what the growth expectation is for them in fiscal 2026.

Answer

CFO James D'Arecca projected that Q1 fiscal 2026 adjusted EPS would likely be flattish to slightly positive year-over-year, not negative. CEO Christopher Simon did not provide a specific revenue figure for Sensor Guided and Esophageal Protection but noted impressive new account opening rates for SavvyWire. He stated the combined category is forecasted to be flat year-over-year in fiscal 2026, as the company has pulled back on ensoETM promotion due to the market shift to PFA.

Michael Petusky asked a high-level strategic question about the top priorities within management's control over the next few years that are key to creating long-term shareholder value.

Answer

CEO Christopher Simon outlined a two-pronged strategy: first, cementing the plasma business as a durable, high-single-digit growth engine generating significant cash flow. Second, using those proceeds to expand into the Med-Surg space (Hospital segment), aiming for double-digit growth and high-20s operating margins. He pointed to the significant EPS growth during the long-range plan as proof of this transformation.

Michael Petusky, Managing Director and Research Analyst at Barrington Research, inquired about the revenue contribution and transition dynamics of VerifyMe's proactive shipping business following the discontinuation of services with its previous shipping partner. He pressed for details on the Q3 and Q4 revenue impact from this change and the expected customer transition rate to the new partner. He also asked about the company's M&A strategy, specific criteria for potential acquisitions, and the breakdown of operating expense improvements, particularly the impact of the Trust Codes divestiture.

Answer

Adam Stedham, CEO and President of VerifyMe, explained that the proactive shipping business transition is a dynamic, 'sliding scale' process, making it difficult to provide precise revenue guidance for Q4 2025 and Q1 2026. He noted that not all customers from the previous partner will transition, but new customers are expected from the new partnership. He confirmed ongoing, significant M&A discussions, indicating a preference for immediately accretive bolt-on acquisitions or transformative deals to address the company's subscale size. Jennifer Cola, CFO, clarified that approximately $500,000 of the Q3 2025 operating expense improvement was attributable to the divestiture of the Trust Codes business in December 2024.

Michael Petusky from Barrington Research inquired about the revenue contribution of VerifyMe's proactive shipping business that transitioned from its previous partner, specifically asking for its impact on Q3 2025 and Q4 2024 revenues, and the company's strategy for customer transitions. He also asked about the status of potential M&A activities and the breakdown of operating expense improvements.

Answer

CEO Adam Stedham explained that the transition from the previous shipping partner is a dynamic, sliding-scale process, not a "cliff," making precise revenue guidance difficult for Q4 2025 and Q1 2026. He noted a 7-10 day negative impact in Q3 2025 from the transition and clarified that while some customers may not transition to the new partner, others will be gained. Stedham also confirmed significant ongoing M&A conversations, indicating elevated legal costs, and outlined criteria for acquisitions: bolt-ons must be immediately accretive, while transformative deals are desirable for addressing the company's subscale size. CFO Jennifer Cola added that approximately $500,000 of the Q3 2024 operating expense was associated with the divested TrustCodes business.

Michael Petusky of Barrington Research Associates inquired about Q2 authentication revenue, the underlying growth of the Periship business excluding prior customer losses, the expected timeline for the new carrier relationship to contribute to revenue, and the company's capital allocation priorities, particularly regarding M&A versus internal investment.

Answer

CFO Jennifer Cola provided the authentication revenue figure of $27,000. CEO Adam Stedham addressed the other questions, explaining that Periship's underlying growth was in the low single-digits after accounting for new sales and market softness. He clarified that the new carrier integration would take a few months, with a material impact not expected until 2026 due to peak season freezes. Regarding capital allocation, Stedham emphasized a disciplined approach, stating the company is actively seeking strategic acquisitions to deploy its strong cash balance for shareholder value but is not in a rush, ensuring they find the right opportunity.

Michael Petusky of Barrington Research Associates inquired about Q2 authentication revenue, the organic growth rate of the Periship business excluding the impact of previously lost contracts, the expected timeline and materiality of the new carrier relationship, and the company's capital allocation priorities, particularly regarding M&A versus internal investment.

Answer

CFO Jennifer Cola stated that authentication revenue was $27,000. President & CEO Adam Stedham explained that Periship's underlying growth, excluding historical customer losses, was in the low single-digit percentage range. He noted the new carrier relationship's financial impact would likely materialize in 2026 due to technology integration and shippers' reluctance to make changes during the peak holiday season. Regarding capital allocation, Stedham confirmed the focus is on deploying cash for strategic M&A to create shareholder value rather than reinvesting in current operations, emphasizing a diligent search for the right opportunity.

Michael Petusky of Barrington Research Associates inquired about Q2 authentication revenue, the organic growth rate of the Periship business excluding the impact of previously lost customers, the expected timeline and materiality of the new carrier relationship, and the company's capital allocation priorities given its strong cash position.

Answer

CFO Jennifer Cola stated that authentication revenue was $27,000. CEO Adam Stedham explained that calculating an exact ex-customer loss growth rate for Periship was difficult but would be in the low single digits. He elaborated that the new carrier integration will take a couple of months, with a material impact not expected until 2026 due to peak season constraints. Regarding capital allocation, Stedham confirmed the priority is to deploy capital for strategic growth, primarily through M&A, to find an external asset with a good ROI, rather than reinvesting in current operations.

Michael Petusky of Barrington Research Associates inquired about the specific authentication revenue for the quarter, the underlying growth of the Periship business excluding the impact of previously lost customers, the expected timeline and materiality of the new carrier relationship, and the company's capital allocation priorities given its strong cash position.

Answer

CFO Jennifer Cola stated that authentication revenue was $27,000. CEO Adam Stedham explained that calculating an exact ex-customer loss growth rate for Periship was difficult but estimated it would be in the single-digit percentage range. He elaborated that the new carrier integration would take a couple of months, with a material impact not expected until 2026 due to technology integration and shippers' reluctance to change during the peak season. Regarding capital allocation, Stedham confirmed the priority is to deploy capital for strategic growth, preferably through M&A, to create shareholder value, rather than reinvesting it into current operations.

Michael Petusky of Barrington Research Associates inquired about Q2 authentication revenue, the growth rate of the Periship business excluding the impact of previously lost customers, the expected timeline and materiality of the new carrier relationship, and the company's capital allocation priorities given its strong cash position.

Answer

CFO Jennifer Cola stated that authentication revenue was $27,000. CEO Adam Stedham explained that Periship's underlying growth, excluding historical customer losses, was in the single-digit percentage range. He noted that the new carrier integration will take a few months, with a material impact not expected until 2026 due to the upcoming peak season. Regarding capital allocation, Stedham emphasized that while the focus in 2025 is on making Periship efficient, the company's strong cash balance is earmarked for strategic growth, preferably through M&A, and they are being diligent in finding the right opportunity.

Michael Petusky inquired about VerifyMe's capital allocation priorities between organic growth and potential acquisitions, and whether any external growth would be related to the core business. He also asked for the specific revenue from the authentication business in the quarter and sought clarity on modeling revenue and operating expenses for the remainder of the year.

Answer

CEO Adam Stedham explained that organic growth initiatives are funded by business operations, with a focus on e-commerce integration and becoming freight-carrier agnostic. He stated that both tuck-in and transformative acquisitions are being considered to address the company's small size, potentially even outside of logistics, though the bar would be higher. Executive Nancy Meyers provided the authentication revenue figure as $26,000 for the quarter. Adam Stedham added that while formal guidance isn't being provided, Q2 will have a challenging revenue comparison, and operating expenses are expected to remain relatively flat at their current reduced levels.

Michael Petusky of Barrington Research inquired about Q1 2025 trends in the Precision Logistics segment, the company's decision not to issue full-year guidance, and the reasonableness of modeling a low double-digit revenue decline for the first half of the year due to a lost customer.

Answer

Adam Stedham, CEO and President, confirmed that the previously announced loss of a major customer will continue to be a drag on year-over-year comparisons for Q1 and Q2. He noted that while the proactive business is stable, overall market conditions are slightly down. Stedham stated that VerifyMe is not providing 2025 guidance due to external market unpredictability and the uncertain timing of strategic capital deployment. He affirmed that modeling a low double-digit revenue decline for the first half of 2025 is a 'very reasonable modeling assumption'.

Michael Petusky of Barrington Research asked about the financial viability and strategic fit of the remaining Authentication business, specifically its adjusted EBITDA contribution. He also inquired about the long-term outlook for the premium logistics business post-FedEx insourcing, the size of the direct premium revenue, recent sales team hires, and whether the company plans an Investor Day to update its strategy.

Answer

CEO Adam Stedham stated that the remaining Authentication business would initially be adjusted EBITDA negative but is targeted to become positive in 2025. He affirmed the company is committed to the path that creates the most shareholder value. Regarding logistics, Stedham explained the strategy is to grow the direct premium business to offset potential future declines in the indirect premium business subcontracted by FedEx. He confirmed a new sales and marketing person was added in Q3 and that the Q4 earnings call will be extended to provide a detailed strategic outlook for 2025, serving as a reset for investors.

Michael Petusky of Barrington Research followed up on the tariff topic, asking if it's a real catalyst for near-term customer action. He also requested the current number of late-stage projects, Q4 cash flow figures, and the estimated cost and timeline for the new ERP system.

Answer

President & CEO Paul Josephs clarified that the business momentum is driven by a broader strategic shift to a more aggressive sales approach, not just tariffs, and confirmed the late-stage project count is now 11. CFO Ryan Lake reported Q4 cash flow from operations was over $5 million and free cash flow was over $3 million. He detailed the ERP implementation, targeting a calendar 2026 go-live with a projected cost of $600,000 to $1 million, and outlined the risk mitigation plans in place.

Michael Petusky asked for an update on the new business pipeline mentioned last quarter, details on Q3 cash flow from operations and CapEx, the cash flow outlook for Q4, and whether Q3's SG&A level represents a new run rate.

Answer

Executive Paul Josephs confirmed strong progress in the business pipeline, evidenced by four on-site visits from large multinationals during the quarter. Executive Ryan Lake provided financial details, stating cash flow from operations was positive at approximately $2 million, and the company was near free cash flow breakeven for the quarter. He expects to be cash flow positive from operations for the second half of the year. Regarding SG&A, Lake noted it is trending down but was impacted by over $2 million in legacy legal matters, indicating further reduction is possible once these are resolved.

Michael Petusky asked for the total debt figure, questioned why EBITDA guidance wasn't raised despite a strong quarter, and inquired about CEO Paul Josephs's early learnings regarding customer conversations, sales cycles, and the market's perception of Lifecore's expanded capabilities. He also sought clarification on the size of the new opportunity pipeline.

Answer

CFO Ryan Lake provided a rough total debt figure of $160 million and explained that guidance was maintained due to some Q2 revenue being a pull-forward from later quarters. CEO Paul Josephs shared that his early learning is that there's a significant opportunity to educate the market about Lifecore's sterile fill/finish capabilities beyond its well-known HA expertise. He confirmed the business development pipeline now contains over 50 new opportunities, with more than 30% from large multinational companies.

Michael Petusky questioned the change in the number of development programs, noting a reduction from previous disclosures, and asked if stalled programs could be revived. He also inquired about the company's cash flow cadence and whether the current quarter represented a low point for cash generation.

Answer

CEO Paul Josephs clarified that the development pipeline now consists of 25 active programs, with about 10 others in a 'quiescent period' due to clinical or financial stalls, which have been removed from projections but could potentially return. CFO Ryan Lake addressed cash flow, stating the company expects to burn cash in the first half of the fiscal year but be free cash flow neutral in the second half, adding that the recent equity raise addresses near-term liquidity needs.

Michael Petusky from Barrington Research Associates, Inc. asked for the specific percentage growth in commercial pricing, the basis-point impact of the negative payer change in Michigan, and whether that issue could spread. He also sought clarification on whether the capital allocation priority for the IIP segment was for internal investment or M&A, and requested an update on the "deep operational dive" with top partners.

Answer

CFO Carey Hendrickson stated commercial rates were up 1-1.5% YoY and the Michigan payer issue had about a $0.30 per visit impact. CEO Christopher Reading viewed the Michigan issue as isolated. He clarified the IIP capital priority is for M&A to add new service lines and is an active focus. Regarding the operational review, he said providing partners with a tangible tool comparing current metrics to their historical peak efficiency has been a key driver of progress.

Michael Petusky inquired about the progress of renegotiating reimbursement rates for the recently acquired Metro business. He also asked about the level of interest from other partners in adopting new capabilities like home care, and sought an opinion on the outlook for CMS pricing given the current political environment in Washington D.C.

Answer

CFO Carey Hendrickson confirmed that rate renegotiations for Metro are already yielding results, with its average rate increasing from $102.40 in Q4 to $106 in March, and a significant new Blue Cross Blue Shield contract effective May 1. President Eric Williams noted that while partners show interest in various new services like home care and cash-based programs, the best path for home care growth is likely through targeted acquisitions. CEO Christopher Reading stated that while a permanent fix to the CMS fee schedule is unlikely, he believes further cuts to physical therapy are improbable due to a growing recognition that the current system is unsustainable.

Michael Petusky questioned if the lower net rate at the newly acquired Metro business could be improved over time. He also asked for clarification on the source of a $3 million EBITDA contribution and sought to understand the potential cost savings from the new AI and virtual staffing technology pilots. Finally, he asked for confirmation that a legislative reversal of the 2025 CMS cut is unlikely.

Answer

COO East Eric Williams confirmed they expect to increase Metro's rates using USPH's payer contracting resources. CFO Carey Hendrickson clarified a $3M+ EBITDA lift was from the IIP business, not technology. CEO Christopher Reading noted it's too early to quantify savings from the tech pilots but expects the virtual front desk initiative to have a larger cost impact than the AI notes. He also confirmed the company is not budgeting for a reversal of the CMS cut.

Michael Petusky requested the payer mix breakdown, the drivers behind the strong organic growth in the injury prevention (IIP) business, and whether USPH's contracting could provide a rate uplift for the newly acquired Metro business. He also asked about the potential impact of the recent election results on Medicare reimbursement legislation.

Answer

CFO Carey Hendrickson provided the Q3 payer mix: 47% commercial, 33% Medicare, 10.4% workers' comp, and 3.5% Medicaid. Executive Christopher Reading attributed the IIP segment's double-digit organic growth to both winning new clients, like a major auto manufacturer, and expanding services with existing ones. He noted that while the Metro team had already secured strong rates, USPH can bring additional resources to help over time. Regarding the election, Reading stated it's difficult to predict but emphasized that the company's advocacy efforts are bipartisan and well-established.

Michael Petusky from Barrington Research Associates inquired about the drivers of the strong U.S. Orthopedics growth and asked for guidance on CapEx and free cash flow for the second half of the year.

Answer

President and CEO Massimo Calafiore explained that U.S. Orthopedics growth is driven by both deeper penetration in existing accounts and entering new markets with the TRULOC Elevate system for the diabetic foot market. CFO Julie Andrews added that H2 2025 is expected to be free cash flow positive, though Q3 may be slower than Q4, and that CapEx will likely be heavier in Q3 but roughly flat for the full year.

Michael Petusky of Barrington Research Associates requested clarification on the Q2 BARDA revenue and the full-year guidance. He also asked if the diagnostics business's cash flow breakeven goal depends on revenue growth, and inquired about capital allocation priorities and the urgency of the share buyback program.

Answer

SVP & CFO Adam Logal confirmed Q2 BARDA revenue was $6.5 million with full-year guidance of $30-$35 million. He asserted that achieving cash flow breakeven for the diagnostics business is not dependent on achieving their growth plan. On capital allocation, Logal emphasized a dual focus on R&D investment and balance sheet strengthening, stating the company would not be shy about using the remaining ~$142 million share repurchase authorization as the balance sheet allows.

Michael Petusky of Barrington Research asked for the revised BARDA revenue guidance, the basis for confidence that the NGENLA profit share issue is a one-quarter event, and if the Diagnostics business could have reached breakeven without the asset sale.

Answer

Executive Adam Logal provided the revised BARDA guidance of $38 million to $44 million. He attributed confidence in NGENLA's rebound to strong underlying script data and historical quarterly patterns. He also affirmed that management had a plan to achieve Diagnostics profitability even without the sale, which would have involved exiting other high-cost testing lines.

Michael Petusky asked about the 2025 outlook for BioReference, specifically the top-line revenue assumptions needed to achieve positive cash flow. He also inquired about the potential pathway for Rayaldee to reach $50 million in annual revenue and asked about the future of the common stock repurchase program.

Answer

Executive Adam Logal indicated that detailed 2025 guidance is forthcoming but stated that significant revenue growth is not a prerequisite for BioReference to achieve profitability. Executive Phillip Frost addressed Rayaldee, highlighting a new marketing initiative based on data showing it can slow chronic kidney disease progression. Logal also confirmed the company has used about a third of its current buyback authorization and will announce an expansion if deemed appropriate.

Michael Petusky asked for more specific details on cash flow, questioning if a positive cash flow quarter is possible in 2025 given large debt payments. He also inquired about the potential timing of outcomes from the strategic alternatives initiative and the specific sources of the $25 million in G&A savings.

Answer

Executive L. Sampson acknowledged that large debt payments in Q2 and Q4 make an annual view of cash flow more appropriate, and while not forecasting a specific positive quarter, he expressed confidence in their cash position. Regarding the strategic review, Sampson stated that deleveraging is a top priority and the company is balancing urgency with patience to maximize value, intending to sell assets at the right time. He clarified that the $25 million in G&A savings primarily came from labor reductions in corporate and shared services, enabled by increased operational efficiency and automation.

Michael Petusky sought clarification on the 30% free cash flow conversion target, the long-term upside for conversion, the potential timing for a Pennsylvania PCS rate increase, and whether the timeline for a Matrix monetization has been pushed out.

Answer

CEO L. Sampson confirmed the 30% free cash flow conversion target applies to the period after mid-2025. He stated that reaching a higher rate, like 50%, is contingent on deleveraging the balance sheet, making asset monetization a priority. While optimistic about a Pennsylvania rate increase, he did not provide a timeline. Sampson also confirmed that the potential timing for a Matrix sale has been pushed out due to Medicare Advantage market headwinds.

Michael Petusky of Barrington Research asked for a recap of the commentary on Matrix Medical, the number of contracts underlying the $60 million receivable, and whether the second-half free cash flow would be weighted towards Q3.

Answer

CEO Heath Sampson reiterated that a potential monetization for Matrix Medical is expected in late 2024 or early 2025. He confirmed the $60 million receivable is concentrated with a couple of large payers. While not giving an intra-quarter update, he expressed confidence in collecting the amount in Q3 and affirmed that second-half free cash flow will be more heavily weighted to the third quarter, as detailed in the company's investor presentation.

Michael Petusky questioned the drivers behind the strong 9% internal growth in the Home Solutions business and asked for the segment's current revenue base.

Answer

CEO Stanley Bergman attributed the strong performance to expanding the business's footprint, adding new referral sources, and effective reimbursement management. CFO Ron South provided the financial scale, stating the business is approaching an annualized revenue of $360 million and is on a trajectory to reach $400 million soon.

Michael Petusky inquired if the capital allocation strategy for 2025 would resemble 2024 or the more M&A-heavy 2022-2023 period. He also asked where acquisitions in the Home Solutions space rank among the company's M&A priorities.

Answer

Ron South, CFO, expects 2025 capital allocation to align with historical run rates of $300-$400 million for both M&A and share repurchases, though the company remains opportunistic. Stanley Bergman, CEO, added that Home Solutions is an area for continued investment to expand national reach and access contracts, but does not require 'huge' investments, focusing instead on bolt-on acquisitions to the existing platform.

Michael Petusky asked about the mechanics of the SurVeil profit-sharing agreement with Abbott, Abbott's plans for an OUS (Outside the U.S.) launch, and the likelihood of receiving early fiscal 2025 guidance.

Answer

CFO Timothy Arens explained that profit sharing is estimated and booked upon shipment to Abbott, with conservative assumptions, and they have not yet received the first reconciliation report. Executive Gary Maharaj stated there are no current discussions with Abbott regarding an OUS launch, as the focus is on the U.S. market. Maharaj also said it is unlikely the company will provide FY25 guidance before the Q4 earnings call, as they need more data from recent product launches.

Michael Petusky from Barrington Research inquired about the status of the SurVeil profit-sharing agreement with Abbott, including how it is calculated and if it has commenced. He also asked about Abbott's plans for SurVeil outside the U.S. (OUS) and whether Surmodics might provide an early outlook for fiscal 2025.

Answer

Executive Timothy Arens explained that profit-sharing is conservatively estimated and booked upon shipment to Abbott, with a true-up expected after receiving official reports, which has not yet occurred. He noted no visibility into Abbott's OUS plans, as the focus remains on the U.S. market. Executive Gary Maharaj reiterated that Abbott is focused on the U.S. launch first. Regarding fiscal 2025, he stated it is unlikely the company will provide an early preview before the Q4 call, as they need more time to validate assumptions for newly launched products.

Sought clarity on the assumptions behind the SurVeil revenue guidance, specifically the timing of the commercial launch within the "first half of calendar 2024" window and whether profit-sharing revenue is included. He also asked about plans to invest more in the Pounce and Sublime sales team.

Answer

The company was intentionally vague on the exact launch timing to respect Abbott's competitive strategy but confirmed the guidance includes the initial stocking order and modest, conservatively estimated profit-share revenue. Regarding the sales team, they plan to grow it selectively and in a cash-efficient manner ("grow as we go"), not doubling it immediately, but a future doubling in 3 years is possible.