Sanara MedTech outlines $5.5M–$6.5M THP investment target while advancing surgical segment growth

Earnings Call Insights: Sanara MedTech Inc. (SMTI) Q2 2025

MANAGEMENT VIEW

* Ronald T. Nixon, Executive Chairman and CEO, opened the call by highlighting "net revenue of $25.8 million in the second quarter, representing 28% growth year-over-year," driven by demand for soft tissue products and bone fusion products. Nixon emphasized, "we generated approximately $500,000 of net income in the second quarter of 2025, an improvement of $2.7 million. We also generated $4.7 million of segment adjusted EBITDA, an increase of $3.3 million or 239%."
* Nixon announced that the company "initiated a formal process to evaluate strategic alternatives for THP" and has "engaged a strategic adviser to assist in conducting this process" with the intention to "explore a full range of strategic alternatives with the ultimate objective of maximizing shareholder value."
* Seth Yon, President of Commercial, stated that the distributor network expanded to "more than 400 distributors compared to more than 300 this time last year," and the customer base grew to "more than 1,400 health care facilities for the trailing 12 months ended June 30, 2025, compared to more than 1,100 facilities in the prior year period."
* Suresh V. Muppalla, Executive Officer, reported on the launch of the THP Copilot mobile app and the start of a pilot program with a provider group, stating, "the provider has begun conducting the first patient encounters as part of this pilot program, and we have been pleased with the initial performance of our THP technology platform to date."
* Elizabeth B. Taylor, Chief Financial Officer, remarked, "Second quarter gross profit increased $5.7 million or 32% to $23.9 million. Gross margin increased approximately 250 basis points to 93% of net revenue, driven primarily by increased sales of soft tissue repair products and lower manufacturing costs related to CellerateRx Surgical."

OUTLOOK

* Nixon stated, "we expect our level of cash investment in this segment [THP] during the second half of 2025 to be between $5.5 million and $6.5 million."
* Taylor indicated, "our net revenue performance in the second quarter modestly exceeded our expectations, and we're encouraged by our momentum through the first half of the year. Our focus remains on driving strong net revenue growth in 2025, fueled by our Sanara Surgical business."
* The company "does not anticipate making material cash investments in THP after year-end."

FINANCIAL RESULTS

* Taylor reported, "Second quarter operating expenses increased $2.9 million or 14%, to $23.9 million. The change in operating expenses was largely driven by a $2.6 million or 14% increase in selling, general and administrative expenses and to a lesser extent, an approximately $300,000 or 28% increase in research and development expenses."
* Operating loss in the second quarter was $31,000 compared to a loss of $2.9 million last year. Net loss for the second quarter was $2 million or $0.23 per diluted share compared to a net loss of $3.5 million or $0.42 per diluted share last year.
* By segment, Surgical generated approximately $500,000 of net income, while Tissue Health Plus posted a net loss of $2.5 million.
* Adjusted EBITDA for the quarter was $2.7 million, an increase of $2.1 million or 350% year-over-year.
* As of June 30, 2025, the company had $17 million of cash, $44.2 million of long-term debt, and $12.25 million of available borrowing capacity.

Q&A

* Junwoo Park, Cantor Fitzgerald: Asked about the timing for new distributors to become productive and the contribution curve. Seth Yon responded that onboarding depends on market readiness and existing approvals, stating, "that timing can vary depending on market based upon the approvals and the opportunities that exist there. But that can range in anywhere from days to certainly months depending on the work that needs to be done."
* Park inquired about OpEx cadence and leverage as THP strategic alternatives are evaluated. Taylor answered, "We have guided that THP for the second half. Investment will be between $5.5 million and $6.5 million...We are not positive when [OsStic] milestones will hit, but the total amount of the milestones is EUR 2 million that we still will hopefully achieve."
* Eduardo Rafael Martinez-Montes, H.C. Wainwright: Asked about product growth drivers in the Surgical segment, particularly Cellerate and BIASURGE. Yon replied, "the backbone of that space is truly Cellerate and BIASURGE as kind of our one-two punch, Cellerate being the largest producer in that category and BIASURGE quickly becoming the second largest producer."
* Martinez-Montes also asked about the decision to seek strategic alternatives for THP. Nixon explained, "we have taken it to the point that we think it's a good time for us to look at other strategic partners that could take the product from where it is today with their capital to complement what we've already done with our capital."

SENTIMENT ANALYSIS

* Analysts displayed a neutral to slightly positive tone, with focused questions on distributor productivity, OpEx cadence, and product growth specifics. There was no evident skepticism or pressing negativity.
* Management maintained a confident and constructive tone during both prepared remarks and Q&A, frequently emphasizing operational progress, growth, and financial discipline. Nixon stated, "we remain on track to launch OsStic during the first quarter of 2027, as we stated previously."
* Compared to the previous quarter, sentiment from both analysts and management remained stable, with ongoing confidence in the company’s commercial strategy and operational execution.

QUARTER-OVER-QUARTER COMPARISON

* The company’s net revenue grew from $23.4 million in Q1 2025 to $25.8 million in Q2 2025, and gross margin rose from 92% to 93%.
* Operating loss narrowed significantly from $2.1 million in Q1 to $31,000 in Q2, with net loss also improving.
* The THP segment investment guidance became more precise, with a specific range provided for the second half, and a formal process to evaluate strategic alternatives for THP was initiated in Q2.
* Management’s tone remained confident, with increased focus on capital discipline regarding THP and continued optimism about growth in the Surgical segment.
* Analysts’ focus on distributor ramp and product-specific growth remained consistent, with questions about OpEx and product adoption recurring in both quarters.

RISKS AND CONCERNS

* Nixon signaled the prioritization of "actively managing expenses by reducing the level of cash investment in our THP segment in the second half of the year 2025 to preserve capital."
* The company is mindful of cash utilization to support THP-related initiatives and has engaged a strategic adviser to explore alternatives for the segment.
* Taylor flagged higher interest expense and fees related to the company’s term loan as contributors to increased other expense in the quarter.
* No material impact from tariffs is anticipated in 2025.

FINAL TAKEAWAY

Sanara MedTech’s Q2 2025 call underscored robust revenue and margin expansion in its Surgical segment, strict capital management for THP, and a formal process to evaluate strategic alternatives for the THP segment. Management highlighted strong distributor network growth and broadening product adoption among facilities and surgeons, while reiterating a focus on capital preservation and operational leverage to support long-term value creation for shareholders.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/smti/earnings/transcripts]

MORE ON SANARA MEDTECH

* Sanara MedTech Inc. (SMTI) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813170-sanara-medtech-inc-smti-q2-2025-earnings-call-transcript]
* Sanara MedTech: Pursuing Rapid Expansion While Debt Levels Climb [https://seekingalpha.com/article/4793380-sanara-medtech-stock-pursuing-rapid-expansion-debt-levels-climb]
* Seeking Alpha’s Quant Rating on Sanara MedTech [https://seekingalpha.com/symbol/SMTI/ratings/quant-ratings]
* Historical earnings data for Sanara MedTech [https://seekingalpha.com/symbol/SMTI/earnings]
* Financial information for Sanara MedTech [https://seekingalpha.com/symbol/SMTI/income-statement]