Sanara Medtech Inc (SMTI) 2023 Q3 法說會逐字稿

Greetings and welcome to the Sanara Medtech Incorporated third quarter 2023 results and business update call. (Operator Instructions) Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Callon Nichols. Sir, you may begin.

Thank you. And good morning, everyone. I'd like to welcome you to Sanara Medtech's earnings conference call for the quarter ended September 30, 2023. We issued our earnings release yesterday afternoon. I'd like to highlight that we've posted today's deck on investor relations page of our website. This supplemental deck that's all the copy of the earnings release and Form 10Q for the quarter ended September 30, 2023 are available on this page. We will reference this information in our remarks today.

We expect today's prepared comments from Ron Nixon, Executive Chairman; and Zach Fleming, Chief Executive Officer; and Mike McNeil, Chief Financial Officer; to last approximately 15 minutes to allow time for Q&A. Certain statements in this conference call, and our press release, and in our supplemental deck includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For more information about risks and uncertainties involving forward-looking statements and factors that could cause actual results to differ materially from those projected or implied by forward-looking statements, please see the risk factors set forth in our most recent annual report on Form 10K. It's supplemented by the risk factors in our most quarterly report on Form 10Q.

Also this conference call, our earnings release and supplemental deck will reference certain non-GAAP measures. In that regard. I direct you to the reconciliation of these measures in the earnings materials that are available on our website.

Now I'd like to turn the call over to Ron.

Thanks, Callon. And good morning, everyone. In Q3 2023, Sanara generated $16 million in net revenue representing a 23% increase from the prior year period. The third quarter of 2023 was eight record revenue quarter for Sanara. And we continue to strengthen our sales infrastructure to support our growth strategy as well as focus on increasing our penetration into hospitals where we have approvals and minimal revenue.

I'd like to point out that by the end of the third quarter of 2023, we have generated more revenue than in all of 2022. Our loss before income taxes narrowed from $3.2 million to $1.1 million year over year in Q3. We had a net loss of $1.1 million in Q3 compared to a net loss of $1.5 million for the prior year period. Company also realized an adjusted EBITDA of $300,000 in Q3 compared to an adjusted EBITDA of negative $1.6 million in Q3 2022. Mike will provide more details on our financial results in a few minutes.

A key strategic milestone for the company in the third quarter was the acquisition of certain assets related to our collagen products business. Acquisition included all rights in ownership for human wound care uses for specific 510(k) cleared collagen-based wound products including CellerateRX and HYCOL. This transaction has had multiple financial and strategic benefits as you will hear about later.

Turning to our product pipeline, subsequent to the end in the third quarter with several key achievements. In early October, we realized our first sale of Allocyte Plus Advance Viable Bone Matrix. This product relaces our are Allocyte Advance Cellular Bone Matrix product in this process by well established supplier and in-house processing cabilities and affords us greater control of our product supply.

Sanara has a sufficient supply to meet current demand. And we believe measures are in place to provide product for our future requirements. In addition to our first sale of Allocyte Plus, the company also realized that first sale of Biasurge Advanced Surgical Solution in early November 2023. We believe both of these products are key in our growth initiatives. As you know, our ATM offering of common stock was paused at the end of Q1. And we did not currently have any plans to reactivate the ATM.

Now Zach will provide more details on our business.

Thanks, Ron. I'd like to start my remarks with a discussion of our accomplishments over the past few years. And how that has laid the groundwork for what we believe will be a very promising future for the company. In 2021, we acquired the assets of Rochal industries. And since that time, we've achieved developing deep in-house technical capabilities for research and development.

Our efforts have prove successful with the launch of Biasurge. And we currently have numerous other promising products at various stages of development. Over the past few years, we've executed on our strategy to expand our surgical bag not only through the in-house development of Biasurge but also through the acquisition of Scendia and a license agreement with Cook Biotech.

We have also focused on expanding our approved locations. And recently, we were approved by a national GPO leading to a 67% increase in hospital approvals between March 31, 2023 to June 30, 2023. This has set the stage for what we believe will lead to growth in 2024. It will be driven by a focused on increasing accelerate usage and additional specialties outside of ortho and spine in an expanded product portfolio with the additional of Biasurge, multiple M&A opportunities and continued work by Rochal to develop new products.

With that overview, I would like to now discuss our most recent results. Our sites supply issues negatively impacted our sales Q3. But we believe we have resolved the supply issue with our new supplier of our site plus. It will take some time to reengage with potential customers who we had put on hold. And these efforts have begun. And we are currently focused on our sales team along with Biasurge.

Concern over salary cost of facilities due to a certain significant use of the product negatively impacted growth in four territories. The surge is a great value to as they say, protect our work. However, procurement reduced our limited usage in a few of these instances. These territories as well as our business as a whole have been analyzed and appropriate adjustments have been made including building stronger account relationships, internal personnel adjustments, the identification of new selling 1099 partners, and expanding our selling efforts to additional special.

We have expanded our training to both our direct and indirect sales team regarding account management. In the trailing 12-month period, our products were sold in over 1,000 hospitals and ambulatory surgery centers across 32 states plus the district of Columbia. The 33rd state missed our trailing 12 months revenue cut off by less than $2,000. Our products were contracted or proved to be sold in over or more than 3,000 hospitals and ambulatory surgery centers as of September 30, 2023.

Leveraging field intelligence and data analytics, we are looking at are their data analy -- sorry, I got a little cut off there. Looking at our product sales mix, sales of soft tissue products were $13.6 million. And sales of bone fusion products were $2.3 million in Q3. The 16% sales growth for bone fusion products for the quarter year over year is encouraging. And we will continue to focus on continuing to build out these product lines.

As Ron mentioned, we launched Biasurge in early November of this year at the American Association of Hip and Knee Surgeons Conference and our first sale is made shortly after that. We have ample supply of this product and are currently selling it through our distribution network. Initial feedback has been positive. And though it will take time to add this product to our existing contracts, we believe there's a case for this product to be used in any surgery where our existing products are being used.

Prior to launch, we were able to add Biasurge to 41 contracts. We will continue to build on these efforts as we market the product. In August 2023 as Ron discussed earlier, we completed the acquisition of certain assets related to our collagen products business. With this acquisition, we acquired specifics. 510(k) cleared collagen-based wound care products including CellerateRX and HYCOL. Nine patents and all of the seller's patents spending for collagen products for human wound care uses and five trademarks.

The acquisition gave us control of the manufacturing process for CellerateRX and HYCOL, which is expected to reduced costs. Initially, we now have full rights to develop new collagen products for human wound care uses based on the acquired technology including CellerateRX and HYCOL and new application formats.

Looking at the financial impact the transaction eliminates the royalty we paid on Cellerate and HYCOL to the sellers, the initial purchase for the acquisition was $15.25 million consisting of $9.75 million in cash paid at closing. Shares have become the company's common stock and with an agreed-upon value of $3.0 million and four equal installments of $625,000 in cash.

The sellers are entitled to receive up to $10 million in potential earn-out payments as well as certain royalties and incentive payments on future products that are developed. The cash at closing was funded through a loan provided by Cadence Bank. Our gross margins increased in Q3 to 89% from 86% in Q2 2023 as a result of this acquisition and the elimination of the royalty we previously paid to the seller.

I would now like to spend some time on the post-acute value-based strategy, which we've renamed Tissue Health Plus. As we've discussed before, we see significant opportunity to positively impact the post-acute wound care market for costs are significantly increasing and a shortage of wound care experts paired with an aging population is materially impacting the quality of care and outcomes. We are planning to offer payers in other population risk-bearing entities a first-in-kind integrated wound prevention and treatment program.

We will bundle advanced products, technology and clinical delivery through value-based contracts for this $35 billion plus market. We are exploring ways to accelerate commercialization of this strategy or find appropriate partners to participate in the execution. Our spending year to date for Tissue Health Plus has been over $5 million.

Now I will turn it over to Mike to discuss our financial results.

Thank you, Zach. As Ron mentioned earlier, we generated revenues of $16 million in Q3 compared to $13 million during the third quarter of 2022. A 23% increase over prior year. For the nine months ended September 30, we generated revenues of $47.3 million compared to $30.5 million during the same period in 2022.This represented a 55% increase over the prior year period.

Higher revenues in 2023 were primarily due to increased sales of soft tissue repair products and to a lesser extent bone fusion products as a result of our increased market penetration, geographic expansion, additional revenues as a result of the Scendia acquisition, and our continuing strategy to expand our independent distribution network in both new and existing US markets.

SG&A expenses for the third quarter were $13.9 million compared to $12.1 million during the third quarter of 2022. Year to date SG&A expenses through September 30 were $40.7 million compared to $31.9 million in 2022. The higher SG&A expenses in 2023 were primarily due to higher direct sales and marketing expenses, which accounted for approximately $6.8 million or 77% of the overall increase from prior year. The higher direct sales and market expenses in 2023 were primarily attributable to an increase in sales commissions of $5.9 million as a result of our higher product sales. Year to date SG&A also included $0.8 million of increased costs as a result of salesforce expansion and operational support.

R&D expenses for the quarter in this September 30, 2023 were $1 million compared to $1.1 million for the same period last year. Year to date R&D expenses were $3.5 million compared to $2.3 million for the same period in 2022. A higher R&D expenses in 2023 were primarily due to costs related to the precision healing diagnostic imager and LFA. R&D expenses also included costs associated with ongoing development for projects currently on our currently licensed products.

We had a net loss. We had a loss before income taxes of $1.1 million for the third quarter compared to $3.2 million during the same period in 2022. Our year to date loss before income taxes through September 30 was $4.2 million compared to $9.8 million in 2022. The lower loss before income taxes in 2023 was due to operating expenses increasing at a slower rate than net sales in addition to the benefit recorded as a result of the change in fair value of earn-out liabilities.

For the quarter ended September 30, we had a net loss of $1.1 million compared to net loss of $1.5 million during the same period last year. For the nine months ended September 30, we had a net loss of $4.2 million compared to $3.9 million during the same period last year. Our cash on hand at the end of the quarter was $6.2 million. A slight increase from $6.1 million we had on hand at the end of the second quarter.

With that, I'll turn it back over to Ron for some closing remarks.

Thanks, Mike. In summary, we are very, very proud of our continued record quarters as well as the introduction of another impactful proprietary product for surgery I mean Biasurge. We will continue to work on executing our strategy to achieve further growth rates and expect to be aided by ample supply of Allocyte Plus.

The key strategic acquisition of assets related to our collagen business will improve our financial results by eliminating the royalty we pay as we continue to grow Cellerate and HYCOL. This also allows us to develop new proprietary product based on these assets through a lot of Sanara research team

That concludes our remarks. We look forward to answering any questions you may have. Operator, we're ready to open the call for questions. Thank you.

Thank you, sir. Before we go through our phone lines, we've had a question sent in. Could you please add more color to the Cellerate's sales slowdown? And did I understand correctly that certain hospitals have caps Cellerate's purchases because surgeons who are buying too much this?

I can take that. This is Zach. Yeah. So you're correct. There were a few hospitals where usage was outpacing what procurement preferred. And so they limited usage. And that's where we've seen a little bit of a slowdown. And we've responded by training up our sales representatives to make sure everybody's educated on the reasons that that product should be used. And that there's an initial evidence and additional evidence that can be provided to support the usage.

And then as further, we wanted to put people on two additional specialties. So you'd have a broader reach in to the surgeon's specialties as opposed to being focused on maybe just a few specialties in the building. And that helps to standardize the usage so that the hospitals will allow the continued usage.

What I'd also like I say in addition to what Zach just said, Scendia has spent a lot of money on gathering the evidence clinical evidence on numerous studies. Some of those of which have just recently come out to support what the value of our products are in terms of the overall value proposition of lowering overall cost and improving outcomes. We see that data is being very impactful. We will continue to do more studies to support that to just keep using evidence as our basis for why these products are still impactful in surgery as opposed to just a preference by surgeon.

(Operator Instructions) Ross Osborne, Cantor Fitzgerald.

Hi, guys. Congrats on the progress. Thanks for taking our questions. So starting off on fading, we're talking for a couple of calls. Would you provide more color on the unique and market challenges you called out in your press release? Any foresight in today's meeting this year, early next?

Did you say fading?

Yes.

Okay. Yeah. We think we've achieved that. So in terms of those facilities where they're impacted, it was limited to just a few four markets. And that was a where an instance where the product was utilized beyond what procurement was comfortable. Procurement pushback on that spend and very situational. And each of those instances was obviously we've remedied that. And moving forward, we'll be able to pick up additional facilities to cover the slight slowdown in those areas as well as regain those markets with additional effort. And that would include in-servicing, making sure everybody's educated on the use of the product, and of course additional surgeons as I mentioned a minute ago.

Okay. Got it. And then maybe turning to some of your recent product launches. How should we think about Allocyte and Biasurge market opportunity in terms of annual dollars and adoption? They're using in a variety of surgeries. But where do you think their low-hanging fruit is? And how would you rate market awareness?

I think the low hanging fruit is any patient or there's a risk for potential infection. And that's very broad. There's a lot of surgeries that there's a risk based on the patients to comorbidities, difference -- statuses of disease, state et cetera. And of course, all surgeries have some risks of complication or infection.

So what we're trying to do is place that product in a prophylactic position where it can be used to prevent any of those types of infection events or complications. So you can imagine really every surgery could potentially be appropriate for that. And certainly, it's going to be focused on those patients where there's a risk factor. And that would be where we would start.

In terms of just the acceptability. I think that's a commonly used practice in historical sense. That they have used an antimicrobial wash of some type. Usually one that's made in-house by the pharmacy but that's not very standardized and not consistent. So in recent years has been a few market entrance where they've come in and offered a consistent no manufactured wash like Biasurge.

Ours offers benefits that the other don't. Such as it's an even rinse. It's also a product that has a low toxicity. And it allows for leave-in usage means they don't have to wash it out with saline. So we think we have a market position there and of course an attractive value to the facility.

And you know, Ross, you may remember this from past data that we have provided. We have tested the Biasurge base formula against numerous of our competitors and did outperform them for biofilm scale as well as the scale of VRE Marcelino, the types of bad actors out there, I mean from the microbe standpoint.

And so therefore, we see a significant market opportunity for this product as Zach mentioned. And it will be a key core product for us as we move forward we believe.

Okay. Great. Thank you for that. And then lastly on aspiration to be a comprehensive on company. Is there any more color you can provide on those types of partners you're looking for that can add a value-based arrangement? And then lastly, any update on precision healing?

Yeah. So I didn't hear the very last part. I heard about what the profile of the partners that we would seek out for the value-based arrangement. But I didn't hear what you said after that.

That's correct. And then any update on precision healing.

Oh yes. Okay. So two things. I'll take that Zach. Two things on that, Ross. One, whether you think about our overall value-based strategy involves everything through the post-acute. So I'd go from the discharge at the hospital and would be down through the entire post-acute, which would include the skilled nursing facilities, home health and then ultimately at home when they're not on the care plan -- a plan care. So what we're looking at is who else could we team with that would really provide that level of service at the home. And there's numerous home health care companies that we know works exceedingly well that are interested in the value-based plan.

We also know that this is a focus on skilled nursing facilities because as you know with the passing of legislation for a snippet home and other programs like that. Everybody is looking to be able to pick up efficient fees and lower cost and improve outcomes. So there's going to be way more focus on that as we move forward with the value-based arrangements being front and center. More and more CMS dollars are being allocated to these value-based arrangements.

So we see fee for service shrinking with CMS. And numerous other payers have responded by saying we've got to get a value-based strategy for these difficult specialties like LoopCare where they are having very high increasing rates and not great outcomes for their patients. So people that would be in sales in the post-acute or people that bring technology or other things or payers that understand the risk they're taking could even be a part of that as well as providers of the services themselves. So we've got a broad array of potential partners. And we've obviously been in discussions with numerous of these over the last year as we prepare.

And then secondly, on precision healing on the lateral flow assay and on the imager. We're going a different pathway with that. And it's a pathway that we'll achieve more from the standpoint of an FDA approval. And so we've taken our time and decided that let's get the better pathway that we'll achieve greater outcome and grow or potential acceptance of the product. So that's what we're doing.

Okay. Sounds great. Appreciate you for taking questions.

You bet.

Ian Cassel, IFCM.

As a follow on to Ross's question. You mentioned in the presentation that you've spent about $5 million in the Tissue Health Plus strategy year to date. Do you expect that number to increase decrease as you start to commercialize that over the next 24 months?

Yeah. For scenario itself, we don't expect that number to increase. We would expect that number to decrease of the next 12 to 24 months. And that would be by executing our strategy with the right kind of partners that would start to carry some of that load themselves.

Okay. And maybe getting back to Biasurge. I know you just launched Biasurge earlier this month. Can you give us some color on just the early indications you are getting for the surgeons since you launched it?

Zach, would you mind.

Sure. Absolutely. Great indicator that we got 41 approvals before launch. So that was really encouraging to see that these hospitals as well surgeons felt like there is a need and there is demand. And so we're able to get approval. And then since launch the American Association of Hip and Knee Surgeons called AAHKS as we call it. Really great response. Just the booth was packed everyday. There is a lot of questions. We had our scientist in the booths. We had our medical science team in the booth. And a lot of interest in terms of just the ability for this product to have an impact on their surgeries. And that momentum has continued.

We've seen a lot of uptake. A lot of us surgeons. We've also seen a lot of distributors asking to add that product into their bag and their product mix. So we're really excited about it. ///

No. Thanks for that. And maybe when you think about -- when investors think about Biasurge, what is the type of revenue per surgery on a product like that? I know it accelerates several hundred dollars per surgery or somewhere around there. How should we think about Biasurge. That $30 a surgery a $100, $200. What range should we think about?

Yeah. We have just started pricing on that and those first facilities. And I'd tell you we're averaging somewhere around $200 a unit right now. And that unit is one liter. And that would be yet to be determined how many they use per surgery.

Okay. Excellent.

That's a pretty big sample. But I just would share that with you here early.

Okay. Thank you. That's helpful. And maybe switching to Allocyte, how would you characterize the demand you're seeing now that you have supply again for that product? I mean is the demand you're seeing back to the levels you saw before the supply disruption? And maybe just give us an indication about.

Yes. The demand is there. It's just a little bit of a little bit of a process to get back added two facilities. We did have to create a line extension Allocyte Plus. And that needs to be added to the contracts. So that's really the biggest stop gap. And why we haven't gotten back completely where we were. But we are selling. We are seeing a lot of pickup to that product. So we're really pleased with that.

Excellent. Thank you.

Thanks, Ian

Stephen Reed, Pitch Investments.

Hi, guys. I think I just wanted to follow on Ian and Ross's question. They hit most of them. But mine will be around precision healing time. On the imaging, what have you learned or anything from the FDA? And then what the process you see going forward on the lateral flow assay submissions and approvals?

You want to take that, Ron. Is Ron still there?

It appears Mr. Nixon's line has come down for a moment. But he is dialing back in as we speak.

Okay. Well if you want to repeat that real quick, Stephen? I was thinking Ron was going to fill that. But if repeat that, I'll answer.

Yeah. Sure. What you've learned so far from your submission if you received any feedback? And then going forward on the lateral flow assay or molecular assay, where you're at? What you've learned? And what the process would be for you to go forward with that technology?

We are working closely with the FDA on the multispectral imager. So we've gotten feedback on that and working for another submission. And should have that feedback again shortly. So we're working with them to resubmit. LSA, we have not announced. So I'm going to withhold any comments on that particular component.

Okay. And have you received any feedback yet on a going out looking for your appropriate partners for this Tissue Health Plus. Is the imaging and diagnostics a critical piece of the process before you see that to materialize?

Yeah. I'll take that. This is Ron. The interest is high out there because everybody recognizes the potential opportunity at this. From our perspective, we believe that the market is much greater than what it reported in the market because it's hard to capture the complete cost of rooms because of all the co-morbidities that they've got. But with most of the people that have the payer's data, they understand that the complications from wounds related to diabetes, related to CLPDCHF, mobility with pressure ulcers. All types of things like that. When you look at the all in costs, cost of amputation, cost of readmission back into the hospital, cost of these complications that may be associated with diabetes but not labelled as to whether.

And when you really look at all of those and think about our prevention program. And then a better solutions for treating these and avoidance of these. Having people go to the wrong location to get their wounds get taken care of meaning higher cost centers. All of that is going to be very appealing to the audience that we're talking to. So at this time, we're not prepared to talk about who those partners are. But there are numerous partners out there that would be interested in joining us with the effort that we've put in over the last few years of building this platform.

Thanks, Ron and Zach. I appreciate the update.

You bet.

You're welcome.

Niraj Gupta, GCI Partners.

Good morning, folks. A couple of questions. All related to Biasurge. Could you just speak more broadly on Biasurge? My understanding was that the product was applicable to virtually any surgery involving sealing the wound cavity. Zach, Ron, could you speak a little bit to just the broadness of the potential applicability for Biasurge as a product?

Yeah. I think -- let me clarify one thing. I would let Zach answer. But it is to kill the bacteria in the worm bed not to seal anything. It's not a sealant. But I'll let Zach answer the question about the opportunity.

I think you're right, Niraj. I think you can imagine this product being used on any surgery. So if you are thinking about the OR. The OR is a sterile environment. However, microbes do get introduced inadvertently. And so they want to protect that surgical margin. That area where they've been doing the work for say an implant or any other type of surgery you might think about. And so they typically will watch that areas throughout the surgery usually with saline. And they will close with a product like this where its antimicrobial nature cleanses or sterilizes the field that they were working in. And then that would reduce surgical site complication.

Just to add to that, we think the data that we have historically already gathered on this product doing a number of studies one of which has not come out yet but we'll be out shortly that was used in the post-acute market. I think you'll see the applicability to that is going to yield lots of results because all of the surgeons are always interested in making sure to minimize the potential from surgical site infection. And so we believe that they have released that study that was our retrospect that study. That our focus on reduction of surgical site infections not related to Biasurge but to Cellerate.

And so it's a perfect complement to Cellerate. But it also is stand alone because of just the impacted spot on microbes in terms of its kill rate. So I think there's just significant opportunity for this product as we move forward.

So I guess the thought that is initial strategy is to leverage your existing presence with Cellerate as you've done with the 40 some odd locations. But as you think longer term, the strategy in terms of marketing and and served-in penetration is much broader than what you would -- what you're selling today is for Cellerate. Is that fair?

We're learning about the product today in terms of who has the appeal for the product. And our impression is yes. It could be broader than Cellerate because it's really for any surgery as opposed to those that maybe are just people who have trouble healing with Cellerate. Cellerate has a massive market obviously because they don't -- aren't able to predict as always, which patients will have complications or challenges healing. So we've seen Cellerate be a tremendous grower because there's so many patients that are benefited from it.

When we think that Biasurge is very similar in that respect. That is going to complement healing, It's going to complement the outcomes of the patient. And so when you think about the doctors probable of trying to keep patients healed post-surgery, both these products serve a great purpose to do that. They allow that patient to have low microbes and then increase the biologic activity to support the healing with Cellerate. So it's a nice one, two punch. You clean the area. And then you complement the healing with Cellerate.

Thanks, Zach. So two quick ones related to that. So one, unbiased or jp talked about rock pricing parameters per liter. Do you expect typical surgery would involve potentially more than one liter usage?

Still learning but yes. There are surgeries that will require more than one liter. And it's typically based on size. But certainly if you had a patient that was a revision surgery where there's already an infection that could be a surgery where they could potentially use some additional product than one liter.

Okay. And then the final one was just -- just thinking about bundling, pricing and just maximizing the growth. Your tool bag is growing, but you've got like do outstanding products Cellerate and Biasurge in terms of the data but the efficacy and what not.

Could you just speak to how does it impact your ability to more broadly penetrate the combined product offering by having both to go to market with? And how does that help reinforce the value proposition Cellerate as you think about ultimately where we are in the life cycle of that product relative to where it can ultimately get to?

Well I think it just really starts more conversations because of the broad appeal. We saw this in the booth at Hip and Knee Surgery Conference. There's just a nice starting point either product. And then you can end the conversation with the other product. And I think when you are able to broaden the conversation to meet the needs of the surgeon and the patient, I think that's a good thing.

So having Biasurge, it really talks about the antimicrobial action and reducing those microbes in a surgery. That then starts the conversation as is. And once you finish that, then you'd want to start to support the healing. And that's where Cellerate would then enter the picture in the conversations. So I think it's really beneficial.

And then of course for the hospitals, they really appreciate the sole sourcing of products like this. So they don't have to go to multiple vendors in order to get these products. So it certainly helps with our strength in a hospital in our staying power because they have then say scenarios of an approved vendor great products. They support the case as well, et cetera et cetera. And so puts us in more situations more shots on goal.

Yeah. And to add to that Niraj, I believe that what we're demonstrating not only with Cellerate but any of the new products that we've come out. We've said from the very beginning of scenario that we're going to provide advanced solutions that are proprietary for our surgeons, our hospitals, our post-acute market. Everywhere we are where we want to provide unique solutions that are going to do two things.

We've said that stayed the course on the US from the very beginning, improve outcomes and lower costs. And if we can continue to do that and we demonstrate that with multiple products, we believe that the brand scenario will actually continue to expand what we get more, more confidence from whomever our customer is. That they know what they're doing. They're backed by strong research. They've got a lot of capabilities to be able to come in and impact what we do to achieve those two goals of lowering costs and improving outcomes.

Thank you both.

Thank you, Niraj.

You're welcome.

Phil Brewster, Investor.

Morning, gentlemen. Thank you for your time. I wanted to ask a question just going through the commission structure and how this business works from an SG&A perspective. Should I be thinking that the commission like -- the real question that I have at the core of it is what kind of operating leverage are we going to get on the sales base three, four, five years out?

And I guess that the question that I keep coming up with is how should I think about how the commissions are paid here? And are they recurring commissions? Or these commissions typically that are paid out and then decline over the lifecycle of a relationship with the hospital or a doctor?

Yeah. So Phil, we don't actually disclose any of the information on our commissions separated out from SG&A. But what I would just tell you is there are always going to be opportunities as we grow this business. So think about the leverage of your SG&A expenses relative to the growth. So as we see more growth, you will see more reduction and or what I would just say proven in efficiency from the that.

But as we expand, Zach mentioned we were just short of going into the 33rd stage as we continue to expand, you're still going to be having a similar construct where you've got people that you're paying in the field. There's got to be a reward system for them achieving goals, which means commissions. And that's just the way that will be moving into perpetuity.

But it doesn't mean we might not be able to gain some additional efficiencies where we've also gained deficiencies by doing things that are accomplished on margins continuing to go up. And so that helps us as well. And mostly as we've just explained earlier in the call, buy the end of the royalty stream that we were paying out. So that's where we see how we're picking up our efficiencies.

That makes sense to me. That was my question. So I appreciate your answer.

Yeah. Thank you, Bill. Appreciate it.

Thank you. As we currently have no questions in queue for this time, I will hand it back to Mr. Nixon for his closing comments.

Yes. Thank you very much. We appreciate everybody being on the call today. Thank you for all the very good questions that you've asked. We we're enthused about where we're headed with the company. And as I think all of you know, we're in it for the long term. We want to really build this around our goal of lowering costs and improving outcomes. We want to reach every possible ASC, or hospital or any place that we can utilize our proprietary products. And our services as it relates to our post-acute.

So thank you guys for all the support. We appreciate that. And that will be the end of our of our call. So thank you all again for being a shareholder of Sanara.

Thank you, ladies and gentlemen. This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.